David Blanchflower writes:
Just before the 2010 general election I met George Osborne in his offices in Westminster and warned him that implementing his politically rather than economically motivated austerity would cause him one big problem: eventually the people would eat the data.
By that I meant despite the spin that all was well, people would instinctively figure out what was really happening in the country.
And so it has turned out. In spite of all the claims that we were “all in this together” and the UK economy was in great shape, the truth is to the contrary: most people, especially outside London and the south-east, are struggling.
A close look at historical data suggests this has been the slowest recovery since the South Sea Bubble 300 ago, and hence worse than any recovery in living memory.
The only other contender is 1816, the “year without a summer”, which resulted in major food shortages across the northern hemisphere.
But it doesn’t help the Tories much to argue over whether this is the worst recovery in 300 or 200 years.
Today, just over a week before the election, the Tories were hit with major bad news.
The ONS published a GDP growth rate of 0.3% for the first quarter of 2015, less than a third of the growth rate of the economy when they inherited it in the second quarter of 2010.
Remember Cameron, Osborne and Clegg’s demonstrably untrue claims at the time of the 2010 general election, that the economy was bankrupt and comparable to Greece’s?
Well, if that was the case then, surely we are even more like Greece now.
Some people have suggested that this number will be revised, and chances are that it will.
But the reality is that since the first quarter of 2008 the average quarterly revision has been zero; the average revision has also been zero in the 88 quarters since the first of 1993, when the present data series started.
So that isn’t going to help.
We don’t have GDP growth data for many other countries; we are expecting data for the US later in the week.
This growth rate of 0.3% is below the average for the G7 and the OECD and is the same as the eurozone average. GDP per head in the UK still remains below its starting level.
The voters are hurting.
Underemployment is particularly high in the UK, as made clear by the European statistical agency Eurostat yesterday.
As a proportion of total employment it is only higher in Spain, Greece, Ireland, France and Cyprus, who between them have an average unemployment rate of 17.2%, compared with 5.6% in the UK.
Plus the UK is almost certainly headed to deflation next month; anything less than a 0.4% growth rate generates deflation.
Since last August every month has had a lower inflation rate than that, so deflation here we come.
Osborne set the remit for the Bank of England’s monetary policy committee a few weeks ago at 2% inflation, and has recently celebrated the fact that the UK is headed to deflation, absurdly taking credit for the fact that falling prices apparently were a result of his nonexistent long-term economic plan.
This is beyond crazy as it threatens the entire credibility of the monetary policy framework.
What a disaster.
The coalition failed to take note of this famous quote from Keynes, written in 1930, just after the Great Crash but before the Great Depression:
“For it is a possibility that the duration of the slump may be much more prolonged than most people are expecting and much will be changed both in our ideas and in our methods before we emerge.
“Not, of course, the duration of the acute phase of the slump, but that of the long, dragging conditions of semi-slump, or at least sub-normal prosperity, which may be expected to succeed the acute phase.”
Most people now have less food on their plates than they had at the start of this parliament. Sadly Osborne didn’t listen to me or to Keynes.
As a result of Osborne’s reckless austerity we are still in the long-dragging conditions of semi-slump.
Just before the 2010 general election I met George Osborne in his offices in Westminster and warned him that implementing his politically rather than economically motivated austerity would cause him one big problem: eventually the people would eat the data.
By that I meant despite the spin that all was well, people would instinctively figure out what was really happening in the country.
And so it has turned out. In spite of all the claims that we were “all in this together” and the UK economy was in great shape, the truth is to the contrary: most people, especially outside London and the south-east, are struggling.
A close look at historical data suggests this has been the slowest recovery since the South Sea Bubble 300 ago, and hence worse than any recovery in living memory.
The only other contender is 1816, the “year without a summer”, which resulted in major food shortages across the northern hemisphere.
But it doesn’t help the Tories much to argue over whether this is the worst recovery in 300 or 200 years.
Today, just over a week before the election, the Tories were hit with major bad news.
The ONS published a GDP growth rate of 0.3% for the first quarter of 2015, less than a third of the growth rate of the economy when they inherited it in the second quarter of 2010.
Remember Cameron, Osborne and Clegg’s demonstrably untrue claims at the time of the 2010 general election, that the economy was bankrupt and comparable to Greece’s?
Well, if that was the case then, surely we are even more like Greece now.
Some people have suggested that this number will be revised, and chances are that it will.
But the reality is that since the first quarter of 2008 the average quarterly revision has been zero; the average revision has also been zero in the 88 quarters since the first of 1993, when the present data series started.
So that isn’t going to help.
We don’t have GDP growth data for many other countries; we are expecting data for the US later in the week.
This growth rate of 0.3% is below the average for the G7 and the OECD and is the same as the eurozone average. GDP per head in the UK still remains below its starting level.
The voters are hurting.
Underemployment is particularly high in the UK, as made clear by the European statistical agency Eurostat yesterday.
As a proportion of total employment it is only higher in Spain, Greece, Ireland, France and Cyprus, who between them have an average unemployment rate of 17.2%, compared with 5.6% in the UK.
Plus the UK is almost certainly headed to deflation next month; anything less than a 0.4% growth rate generates deflation.
Since last August every month has had a lower inflation rate than that, so deflation here we come.
Osborne set the remit for the Bank of England’s monetary policy committee a few weeks ago at 2% inflation, and has recently celebrated the fact that the UK is headed to deflation, absurdly taking credit for the fact that falling prices apparently were a result of his nonexistent long-term economic plan.
This is beyond crazy as it threatens the entire credibility of the monetary policy framework.
What a disaster.
The coalition failed to take note of this famous quote from Keynes, written in 1930, just after the Great Crash but before the Great Depression:
“For it is a possibility that the duration of the slump may be much more prolonged than most people are expecting and much will be changed both in our ideas and in our methods before we emerge.
“Not, of course, the duration of the acute phase of the slump, but that of the long, dragging conditions of semi-slump, or at least sub-normal prosperity, which may be expected to succeed the acute phase.”
Most people now have less food on their plates than they had at the start of this parliament. Sadly Osborne didn’t listen to me or to Keynes.
As a result of Osborne’s reckless austerity we are still in the long-dragging conditions of semi-slump.
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