Tagged with GDP

Britain isn’t booming – it’s in a crisis

Chancellor Phillip Hammond

The latest UK GDP data confirm that the British economy remains in a crisis. As government spokespersons never tire of telling us the opposite, and are dutifully echoed by the majority of the media, then it is important to set out the factual case on the economy and to explain where the discrepancy between rhetoric and reality arises.

Once the factual analysis is made the following points are clearly established:

  • The UK remains in a crisis
  • On key measures of the living standards of the population, the UK is in the worst position of all the advanced industrialised economies
  • Fundamental economic factors mean that this crisis is set to deepen
  • The project of austerity will be resumed with a vengeance in response to Brexit

The UK economy grew by just 1.8% in 2016. This is below the average growth level since the recession, which itself has been miserably weak. On a calendar year basis, the recovery began in 2010. Since then GDP growth has been an average of 2%, so 2016 was among the slower years in a poor recovery. Continue reading →

Marx was right all along, says investment bank

rude marx by agitprop, file at http://www.flickr.com/photos/akitzmil/3241102767/sizes/m/in/photostream/Well, not quite. But a recent study by leading investment bank Credit Suisse shows that long-term growth rates of GDP in selected industrialised economies are negatively correlated with financial returns to shareholders. That is, the best returns for shareholders are from countries where GDP growth has been slowest, and vice versa. Where growth has been strongest, shareholder returns are weakest. This is shown in a chart from Credit Suisse (below, right).

Business Insider magazine carries a report of the research. It makes a series of bizarre arguments in an attempt to explain the correlation. The first is that stock markets anticipate future economic growth. But given that these data are based on the last 113 years, the stock markets must be very far-sighted indeed. The subsequent arguments do not get any stronger. Continue reading →

‘The worst of recession is over’? That will come back to haunt Cameron

Where did we hear it before? ‘I detect the green shoots of growth’ (Norman Lamont as the economy plunged again) and ‘We’ve ended boom and bust’ (Gordon Brown just before the biggest financial crash for a century).

Equally Cameron’s ‘worst of the recession is over’ is a foolish hostage to fortune which he will come to regret. Clearly the worst of the recession is far from over, but we have been festooned with an all-out PR blitz to convince us that it is.

What it really exposes is how utterly desperate Cameron is to escape the impression (and the political consequences) of endless austerity whilst at the same time tightening the screw to make sure it bites even deeper.

Continue reading →

Tories will have to U-turn as usual: but where to?

U-turns: how many?As the Tory conference gets under way, one has in all fairness to acknowledge that all governments are occasionally forced to change tack, but this government has turned it into an art form. After a whole series of dizzying about-turns – at least 15 on my count – there aren’t too many exits left, and even if they come up with a new one, can one really expect it to last beyond its immediate expedient use?

Everyone will remember those airbrushed Cameron adverts before the election stating “I will cut the deficit, not the NHS” and “no top-down reorganisation”. Two big (and deliberate) whoppers for a start. But the U-turns have cascaded fast and loose since then.

Continue reading →

Put growth and jobs first

Ed Balls lost no time in attacking the government when the latest figures emerged showing a contraction of the economy in the last quarter, urging them to “urgently re-think their reckless plan to cut the deficit too far and too fast and start putting growth and jobs first.” Osborne’s reaction, however, is “we’re not going to be blown off course by the bad weather.” In fact, it’s worse than that: at the very time we might be slipping into a double-dip, the government’s primary focus is likely to be on inflation. The markets are already assuming that there will be a three points rise in interest rates this year in spite of city fears that higher rates too soon “could be GDP suicide“. Higher prices are primarily caused by a weak pound, the government’s foolish decision to raise VAT and the surge in global commodity prices. If this turns out not to be a temporary inflation spike, it is surely right to increase the inflation target rather than prejudice growth and jobs. Continue reading →