Posts Tagged ‘2008 crash’

Everything else is a sideshow to economic growth

18/12/2012, 07:57:19 AM

by Jonathan Todd

Once you start thinking about economic growth, as the economist Robert Lucas famously said, it’s hard to think about anything else. The British paradox, however, is that, while almost all policy questions come back to growth, our politics so lacks serious thinking and debate on growth.

In 2008 Barack Obama was the new kid on the block, Rafa Benitez and Fernando Torres were loved in Liverpool and reviled in Chelsea, and Gordon Brown was mid-premiership. It was a long time ago. Yet the British economy remains 3 percent smaller than it was then. The economies of emerging Asia, in contrast, are 30 percent bigger.

We recovered more quickly in the halcyon days of the 1930s. We have had our first double dip recession since 1975. We may still have our first ever triple-dip recession.

We are progressively poorer in real terms as inflation persistently outpaces growth. The less cake there is to share the quicker we are to point the finger at those who did not prepare it; whether these are global coffee chains that do not pay their taxes or “shirkers” that do pull their weight.

The longer the cake takes to bake the more austerity we are promised. It was meant to last until 2015 and now until 2018. We are halfway through this parliament and we have five years of promised austerity ahead of us – as we did at the start of this parliament. If growth does not improve and neither the doctor nor the medicine are changed then the current rate of progress and inflexible strategy will have us facing another full parliament of austerity at the end of this one.

In fact, current trends have us facing endless austerity. Without growth we can cut as much as we like and not reduce the deficit. The longer this persists the more invidious the spending choices will become. Only the organs of the state remain when cuts have already gone to the bone.


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