UK: broke, broken, brokenest
The worst thing about the most recent unemployment figures is that they are going to get worse. Much worse.
In the three months to November 2011, unemployment across the UK rose by 118,000 to 2.69 million and the respected Item Club is now predicting that unemployment will peak in 2013 at the talismanic 3 million.
The other economic runes are not good – growth is flatlining with forecasters like the Item Club revising their estimates for both the UK and Scotland downwards. And all of it predicated on a steady international ship – more Eurozone drama or international economic dips and we will be in crisis. If you want a cheery read, I’d avoid the Scottish Item Club’s latest projections for 2012. We’re heading for a “lost generation” in terms of youth unemployment and a “lost decade” of economic growth.
Few forecasters mention collective wealth. How much money does the UK make and have? The best measure (or at least, the most obvious one) is Gross Domestic Product or GDP. And one analysis brought home just how perilous the UK’s situation is. Basically the UK is broke and its economy is broken.
John Ross, a visiting Professor at the Jiao Tong University in Shanghai, modelled growth and decline in a range of countries’ GDP by converting everyone’s currency into dollars, on the basis that it is one of the most common international purchasing measures and doing so, allows meaningful comparison.
And he found that “no other economy in the world has shrunk even remotely as much as the UK“. Our economy has shrunk more than all those basket case countries like Ireland, Spain and Italy. Indeed, the decline in the UK’s GDP is greater than the whole of the Eurozone taken together. We have 562 BILLION dollars LESS value in our economy, amounting to an eyewatering 20% decline. As the Professor also helpfully points out, “the UK’s decline was more than two and a half times that of the entire Eurozone. The UK accounted for a somewhat astonishing 77 per cent of the EU’s decline.”
Two issues appear to have combined to create this dazzlingly depressing situation. Low economic performance – lower even than the Eurozone countries – and the declining value of the pound against the dollar. You could argue that this latter fact distorts the modelling process but few would argue that it is unacceptable to apply the currency of choice in times of flight to an examination of a range of counries’ economic performance. It does indeed allow for comparison.
Perhaps what is most remarkable about this little exercise is the fact that it has been unable to factor in the impact of the Conservative-Liberal Democrat government’s austerity measures. For the GDP figures analysed are for 2007 – 2010.
This analysis is in fact a damning indictment of Labour’s stewardship of the UK economy in the last years of its government. It was indeed Labour what did it. Professor Ross does not really acknowledge this fact in his article, though he does point out that as there was “no substantial growth in dollar terms” in the UK economy in 2011, there is unlikely to be a turnaround in our fortunes. If anything, given what we know about the UK’s output and economic performance during 2011 – technical recession as the Item Club put it for the last quarters – our GDP value could diminish still further. Something to look forward to then.
In political terms, it is Labour who broke Britain and it is the Tories and Liberal Democrats who are determined to make us the brokenest (yes, made up word I know but it’s a good one). And while it might make political sense for Labour in Opposition – though I confess I am failing to see it – to adopt the austerity policies of the UK Government, it clearly doesn’t make any economic sense.
Using my very limited economic understanding, which largely comprises of common sense, the financial crisis and economic contraction that resulted from it probably caused the start of the decline in GDP. But the Labour UK Government had run out of ideas and steam and therefore had nothing to offer by way of a fix. Now, the austerity measures, high inflation, lack of consumer spending power, continued lower export demand (despite the lower value of the pound) being peddled by the Tory-Lib Dem Government are combining to reinforce and indeed, accelerate further decline.
And with no one having a scooby how to shift our economic house of sand onto firmer foundations, nothing is being done to fix the deep-seated issues. Neither symptoms nor causes are being effectively tackled and both Conservatives and Labour have signalled this to be their approach for some time to come.
It is this maelstrom of poorly performing economic indicators that also causes the money men to continue to look askance at the pound. And without any interventionist attempts to address any of these factors in our economy, the value of GDP is likely to continue to contract in international terms. Kinda puts all that jingoistic waving of the triple A credit rating into a more meaningful, wider perspective.
It would be interesting if some pointy-heid somewhere could model Scotland’s GDP performance over the same period using the same measure. Just to compare. The picture won’t be pretty but will it be as bad as the UK’s as a whole or have we managed to punch above our weight?
But in some respects, it doesn’t matter. Because the big economic and fiscal levers are controlled by the UK Government, our performance is largely determined by decisions made in London. No matter how hard the Scottish Government tries with its Plan MacB and investment for growth strategy, it is fiddling around the margins and can only really, try to ameliorate the worst effects of decisions made elsewhere.
This kind of analysis and modelling is important in the months ahead. We need to add it into the mix, if only to mitigate against the impact of the partisans. Naturally, the pro and anti-independenistas will be utilising statistics and data to suit their own ends.
Yet, it doesn’t take Sherlock Holmes to deduce that this is clearly the kind of analysis that is more helpful to the pro rather than the anti arguments. Better off together? Scotland too wee, too poor? Scotland can’t afford to stand alone? Hmm.
Posted on January 19, 2012, in Political witterings and tagged #sp4, austerity measures, ConDem government, Conservatives, economy, GDP, Labour, Liberal Democrats, Professor John Ross. Bookmark the permalink. 11 Comments.