No, I’m not about to start saying that everything is just peachy, even I’m not that optimistic. But can we at least have a little bit of proportion here?
Economists were expecting GDP to have contracted by 1.5pc in the final quarter of last year – in line with the preliminary estimate – but the Office of National Statistics had to revise the figure downwards to 1.6pc.
It is the biggest quarterly fall in GDP since 1980 and the biggest annual fall since the last recession in 1991.
That proportion being that the economy has indeed just shrunk. All the way back to the size it was in, ooh, say, March or April of last year. Yes, it might indeed get worse again as well but there’s just about no one who thinks that it’s going to shrink as far as, say, the level of 1999. If it did that would be a Great Depression sized fall and there are very very few who are predicting that.
As I say, I’m not trying to insist that everything’s just fine, nor that a lot of people are going to actively enjoy the downturn. But I would like a little more proportion.
The one defining characteristic of this liberal capitalism shtick is that it delivers, consistently, over time and for the average person, a rise in the general standard of living. The other name for this is economic growth. As the major report on climate change notes:
The global economy expands at an average annual rate of about 3% to 2100, reaching around US$550 trillion (all dollar amounts herein are expressed in 1990 dollars, unless stated otherwise). This is approximately the same as average global growth since 1850, although the conditions that lead to this global growth in productivity and per capita incomes in the scenario are unparalleled in history.
We think that trend growth, the possible or even likely long term growth rate, for the UK is 2.5% to 3%. A 1.6% fall in GDP is thus we’ve lost that year’s growth and retreated 8 months. This isn’t, I’d like to posit, the disaster that most seem to be saying that this is.
It certainly isn’t enough of a disaster for us to throw out that only economic system ever uncovered that provides that 3% growth over the long term.
So before we decide that capitalism is dead and we’re off to bury it in regulation and stagnation, could we just make sure that we really do want to stop the occasional hiccup at the cost of never again having that 3% growth?
Oh, and yes, you do know that that 3% average growth over the century includes the falls at times like the Depression? That this is the growth rate after the hiccups?