As the signals intensify that the recession may be coming to an end, we have a chance to take stock of the damage done to the economy. At first glance the figures look pretty unpleasant, but before we despair, it’s worth stepping back and taking a broader view over the last sixty-five years:
|The graph shows the total output of the UK economy in each quarter between 1955 and today, adjusted for the seasons and changing prices. Even the current recession, the steepest and deepest of the period, seems relatively insignificant in this context – the economy is still bigger than at any time before 2005.
Of course, the recent contraction has not been evenly spread across regions or industries, and the hardship for many has been terrible, but the bigger picture is clear: the recent crisis has been little more than a hiccup in decades of sustained growth.
We should maintain this sense of perspective not only in assessing the harm wrought by this recession, but in developing policy for the future. The living standards of the next generation will not be chiefly determined by the severity of cyclical fluctuations, but by the long-term rate of growth in the intervening years.
In responding to the current crisis, and to the wider ills of society, a brave and forward-thinking government will bear this in mind, and pursue goals that do not simply address the problems of today, but recognise that economic growth offers the best solutions to the problems of tomorrow. It will accept that short-term sacrifices are necessary for long-term gains. It will encourage competition and innovation; it will reduce taxation and spending, and eliminate subsidy. It will ensure a productive workforce by educating and training the workers of the future, liberalising the labour market, and demolishing the benefits trap. And it will stimulate investment through price stability and fiscal prudence.
Or perhaps, as ever, it will succumb to the temptations of short-term, politically-motivated policy.