Osborne's "Success"

[The Minsky Moment]

The UK economy grew 0.7% in the 2Q of 2013.  That is pretty respectable, albeit only quarter.
One would expect the Tory press to crow, but I was surprised to see the likes of the FT editorial page present the quarterly result as some kind of vindication of Osborne's austerity strategy.

UK GDP remains more than 3 percent *below* its pre-recession peak.  That is historically awful performance, even for a balance sheet recession.
Compare to the US, which engaged in some limited amount of stimulus spending.  The US economy post-crisis has been very disappointing, but it is still 12 percent *above* the pre-recession peak.

To put raw numbers on that kind of differential, it means that 360 billion US dollars is missing from the UK economy compared to what it would been had it performed like the US economy during the same period.  Or about US $5700 for every man, woman and child in the UK.

I can't prove that the austerity was the cause of Britain's poor economic performance.  But the claim that the strategy succeeded because five years later the country managed to pull off a single respectable quarter of GDP results is risible, absurd.  And the claim that the Keynsians were proved wrong because the UK did not stagnate in perpetuity (also raised in the FT editorial) is asinine, a textbook example of the strawman fallacy. 

[Admiral Yi]

How much debt would the UK have had to bequeath to future generations (assuming there would have been willing lenders) to get back that $5,700 in lost consumption?

And you and I may understand that the deflationary trap does not work that way, but based on my reading it seems there are plenty of people who think that's exactly how it works.  There is value in pointing out to those people the truth.

[Sheilbh]

I also wonder how much of Osborne's success is because he had to give in to critics. He won't say as much but the pace of austerity slowed dramatically and is now, roughly, going at the level Alastair Darling proposed in 2010.

It's just a shame we lost three years with really incompetent cuts (cutting capital spending by around 50% :blink) that hurt the economy and, I suspect, have increased debt more rapidly.

It doesn't look like a vindication of Plan A so much as of Plan B+

[crazy canuck]

I also wonder to what extent this blip in growth is attributable to other major economies not going the route of hard core austerity.

[mongers]

I also wonder to what extent this blip in growth is attributable to other major economies not going the route of hard core austerity.

Yes, I think in part growth in Germany, our largest trading partner, is helping us out.

[mongers]

The UK economy grew 0.7% in the 2Q of 2013.  That is pretty respectable, albeit only quarter.
One would expect the Tory press to crow, but I was surprised to see the likes of the FT editorial page present the quarterly result as some kind of vindication of Osborne's austerity strategy.

UK GDP remains more than 3 percent *below* its pre-recession peak.  That is historically awful performance, even for a balance sheet recession.
Compare to the US, which engaged in some limited amount of stimulus spending.  The US economy post-crisis has been very disappointing, but it is still 12 percent *above* the pre-recession peak.

To put raw numbers on that kind of differential, it means that 360 billion US dollars is missing from the UK economy compared to what it would been had it performed like the US economy during the same period.  Or about US $5700 for every man, woman and child in the UK.

I can't prove that the austerity was the cause of Britain's poor economic performance.  But the claim that the strategy succeeded because five years later the country managed to pull off a single respectable quarter of GDP results is risible, absurd.  And the claim that the Keynsians were proved wrong because the UK did not stagnate in perpetuity (also raised in the FT editorial) is asinine, a textbook example of the strawman fallacy.

Thanks for that JR, I think a probably majority of the UK population intuitively know his too.

Leaving aside the London/M25 bubble, It's not pretty from the inside for many. 

[Sheilbh]

Yes, I think in part growth in Germany, our largest trading partner, is helping us out.

We're Germany's largest trading partner, but the US is still ours.

I think Germany's our largest trading partner in goods (though them and the US have fluctuated since the 70s I think), but once you add in services then the US is far larger.

In either case they've both had relatively pleasant recoveries.

[Josephus]

I thought this was going to be about Ozzy 

[Eddie Teach]

I thought this was going to be about Ozzy 

Joan would be more deserving of the scare quotes.

[Richard Hakluyt]

There is the possibility that permanent damage may have been caused to the UK economy. That is, despite the terrible numbers that JR mentioned, the output gap may not be that large.

[Ed Anger]

There is the possibility that permanent damage may have been caused to the UK economy. That is, despite the terrible numbers that JR mentioned, the output gap may not be that large.

I read somewhere that ~99% of the UK workforce is service based. Which, in my mind, is insane.

Then again, you people built the Reliant Robin.

[Ideologue]

They can't be that tertiary, can they?  There's still coal to be mined.

[Ed Anger]

They can't be that tertiary, can they?  There's still coal to be mined.

I don't even know if those figures are right. But if I wanted a factory in Europe, I wouldn't pick England.

[Richard Hakluyt]

The service sector is about 80% IIRC and the UK runs a big trading surplus in services. Agriculture is 2% at most but does provide about 2/3 of food requirements. Manufacturing is about 10% and the bulk of the remainder is construction.

It is very important to the UK that our services sector can keep making big profits abroad, without it we would probably only be a middle-income country.

[Ed Anger]

I shall humbly apologize to the English for those bad numbers.

Edit NOT TO THE WELSH THOUGH