The UK’s Lost Decade(s)
The past two weeks have provided some good and some bad news on the UK economy. On the one hand GDP data for Q1 2013 was better than expected, whilst on the other GDP per capita figures suggested that the hole we are currently in is much bigger than previously thought.
GDP per capita measures economic output per person. In many ways this is the most sensible way to measure growth over the medium term and the best way to compare growth across nations.
Over the decade 2008 to 2017 the UK will experience, according to the most recent IMF forecasts, GDP per capita growth of 0.0%. In real terms GDP per capita was £23,777.32p in 2008; by 2017 it will have reached just £23,768.25p. In terms of growth per head the UK is set to have its own ‘lost decade’.
The data really tells us three things. First that the UK experienced an especially severe recession in 2008/09, second that the recovery has been historically weak and drawn out and thirdly that in terms of the ‘global race’ that the government is so keen to talk about, we are doing especially badly.
Over the decade in question countries such as Germany, the US and Sweden will see output per head grow by around 10%. In Asia, the developed economies are set grow output per head by over 20%. Amongst the G7 only Italy is expected to underperform the UK.
Looking at this data it is hard to escape the conclusion that we face a growth crisis. And this growth crisis is feeding through into an equally severe living standards crisis.
Even these awful GDP per capita figures fail to capture the extent of the squeeze the middle is experiencing, as they fail to capture the unequal rewards from the little growth we are experiencing. The Resolution Foundation has calculated that median real wages are set to be well below 2008 levels in 2017. In fact real median wages are set to be below 1999 levels as late as 2017.
We face a lost decade of growth and two lost decades of living standards, we are losing the global race, deficit reduction is widely off track and yet the Chancellor still refuses to change course.
Instead any sign of growth is celebrated as if it were a major achievement – even if the recovery is weaker than expected, weak by international standards and very weak by comparison with the UK’s on historical experience. What a sad state of affairs.