From the TUC

Smugness & Fatalism in One Chart

31 Oct 2013, by Guest in Economics

Richard Murphy has spotted a chart that can only be described as terrifying. It comes from a new paper from Sheffield University’s Political Economy Research Institute and, for me at least, pretty much sums up all that is wrong with the government’s new found triumphalism on the economy.

It shows GDP per head from 1948 and the latest OBR forecast on its likely path.


Now those OBR forecasts are likely to be revised up somewhat at the coming Autumn Statement but not in a way that will fundamentally alter this picture. And this picture understates the real crisis in living standards facing the majority of the population, GDP per capita is a useful measure but not an exact proxy for median living standards.  Whilst GDP per capita is currently growing at a reasonable clip, living standards for the majority remain squeezed.

This is a chart that shows a lost decade and that clearly demonstrates that the recent pickup in growth is far less impressive when put into its proper context. I look at this chart and I am reminded of a Paul Krugman quote that I’ve used more than once on this blog before.

The slowness with which Japan’s economy deteriorated was in itself a source of much confusion. Because the depression crept up on the country, there was never a moment at which the public clamoured for the government to do something dramatic. Because Japan’s economic engine gradually lost power rather than coming to a screeching halt, the government itself consistently defined success down, regarding the economy’s continuing growth as a vindication of its policies even though that growth was well short of what could and should have been achieved. And at the same time, both Japanese and foreign analysts tended to assume that because the economy grew so slowly for so long, it couldn’t grow any faster.

So Japan’s economic policies were marked by an odd combination of smugness and fatalism – and by a noticeable unwillingness to think hard about how things could have gone so wrong.  (My emphasis)

This feels very apt.

2 Responses to Smugness & Fatalism in One Chart

  1. Allan Martin
    Nov 1st 2013, 7:22 am

    Sadly this graph doesn’t start in the 1920’s when the depression of the 1930’s could be compared to the great(er) depression of 2008 – 2022. Even more sad is the catastrophe of 1939-45 which transformed the world’s finances after WW2 and provided the very poor and inappropriate starting point for the illustration. Although real growth is illustrated, I think this needs to be considered with several world events such as oil crisis of 1974, freedom of currency movement, stock market big bangs, China and globalisation. The illustration of the build up of unsustainable debt from 1990 (say) onwards would also help to add reality. World competition in manufacturing has already arrived, world pressures in oil refining and petro chemicals was recently illustrated and services will follow to an even greater extent.

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