Responding to the latest fall in GDP, the Chancellor described the UK economy as ‘strong’ and said it was making ‘significant progress’, blaming bad weather for the drop. Simon Wren-Lewis (Oxford University) says the media have been too ready to accept dishonesty from the government about the state of the economy.
The first quarter growth figures for the UK are terrible, with GDP per head falling slightly, and they are consistent with an underlying economy which is very weak. As you can see from the chart below, quarter on previous year’s quarter growth in GDP per head was reasonable in 2014, but has been falling since. The economy has been suffering from Brexit uncertainty and the Brexit-induced falls in real wages, and as I guessed immediately after the referendum the temporary boost to competitiveness has not been enough to offset this. (More discussion here.) [1]
Figure 1: UK GDP per head quarter on previous year’s quarter growth: source ONS
As Will Hutton says, in any other world there would be national soul-searching. But the reaction of the Chancellor to the latest data is that it “reflects some impact from the exceptional weather that we experienced last month, but our economy is strong and we have made significant progress”. The Chancellor says the economy is strong when GDP per head, the best measure of average prosperity we have, is falling. And the ONS said the weather had a relatively small impact.
This kind of Orwellian description of the economy (weak is strong) is something that I first noticed in the run up to the 2015 election. The first three years of the Coalition government were terrible in economic terms, and the government did not try to pretend otherwise. Everyone was expecting a recovery and it didn’t come. But that opened the way for dishonesty to emerge from 2013, as the economy began growing again. UK growth in 2013 and 2014 was really no more than a return to normal growth, but it was enough for both the government and journalists to talk about a recovery, even though there are strong reasons for reserving the term recovery for growth that returns us to a pre-recession trend level of output. The idea that 2013 vindicated austerity was truly Orwellian: no economics student anywhere would get away with such a statement. The government started talking about a strong economy during that period.
The strong economy line became the Conservatives’ key claim in the 2015 general election. The economy was pretty well their only strong point among voters, but that did not make the claim true. In reality we had the worst ‘recovery’ in centuries: it was not really a recovery at all because we did not move any closer to pre-crisis trends. Yet parts of the media – what I called mediamacro – accepted the strong economy line, and largely ignored an unprecedented fall in real wages and the associated decline in productivity growth the likes of which we have never seen before. For that reason I argued that the Conservatives won the election because of mediamacro.
When we see Brexiters repeat nonsense about borders between the EU and Switzerland, tell lies about how the EU stops trade with Africa and how they will spend the Brexit dividend they are simply continuing where David Cameron and George Osborne left off in describing the economy as strong. What Conservative politicians have learned is that the BBC in particular does not have either the expertise or the will to call Conservative politicians out on doublespeak. The more unscrupulous the politician the more they have exploited that weakness in our democracy.
[1] The response of Brexiters is to keep saying it’s not as bad as the government’s pre-referendum short term forecast. For some reason it’s a line that reminds me of this.
This post represents the views of the author and not those of the Brexit blog, nor the LSE. It first appeared at Mainly Macro.
Simon Wren-Lewis (@sjwrenlewis) is Emeritus Professor of Economics and Fellow of Merton College, University of Oxford.
i was working in switzerland in 2007 for a american multinational who manufactures and markets high speed digital printing equipment. on several occasions i had to transport equipment over the border into france and return it, several days later to near geneva. i was about 15 mins at the border with some customs papers to get stamped, and i was on my way- a tick and flick operation.
pretty simple actually. on many occasions i had to travel from France to switzerland on the train on in car or truck. quite simple, show passports, and anyone who looked dubious was pulled aside and checked further. I have lived 19 years in Paris in various technical jobs in blue chip companys pre- europe and during, and also in switzerland for 3 years. things will turn back to as they were, but with the technical advancements today, it will be alot faster. You have to remember that most of the EU countrys have high- nearly double uk unemployment figures, and lower pay- the only exception to this is germany. growth not being exceptional at this moment is a blip on the radar- thousand still move to the UK for work, in all areas. as for brexit ‘lies’ the EU does a great job on shafting countrys and steamrollering any opposition.the people are at the bottom of the pile with the EU, its all about the big corporations and banks. Personally i have seen in the EU’s influence in France , massive redundancys, wage compression and nearly zero growth. and for decades. thanks EU for nothing- just ask anyone that has weathered pre- EU to the current situation.
What a huge set of lies here… another gobbling Brexiter it looks.
UK salary is cca 25k, lower than most countries in Western Europe, and when you consider extremely high living expenses, especially rent, terribly low. Also far more hours and stress in UK.
Young people in UK, pay up to 90% just on rent, for tiny, damp rooms. This is in addition to huge university loans.
Unemployment figures in UK are heavily massaged. UK has one of largest low skilled sectors.
UK has the worst quality of life, and no city on any list in top 100. Bad weather, bad food. Terrible public services.
Terrible current account, and abysmal productivity mean that UK is reversing, and entire economy is one real estate bubble.
In this EU, there are countries with unemployment as low as 2%. Eu does not create these policies, countries do.
An excellent article, Simon.
Uk has extremely deep structural problems, which means economy entirely based on unsustainable private sector borrowing, pushing private debt and current account to extreme, and this is not backed by any growth in productivity.
UK has already faced a BOP crisis, it may happen again.
Over reliance on casino-banking and mostly low level service sectors, has created a hollow economy unable to grow productivity. Education, skills, infrastructure are also very lacking.