Austerity's False Economy? Brexit's Blow? The Long Shadow of 2008? You need much more than those to account for Britain's pitiful economy since Nick Clegg decided to let the Tories govern the place...
It has been observed many times that modern Economics doesn't have a model, or in most cases even a variable, for social power. Perhaps the root cause is that there are powerful people in the UK who don't want the nation to be 11,000/person wealthier if that wealth will be somewhat evenly spread around the population and not 95% to themselves. It is more fun to rule as Duke over a population that is weak and beholden to you even if costs you a bit of absolute wealth - or so some people think.
The divergence between New Zealand and Australia is striking evidence for the persistent effects of recessions. NZ had a string of recessions after 1990 (Don Brash played a big role here) while Australia went 20 years without one. While the two countries grew in parallel for most of C20 NZ is now much poorer and the gap is widening even now.
A possible separate explanation is that, as the centre of financialisation, Britain was hit harder by the Global Financial Crisis than anywhere else. I don't have an analysis in terms of growth effects, but the financial sector has certainly declined in terms of political and economic influence, though it had enough to sink Liz Truss. The idea of London as the archetypal "global city" seems like a distant memory now.
I think that using the chart,that leaves you so dumbfounded, as a starting point for any analysis of the UK economy is floored. The UK's growth trajectory ahead of the GFC was distorted upwards by the growth in the outsized financial sector, itself disproportionately funded out of short term debt, and a very strong fiscal stimulus. In short, a more prudent policy mix, would have led to a less dramatic upslope for the economy's growth trajectory and a less dramatic shortfall in the extrapolated, subsequent growth shortfall. This is not to take from the damage done by the policy of endless austerity and Brexit, but just to contextualise the debate.
I think you are overstating Clegg's role in all of this. There was little possibility of getting a Labour led coalition in 2010 and they were also pro-austerity.
All you had to do to get a Labour-led coalition in 2010 was for Nick Clegg to decide to make it so. After all, the Tories' offer to the LibDems on policy for their joining Cameron was Michael Corleone's offer: nothing.
And to claim that Labour fiscal policy in the 2010s would have been the same as Tory fiscal policy because they were both "pro-austerity"—can you please point me to a sillier thing written on the internet in the past week, because I have not seen one...
You overestimate Clegg's agency in all this. There was little appetite amongst Labour grandees to pull together every non-tory party into a coalition that many thought wouldn't have endured for long e.g John Reid. https://www.youtube.com/watch?v=rR_prPtIPQo
I think it's rather silly you are straw-manning my argument. Labour austerity still would have resulted in very large spending cuts across the public sector, maybe not to same extent as the Tories but Darling's planned "two parliaments of pain" wouldn't have been good for the British economy.
Separately, in that bromance (remember the back garden cermony?), Nick Clegg was ridden hard and put away wet. I apologize, but to whom are too numerous to mention.
How would you price and incorporate the rolliing constitutional crisis that surrounded Brexit? Does the Brexit impact include:
- The opportunity cost of having the entire political class (including all those who are ministers with decision-making capacity) embroiled in endless febrile debate about the one issue that is most obviously on fire and therefore limited in their capacity to pay attention to other matters that are smouldering in the corners - and have none at all to think about sensible long term planning?
- The damage that frequent and irregular rotation of leadership does to the large organisations that make up the public sector/the delivery arm of government?
- The weakening of state capacity from a rolling permacrisis?
- The impact of that rolling permacrisis and the associated anxiety on economic decisions made by millions of individuals? (Including personal investment or entrepreneurial decisions but also including the round of daily decisions to get up and go to work effectively, etc).
The other thing potentially missing from your list is housing. Not necessarily in the sense that the 2008 moment was a change in the housing situation in the UK, but perhaps in the sense that the barriers to increasing housing supply make it much harder than it should be for economic activity to pick up again after a temporary shock.
It has been observed many times that modern Economics doesn't have a model, or in most cases even a variable, for social power. Perhaps the root cause is that there are powerful people in the UK who don't want the nation to be 11,000/person wealthier if that wealth will be somewhat evenly spread around the population and not 95% to themselves. It is more fun to rule as Duke over a population that is weak and beholden to you even if costs you a bit of absolute wealth - or so some people think.
Isn't the fear there higher taxation rates?
The divergence between New Zealand and Australia is striking evidence for the persistent effects of recessions. NZ had a string of recessions after 1990 (Don Brash played a big role here) while Australia went 20 years without one. While the two countries grew in parallel for most of C20 NZ is now much poorer and the gap is widening even now.
RBA avoided one :) Why didn't RBNZ?
A long story, but a search on “Don Brash” gives part of the answer
He ran an AIT regime when a FAIT would have been better?
Powell should take inspiration and challenge Vance in the primaries! :)
A possible separate explanation is that, as the centre of financialisation, Britain was hit harder by the Global Financial Crisis than anywhere else. I don't have an analysis in terms of growth effects, but the financial sector has certainly declined in terms of political and economic influence, though it had enough to sink Liz Truss. The idea of London as the archetypal "global city" seems like a distant memory now.
I think that using the chart,that leaves you so dumbfounded, as a starting point for any analysis of the UK economy is floored. The UK's growth trajectory ahead of the GFC was distorted upwards by the growth in the outsized financial sector, itself disproportionately funded out of short term debt, and a very strong fiscal stimulus. In short, a more prudent policy mix, would have led to a less dramatic upslope for the economy's growth trajectory and a less dramatic shortfall in the extrapolated, subsequent growth shortfall. This is not to take from the damage done by the policy of endless austerity and Brexit, but just to contextualise the debate.
More about these.
What is "austerity?" Is it just fiscal policy that minimizes Σ(expenditures with NPV>0)? This is bad for growth. Is that the L1500?
But could BoE not goose private investment and devalue the Pound sufficiently to maintain aggregate demand? This is L3000?
Brexit happened, but surely an exit that preserved more freedom of movement of goods, services and people could have been negotiated. L2000?
I think you are overstating Clegg's role in all of this. There was little possibility of getting a Labour led coalition in 2010 and they were also pro-austerity.
All you had to do to get a Labour-led coalition in 2010 was for Nick Clegg to decide to make it so. After all, the Tories' offer to the LibDems on policy for their joining Cameron was Michael Corleone's offer: nothing.
And to claim that Labour fiscal policy in the 2010s would have been the same as Tory fiscal policy because they were both "pro-austerity"—can you please point me to a sillier thing written on the internet in the past week, because I have not seen one...
-B.
You overestimate Clegg's agency in all this. There was little appetite amongst Labour grandees to pull together every non-tory party into a coalition that many thought wouldn't have endured for long e.g John Reid. https://www.youtube.com/watch?v=rR_prPtIPQo
I think it's rather silly you are straw-manning my argument. Labour austerity still would have resulted in very large spending cuts across the public sector, maybe not to same extent as the Tories but Darling's planned "two parliaments of pain" wouldn't have been good for the British economy.
https://amp.theguardian.com/politics/2010/mar/25/alistair-darling-cut-deeper-margaret-thatcher
I'd be happy to change my if you can prove Darling's austerity would have been materially better for Britain.
Interesting that even with the poor economic growth the unemployment rate is 4.6%.
"I did find this: Median income grew by 6% from 2009–10 to 2022–23. Before the Great Recession, we could have expected growth of 30% in a 13-year period. Even comparing with 2011–12 – the year in which incomes reached their nadir after the Great Recession – incomes rose by only 10% over the subsequent 11 years." Link: https://ifs.org.uk/publications/seven-key-facts-about-uk-living-standards#:~:text=Median%20income%20grew%20by%206,over%20the%20subsequent%2011%20years.
Separately, in that bromance (remember the back garden cermony?), Nick Clegg was ridden hard and put away wet. I apologize, but to whom are too numerous to mention.
Covid 2020. Easy fix.
How would you price and incorporate the rolliing constitutional crisis that surrounded Brexit? Does the Brexit impact include:
- The opportunity cost of having the entire political class (including all those who are ministers with decision-making capacity) embroiled in endless febrile debate about the one issue that is most obviously on fire and therefore limited in their capacity to pay attention to other matters that are smouldering in the corners - and have none at all to think about sensible long term planning?
- The damage that frequent and irregular rotation of leadership does to the large organisations that make up the public sector/the delivery arm of government?
- The weakening of state capacity from a rolling permacrisis?
- The impact of that rolling permacrisis and the associated anxiety on economic decisions made by millions of individuals? (Including personal investment or entrepreneurial decisions but also including the round of daily decisions to get up and go to work effectively, etc).
The other thing potentially missing from your list is housing. Not necessarily in the sense that the 2008 moment was a change in the housing situation in the UK, but perhaps in the sense that the barriers to increasing housing supply make it much harder than it should be for economic activity to pick up again after a temporary shock.