Why does the media think low growth is a big achievement for Osborne?


9:02 am - April 4th 2012

by Duncan Weldon    


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The British Chambers of Commerce released their latest forecasts for the UK economy yesterday, saying growth was still too weak. They estimated that growth in 2012 as a whole will be just 0.6%.

Let’s be clear – that is a disastrous forecast: growth even weaker than in 2011. But a quick glance at the headlines tells a different story. Instead of looking at the whole year figures, most of the coverage so far has focused on their prediction of 0.3% growth in Q1 – i.e. the UK avoiding a ‘double dip recession’.

We find ourselves in a ludicrous situation whereby the success or failure of the government’s economic policy is being measured almost entirely on whether we have two back-to-back quarters of negative growth or not.

The BBC points out the signs of improvement, ‘Businesses up beat on economic prospects’ says the FT whilst ‘Dip Dip Hurray as recessions fears eased’ says the Sun.

The BCC releases a quite gloomy forecast and many are prepared to call it ‘good news’?

I’ve pointed out before that even if the economy grew by 1.5% in 2012 – twice as much as the OBR have predicted – this would still be a bad result.

But expectations are so diminished that the Government might get away with hailing this as a success.

Paul Krugman, borrowing a term from President Bush, has called this (in a slightly different context) the ‘Soft Bigotry of Low Employment Expectations‘.

I now seriously worry that the UK is suffering from an acute case of the soft bigotry of low growth expectations.

I think the OBR has not adequately taken into account the impact of austerity (show by Adam Posen last week) and I worry that the UK is misdiagnosing a serious demand problem as a productivity problem.

But on some level this actually makes me angry.

Angry that many people seem to have accepted very low growth as either somehow ‘inevitable’ or, even worse, as somehow a ‘good result’.

Low growth is not inevitable nor is an achievement.


A longer version is at Touchstone blog

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About the author
Duncan is a regular contributor. He has worked as an economist at the Bank of England, in fund management and at the Labour Party. He is a Senior Policy Officer at the TUC’s Economic and Social Affairs Department.
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Reader comments


I wonder if on some level it’s because, so much of the public is drowning in debt, that keeping interest rates at rock bottom is the key priority. If we grow too quickly, then interest rates go up, taking default rates with them.

Just a thought.

2. Andrew Suffield

To answer the headline question: Labour spent massive amounts of time talking about an inevitable “double dip recession”. Well, the media listened.

Be careful what you wish for.

This is why we need a really free factual reporting press instead of the propaganda style bullshit that Goebals would have been proud of!

4. Leon Wolfeson

Because with their policies it is. They’re managing to paper enough wallpaper over the cracks to avoid collapse. Won’t last, of course.

The Greens have been urging low GDP growth rates upon us for decades – recall that Club of Rome Report in 1972 on: Limits to Growth:
http://en.wikipedia.org/wiki/The_Limits_to_Growth

Surely, the Greens should be celebrating Osborneconomics.

We find ourselves in a ludicrous situation whereby the success or failure of the government’s economic policy is being measured almost entirely on whether we have two back-to-back quarters of negative growth or not.

Yes. That’s largely thanks to Mr Balls.

http://www.guardian.co.uk/politics/2010/aug/27/ed-balls-attack-spending-cuts

“Double-dip” is a strangely memorable phrase too – it sticks in the public mind in the way that “below trend economic growth” just doesn’t. Labour made this the benchmark of success back in 2010, and for all that they’ve tried to row back since, it’s stuck. As Chris Dillow predicted here a year ago:

http://liberalconspiracy.org/2011/04/20/is-it-tactically-wise-for-osbornes-critics-to-predict-a-recession/

I won’t stress exactly who Chris was chiding there…

The arbitrary benchmark definition of a “recession” as two successive quarters of negative GDP “growth” has been accepted practice for decades. It was not an invention of Ed Balls.

8. Duncan Weldon

@6, TimJ

A fair comment. I reversed my double dip call with a mea culpa footnote 6 weeks ago.

http://touchstoneblog.org.uk/2012/02/benchmarking-a-potential-recovery/

To be fair – I try and call the economy as i see it, not as may be ‘tactically wise’.

D

9. Shinsei1967

The UK grew at an average of 2.5% during the decade prior to the banking crash.

These years were characterised by globalisation, strong global growth, low inflation and, on the whole, lowish commodity prices.

The UK saw a massive increase in borrowing from the household sector and a sizable increase in borrowing from the government.

So with this confluence of a strong macro-environment and massive borrowing growth was 2.5%.

We are now in a situation of high commodity prices, a semi-comatose financial system and a widespread desire to deleverage.

So, yes, growth of 1-1.5% under such circumstances is pretty good going.

8 – Which I think is perfectly reasonable of you! It’s still touch and go whether the UK will slip back into recession after all.

But Labour aren’t and can’t be impartial observers of the economy, and it was largely their doing that the UK’s economic success/failure has been reduced to growth vs. recession. You can’t blame the Govt for leaping on such a relatively low benchmark!

I simply wish the stories would go beyond statistics and look at the human cost of poor economic growth- unemployment, lack of opportunity, the stifling of creativity, increased prevalence of emotional depression….the list goes on and on

The broader point here, how the media set what amount to random expectations, is a crucial one to liberal democracy. An idea is mentioned and insidiously, without any formal discussion, but with grim sounding analysis and stern words, it becomes simple truth. Be this low growth or the invasion Iraq/Afghanistan/Iran or the break up of the NHS. There is no “truth” on these issues, just our own opinions being warped, so that in the space of a few months in which nothing changes much of the media and thus of the population switches position.

This article points out the random nature of it; others have mentioned Labour’s chatter, and this is a great example of a flimsy reason to think something, no factual value, just reversed posturing. A random expectation formed for very little reason, just like so many big issues today.

13. White Trash

Leon Wolfeson -: “They’re managing to paper enough wallpaper over the cracks to avoid collapse. Won’t last, of course.”

No. Western economies are in advanced state of senility, or could be described as zombie economies; the living dead. End. We’ve run out of frontiers to conquer and new territories to invade.

The only future most can imagine involves keeping desperately on trying to pump debt round the sick system by vain notions like “re-starting the housing market”, aka blowing yet another bubble of boom and bust.

http://www.economicvoice.com/cameron%E2%80%99s-brave-new-housing-bubble/50025884#axzz1r5CCOlc3

I think the political and media obsession with things like ‘ double dip recession ‘ is absurd. They are all meaningless terms without much common agreement. Some people say any quarterly decline in output before the economy passes the previous peak of output should be classed as a double dip recession. Others legitimately say that until the economy passes the previous peak it still is in a recession even if output is growing. The UK will probably not pass the 2008 peak until about 2014. That truly is a dismal performance and one could call it a six year recession. Negative growth is a particularly dumb term. However, the public will not notice the difference in their daily life if output in the economy is reported as growing at 0.1% or two quarters of 0.1% declining output.

The column inches and political hot air that is wasted arguing over minute differences in ONS quarterly GDP estimates is just stupid. They are only estimates and are regularly subject to revision years later. For example, Q3 2009 GDP was originally reported as a decline of 0.4% has since been revised to a rise of 0.2%. That is a huge difference and all the comment on the original release would be just nonsense because they were commenting on wrong data. Moreover, these ONS releases cause more political ripples than they should. Back at the beginning of 2010, the ONS reported the economy had finally started growing and reported growth of 0.1%. Cue media and political mocking of such a puny growth rate. That quarter has since been revised to 0.4% growth. Moreover, the economy started growing in August 2009, four months before the ONS originally noticed.

Most people do not think in terms of GDP. They care about their jobs or the lack of them. Therefore, employment and underemployment should be the metrics that we judge economic policies. We should stop obsessing about quarterly changes in GDP and concentrate on whether employment is growing.

I can’t understand why the Greens aren’t celebrating Osborne’s achievement in securing low GDP growth. After all, credit where it is due.

16. Leon Wolfeson

@13 – Funny, it seems that the UK and Greece are doing uniquely badly. Keep making excuses for the Tories.

We are now in a situation of high commodity prices, a semi-comatose financial system and a widespread desire to deleverage.

So, yes, growth of 1-1.5% under such circumstances is pretty good going

In other words, Shinsei doesn’t believe in the mythical “Innovative Private Sector” propaganda either.


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    Why does the media think low growth is a big achievement for Osborne? http://t.co/UitTSRgb

  2. James Ball

    Why does the media think low growth is a big achievement for Osborne? http://t.co/UitTSRgb

  3. leftlinks

    Liberal Conspiracy – Why does the media think low growth is a big achievement for Osborne? http://t.co/gjE6bxek

  4. sunny hundal

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  5. Chris Paul

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  6. Steve Graves

    Simple question: Why does the media think low UK growth is a big achievement for Osborne? http://t.co/uTz9dGnk

  7. ScriptoniteDaily

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  12. Neil Courtman

    Simple question: Why does the media think low UK growth is a big achievement for Osborne? http://t.co/uTz9dGnk

  13. BevR

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    Simple question: Why does the media think low UK growth is a big achievement for Osborne? http://t.co/uTz9dGnk

  15. Lee Hyde

    Simple question: Why does the media think low UK growth is a big achievement for Osborne? http://t.co/uTz9dGnk

  16. Kev

    “@libcon: Why does the media think low growth is a big achievement for Osborne? http://t.co/ZRwFnHPe”

    They don't understand either?

  17. Sophie Gale

    Why does the media think low growth is a big achievement for Osborne? http://t.co/UitTSRgb

  18. Pucci D

    RT @libcon: Why do the media think low growth is a big achievement for Osborne? http://t.co/mDeK1TTP #fb

  19. BevR

    Why does the media think low growth is a big achievement for Osborne? http://t.co/UitTSRgb

  20. Martin Edwards

    Why does the media think low growth is a big achievement for Osborne? http://t.co/UitTSRgb

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  24. Alex Braithwaite

    Why does the media think low growth is a big achievement for Osborne? | Liberal Conspiracy http://t.co/Rx7evUac via @libcon

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    Why does the media think low growth is a big achievement for Osborne? | Liberal Conspiracy http://t.co/5NLqxxy6 via @libcon

  26. Mark Martin

    To put it simply, the media and right-wingers are cheering that we're all getting poorer http://t.co/uTz9dGnk

  27. Shifting Grounds

    @DuncanWeldon Many seem to have accepted very low growth as either somehow inevitable or, even worse, as a good result http://t.co/syicXnMF

  28. Louise Brown

    To put it simply, the media and right-wingers are cheering that we're all getting poorer http://t.co/uTz9dGnk

  29. BevR

    To put it simply, the media and right-wingers are cheering that we're all getting poorer http://t.co/uTz9dGnk

  30. itsnotme

    Why does the media think low growth is a big achievement for Osborne? | Liberal Conspiracy http://t.co/Jn7rXCXp via @libcon

  31. Ed Antarctica

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  32. doasyouwouldbedoneby

    To put it simply, the media and right-wingers are cheering that we're all getting poorer http://t.co/uTz9dGnk

  33. Paul Southworth

    The media are reporting low growth as a success story rather than Osborne's almighty cock-up: http://t.co/wgDyYQW2

  34. Nick H.

    To put it simply, the media and right-wingers are cheering that we're all getting poorer http://t.co/uTz9dGnk

  35. Chris Barker

    To put it simply, the media and right-wingers are cheering that we're all getting poorer http://t.co/uTz9dGnk





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