Is the recession over? These figures don't tell the whole story
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Version 0 of 1. According to the media, the great recession that began in 2008 is now over: the UK economy is supposed to have returned to the levels it reached that year. The National Institute of Economic and Social Research (NIESR) has revised its GDP growth predictions for 2014 upwards from 2.5% to 2.9%, and said that the economy will reach its pre-recession peak in a few months. Predictions also show that unemployment will fall close to 6% by 2015 and inflation will remain close to its 2% target. The director of the NIESR, Jonathan Portes, has claimed that it is "important symbolically that the economy is, or will very shortly be, bigger than it was in 2008". The trouble is that the financial crisis and everything that we should have learned from it risks being washed away in a rising tide of economic optimism. The implication of this news is that the economy is fixed after its great malaise and that we can return to business as usual. It also illustrates just how much GDP and unemployment figures can obscure what is really going in an economy. Rising growth figures hide that nearly 80% of jobs created since 2008 have been in low-wage sectors and that, since 2010, 79% of private sector jobs have been created in London. GDP figures, even when taken per capita, give the impression that we are all in this together when, in fact, the regional and occupational distribution of growth is highly unequal. Despite these shortcomings, GDP retains it seat on the throne at the centre of how we understand our economies and judge their success. When a piece of policy comes up for discussion, the first question ministers ask about is what its implications for growth are. Politicians from across the political spectrum – excluding perhaps the Green party – plus media commentators and policymakers, all buy into the idea that economic growth represents economic health and prosperity. The business-as-usual narrative has not gone unchallenged. Labour has picked up on the decoupling of GDP and standards of living by highlighting the cost-of-living crisis. But it still relies on similar economic logic to inform its policies as the other parties. GDP appears to have been detached from all that it is supposed to measure and has been imbued with an intrinsic value all of its own. So far, there seems little hope of a new breed of public figure with a more critical understanding of GDP. In economics education, the very first class is devoted to growth and national accounting and from then on it is accepted uncritically as the primary measure of economic success. The Post-Crash Economics Society and students from across the world are campaigning for reform to economics education. In our recently published report we argue that as a result of making one way of doing economics the sole object of study, economic theory is often communicated as universally established truth. Society's ability to effectively manage its economies relies on its politicians and economists understanding a range of perspectives and how each thinks about growth. For example, ecological economics might advocate a zero-growth economy while post-Keynesian economics could highlight the importance of the public sector for ensuring full employment, and Austrian economics might highlight the risks of central banks inflating growth artificially by setting low interest rates. It is only through embracing a range of perspectives that we can demystify the concept of growth and restore it to its proper place as one of a wide range of indicators of economic success and human wellbeing. The past six months has seen the emergence of a battle over how society should judge the state of its economy and the wealth of its people. If we listen to today's growth figures then we might accept that all is well and carry on with business as usual. But we must never forget that the financial crisis had far deeper causes and consequences than a few periods of negative GDP growth. We have returned to the position in 2008, according to the figures, and yet we are – in other ways – not in the same place at all. Or, if we are in the same economic place, then it seems very different to what it was last time we were here in 2008. We are a little wiser. We can see more of the truth, about the world and about economics. As TS Eliot wrote, we have arrived where we started and now "know the place for the first time". |