Most people will have bigger concerns than GDP this Friday

On Friday the latest GDP figures will be released and will almost certainly show that the recovery is well underway, with growth of perhaps as much as 1 per cent for the third quarter of the year.

Provided the predictions are correct, this will be the third successive quarter of growth, boosting the chancellor George Osborne after a bumpy three years.

Come Friday expect triumphalism from the Tories and calls for further cuts and austerity shortly afterwards by right-wing outriders such as the Taxpayers’ Alliance.

More than anything, though, expect to encounter the assumption in the media that economic growth will equals a significantly improved showing in the polls for the Tories as we approach election year.

For many the debate that has taken centre stage for the past five years – cuts or Keynes – has been framed like this: if we see significant growth return before the 2015 election, then the Tories will win; if we don’t then in all probability Labour will.

Not only is this dangerously simplistic, but the appearance of triumphalism on the part of the Tories as growth comes back could work to significantly damage the party’s electoral prospects.

For one thing, the economy was always going to recover at some point whoever was in office. The real argument today is not whether GDP would still be sliding were Labour in office, but whether or not the recovery has been needlessly delayed by austerity.

Also – and it may just be me – I rarely hear friends and family talking about things like GDP and ‘growth’. In fact, *I* rarely talk about GDP and growth, apart from the once every three months when the figures are released. What I do talk about with friends and family, however, is whether or not we feel better or worse off than we did previously – six months, a year, two years ago. This is what people will (still) be talking about come Friday, not GDP.

Of course GDP matters – only a fool would say that it didn’t – but politically it matters far less than much of the political and media establishment seem to believe. Were growth always shared equally, or were it even to reach every corner of the country, then they might be right to do so. Only we know that that’s not what happens – a cursory look at those areas almost untouched by growth during the 1980s should be enough to correct anyone suffering that sort of myopia.

Despite the changing fortunes of the statistical economy, for most people there is still very little sign of ‘growth’ in the real economy. According to yesterday’s YouGov polling for Sunday Times, merely half of those questioned (48 per cent) think the financial situation of their household will worsen over the next 12 months. Just 12 per cent think it will improve.

And there are a number of reasons to believe that this pessimism is warranted. Just yesterday the Asda income tracker showed that the average UK household had £157 a week of discretionary income in September 2013, down £2 a week from the same month last year and £8 a week down compared to February 2010. Wage growth was the weakest on record, up just 0.8 per cent over the past year. Wages have also been stagnating for over ten years now, and real wages are not forecast to increase until 2015 – with a return to pre-crash levels not expected until 2023.

Triumphalism about ‘recovery’ will – and should – prompt the obvious rebuttal: recovery for whom? And that’s the last question politicians like David Cameron and George Osborne, already considered wildly out of touch, will want the electorate asking.

5 Responses to “Most people will have bigger concerns than GDP this Friday”

  1. swatnan

    I’m glad there’s someone else out there besides me that firmly believed that the the Economy ‘was always going to recover’, despite Osbornes’s, or Ballses, efforts to wreck it. The British Economy seems to have a mind of its own, like Gaia’, and into cycles of boom and bust, and there’s precious little that politicians can do to influence it.

  2. Sparkyboy

    It’s called the power of the free market, and it’s done more historically to lift people out of poverty than socialism ever did, or ever will. Look at how South Korea has prospered, look at the transformation of China since it embraced the market. And I’m not talking about a select few at the top, I’m talking about millions of people lifted out of poverty. Centrally-planned left wing economies do not work.

  3. henrytinsley

    So there’s no central planning in China? Or S Korea for that matter?

  4. swatnan

    I’m still a bit undecided about who the wealth creators are; is it the entrepreneurs and business leaders, or is it the workers by ther sweat ogf their brows etc etc etc etc.; its probably a combination of the two, but then the argument is, which is primarily responsible? And I have no answer to that, and nobody else really has either. But what is absolutely certain is that politicians are useful in re-distribution of that wealth; and there I am tribalistic and sensible in saying that a socialist party is more atune to needs of ordinary people than an ideological right wing party.

  5. henrytinsley

    I guess my point is if you look at the successful Asian economies, they break all the rules of the free market dogma we’ve been fed for the last couple of decades. Government and business have worked together closely, if not always amicably, to transform their countries radically.

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