UK has highest GDP per capita rise in G7 since 1997

Britain had the highest per-capita rise in GDP in the G7 since Labour came to power. But critics are calling for an end to "unsustainable" growth.

As the economy emerged from recession, figures from the IMF – including data for 2009 – show that since 1997, Britain has had the highest per-capita rise in GDP in the G7. But critics are calling for an end to “unsustainable” growth.

As the chart below shows, Britain’s GDP per per capita rose 21 per cent since 1997, with GDP overall rising 28 per cent, behind only Canada (35 per cent) and the US (31 per cent).

The growth in GDP was responsible for creating millions of jobs, providing a better standard of living for a decade, and mending the broken public services infrastructure. Although some, including James Purnell, have pointed out that, “GDP had been artificially inflated by the housing and financial bubble.”

A new campaign by the New Economic Foundation is arguing that “indefinite global economic growth is unsustainable” while campaign group 38 degrees are calling for an end to the “fixation” with economic growth.

A new website and YouTube video, The Impossible Hamster, has been set up to promote the campaign.

Watch it:

23 Responses to “UK has highest GDP per capita rise in G7 since 1997”

  1. jaqi

    RT @leftfootfwd: Despite the recession, UK has highest GDP per capita since 1997 but critics call for an end to "unsustainable growth" //bit.ly/6nbyIm

  2. Tim Connor

    Oh, right, so everything’s okay then, is it? I hadn’t realised. We’ve had fewer war dead over the last six years than in 1939-45, too. We should be more grateful.

  3. NorthernJohn

    Will – that’s easy when you borrow. My neighbour’s standard of living has increased faster than mine in the last couple of years. He bought himself two new cars, a top-notch laptop, a conservatory, and a flat screen TV. Does he work harder than me? No. Does he earn more than me? No. He did it all with credit cards and personal loans.

    In just the same way, our ‘boom’ was fuelled by excessive borrowing, including Labour government borrowing of nearly FORTY BILLION POUNDS PER YEAR at the TOP of the economic cycle. Total madness and this lot have a lot to answer for.

  4. nef

    RT @leftfootfwd Critics call for an end to "unsustainable growth" //bit.ly/6nbyIm

  5. Sarah Jane Allison

    RT @theneweconomics: RT @leftfootfwd Critics call for an end to "unsustainable growth" //bit.ly/6nbyIm

  6. Henry

    And if our GBP/capita hadn’t been so high, your Tory posters would no doubt be complaining that the Labour government damaged economic growth…

  7. Martin Johnston

    RT @leftfootfwd: UK has highest GDP per capita since 97 but critics call for end to "unsustainable growth" //bit.ly/6nbyIm

  8. JamieSW

    RT @theneweconomics: RT @leftfootfwd Critics call for an end to "unsustainable growth" //bit.ly/6nbyIm

  9. Claire Fair

    Will, I am not clear on which side of the fence you fall (or if are you sitting on it?!). Do you want to continue to protect per capita (sic) GDP incomes derived from the financial sector (AKA gambling incomes) from a which a tiny proportion of society benfits? How forward thinking do you/we want to be?

  10. Alfred T Mahan

    The USA’s GDP rose significantly because of Hurricane Katrina, but I doubt anyone would argue the country was better off having regular hurricane disasters. Since GDP includes all the government’s spending on the never-never, it would be amazing if GDP hadn’t risen significantly – but it’s a meaningless and misleading statistic in this context. Anyway, you admit this yourself when you quote James Purnell saying that GDP has been artificially inflated. I’d stick to the day job if I were you.

  11. Mark

    A bit selective citing just the G7 and then starting in 1997. Remember, today’s GDP numbers confirm GDP is back to where it was in 2005. So an “average voter” in the next election might well be worse off than when they voted last time, as measured by output.

    Amongst G20, the UK’s had the longest recession in the G20, it’s had the second deepest recession, it’s got the biggest budget deficit, it’s had the largest currency devaluation and now it’s got the weakest recovery. Is Gordon Brown is a closet fan of the campaign to move away from economic growth? He’s certainly trying his best.

  12. Roger

    Firstly, “the growth in GDP was responsible for creating millions of jobs, providing a better standard of living for a decade, and mending the broken public services infrastructure”

    You are aware that these are arguably all causes as well as effects of a rise in per capita GDP?

    In ignoring that aren’t you effectively conceding to the primitivistic free marketeer myth that only the private sector is productive and that everything the state does is somehow parasitic?

    Secondly there are two variables here: GDP and population – and its not insignificant that the two countries that did better than the UK are those that had the larger rises in pop (UK +8%, Canada +12% and US +15%) and those two that did worst had the lowest (Italy +6% and Japan just 1%).

    This seems counter-intuitive in that having relatively fewer people sharing the cake sounds like it should result in bigger average slices – but in fact bigger populations (or rather pops with more working age adults) result in a cake that grows faster in both absolute and relative terms.

    Failure to take proper account of the effect of population growth on GDP is also at issue in a debate that’s been taking place in the US political blogosphere between right-wing economist Jim Manzi (for whom the faster US growth is purely a function of its ‘freer’ economy) and various critics who’ve pointed out his dodgy methodology and that laxer immigration policies are a bigger factor (see e.g. //yglesias.thinkprogress.org/archives/2010/01/gdp-maximizing-policies.php)

  13. Will Straw

    Thanks for the comments, everyone. The point of including both a longer view on GDP growth and a critique of it was to provoke exactly this kind of discussion and get away from today’s narrow discussion on whether we’re out of recession or not.

    I think these comments indicate that discussions over growth (and whether we want it) are going to become critical in years to come.

    On the specific points:

    Tim – No everything’s not OK (see our earlier post on the GDP figures) but it is interesting that the economy has done better than the G7 since 1997 on one measure of economic performance.

    NorthernJohn – Some of the boom was fuelled on credit (as the Purnell quote indicated) but some was also fuelled by population growth (much from migrants) and from a rise in the trend rate of productivity growth.

    Henry – Indeed.

    Claire – I hope my comment above clarifies your question but we shouldn’t pretend that all the economic growth from the last few years was fuelled by casino capitalism. Much of it was productive and socially useful.

    Alfred – GDP is an imprecise measure (the point of the work of Stilitz for President Sarkozy) but it’s the best we have at the moment and since it is pored over to determine that the recession has ended, it’s not unreasonable to go back and look at what’s happened since 1997.

    Mark – The G7 is the right comparison because most of the other G20 countries are middle income and therefore have higher levels of growth because they are playing catch up. 1997 is a good starting point because it allows you to measure the entire increase in economic output across Labour’s time in office. Despite what we’re led to believe, the story is a fairly positive one.

    Roger – Not at all. As you know, GDP = C + G + I + NX. The G is Government spending so we are talking about both private and public sectors of the economy. Great point on increasing population – we also need to be honest about how much of our growth came from increased levels of migration over this period.

  14. Roger

    Will – still think your rhetoric ran away with you on GDP as a cause and not an effect: after all its quite possible to have strong GDP growth without more jobs, increased standards of living or improved social infrastructure – and theoretically vice versa (that’s exactly the utopian ideal the NEF have in mind – which makes me wonder why you brought them into it at all?)

    On population and GDP suggest you follow up on the US debate – the original piece by Manzi argued that the US had done far better in growing GDP than ‘socialistic’ Europe since the 1970s – IIRC Krugman, Yglesias, DeLong and others attacked on multiple fronts (of which not accounting for pop growth was just one) and completely demolished his case – if only we had economics commentary of that quality over here…

    Will see if I can provide links when I have more time.

  15. Mark

    Will, look at the evidence and the trend began in 1991. The UK economy has grown by almost 50% since this date, no mean feat. Especially since the French economy only expanded by a third and the Germans by less than a quarter.

    But since the UK was matched by the US and Canada, this implies that the Anglo-Saxon Thathcher-Regan reforms, embraced by Labour, delivers superior performance. Not sure if that’s the progressive message you are after but that’s appears to be the evidence with continental Europe and cohesive Japan slipping behind.

    By all means start in 1997 but it’s an arbitrary date and only relevant to party political types. In this I mean nothing happened to the trend in 1997.

  16. Post-recession carping | FTdotcomment | FT.com

    […] Straw, from the left, highlights IMF figures showing Britain has had the highest rise in GDP per person since 1997 of any of the G7, in spite of the […]

  17. soondra

    This is a very interesting analysis and as the recovery begins, slowly, Labour can perhaps present its case as a party of economic management. Although we’ve had a dreadful downturn, unemployment has in fact been relatively benign (peaking at 2.5m on the broad measure //www.guardian.co.uk/business/2010/jan/20/uk-unemployment-surprise-fall). And the Conservatives would clearly have withdrawn credit and stimulus from the economy too early. A mistake they should be reminded of during the campaign.

    To Mark, it seems to me perfectly legitimate to pick 1997. This is the three Parliament record of this Government. And it is a relatively good record.

  18. Mark

    Like I say this began in 1991 so claiming it for Labour is spurious. No doubt this won’t stop some but the performance has little to do with specific Labour policies, it’s more right place right time stuff, not the stuff of evidence-based blogging.

    Be careful to claim credit for things unattributed to you for you might have to accept responsibility for the negative things too.

  19. soondra

    Mark, you make a very good point: be careful to claim credit for things without taking responsibility for the negatives.
    But this contradicts your entirely arbitary 1991 date. The Tories were in government 1979-1997 and didn’t take over in 1991. In fact their record in terms of GDP growth per capita per annum (1979-1997) is around 1.8%, pretty much exactly the same as Labour during their time in office. But of course the social consequences of the 1980-82 and 1990-91 recessions were much worse; unemployment topped 3 million in both Tory recessions, whereas it looks like unemployment has peaked at around 2.5 million in the current one.

    If growth (in the long term) is the same, but adverse social costs are lower, I’ll vote Labour.

  20. Mark

    soondra: The date of 1991 isn’t arbitrary, it’s when UK GDP started to grow after a recession. If we wanted to discuss postwar politics in the UK, we’d start at 1945. If we want to discuss GDP growth we go back to 1991 since that’s the start of the data series and therefore very relevant.

    Your point on the “social costs” is similar to my point above: it’s got little to do with Labour. What has Labour done to keep unemployment down in this recession? After all, the fiscal stimulus was small, it was half the size of the measures taken in France or Germany. Instead, economists tend to think that actually Britain’s famously flexible labour market has responded here. Firms have fired some workers but they’ve also cut the pay of others, so people remain in jobs but on low pay. Plus those losing work are being forced into accepting part-time work. In other words, just as the GDP outperformance of the UK, US and Canada compared to Europe and Japan is believed to be a result of the Thatcher-Regan legacy, so the UK’s low unemployment owes itself to flexible labour markets, aka McJobs.

    So vote Labour if you like but the evidence suggests you are actually approving neo-liberal reforms from the 1980s rather than any actual Labour policies. Once again, just because something happens during a Labour government does not imply that policy is responsible for it. Labour’s embrace of Margaret Thatcher’s reforms has more to do with both GDP growth and lower unemployment but as I pointed to Will above, this evidence is not the progressive image some of a partisan* stance want.

    I’m not party-political, I want an open, liberal and progressive society but am wary of parties, their power structures and their groupthink.

  21. Fab 5: Tuesday 26 January 2010 | The Young Fabians Blog

    […] GDP figures released today show the UK is technically out of recession. The BBC’s Economics Editor, Stephanie Flanders, provides the IMF’s take on UK growth prospects. Will Straw of Left Foot Forward highlights rising GDP per capita since 1997, and a new campaign to end the “fixation” wi… […]

  22. Roger

    In defence of Will you have to put your goalposts somewhere – 1991 would actually distort the figures even more as you are then starting off from a recession – ditto for 1979.

    When Jim Manzi did a similar exercise from a right-wing perspective he actually started in 1973 and made the US look even better by lumping not just the EU but the whole of the former Soviet bloc into one ‘Europe’ figure.

    As I said above demographics is probably as or more important than macro-economic policies – Japan is probably a case in point having successively tried pretty every variant of free market and Keynesian solution since 1990 to little avail given that it has an ever more unforgiving demographic profile.

    GDP and GDP per capita are just way too crude measures – would anyone who knows Germany and France well really want to exchange their economic systems for ours just because we managed to add an extra half to one point more to GDP per year.

  23. Tom Freeman

    Hi Will

    Do you have a link to the per capita data? I’ve had a look at the latest WEO but I can’t see it.

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