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:
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23 Responses to “UK has highest GDP per capita rise in G7 since 1997”
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.
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. http://yglesias.thinkprogress.org/archives/2010/01/gdp-maximizing-policies.php)
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.
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.
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.