As the UK economy descends into a double-dip recession, new figures today show the US economy continuing to grow, albeit it at a slower rate, writes Shamik Das.
In the first quarter of 2012, the US economy grew by an annualised 2.2 per cent – or 0.55% on a quarter on quarter basis, compared to the UK’s 0.2 per cent quarter-on-quarter contraction in Q1 2012. As Graph 1 shows, the US annualised growth rate is down slightly on Q4 2012, yet still up, unlike the UK’s austerity-driven contraction.
In all, over the course of the 18 months since George Osborne’s spending review, the UK economy has shrunk by 0.2 per cent; over the same period, the US economy has grown by 2.8 per cent. America’s economy is now 1.3 per cent above its pre-crisis peak; Britain’s is now 4.3 per cent below.
Shadow chancellor Ed Balls today contrasted President Obama’s “jobs plan to support the recovery” with the UK government’s “self-defeating austerity”, and called on the prime minister and chancellor to “wake up to the reality” of the recession they had created and change course.
“The results of two different economic strategies are increasingly clear to see. By taking a more balanced approach over the last couple of years, with a jobs plan to support the recovery, President Obama has delivered a growing economy in America. But David Cameron and George Osborne’s self-defeating austerity policies have plunged Britain back into recession.
“In the 18 months since George Osborne’s spending review, Britain’s economy has shrunk by 0.2 per cent while America has grown by 2.8 per cent in the same period. That is why the US economy is now over 1 per cent bigger than before the global recession, while Britain is now over 4 per cent smaller.
“While in America there is disappointment that these figures are not even stronger and policymakers are rightly debating with urgency what more can be done to boost jobs and growth, in Britain our complacent and out of touch Government has delivered a recession but sits on its hands and offers more of the same.
“There do need to be tough decisions on tax, spending and pay. But cutting spending and raising taxes too far and too fast has badly backfired in Britain, with £150 billion of extra borrowing to pay for higher unemployment and economic failure.
“David Cameron and George Osborne must wake up to the reality of the double dip recession they have created. We need a change of course and a jobs and growth plan to get Britain back on track – and we need it now.”
• OBR get growth projection wrong (again) 25 Apr 2012
• Obama/Cameron love-in comes unstuck over cuts 25 May 2011
Last September, President Obama made the case for State spending in tough times as a driver of growth, hitting out at the small-State demagogues who advocate ever-more austerity, bigger cuts, less investment – exactly the disastrous set of policies pursued by the UK government, with devastating results.
The president said:
“Yes, we are rugged individualists. Yes, we are strong and self-reliant. And it has been the drive and initiative of our workers and entrepreneurs that has made this economy the engine and envy of the world. But there has always been another thread running throughout our history – a belief that we are all connected; and that there are some things we can only do together, as a nation.
“We all remember Abraham Lincoln as the leader who saved our Union. But in the middle of a Civil War, he was also a leader who looked to the future – a Republican President who mobilised government to build the transcontinental railroad; launch the National Academy of Sciences; and set up the first land grant colleges. And leaders of both parties have followed the example he set.
“Ask yourselves – where would we be right now if the people who sat here before us decided not to build our highways and our bridges; our dams and our airports? What would this country be like if we had chosen not to spend money on public high schools, or research universities, or community colleges? Millions of returning heroes, including my grandfather, had the opportunity to go to school because of the GI Bill. Where would we be if they hadn’t had that chance?
“How many jobs would it have cost us if past Congresses decided not to support the basic research that led to the internet and the computer chip? What kind of country would this be if this Chamber had voted down Social Security or Medicare just because it violated some rigid idea about what government could or could not do? How many Americans would have suffered as a result?”
“Pass this jobs bill, and we can put people to work rebuilding America. Everyone here knows that we have badly decaying roads and bridges all over this country. Our highways are clogged with traffic. Our skies are the most congested in the world.
“This is inexcusable. Building a world-class transportation system is part of what made us an economic superpower. And now we’re going to sit back and watch China build newer airports and faster railroads? At a time when millions of unemployed construction workers could build them right here in America?
“There are private construction companies all across America just waiting to get to work. There’s a bridge that needs repair between Ohio and Kentucky that’s on one of the busiest trucking routes in North America. A public transit project in Houston that will help clear up one of the worst areas of traffic in the country. And there are schools throughout this country that desperately need renovating.
“How can we expect our kids to do their best in places that are literally falling apart? This is America. Every child deserves a great school – and we can give it to them, if we act now.”
If only Osborne and Cameron had been a bit less arrogant, opened their eyes a little and looked across the pond, we too might be growing not double-dipping.