Monday, 29 July 2013

The economic 'recovery' that'll feel like a grim old route march


The news that the British economy is now gently accelerating towards recovery is very welcome. It's late, delayed and uneven - but it's there, and that's something to punch the air about.

But you know what? This is the slowest recovery from recession in modern times. Slower - much, much slower - than our crawl out of the disaster of Wall Street Crash and the 1931 currency crisis. Slower than our emergence from the disasters of the early 1980s. It's very, very weak - so weak that even anaemic growth like this looks (paradoxically) pretty quick. We're still way below the production and the wealth that we enjoyed at the economy's booming peak, in 2007, and we're unlikely to get back to those now long-lost levels of wealth and progress for a year or so.

But there's no doubt that things feel different. That something has changed. There's a bit of optimism in the air. A spring in Britons' steps. Well, in some of them anyway.

I'm always going on about the paradoxes of public policy - the fact that the outcomes you expect almost never, never issue from the causes you imagine. When we look at the economy right now, the interesting thing is that things have been so, so bad - for so, so long - that the merest chink of light feels like we're in a boom. Despite the complete failure of the Chancellor's deficit reduction strategy. Remember when he said that he'd eliminate the structural deficit in this Parliament? Well, he doesn't say that any more. Remember when he said that manufacturing and exports should power our return to growth? Well, er, take a look at the statistics right now (above) and it's the service sector and house prices that are pulling us away from the brink - yet again. That's storing up trouble for the future, as Mr Osborne knows, but he's reached for the only lever he had left. The one they always pull: the one marked 'private borrowing', which is likely to pump things up a bit for the next two or three years.

That'll help the Government, which is already climbing in the polls. It might mean that we get a Conservative (or, much more likely, Conservative-led) government after the next General Election.

But it won't mean that the pounds in your pocket will feel any more plentiful in the near future. For inflation is likely to tick up as borrowing-mad Britain goes on another spree, at the same time as wages are squeezed. Meaning that average household incomes are not going upwards this side of an election - something the Treasury is so nervous about that they've started quoting the figure for all household income, in gross terms, inflated as it is by the earnings of the richest ten per cent. Another one of Her Majesty's Government's many statistical misrepresentations, but there you are. Incomes have been falling for many years now - something that hasn't happened in modern British history, and probably not since the 1870s and 1880s. A ray of sunshine has punched through those storm clouds, that have been so dark that any glimmer of hope is clutched at with near-desperation and great acclaim.

But it's still going to be a slog. Sorry about that.

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