I note that GDP growth for the second quarter of 2011 is only 0.2%.
Nobody should be worried about this. As the below historic graph shows, quarterly GDP growth has always been very volatile. Just look at the quarters of very low or no growth after the recession in the early 1980’s for an example.
There are many dangers out there to the UK economy in the short-term, mostly external such as potential oil price shocks, a US debt default, further problems in the Euro-zone and most likely a default by at least one of the very heavily indebted countries in the Euro. Internally, not reducing and eliminating our structural deficit is the main one, and also not encouraging private-sector growth.
I am not going to get worried about a few quarters of GDP growth below expectations. We have just emerged from the worst recession in decades, which should really have been worse but instead we “saved the banks” (or rewarded reckless behaviour depending on your point of view), “protected home-owners” (or rewarded reckless borrowing depending on your point of view) and “injected huge amounts of money into the system through quantitative easing” (or created inflation to reduce the debt, and yet again punish those who are innocent in creating the recession, depending on your point of view).
It is going to take many years, and perhaps a decade or two, to restore the country to long-term growth. The boom-years of 2000 onwards were funding through borrowing – very little productive gains were made in the economy.
I thoroughly believe that by paying debt back, we will be in a stronger position. Imaging that right now, you added the monetary value of everything up that you owned. But you owe about 70% of that value in loans. And this is increasing by about 10% a year. At some point this becomes unsustainable, those who have lent you money will stop lending and demand it back, or higher interest rates. When this happens, the debt repayments become unfeasible. The Greece debt is 160% of it’s value. The UK’s debt is heading that way. Therefore the UK government is doing the right thing in trying to get to a position by 2015 where we are not adding any more to our debt.
Good economic times are over, and we have to get used to that. But not forever. In the 1970’s, the UK was known as the sick-man of Europe, in regards to the economy. A couple of decades later, we had the 5th largest economy in the world.
For those that want to know a bit more about why I am so confident about our mid-term to long-term economic future (unless we let the fucking socialists back in again), there is an excellent 3-part documentary on the BBC iplayer called ‘Made In Britain’. It explains the history of the economy, the present, and the likely future, including why the UK has many special factors which can make us stand out as a place to invest in, and why the future of the UK economy is bright.
Not only that, it is a good guide as to what those who want a good employment future should think about doing in the future, it should be an inspiration. Perhaps the most important lesson for anyone to take out of it, is ‘don’t stand still’.
I fully recommend 3 hours of your life to watch this, if you are vaguely interested. You might even be inspired to a greater future.