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Thursday, December 26, 2013

British Economic Triumphalism in Perspective

Menzie Chinn: 

British Economic Triumphalism in Perspective, by Menzie Chinn: Prime Minister Chancellor of the Exchequer Osborne has lauded the recent UK growth numbers as validation for the policy of austerity [1] (recently relaxed, although he doesn't mention that). ...
I think it useful to compare the US and the UK. The former embarked upon a policy of fiscal stimulus, and then retrenchment, but nothing compared to the retrenchment implemented in the latter. And in the US, per capita GDP growth was much more rapid than in the UK.

Us-uk
Figure 1: Log per capita US GDP, in Ch.09$ (blue) and per capita UK GDP, in Ch.2010£ (red). UK population is annual midyear data from IMF WEO, interpolated using quadratic match. Source: BEA, ONS, IMF WEO (October).

The gap between the two series is 7.3% as of 2013Q3. So, the growth in the UK now is merely digging the economy out of a big hole dug for itself in the search of expansionary fiscal contraction. [2].

    Posted by on Thursday, December 26, 2013 at 12:33 AM in Economics, Fiscal Policy, Politics | Permalink  Comments (59)

          


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