While there has been much discussion about the recovery there has been hardly any comment about the change in the figure, known as the deflator, used by the Office for National Statistics to determine the rate of real economic growth.
For the last 30 years, until the Coalition Government came to power, the deflator followed closely the Retail Prices Index, but these two measures have now diverged substantially.
This change means that, since 2010, GDP growth has been recorded as higher than it would have been had the old relationship between the deflator and RPI still existed.
This raises the possibility that the current economic recovery may be based on illusion. The recovery differs substantially from those of the past in a number of other ways.
Firstly, we’ve had to wait an extraordinarily long-time for it.
Second, the recovery is extraordinarily weak given the degree of economic stimulus.
And third, the failure of recovery to bring growth in real wages is quite extraordinary.
I suspect the recovery will prove to be not so different in other ways with stronger growth evident in London and the South East crescent and weaker in the rest of the country; and since the economy has long been financialised the rewards of recovery will go primarily to those that are already extremely wealthy.
For the vast majority of people, impoverishment beckons with real wages continuing to fall along with welfare payments.
As best I can judge, the forces depressing real wages are structural in nature. If my assessment is correct, this situation will run for some time yet.
It is absolutely tragic The Great Recession was not used to reappraise our national economic model of off-shoring production while simultaneously increasing domestic consumption supported by abundant credit.
This model is economically absurd and unsustainable in the long run. We would be far better as a nation confronting this now and finding a different way of ordering economic affairs, for sooner or later we will be forced by circumstances to do so.
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