Growth figures: Lies, damned lies and statistics
STEVEN WALKER explains why the GDP figures being trumpeted by the government aren’t what they might seem to be
RECENT news about the growth in gross domestic product (GDP) is meant to reassure people that the economy
is improving and provide evidence that the Con-Dems’ austerity cuts are working.
Nothing could be further from the truth. GDP is a kind of benchmark economic “big number” that captures news
headlines and enables politicians to boast of their cleverness. Cue smug Chancellor George Osborne.
But, taking a sceptical look at GDP, what do we find? What is officially known as “nominal” GDP puts Britain
among the top five countries.
However, when measured on the basis of GDP per capita (per head of population), which divides GDP by the size
of a country’s population, Britain is actually outside the top 20 as measured by data from the International
Monetary Fund, World Bank and even the Central Intelligence Agency.
This puts us well behind countries such as Ireland, Denmark, Australia, Luxembourg, Singapore, Sweden and
Comparisons of national wealth are frequently made on the basis of nominal GDP, which also does not take into
account variances in the cost of living in different countries.
Using a comparison with per capita GDP is arguably more useful when comparing generalised differences in
living standards between nations, because it takes into account the relative cost of living and the inflation rates of
the countries, rather than using just foreign exchange rates which may distort the real differences in income.
GDP per capita is often considered an indicator of a country’s standard of living, although this can be problematic
because GDP per capita is not a measure of personal income.
The government’s narrative about jobs, prosperity and growth is a sham. And although the recent GDP news
claimed that this is the fifth quarter of growth in a row, suggesting that some sort of self-sustaining recovery has
started, output is still some 0.6 per cent below its pre-crisis 2008 peak.
As for industrial production and construction — often considered the real engine of economic health — this
remains a massive 12 per cent below the 2008 peak.
Per capita output also remains firmly stuck well below the levels before the latest capitalist crisis. Output per hour
worked, according to the TUC, has fallen by 5 per cent in the past six years and is 15 per cent below 2008 levels.
This is what is meant by “productivity” and the trends are worrying as the economy becomes further unbalanced
in favour of low-skill, low-paid, part-time or self-employed jobs.
For example, in traditionally high-productivity sectors such as manufacturing there are now 300,000 fewer people
employed than before 2008.
Remember that phrase “We are all in it together”?
Check out these random examples from recent research.
FTSE 100 non-executive directors responsible for setting executive pay in their companies have seen their fees
rise by more than 8 per cent in the last year, according to independent researchers at Incomes Data Services.
Other sources reveal that the BBC’s top 412 senior managers were paid a total of £50.8 million, according to a
snapshot of remuneration taken in 2013.
What about another iconic institution, the NHS? In 2010, as the coalition opened the NHS up to more privatisation,
ministers told the Senior Salaries Review Body that by the time the changes were completed in April this year,
there would be fewer than 100 very senior managers working in the top salary bracket of between £70,000 and
£240,000 a year.
But the Department of Health recently admitted the number is well over 400, including 211 super-managers at
NHS England, the new body which oversees the budget and delivery of day-to-day services.
The average pay of these managers is around £123,000 a year. And those figures do not include the 259 chief
executives of NHS trusts whose pay is set by their own remuneration committees and in some cases is more than
£240,000 a year.
So are we all in it together? Not according to the respected Institute for Fiscal Studies.
Lower-income groups will fare much worse over the post-recession period, mainly because of welfare cuts.
Recovery or not, poverty is now set to deepen. This prospective divergence of fortunes gets even sharper when
the prices of essential goods, which weigh most heavily in modest budgets, are factored in. These have risen
Headline inflation has appeared to be quite low, but food costs are up by 30 per cent and energy 60 per cent. This
drags down living standards and widens the gap between rich and poor.
Official government data shows that real wages have dropped consistently since 2010, with an average annual
fall of 2.2 per cent.
In other words, to put all the stats and numbers into plain language, the poor are getting poorer and the rich a lot
richer. Don’t believe anything else.
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