Snigger

For the UK, the position looks particularly serious. Stagnant productivity since
the financial crisis has left the economy effectively unable to drive growth from
within. The OBR now estimates that the UK’s ‘output gap’ – the amount by which an
economy can grow in a year without causing inflation – has turned positive for the
first time since 2008, meaning that there is little slack in the economy to take up
any increase in demand.140 If fear of inflation now prevents further stimulus, there
is a real risk that the UK’s ‘lost decade’ of growth will become permanent, and GDP
will never catch up with its pre-financial crisis trend.141
It is hard to avoid the conclusion that we need a new approach. With interest rates
still at record lows, the case for public investment to drive demand is particularly
strong. Borrowing for public investment is not the same as borrowing for current
consumption: investment (assuming it is well made) generates long-term growth.

We don’t have an output gap any more so therefore we should stimulate the economy with public borrowing and spending.

Whut?

By stimulating demand, public sector investment
can ‘crowd in’ finance from the private sector.

Yep, when there’s no output gap and we’re at full employment.

7 thoughts on “Snigger”

  1. Slightly OT, productivity figures for countries are worked out on output per worker, would it not make more sense to calculate output per working age head of population, regardless of whether they work? Would that not give a more balanced view of how productive a country is, rather than ignoring the unemployed and pretending they don’t exist?

  2. Jim

    I would agree – additionally I am still curious as to both the accuracy of productivity measurements and the difficulty in measuring public sector productivity. It’s widely acknowledged that Gordon Brown showered the economy with largesse to generate legions of non-jobs for Labour Party activists.

    I do not see how it is possible to measure productivity for something like a member of the EHRC or a ‘5 portion a day’ co-ordinator – surely if we are looking for the explanation of the figures, the fact nearly 2 million people are engaged in jobs like the above examples is the main explanation…

  3. “Stagnant productivity since
    the financial crisis has left the economy effectively unable to drive growth from
    within. ”

    So the only solution is to increase exports? [And/or reduce imports].

    We could abolish set-asides and grow more food and abolish the limit on our dairy herds imposed by the EU so that we should be required to import some of France’s excess production of milk. That would generate an increase in GDP without inflation.

  4. Yes, public sector ‘productivity’ calculations are a complete mess – I think its assumed that an extra £1 spent in the public sector generates an extra £1 of value (or GDP) therefore increasing public sector spending does not reduce productivity. Whereas we all know it most certainly does……if you pay a doctor more and they treat the same number of patients as before, actual productivity is stagnant but according the stats its risen…..so presumably if you eliminate low productivity jobs in the private sector by introducing and increasing minimum wages, and spend more money on the public sector, hey presto, rising ‘productivity’!

    There really ought to be a statistical analysis done of the actual output of the public sector and an estimate of its market value, entirely separate from the financial inputs that paid for it. Then we might see exactly how much is wasted by the public sector…….

  5. It’s hard to why the public sector’s included at all in GDP figures. The spending is the cost of the things presumably needef torun the rest of economy. The equivalent would be showing the electricity bill as part of the turnover of a company

  6. “a ‘5 portion a day’ co-ordinator”

    I mentioned registering at a new doctors’ the other day. They asked me how many of my 5-a-day I ate. I was unable to answer in anything other than generalities, so in the two weeks to my follow-up tests I kept a food diary and presented it today. It seems I average ten a day, and manage to get five a day just in my normal half an hour’s walk scavenging blackberries.

    (Nanny Ogg was there again immovably clamped to her seat weighing the babbies)

  7. I’m grateful to Tim for reading this and the extracts.
    I wonder what is missing, and too lazy to read the whole toilet scroll itself.
    So does anyone know if they discuss the high employment rates, immigration effects ( moving from £300/month in Craiova to £1200/month in Essex reduces average wages in the UK and average productivity it seems ), and ceiling effects ( where working 16hrs or 24hrs a week maximises the value of a benefit claim, and choosing to earn just under the tax threshold maximises the value of work for those not on benefits )

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