Britain’s economic performance in the noughties was a minor miracle, and not a mirage, a small majority of economists believe.
Although growth was the lowest for any decade since the second world war, 30 economists who expressed an opinion thought the relatively strong performance was not an illusion, compared with 25 who thought it was.
The defining characteristic of the majority who praised the British economy in the decade – despite its terrible last two years – pointed out that similar busts happened in other countries, reflecting global not domestic errors.
“Once the whole 1992-2012 period is taken into account, Britain will have easily outpaced its continental rivals. You cannot employ extra millions on a mirage, and financial services are a valuable activity,” said Giles Wilkes of CentreForum, the think-tank close to the Liberal Democrats.
Julian Le Grand, a London School of Economics professor, went further. “It is not an illusion that Britain’s GNP increased by 50 per cent since 1997. Even in the worst-case scenarios, this recession will not put a major dent in that.”
John Van Reenen, director of the Centre for Economic Performance, said Britain’s success was based on a skilled workforce that ensured “productivity growth was strong over this period” relative to other developed nations.
The City is still seen as a source of strength. Arguing that growth was not an illusion, David Blanchflower, a former Bank of England monetary policy committee member, said: “The UK benefited from having a large financial sector which gave it benefits but then exposed it to greater risk in the face of a financial shock.”
Almost as many economists disagreed with this view, arguing variously that household debt, naive inflation targeting, public sector excess, illusory bank profits and borrowing from abroad flattered UK economic performance over the decade and would threaten growth in the next 10 years.
Dhaval Joshi of RAB Capital complained that the period of Gordon Brown’s stability was “simply down to a plunge in the savings rate”, while Phil Thornton of Clarity Economics said the growth was “built on debt, both private and public, and excessively on one sector: financial services”.
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