Friends say I’m obsessed with the US economy. And they’d be right. First, there’s its sheer size: 24 per cent of global GDP on 4 per cent of the population. Second, its relentlessness: prior to the Covid-19 pandemic, America was enjoying its longest-ever economic expansion. Third, the wealth it generates for its citizens, and not just the billionaires: US GDP per capita, at roughly $70,000, is around a third higher than most of its peer nations.
But the statistic that caused my eyes to pop out of my head – like a Looney Tunes character – was that the US economy returned to its pre-pandemic trend last year. That means it is not only larger than before Covid, but 5 per cent larger, as if the pandemic never happened.
Now, comparison is the thief of joy. Britain lacks the size, scale, natural resources, venture capital and global reserve currency the US enjoys. Plus, the less said about its political situation (are you pro or anti minting the coin?), the better.
But the German economy has returned to its pre-pandemic level. France, Italy and Spain are above theirs. Britain’s economy is still smaller and, according to the International Monetary Fund (IMF), is set to be the only major economy to contract in 2023. That list includes sanctions-hit Russia.
This matters more than for bragging rights at G7 finance minister summits, because it quickly filters down into living standards, an arena in which Britons have endured something of a lost decade and a half – with further pain to come.
The Resolution Foundation think-tank predicts that typical incomes will be below their real-terms pre-pandemic level as late as 2028. We do not need to take the IMF’s forecast at face value to know the British economy is in a bad way – and has been for some time.
Of course, the future is not predestined. Britain possesses real, scaleable strengths. In financial and professional services, further education, the creative industries and life sciences. It is not a coincidence that one of the major Covid-19 vaccines was developed in the south of England, saving millions of lives in the process.
But the signs are not good. As Business Editor Jonathan Prynn reports this afternoon, Tech Nation, the government-backed body that has helped hundreds of start ups – including around one-third of Britain’s unicorns – to get off the ground, is to close in March, saying it is no longer viable. The closure will inevitably be viewed a symbolic setback for London’s ambitions to cling on to its status as the world’s most vibrant tech capital outside of the US.
Meanwhile, on its third anniversary, we haven’t even mentioned Brexit, the classic slow puncture gently eking life out of the economy – though it may not feel ‘gentle’ to those businesses that have folded or given up trying to export their goods to the EU.
There was a fascinating review published yesterday into how the BBC reports on the economy. Criticisms included the fact that concepts such as tax cuts were too often assumed to be good and deficits bad. Now, this newsletter does not operate under the same sort of impartiality guidelines as the BBC, but it certainly encouraged me to challenge my own priors (do read the summary).
Needless to say, I’m not an economist, just a consumer with infinite wants in a finite world. But wherever your politics lie, there is broad agreement that a strong economy is vital for life chances. These could – and should – be better in Britain.
In the comment pages, Suzannah Ramsdale asks why have we chosen to make January into a living hell for ourselves? Meanwhile, apparently we all need to brag more to get ahead, but Robbie Smith would rather be left behind. And Maddy Mussen says if Sam Smith’s nipple tassels offend you, maybe you’re the problem.
Finally, the football transfer window Slams ShutTM tonight. As an Arsenal fan, I was raised not to observe this particular civic ritual, but the Gunners have actually signed someone. You can follow along with the deadline day live blog here.
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