Monday, May 11, 2015

Did UK electorate vote for austerity in polls?

The victory of the Conservative party, which surprised pollsters and shocked pundits, is on account of the significant turnaround in the UK economy brought about by the austerity policies of Chancellor George Osborne, writes Niall Ferguson the historian. He contends that, contrary to the predictions of economists such as Paul Krugman, austerity produced impressive results:

The UK had the best performing of the G7 economies last year, with a real gross domestic product growth rate of 2.6 per cent. In 2009, the last full year of Labour government, the figure was minus 4.3 per cent. Moreover, far from being in depression, the UK economy has generated more than 1.9m jobs since May 2010. UK unemployment is now 5.6 per cent, roughly half the rates in Italy and France. Weekly earnings are up by more than 8 per cent; in the private sector, the figure is above 10 per cent. Inflation is below 2 per cent and falling.....the general government deficit has been nearly halved from 10 per cent in 2009 to 5.7 per cent last year; the structural deficit more than halved from 9.8 per cent to 4.2 per cent. The net public debt has been stabilised at roughly the same level relative to GDP as that of the US.
Showing a growth rate after a decline is not a big achievement, although it's better than accentuating the decline itself. The crucial question is whether the UK is back to its pre-crisis level of GDP and how close it is to the trend rate of growth. Also, we have no means of knowing the answer the question: would Keynesian policies have produced better results?


Anonymous said...

Thanks Prof ...

A moderately better reversal of economy did help offset some of the austerity measures. I wonder whether it is an approval for further cuts in healthcare services etc. A deft campaign management which also helped in projecting Cameron's via different angularities helped.

We have our own motley brigade of economists who keep on screaming about of how Modi's election was about ending the "dole" culture as they like to call it .. while never mentioning the corporate "doles" received like tax exemptions. They never try to understand a person votes for an effective delivery of issues. If a citizen is made capable of paying for the services, she wouldnt complain of any spending cuts.

- Deeps

T T Ram Mohan said...

Deeps, what you say is true. But given our income levels, the ability to pay for food and other important requirements will remain for a while. Hence no escape from subsidies.