Next month it will be official. Figures will provide the first estimate of by how much the UK economy shrank in 2020. Depending on what happened when lockdown restrictions were temporarily eased in December, the likelihood is that there was a fall of about 10%.
That will be the signal for all sorts of comparisons. Germany, which has already released data, contracted by 5% last year. Numbers for the US are not yet out but will probably show the world’s biggest economy suffered a 4-5% drop in gross domestic product. China grew by about 2%.
Historically, 2020 was a real stinker for the UK – the worst since 1709 – the era of Isaac Newton, the Duke of Marlborough and Daniel Defoe. Be ready for pictures of a frozen Thames to illustrate the 15% collapse of the economy caused by the Great Frost.
Does any of this matter? Looking back to the early 18th century is fun, but it was a different world back then. The UK had a population of 5 million in 1709 and the economy was largely agrarian. A 10% contraction in GDP in 2020 effectively wipes out a decade and a half of growth. A 15% drop in 1709 meant people starved to death.
There are not that many memorable speeches about gross domestic product but that may be because the one made by Bobby Kennedy while on the campaign trail in 1968 said it all.
As Kennedy pointed out, the production of napalm and nuclear warheads counted towards GDP but the health of American children and the joy of their play did not.
“It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.
“It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.”
Those words were true in 1968 and they resonate even more strongly today. Measured by GDP, the US is the world’s richest country. Measured by GDP per head it is one of the richest. Measured in other ways, in life expectancy for example, the US would be a long way down the international league tables. As recent events have shown all too clearly, it is not a country at ease with itself.
Over time, people get smarter and find better ways of doing things. When economists talk about productivity they mean that more goods and services can be delivered with less effort. Countries reap a productivity dividend which can be taken in different ways: they can produce the same…
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