Vladimir Lavrentiev reports on the flaws in the reporting of ‘economic growth’
The British press used to unanimously spout the story of a ‘double dip recession’ and now they are attempting to put the agenda of economic growth into the headlines.
Even Philip Aldrick wrote in The Telegraph: “Signs of a resurgent economy follow the sharp rise in growth in the second quarter to 0.6 percent”. Unfortunately, journalists’ understandings of the figures are amateur at best. They stem from hearsay understanding of economics instead of one that comes from mathematics textbooks.
The economic reality is that we have been in a state of economic stagnation since 2009. Calling two quarters of nominal fall in GDP a recession as the press did last winter is like measuring your penis for six months and falling into panic when your final measurement has decreased by 0.2 of a hundredth of what it used to be. The same can be said for such insignificant growth.
Not only do the statistics not take into account all the cash-businesses, but once inflation is factored in, Britain’s real growth (economic growth with inflation accounted for) is at a very steady decline. The media feeding us nominal growth figures could be compared to a geography teacher who takes a measurement with a 10-inch ruler and then rewrites his findings to say that these now measure 12-inches. As justification of this claim, he states that his ruler has grown.
The suggestion that the figures will “make confidence grow” does not magically ensure economic growth. In 2006, business confidence was very high and totally oblivious to the cliff ahead. Irrational confidence is dangerous. We must ensure that we are not the junkies standing on a window-ledge looking at the cheap credit five floors beneath us.
To talk of anything less than 1% real growth as growth is a rather comical merry-go-round of the macroeconomic incompetence of today’s voting population, their media manipulators and the politicians that have derived from them. We deserve a better quality of reporting and a political class that will allow us to feed on more than just the placebo effect.
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