Lost year, or lost decade?

Growth will flatline over the next year, but already things are back where they were in 2002.

I wrote yesterday that it doesn't really matter that the UK is in a technical recession. The zero boundary is unimportant in many aspects of economics, and growth is one – the difference between -0.1 per cent and 0.1 per cent is the same as the difference between 0.1 per cent and 0.3 per cent.

But when economics feeds into politics and the media, the difference does matter. Headlines of "UK not in recession" are far more likely in the event of 0.1 per cent growth than headlines of "UK remains in crippling stagnation"; similarly, the news yesterday was always going to be about the two consectutive quarters of negative growth, not the seven consecutive quarters in which the UK economy has barely changed. Headlines affect how people think, how people think affects how they act, and how they act feeds back into the economy.

All of which is to say that if it didn't matter that we were in a technical recession when the stats were released at 9:30am yesterday, it probably did by the time the front pages were fixed at 9:30pm.

Gerard Lyons, Standard Chartered's chief economist, said:

The likelihood is that the data will further dent confidence and push the recovery back.

The second quarter of 2012 was always going to be a weak one. The OBR, which overestimated Q4 2011 growth by 0.1 per cent and Q1 2012 by 0.5 per cent, predicts a flatlining Q2 2012, with 0.0 per cent growth. If their past pattern continues, we should expect a third quarter of contraction - especially as consumer confidence, hit by the news of recession, will depress that quarter still furter.

Little wonder that Philip Aldrick, the Telegraph's economics editor, is calling this a "lost year", fearing that the overall contraction in 2012 could be 0.1 per cent. But even there, talk of a lost year glosses over the longer term weaknesses. Nominally positive growth below the rate of population growth results in GDP per capita contracting. Even if we find out, after the final GDP figures come out in two months, that we weren't in a national recession, we've been in a per capita recession for a while. And under OBR and ONS predictions for the rate of GDP and population growth, it won't be until 2016 that GDP per capita is back to where it was in 2007. That isn't a lost year; it's a lost decade.

And even talk of a lost decade is understating the problem. Pay rises have been near at or below inflation for so long that the average weekly wage now is worth the same as it was in September of 2002 – and because price inflation remains higher than wage inflation, this is getting worse, not better. In terms of what you can buy for your wage, we've already lost a decade. The trick will be to not lose two.

Buckingham Palace during the Golden Jubiliee, the last time real wages were this low.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

Northern Ireland election results: a shift beneath the status quo

The power of the largest parties has been maintained, while newer parties running on nicher subjects with no connection to Northern Ireland’s traditional religious divide are rapidly rising.

After a long day of counting and tinkering with the region’s complex PR vote transfer sytem, Northern Irish election results are slowly starting to trickle in. Overall, the status quo of the largest parties has been maintained with Sinn Fein and the Democratic Unionist Party returning as the largest nationalist and unionist party respectively. However, beyond the immediate scope of the biggest parties, interesting changes are taking place. The two smaller nationalist and unionist parties appear to be losing support, while newer parties running on nicher subjects with no connection to Northern Ireland’s traditional religious divide are rapidly rising.

The most significant win of the night so far has been Gerry Carroll from People Before Profit who topped polls in the Republican heartland of West Belfast. Traditionally a Sinn Fein safe constituency and a former seat of party leader Gerry Adams, Carroll has won hearts at a local level after years of community work and anti-austerity activism. A second People Before Profit candidate Eamon McCann also holds a strong chance of winning a seat in Foyle. The hard-left party’s passionate defence of public services and anti-austerity politics have held sway with working class families in the Republican constituencies which both feature high unemployment levels and which are increasingly finding Republicanism’s focus on the constitutional question limiting in strained economic times.

The Green party is another smaller party which is slowly edging further into the mainstream. As one of the only pro-choice parties at Stormont which advocates for abortion to be legalised on a level with Great Britain’s 1967 Abortion Act, the party has found itself thrust into the spotlight in recent months following the prosecution of a number of women on abortion related offences.

The mixed-religion, cross-community Alliance party has experienced mixed results. Although it looks set to increase its result overall, one of the best known faces of the party, party leader David Ford, faces the real possibility of losing his seat in South Antrim following a poor performance as Justice Minister. Naomi Long, who sensationally beat First Minister Peter Robinson to take his East Belfast seat at the 2011 Westminster election before losing it again to a pan-unionist candidate, has been elected as Stormont MLA for the same constituency. Following her competent performance as MP and efforts to reach out to both Protestant and Catholic voters, she has been seen by many as a rising star in the party and could now represent a more appealing leader to Ford.

As these smaller parties slowly gain a foothold in Northern Ireland’s long-established and stagnant political landscape, it appears to be the smaller two nationalist and unionist parties which are losing out to them. The moderate nationalist party the SDLP risks losing previously safe seats such as well-known former minister Alex Attwood’s West Belfast seat. The party’s traditional, conservative values such as upholding the abortion ban and failing to embrace the campaign for same-sex marriage has alienated younger voters who instead may be drawn to Alliance, the Greens or People Before Profit. Local commentators have speculate that the party may fail to get enough support to qualify for a minister at the executive table.

The UUP are in a similar position on the unionist side of the spectrum. While popular with older voters, they lack the charismatic force of the DUP and progressive policies of the newer parties. Over the course of the last parliament, the party has aired the possibility of forming an official opposition rather than propping up the mandatory power-sharing coalition set out by the peace process. A few months ago, legislation will finally past to allow such an opposition to form. The UUP would not commit to saying whether they are planning on being the first party to take up that position. However, lacklustre election results may increase the appeal. As the SDLP suffers similar circumstances, they might well also see themselves attracted to the role and form a Stormont’s first official opposition together as a way of regaining relevance and esteem in a system where smaller parties are increasingly jostling for space.