Does a technical recession really matter?

We are balancing on a knife-edge, but it doesn't matter where we fall.

Today, NIESR release their growth estimates. They will either chime with the OECD's figures from last week, and show us narrowly entering a technical recession (defined as two straight quarters of negative growth), or they will be more like this week's vaguely positive PMIs (for construction, services and manufacturing) and show us narrowly avoiding one.

As we approach the release of the official figures – on 25 April – more and more estimates get released, and the same story will come again and again (we won't be immune, either), until finally the ONS finishes the whole thing off in a quivering mass of statistics.

The problem is, distinction doesn't really matter. Actually, that's not quite true; to the political realm, it matters a great deal. It's the difference between Labour being able to tar Osborne as the chancellor who brought us back into recession, and the chancellor who just dampened the recovery. One might be remembered come the election, the other will probably be forgotten.

But in terms of what the figures actually mean, rather than how they can be spun, the most important thing to remember is that neither 0.1 per cent shrinkage or 0.1 per cent growth are actually very good. In fact, they are both abysmal.

The Touchstone bloggers have three good posts addressing just this; Duncan Weldon, quoting Paul Krugman quoting George Bush, calls it "the soft bigotry of low growth expectations." He writes:

We find ourselves in a ludicrous situation whereby the success or failure of the government’s economic policy is being measured, by many, almost entirely in terms of whether we have two back-to-back quarters of negative growth or not.

The BCC releases a quite gloomy forecast and many are prepared to call it ‘good news’.  

I’ve pointed out before that even if the economy grew by 1.5% in 2012 – twice as much as the OBR have predicted – this would still be a bad result. But expectations are so diminished that the Government might get away with hailing this as a success.

There is also the worry that, by redefining success to mean "not in recession", we are creating a self-fulfilling prophecy. If people think that growth is naturally low, they plan for and create low growth. Weldon quotes from Krugman's book The Return of Depression Economics (addressing Japan):

Analysts tended to assume that because the economy grew so slowly for so long, it couldn’t grow any faster.

Richard Exell adds that the PMI figures, although positive, are also well below what was normal before the recession (and the ONS figures, released as I write this, are even worse than that).

Jonathan Portes pointed out another pernicious side-effect of this rhetoric in March, after the budget. If the narrative that "the path of recovery is likely to be arduous, long and uneven" is accepted uncritically, then there will be a huge amount of unnecessary pain. It's not just that we won't grow fast enough. It's that measures to boost employment, invest in infrastructure and fix our broken housing situation are being wrongly dismissed as too expensive for a slow growth economy, when it is precisly those measures which will speed up the recovery.

Andrew Sentance proposes one solution: stop focusing on the technical definition of recession. It creates confusion, hides some problems and exaggerates others. By focusing on more important indicators, like unemployment, business activity, and a less volatile measure of GDP, success can no longer be defined as merely not failing. If that were the case, we would all benefit.

Could the fuel panic have pushed us out of recession? Does it matter? (Getty)

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

Photo: Getty Images
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The Fire Brigades Union reaffiliates to Labour - what does it mean?

Any union rejoining Labour will be welcomed by most in the party - but the impact on the party's internal politics will be smaller than you think.

The Fire Brigades Union (FBU) has voted to reaffiliate to the Labour party, in what is seen as a boost to Jeremy Corbyn. What does it mean for Labour’s internal politics?

Firstly, technically, the FBU has never affliated before as they are notionally part of the civil service - however, following the firefighters' strike in 2004, they decisively broke with Labour.

The main impact will be felt on the floor of Labour party conference. Although the FBU’s membership – at around 38,000 – is too small to have a material effect on the outcome of votes themselves, it will change the tenor of the motions put before party conference.

The FBU’s leadership is not only to the left of most unions in the Trades Union Congress (TUC), it is more inclined to bring motions relating to foreign affairs than other unions with similar politics (it is more internationalist in focus than, say, the PCS, another union that may affiliate due to Corbyn’s leadership). Motions on Israel/Palestine, the nuclear deterrent, and other issues, will find more support from FBU delegates than it has from other affiliated trade unions.

In terms of the balance of power between the affiliated unions themselves, the FBU’s re-entry into Labour politics is unlikely to be much of a gamechanger. Trade union positions, elected by trade union delegates at conference, are unlikely to be moved leftwards by the reaffiliation of the FBU. Unite, the GMB, Unison and Usdaw are all large enough to all-but-guarantee themselves a seat around the NEC. Community, a small centrist union, has already lost its place on the NEC in favour of the bakers’ union, which is more aligned to Tom Watson than Jeremy Corbyn.

Matt Wrack, the FBU’s General Secretary, will be a genuine ally to Corbyn and John McDonnell. Len McCluskey and Dave Prentis were both bounced into endorsing Corbyn by their executives and did so less than wholeheartedly. Tim Roache, the newly-elected General Secretary of the GMB, has publicly supported Corbyn but is seen as a more moderate voice at the TUC. Only Dave Ward of the Communication Workers’ Union, who lent staff and resources to both Corbyn’s campaign team and to the parliamentary staff of Corbyn and McDonnell, is truly on side.

The impact of reaffiliation may be felt more keenly in local parties. The FBU’s membership looks small in real terms compared Unite and Unison have memberships of over a million, while the GMB and Usdaw are around the half-a-million mark, but is much more impressive when you consider that there are just 48,000 firefighters in Britain. This may make them more likely to participate in internal elections than other affiliated trade unionists, just 60,000 of whom voted in the Labour leadership election in 2015. However, it is worth noting that it is statistically unlikely most firefighters are Corbynites - those that are will mostly have already joined themselves. The affiliation, while a morale boost for many in the Labour party, is unlikely to prove as significant to the direction of the party as the outcome of Unison’s general secretary election or the struggle for power at the top of Unite in 2018. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.