The UK economy hasn't grown more than the US

The US has grown by 2.3 per cent in the last year, while the UK has remained flat.

The final set of US growth figures before the presidential election were released today, showing that the economy grew at an annual rate of 2 per cent in the third quarter or a quarterly rate of 0.5 per cent. The Tories, unsurprisingly, are keen to point out that that's a worse performance than the UK, which, as we learned yesterday, grew at a quarterly rate of 1 per cent in Q3.  But they would be wise not to invite too much comparison of the UK and US economies.

First, while the US has grown by 2.3 per cent over the last year, the UK economy has failed to grow at all. As the Office for National Statistics reported yesterday: "GDP in volume terms was estimated to have been flat in Q3 2012, when compared with Q3 2011".

Second, while the US economy is now 2.3 per cent above its pre-recession peak, the UK remains 3.1 per cent below. The US has grown for 13 consecutive quarters, but we've only just recovered the output lost in the double-dip recession (a fate that the US, partly thanks to a policy of stimulus, rather than austerity, avoided). As a result, while they've grown by 3.9 per cent over the last two years, we've grown by just 0.6 per cent.

Finally, since the UK Q3 figure was artificially inflated by the bounce-back from the extra bank holiday in June (responsible for around half of the 1 per cent growth) and the inclusion of the Olympic ticket sales (responsible for 0.2 per cent), it's foolish of the Treasury to cite it as proof that we're "on the right track". Indeed, as I wrote yesterday, a significant number of forecasters believe it's possible or even probable that the economy will shrink in quarter four. Rather than complacently boasting about a one-off surge in growth, the Tories should be acting to prevent a triple-dip recession.

The US economy is now 2.3 per cent above its pre-recession peak, while the UK remains 3.1 per cent below. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

How to end the Gulf stand off? The West should tell Qatar to reform its foreign policy

Former defence secretary Geoff Hoon on the unfolding crisis in the Gulf. 

Only one group stands to benefit from a continuation of the crisis in Gulf: The Quartet, as they are now being called. Last week, The United Arab Emirates foreign minister tweeted that Qatar and its Gulf Cooperation Council neighbours are heading for a "long estrangement". We should take him at his word.

The European political establishment has been quick to dismiss the boycott by Saudi Arabia, the UAE, Bahrain and Egypt as naïve, and a strategic mistake. The received wisdom now is that they have acted impulsively, and that any payoff will be inescapably pyrrhic. I’m not so sure.

Another view: Qatar is determined to stand up to its Gulf neighbours

Jean-Yves Le Drian, France's foreign minister, was in the region over the weekend to see if he could relay some of his boss’s diplomatic momentum. He has offered to help mediate with Kuwait, clearly in the belief that this is the perfect opportunity to elevate France back to the top table. But if President Emmanuel Macron thinks this one will be as straightforward as a Donald Trump handshake, he should know that European charm doesn’t function as well in the 45 degree desert heat (even if some people call him the Sun King).

Western mediation has so far proceeded on the assumption that both sides privately know they will suffer if this conflict drags on. The US secretary of state Rex Tillerson judged that a Qatari commitment to further counter-terrorism measures might provide sufficient justification for a noble reversal. But he perhaps underestimates the seriousness of the challenge being made to Qatar. This is not some poorly-judged attempt to steal a quick diplomatic win over an inferior neighbour.

Qatar’s foreign policy is of direct and existential concern to the other governments in the Gulf. They will not let Qatar off the hook. And even more than that, why should they? Qatar has enormous diplomatic and commercial clout for its size, but that would evaporate in an instant if companies and governments were forced to choose between Doha and the Quartet, whose combined GDP is almost ten times that of their former ally. Iran, Turkey and Russia might stay on side. But Qatar would lose the US and Europe, where most of its soft power has been developed. Qatar’s success has been dependent on its ability to play both sides. If it loses that privilege, as it would in the event of an interminable cold war in the Gulf, then the curtains could come down.

Which is why, if they wanted to badly enough, Le Drian and Tillerson could end this conflict tomorrow. Qatar’s foreign policy has been concerning for the past decade. It has backed virtually every losing side in the Arab world, and caused a significant amount of destruction in the process. In Syria, Libya, Egypt and Yemen, Qatar has turned a blind eye to the funding of Islamic revolutionaries with the financial muscle to topple incumbent regimes. Its motives are clear; influence over the emergent republics, as it had in Egypt for a year under Mohamed Morsi. But as we review the success of this policy from the perspective of 2017, it seems clear that all that has been achieved is a combination of civil unrest and civil war. The experiment has failed.

Moreover, the Coalition is not going to lift sanctions until Doha suspends its support for the Muslim Brotherhood. When Western leaders survey the Gulf and consider who they should support, they observe two things: firstly, that the foreign policy of the Quartet is much more aligned with their own (it doesn’t seem likely to me that any European or American company would prefer to see a revolution in Dubai instead of a continuation of the present arrangement), and secondly, that Qatar would fold immediately if they applied any significant pressure. The Al Thani ruling family has bet its fortune and power on trans-Atlantic support; it is simply not credible that they would turn to the West’s enemies in the event that an ultimatum was issued. Doha might even welcome an excuse to pause its costly and ineffective programmes. Even if that involves some short term embarrassment. It is hardly going to lose support at home, with the highest GDP per capita in the world.

It would be necessary to make sure that the Coalition understands that it will have to pay a price for decisive Western intervention. The world will be a more dangerous place if our allies get the impression they can freely bully any smaller rival, knowing that the West will always come down on their side. That is however no great hurdle to action; it might even be a positive thing if we can at the same time negotiate greater contributions to counter-terrorism or refugee funding.

Unfortunately the reason why none of this is likely to happen is partly that the West has lost a lot of confidence in its ability to resolve issues in the Middle East since 2003, and partly because it fears for its interests in Doha and the handsome Qatari contributions in Western capitals. This cautious assessment is wrong and will be more harmful to Qatar and the aforementioned interests. The Quartet has no incentive to relent, it can’t afford to and will profit from commercial uncertainty in Doha the longer this drags on. If the West really wants this to end now, it must tell Qatar to reform its foreign policy or face sanctions from a more threatening ally.

Geoffrey Hoon was the UK defence secretary from 1999 to 2005.