Tom Jones is Councillor for Scotton and Lower Wensleydale and author of the Potemkin Village Idiot substack.
Does a recession really matter?
Following yesterday’s announcement that the UK fell into a technical recession at the end of 2023, Rishi Sunak will be hoping not.
The recession was attributed to hard-pressed households cutting back on spending and a resulting collapse in retail sales in the run-up to Christmas. Sunak will be presented with the latest in a long line of grim tasks he has taken on in his short tenure as Prime Minister – making the difficult case to the electorate that, with inflation falling, a recession happening on his watch is irrelevant, and a return to growth is only one more Conservative General Election victory away.
This is an unenviable task, but it isn’t purely political spin; the relatively small recession (0.1 per cent fall in GDP in Q3, 0.4 per cent in Q4) doesn’t matter. As Sam Freedman argued; “The whole concept of a “technical recession” is made up anyway. There’s no magic point where you suddenly enter one. And the numbers get changed retrospectively anyway. What matters is that the economy is stuck. And that’s also all that voters care about.”
The truth is that thanks to the strategies successive Tory governments have employed to boost it, GDP is a measure that is increasingly irrelevant to political discourse, and increasingly unmoored from the everyday reality of the lives of the electorate.
Successive Conservative governments have sought to juice GDP figures with increasing amounts of immigration. But this process has not made our economy more dynamic or our citizens more wealthy – rather, it has simply increased GDP through increasing the population. It is, more or less, a process of human quantitative easing. But as Andrew Neil notes, increasing GDP by increasing the population means GDP figures no longer tell a relevant story about the everyday economics that drive the electorate’s voting patterns:
At a time of massive net immigration (like now) GDP per head probably tells a better story than overall GDP headline stats. GDP per head fell 0.7 per cent in 2023, which means by end of last year it was lower not just than end-2022 but lower than end-2021. That’s the real economic albatross around Tory necks come the election.
A technical recession of 0.5 per cent of GDP is largely irrelevant to the electorate. As Torsten Bell explains, GDP per capita is what ultimately matters for our living standards. Sunak’s real problem is that whilst GDP has risen by 17.5 per cent since 2007, GDP per capita has fallen from $40,397.7 to $46,125.3 – a drop of over 8 per cent. GDP per capita hasn’t grown since Q1 of 2022 – the longest unbroken run without per capita GDP growth since records began in 1955.
This is the true Tory albatross, summed up perfectly by noted poster Post-Liberal Pete:
The UK economy has been stagnating for nearly two decades now whilst, at the same time, immigration levels to this country have reached historic highs but yet there are people who will still continue to insist that immigration maximalism is necessary for supposed economic reasons.
It should be noted with grim irony that this year, the biggest fall in living standards on record has coincided with yet another all-time high immigration record. Despite being told that immigration is economic rocket fuel – and that we need much more, always much more – we are yet to see runaway growth, rocketing GDP per capita, huge leaps in productivity, a prospering welfare system, or the lowering of the retirement age. Perhaps we are only one more set of record-high immigration figures away from paradise.
The fact is that, whilst it may shore up public services and boost GDP in the short term, importing cheap foreign labour is not a sustainable way to run an economy. Human QE has allowed successive governments to coast by without taking serious – and politically costly – decisions around delivering growth and protecting living standards.
Human QE has been employed to give successive governments flexibility in other policy areas. Rather than reducing costs for businesses through reducing energy costs, human QE allowed businesses to maintain profit margins with cheap human capital. Rather than protecting living standards by driving towards a high-productivity, high-wage economy, human QE has provided a low-wage workforce to subsidise the lifestyle of the electorate – particularly, as Chistophe Guilly argued in Twilight of the Elites, for middle and upper classes.
However, the Government pays dearly for the flexibility offered by human QE. In The Fiscal Impact of Immigration on the UK, a 2018 report from Oxford Economics – immigration is a relative data desert – found that, whilst EEA migrants contributed around £2,300 per head more than the average UK adult, non-EEA migrant adults contributed over £800 less.
The Government deficit that year ran to £46 billion; ‘natives’ contributed £41.4 billion to that debt, whilst non-EEA migrants added a further £9 billion. Only EEA migrants made a positive fiscal contribution, of £4.7 billion – £4.3 billion of which came from the migrants from the original EEA member states. Since the EU referendum not only has immigration rocketed, but the sources have also markedly changed, with a decline in EEA immigration and a sharp rise in migration from elsewhere. Non-EU migration stood at 90,000 in 2016. In 2022 it reached 873,000.
Two years ago, President Macron warned “we are living through… what could seem like the end of abundance”. Perhaps that it is true; but perhaps we are finally waking up to the fact that our economic model, relying on government subsidy to provide cheap human capital and debased wages, has only provided the illusion of prosperity.
Tom Jones is Councillor for Scotton and Lower Wensleydale and author of the Potemkin Village Idiot substack.
Does a recession really matter?
Following yesterday’s announcement that the UK fell into a technical recession at the end of 2023, Rishi Sunak will be hoping not.
The recession was attributed to hard-pressed households cutting back on spending and a resulting collapse in retail sales in the run-up to Christmas. Sunak will be presented with the latest in a long line of grim tasks he has taken on in his short tenure as Prime Minister – making the difficult case to the electorate that, with inflation falling, a recession happening on his watch is irrelevant, and a return to growth is only one more Conservative General Election victory away.
This is an unenviable task, but it isn’t purely political spin; the relatively small recession (0.1 per cent fall in GDP in Q3, 0.4 per cent in Q4) doesn’t matter. As Sam Freedman argued; “The whole concept of a “technical recession” is made up anyway. There’s no magic point where you suddenly enter one. And the numbers get changed retrospectively anyway. What matters is that the economy is stuck. And that’s also all that voters care about.”
The truth is that thanks to the strategies successive Tory governments have employed to boost it, GDP is a measure that is increasingly irrelevant to political discourse, and increasingly unmoored from the everyday reality of the lives of the electorate.
Successive Conservative governments have sought to juice GDP figures with increasing amounts of immigration. But this process has not made our economy more dynamic or our citizens more wealthy – rather, it has simply increased GDP through increasing the population. It is, more or less, a process of human quantitative easing. But as Andrew Neil notes, increasing GDP by increasing the population means GDP figures no longer tell a relevant story about the everyday economics that drive the electorate’s voting patterns:
At a time of massive net immigration (like now) GDP per head probably tells a better story than overall GDP headline stats. GDP per head fell 0.7 per cent in 2023, which means by end of last year it was lower not just than end-2022 but lower than end-2021. That’s the real economic albatross around Tory necks come the election.
A technical recession of 0.5 per cent of GDP is largely irrelevant to the electorate. As Torsten Bell explains, GDP per capita is what ultimately matters for our living standards. Sunak’s real problem is that whilst GDP has risen by 17.5 per cent since 2007, GDP per capita has fallen from $40,397.7 to $46,125.3 – a drop of over 8 per cent. GDP per capita hasn’t grown since Q1 of 2022 – the longest unbroken run without per capita GDP growth since records began in 1955.
This is the true Tory albatross, summed up perfectly by noted poster Post-Liberal Pete:
The UK economy has been stagnating for nearly two decades now whilst, at the same time, immigration levels to this country have reached historic highs but yet there are people who will still continue to insist that immigration maximalism is necessary for supposed economic reasons.
It should be noted with grim irony that this year, the biggest fall in living standards on record has coincided with yet another all-time high immigration record. Despite being told that immigration is economic rocket fuel – and that we need much more, always much more – we are yet to see runaway growth, rocketing GDP per capita, huge leaps in productivity, a prospering welfare system, or the lowering of the retirement age. Perhaps we are only one more set of record-high immigration figures away from paradise.
The fact is that, whilst it may shore up public services and boost GDP in the short term, importing cheap foreign labour is not a sustainable way to run an economy. Human QE has allowed successive governments to coast by without taking serious – and politically costly – decisions around delivering growth and protecting living standards.
Human QE has been employed to give successive governments flexibility in other policy areas. Rather than reducing costs for businesses through reducing energy costs, human QE allowed businesses to maintain profit margins with cheap human capital. Rather than protecting living standards by driving towards a high-productivity, high-wage economy, human QE has provided a low-wage workforce to subsidise the lifestyle of the electorate – particularly, as Chistophe Guilly argued in Twilight of the Elites, for middle and upper classes.
However, the Government pays dearly for the flexibility offered by human QE. In The Fiscal Impact of Immigration on the UK, a 2018 report from Oxford Economics – immigration is a relative data desert – found that, whilst EEA migrants contributed around £2,300 per head more than the average UK adult, non-EEA migrant adults contributed over £800 less.
The Government deficit that year ran to £46 billion; ‘natives’ contributed £41.4 billion to that debt, whilst non-EEA migrants added a further £9 billion. Only EEA migrants made a positive fiscal contribution, of £4.7 billion – £4.3 billion of which came from the migrants from the original EEA member states. Since the EU referendum not only has immigration rocketed, but the sources have also markedly changed, with a decline in EEA immigration and a sharp rise in migration from elsewhere. Non-EU migration stood at 90,000 in 2016. In 2022 it reached 873,000.
Two years ago, President Macron warned “we are living through… what could seem like the end of abundance”. Perhaps that it is true; but perhaps we are finally waking up to the fact that our economic model, relying on government subsidy to provide cheap human capital and debased wages, has only provided the illusion of prosperity.