UK economy ranked below Zimbabwe by World Economic Forum, thanks Cameron

D002While UK Prime Minister David Cameron and his chancellor George Osborne claim their austerity policies are making the UK economy stronger, a devastating report by the World Economic Forum argues otherwise. In fact, parts of the UK economy are now performing worse than Haiti and Zimbabwe.

The World Economic Forum releases it’s Global Competitiveness Survey every year, a major report that is read and referenced by decision makers in politics and business the world over. This year, the UK slipped from 9th to 10th overall, out of the 140 countries studied. But if Cameron and Osborne are saying the UK economy is not only in recovery, but the fastest growing economy in the developed world, how can we be slipping down the league tables?

The answer is debt. In the area of the assessment entitled ‘macroeconomic environment’, the UK came 108th, behind Haiti, Senegal, Zimbabwe and even Liberia.

D001Graphic via Mike Bird/Business Insider

Why does this matter? What does ‘macroeconomic environment’ even mean?

In short, macroeconomic means the big picture. You know the difference between immediate weather versus weather systems? Well think of the macroeconomy as the latter.

If we stick with our weather analogy, micro weather would be, you look outside the window and it’s sunny. But if you wanted to understand the macro weather, you’d go sit in the Met Office and see what’s happening with the gulf stream, and hot/cold fronts, and the wider weather systems. That will tell you not only what the immediate weather is where you are, but what’s happening elsewhere and how that will impact your local weather in the future. Then you’d be able to see that while it is sunny now, there happens to be a Hurricane coming.

When examining the macroeconomic environments of the 140 countries in the study, the World Economic Forum assessed five factors to build that ‘big picture’. While the UK’s overall rank was a dismal 108, we actually ranked significantly lower than that in several key areas.

  • Inflation: 1st of 140
  • Country credit rating: 14th of 140
  • Government budget balance: 118th of 140
  • Gross national savings: 118th of 140
  • General government debt: 123rd of 140

Cameron and Osborne claim to have balanced the UK’s books, yet one of the most respected global studies ranks the UK’s budget 118th in the world. Something is wrong with this picture.

If any other element would have come out this poorly, but macroeconomic environment would have been high, Cameron and Osborne could have argued: ‘look, while individual elements of the economy are still struggling to recover, we have the big picture in place, the other elements will fall into line.’ But they don’t have that defense. What this study suggests, as have notable economists throughout the last five years, is that Cameron and Osborne are making short term cosmetic economic lifts by decimating the national economy. By creating more public debt in their first three years than New Labour did in 13 (and they bailed out the banks!), they are crippling the UK economy in the longer term.

Think of it like two neighbors living in wooden houses which both need a new heating system. House 1 goes out and buys a new, safe central heating system. House 2 tears bits of wood from the structure of the house to make a fire. At first, House 2’s ‘budget’ looks better because it isn’t carrying the cost of the new heater or the ongoing heating costs – and as they’re only using floorboards from the attic, no one seems to notice a problem. But over time, the floorboards run out, so do the ones in the spare room, and eventually guests start noticing panels are missing from the walls. It becomes harder and harder to live in the house as bits are missing and unsafe, rain is coming through the roof and rotting away the internal structures, the inhabitants are getting sick, and things become so bad the the house is uninhabitable. Eventually, it collapses. While House 1 have been getting on with their lives in safety and warmth, House 2 has fallen apart. In order to make House 2 livable again, the new owners not only have to buy the central heating system the house needed all along, but they have to spend large sums to repair the house.

This is what future governments will have to do once Cameron and Osborne vacate their roles, the next government and us taxpayers will be footing the bill for their devastating short-termism. The conservative government are not balancing the books, they are cooking the books.

Multiple studies have shown that this has been the slowest economic recovery in history, and that the Chancellor has used cuts to, and sales of, public services to create positive looking figures in the short term, while killing off the potential for future growth (investment and assets) in the future.

This was the same mentality that New Labour had during the first decade of the 21st century when they failed to regulate the Financial Services sector. They felt the good times would never end, there ‘would be no return to boom and bust’. But bust came, and instead of learning from the disaster and taking a wholly new approach, the Tories have doubled down on this morally and literally bankrupt strategy.

The Tory party (and neoliberals everywhere) will tell you we can’t afford to end ‘austerity’, but the truth is, we can’t afford not to.

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46 thoughts on “UK economy ranked below Zimbabwe by World Economic Forum, thanks Cameron

  1. While I generally support your overall goal and the particular political goal of this article I’d like to point out a few problems I have with this particular article. A following quote that you aspire to:

    “We will be bringing you independent, well-researched, and fearless reporting on news, politics, current affairs, science, tech, health and wellness – seven days a week.”

    is very good and I hope you achieve it. However this read like propaganda – propaganda that I generally agree with but propaganda none the less. It shows that you’ve done research but perhaps not enough. For instance is the big debt of the Tory government because of their doing like you say or could it be that the massive drop in tax revenue during the recession combined with static debt repayment meant that the government had to borrow more just to sustain the inherited debt? There’s a few bits and bobs like that… And finally articles without reference are a bit of a joke these days so always reference your claims. I know you’ve got a few links in there but it doesn’t cover all your claims.

    I’m just pointing these things out so you can achieve your goal faster – good luck guys!

  2. When will all of you dreamers wake up. I’ve been listening to all this rubbish for over 60 years. Borrow more money and spend it on this or that, take some off this section of the population and give it to another section. Make the bankers pay for their misdemeanor’s, macroeconomics, microeconomics, Conservative, Labour, Liberal, now Ukip, It doesn’t matter who runs this unworkable, unequal, greedy, stupid system. If you all spent as much of your time, effort and energy ridding this World of the cause of poverty, disease and inequality as you do trying to work out an answer to this unworkable system you would all be much happier.

  3. Fantastic article, the tories are doing an astonishing am out of harm to the country, both in long term and the short term. If there is a time to borrow for infrastructure and get our problem with productivity under control this is certainly it.
    I have no idea why Gideon thinks, that by contacting the economy and getting in less tax recipts in, we will somehow get the national deficit down.. growing our way out of this was always the only way to go.
    I’m not sure what position labour are in sans the Corbyn leadership: as to be frank our media cannot be trusted on the issue ( and many others) I somehow don’t think he is as much of a bad bet as they keep saying. Or else why go to the trouble to kick him to death in the way they are…
    Time will tell.

  4. What an incredible piece of spin. It’s really first class. You’ve taken the one bad indicator and extrapolated a completely unjustified picture. Well done. The report points out how the UK is very high, if not first in almost all categories. It’s only the debt that lets us down badly. We know that. We have a deficit and even though that is falling, debt will increase until it’s gone. Some people really prefer their glasses half empty.

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  6. The only problem in the World is money, rid the World of money and the problem is solved. The Capitalist system has never worked in the past, it sure as hell is not working now and it will never work in the future. The only people that benefit from the money system are the 5% who own it all, so you can see that a system without money would only benefit the remaining 95%!!!!The Capitalist system can be likened to a train that has never worked, every five years or so we elect another driver and still the train won’t go. Don’t change the driver, change the train.

  7. Kind of seems like you’ve cherry picked the worst statistic the UK performs in to feed your own idea that the Conservatives are evil people. In reality if macroeconomic development was all that mattered then countries like Botswana would be huge economic forces. But alas they aren’t because statistics such as employment, GDP per capita, trade and many others are all important too (if not more).

    Not saying debt isn’t a problem, but the most proven way to deal with debt is austerity, countries like Greece tried the alternative under a left-wing government and it failed miserably.

    If you want to be taken seriously at least try and hide the Bias. The fact is, the UK economy is doing well especially compared to the rest of Europe who suffered the same recession.

    • Syriza did not get the opportunity to try out an alternative to austerity in Greece. Get your facts right if you wish to hide your bias. They were bullied out of it before they began blackmailed by the debts they inherited.
      I don’t know how useful this original article is except to remind us that paying for the bankers bail out by cutting the public sector has not dealt with the national debt caused by the financial crisis of 2008. It wasn’t meant to was it? It’s part of an ideological programme of privatisation on principle. The rich are richer the poor are cheaper. Job done.

  8. Pingback: UK economy ranked below Zimbabwe by World Economic Forum. Thanks, Cameron | Scriptonite Daily | Vox Political

  9. Austerity is a method to control and downgrade the public throughout europe and usa. Does anyone still believe allowing private individuals (fed reserve, bank of england, imf etc) 😀 to print(or push buttons) money out of fresh air to acumulate real debt and interest is acceptable? Politicians who want countries to print their own money debt free get assasinated. Anotherthing, so the best brains in the western world all borrowed too much that can never be repaid. REALLY!

    • it’s sucked up by the financial sector and shifted to tax havens…. the same people that went “Oh we’re broke and about to crash” in 2008 that Brown bailed out… the same people who have now lent that same money back to the Govt… The same people that have created 97% of all the money in the economy from thin air…..

  10. The big macro problem is the balance of payments deficit at £100 Billion a year, adding to the debts of government, households and businesses. Cameron can not face the idea that the City first economic policy is failing and must pray no one will notice that the country now survives on a mix of financial piracy, dodgy arms deals, dodgy pharma sales, rapacious extractive industries, fantasy computer games and Osbourne flogging off anything marketable in a grand international yard sale. Cameron talking about security is on a par with Churchill doing his “Finest hour” routine while asking cabinet if Britain should surrender to the Germans or the Americans.

  11. Stop using the line ‘Cameraon created more debit in 5 than labour did in 13 or whatever line’, it’s like saying less water leaked into the ship of 13 days of smooth sailing under captain labour than in the 5 days after hitting the rocks under captain conservatives
    It discredits your argument
    I shows the lack of very basic understanding of economics ie the difference between Debit and Deficit, or extreme bias.

    Say something like It’s taken conservatives 5 years to take the government from borrowing 20 million an hour to keep going to 10 million per hour, or The conservatives still haven’t cut the deficit.

    Your end austerity argument seems a bit all over the place,
    on the one hand your saying The UK has to much debt and the conservatives haven’t sold the problem and then you say the responsible approach to this should have been to borrow more money and invest it and hope it pays out.

    Imagine giving that advise to bankrupt friend, No stop trying to live within your means and pay off the debt, instead take out another loan and invest it in the stock market or set-up a business (50% failure rate)

    • 1. Your bankrupt friend wouldn’t have the ability to create money. That analogy doesn’t hold.
      2. In no place in this article do I refer to debt when i mean deficit or vice versa. I am clear on the difference, and it is irrelevant based on the arguments I put forward in this piece.

      • Yes, but the opposite of austerity, the current policy would be to borrow money and invest to stimulate future growth. The nature of doing this would have the UK even lower in these rankings. So, bashing politicians for their policies using this as your evidence shows a real lack of understanding in the way things work.
        Describing it as a “devastating report” is scare mongering aimed at people that don’t understand economics. It is simply a report which puts the UK as a whole ranked 10th one place ahead of Norway a country with no national debt.
        The interesting thing about macroeconomics is that a single governments policies can barely influence what actually happens. The British economy for example has a large service sector, more specifically London is a major global financial center which does business with virtually every country on earth. So, given this, how are politicians meant to make policy in the UK that is able to address the recession in Brazil and falling growth in China which are huge factors as to why there is such a bleak macroeconomic outlook.

        • You know full well that a national government is able to influence it’s budgetary balance, national debt and national savings – along with the other of the five factors WEF assessed to rate the macroeconomic environment. Your examples are great to debate as a separate conversation, but had no bearing on the ratings here.
          You are free to argue that it is not ‘devastating’ that after the enormous sell offs of our public assets, the UK now has a worse macroeconomy than several developing nations. But I think you’ll be in a minority.

          • You are taking a stand against austerity with this article and basing it on the fact that the macroeconomic situation in isn’t the best. (Or ‘devastating’ in sensational journalistic terms)
            My problem with the article is that if the government were to invest in infrastructure, re-nationalise railways etc. (regardless of if this is good thing or not) The rankings for the United Kingdom regarding this report would be a lot lower as it is now. Meaning that your argument is fundamentally flawed.
            The only way investing in the local economy would work would be with quantitative easing which would result in inflation (the only thing being well managed) or HIGHER levels of national debt.

            Balancing the budget is a very difficult thing for governments get right when the global economy as a whole is very unstable. Exchange rates, other nations economic welfare, FDI etc. play an important role in this, as each investment is supposed to pay returns.

            looking at each economic indicator individually and comparing countries to those who are in completely different stages of development is arbitrary and frankly useless.

            • Why would we be lower? Perhaps in the short term but for sustained growth you can’t continue cutting, you need to grow out of the deficit through investment. Isn’t it clear the recovery is painfully slow and not working as intended? Tories promised to get rid of the deficit by 2015… Surely another economic approach is justified in the failure of this supposed Tory austerity?

        • Instead of “the opposite of austerity”, tweak it from current policy. Use Quantitative Easing that goes not into the back pockets of the financial sector, but into the national infrastructure.

          AKA print money out of thin air but put it into the country’s roads, buildings, technologies and services instead of giving it to the ruling strata while pretending that they’re going to let it trickle down against every single shred of evidence we’ve seen since 2006 and beyond.

          Thank you, come again!

    • Matt, you criticise one argument for a lack of basic understanding and then you end with an analogy that compares macroeconomics with an individual person, which anyone who has any understanding of economics whatsoever will tell you is always a bogus comparison.

  12. Well done. The whole thing is a myth anyway. The economy is treated as a god demanding ever-greater sacrifices, but actually it’s only an abstract of statistics and there’s lots else going on that isn’t measured. Its main value is that it distracts attention from the more important matter of meeting everyone’s needs. 40 or 50 years ago economic growth was debated, and the argument in favour was that it enabled the poor to benefit without taking from the rich. Now, the rich have so much that we really don’t need any economic growth, and the power inequalities are the main problem – eg the media are run by people who just aren’t interested in all the suicides driven by benefit sanctions.
    Turning to more important matters, what’s that in the coffee cup? What are you drinking? Is it scriptonite?

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  14. Good article, however at the risk of coming across as a grammar Nazi pedant, please check your the language of your spell checker. Great article though.

    • That’s not s spellcheck issue sadly. I’ve been writing predominantly for a US news site for the last year and I’m still relearning how to write in (what they lovingly refer to as) ‘Brit’ :)

  15. Unless inequality is addressed at a fundamental level and the entire tax system revised, the average British person is going to have a worse and worse time of it. Massive changes are required but because the super-rich and their mates are whispering into the ear of government, the 99% have to suffer at the hands of the 1%. As the “Labour” party changes to become the Labour party again, we can only hope that the common man and woman once more have a voice with which to speak effectively. The only alternative is the pitchforks.

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