US and Europe growth rates


          The media is contrasting the  US growth rate which hit 2.8% per annum in the last quarter of 2011 favourably with the stalling economies of Europe. What they are not doing, however, is picking up on the different composition of growth.

            In the UK the public sector made a positive contribution to growth, whilst industry and mining fell, producing an overall small decline.  In the US federal spending was down 7.3% and total public spending  down by 4.6%  whilst  the private sector grew well, producing the overall gain of 2.8% per annum.

 I presume this part of the truth did not fit in with the highly spun stories abouts cuts, or with the belief that Obama has avoided cuts.  The facts show in the last quarter tough cuts in US public spending along with good growth. In the UK there was public spending growth with no overall growth.  That’s too difficult for UK commentators to explain!


  1. Brian Tomkinson
    January 27, 2012

    You could call it an ‘Inconvenient Truth’.

  2. lifelogic
    January 27, 2012

    Exactly it does not fit with “BBC Guardian think” so not reported. The question is why is the Government not cutting waste/regulations/tax and getting cheap energy – do they not want to win the next election? It is almost too late now anyway. They might also, perhaps, try taxing high earners sensibly at 15% as the US instead of 52%. Well at least no more than 40%!

    1. Bob
      January 28, 2012

      To: David Cameron, Nick Clegg, The BBC, uanime5 and The Guardian.

      Subject: Tough Love

      People are turning down work because earning money makes them poorer due to the ensuing reduction to their benefits, which means that I am paying people (through taxes) not to work for me!

      • Reduce my tax burden
      • Reduce benefit payments
      • I will use the tax saved to pay them higher wages
      • They will find the prospect of getting out of bed in the morning more attractive than starving
      • They regain their dignity
      • I get to spend some time with my family
      • Win/Win

      1. Bazman
        January 29, 2012

        Memo to Bob.
        You arrogantly assume that all those on benefits are not looking for work and reducing their benefits will somehow motivate then to look harder for a job by making them more desperate. Why don’t we make you more desperate by cutting your pay and reducing your rights at work. The money saved by your company could be used for expansion and more jobs. Win. Win.

    2. Steven Whitfield
      January 28, 2012

      I suspect the reason is because the rules of political correctness dictate that any cut, real or imaginery is percieved as an attack on ‘vulnerable people ‘ in society. The terms of the debate then label anyone who takes a contrary position as being ‘nasty’. This is why Theresa May got it so deeply and utterly wrong when she descibed her own party as ‘the nasty party’ . What she did was signal the party’s wholesale embrace of the whole PC agenda.

      What we need is someone willing to step outside the loop and attack the ideology behind this mindset, but for one reason or another it never happens. We have had decades of politicians encouraging people to strive for the bottom rather than the top , to blame their ills on society not themselves etc. The elite aren’t going to admit they have been massively wrong in encouraging this sense of entitlement by reducing spending by anything like what is needed.

      Secondly the coalition is hooked on the boost in growth that throwing taxpayers money around causes. Fundamentally Clegg and Cameron and his ilk do not understand how business works so they need a short term fix to stop the growth figures falling through the floor…so spending has been allowed to slide….

    3. Bazman
      January 29, 2012

      Charity for the rich? How will this help anyone?

  3. Peter van Leeuwen
    January 27, 2012

    (slightly off topic) EU attention is finally attention turning to growth and jobs. I hope the EU will especially focus on youth unemployment (November 2011: Germany 8.9%, The Netherlands 7.0%, UK 20.4%) and take the best models to follow.

    As I like to turn my interest to new areas, this will be my final contribution in this blog for at least a year with thanks to Mr. Redwood and many contributors, with whom I was allowed to spar.
    Now that even Mr. Soros is investing heavily in Italian bonds, I imagine that any Anglo-American speculator attacks on the euro will run out of steam within say, two years from now. Although it would make my holidays cheaper, I do hope that speculators won’t turn on the pound sterling instead.
    Two years, because the reform process in the eurozone will continue to be slow and painful. Why? Because there are 17+ democracies struggling to agree with each other and with their parliaments in the process of further integration. I’m very confident though, that Europe as a post-war project for peace will continue to evolve, be it slowly. I hope that the UK will be able to unite about its preferred relationship with or in the EU.
    It’s been fun. All the very best to you all, Peter van Leeuwen.

    Reply: Thank you for your intelligent defence of the EU to an audience not on your side. It has made the debate more interesting. The ECB has bought the Euro some time with the larger cash injections into the banks, but has not solved the underlying problems. Greece will be the first to exit,. The Euro is not an optimum currency zone, and the currency is creating political and economic tensions that can only be solved by having fewer countries in the zone.

    1. Martyn
      January 28, 2012

      Good luck, Peter. You have withstood the flame and fire from we, largely I suspect, disenfranchised English folk very well and although our views are a continent (or should I say several regions?) apart, I wish you well. Regards, Martyn

    2. lifelogic
      January 28, 2012

      To reply: Exactly right not a solution (pointless damage is still being done to EU economies) just a further time to find a real solution.

    3. Mazz
      January 28, 2012

      To Peter van Leeuwen

      I wish you well. It is always good to have differing viewpoints to consider.

  4. ken from glos
    January 27, 2012

    If you believe the u.s growth figures then you are wrong. They are as bad as the chinese growth figures.

    This is all a figment of their imagination . Read wordpress the slog blog

    1. APL
      January 29, 2012

      ken from glos: “They are as bad as the chinese growth figures. ”


      The problem is this. In an expanding world economy it is quite possible to borrow from the future to spend today and call that growth in GDP.

      Over the last sixty years even in the deepest recessions, the world economy has continued to grow, credit has been expanded and an enormous rate.

      Now of course, when credit is contracting, we see the inevitable results in for example Greece, but they are just a fore taste of what is to come.

      The point I want to make though is this: We are now in a credit deflationary period – which might last for twenty years. We simply cannot pursue the model – borrowing today equals two extra percentage points on GDP anymore.

      But with out borrowing GDP in the US would be 20% smaller, and the UK probably contract more because we have a disproportionately large financial sector.

  5. Bazman
    January 27, 2012

    It’s impressive how up to date John Redwood is.

    1. Jason Williams
      January 28, 2012

      It is for no reason that he is one of the first websites that I check everyday.

      Keep it up John!

  6. Caterpillar
    January 27, 2012

    I suppose the good news here is that as/if the UK actually begins to really do some cutting then we might get somewhere. The US though has also had a large amount of price adjustment already (e.g. houses) and its inflation rate didn’t get quite so high as UK and certainly not for so long.

    (The bad news might be that with the view that the US over seasonally adjusts that numbers may get misquoted lower in the summer and panic may set in.)

  7. Joe McCaffrey
    January 27, 2012

    ” I presume this part of the truth did not fit in with the highly spun stories abouts cuts, or with the belief that Obama has avoided cuts.”
    On the former you are certainly correct – the coallition governnment has not reduced spending but increased it. However it is not the case that this shows Obama has not avoided cuts, we must remember that there was a massive Keynsian stimulus attempted in the first two years of his administration, this last year it has begun to be winded down, as originally planned, so the 7.3% reduction must be seen in that context – and crucially spending is much higher than it was when he took office.

  8. Rob
    January 27, 2012

    I didn’t vote Conservative to get socialism. Time for a rethink about my future voting intentions.

  9. Geoff
    January 28, 2012

    How does the public sector help growth? All it’s money is taken, under threat of violence, from the productive private sector or “borrowed from the future, and given to bureaucrats, warmongers, insiders, insolvent banks and businesses or plain wasted on a variety of ridiculous schemes and adventures like the new HS2 white elephant. Amongst all that is a very small core of necessary services like police, courts, and basic national defence. Every other thing could be provided by private enterprise, cheaper and better or just not done at all. Naturally we have been brainwashed into thinking the state must do everything and now it’s being credited with helping growth. That is just not possible. It can only get in the way.

  10. Electro-Kevin
    January 28, 2012

    Obama is declaring ‘US jobs for US workers’ and the media don’t pick up on this as racist.

    Off topic if I may:

    The largest of Govt expenditure is welfare and pensions.

    I posit that there ought to be a distinction between pensions for which no national insurance has been paid. This is tantamount to saying that benefits are ‘wages’.

    1. Electro-Kevin
      January 28, 2012

      Clarification: How can anyone who has never worked or contributed to a pension ‘retire’ in the normal sense ?

      1. Mark
        January 28, 2012

        It means they no longer visit the job centre to sign on.

      2. uanime5
        January 28, 2012

        Why should people be penalised because there weren’t enough jobs available? Until there is a surplus of jobs people living on benefits will remain endemic.

        1. Caterpillar
          January 28, 2012

          (uanime5) I am not defending it, but having a stock of unemploymed does not require the same people to be permanently unemployed. I am also in no way suggesting the following policy but I guess 10% unemployment approxiamtes to full-employment at a 4.5 day week.

        2. lifelogic
          January 29, 2012

          There is no shortage whatsoever of work that needs doing.

    2. Bazman
      January 29, 2012

      Certain living standards, healthcare and housing in Britain are an entitlement, if you would care to argue they are not, do try. When we are seeing the utter failure of any government to link bonuses of bankers to there own personal financial and caving in to empty threats of these and the idle rich, this reinforces this idea.

  11. Martyn
    January 28, 2012

    The age-old ‘Smoke and mirrors” technique springs to mind. It often works quite well….

  12. oldtimer
    January 28, 2012

    The prevailing UK group think is that UK public spending is being cut (when it is going up) and that our problems are the fault of the EZ (when in fact most are home made). Clearly external events have an influence, but it does no credit to those in the political class and commentariat who ignore the problem of the UK deficit and ever growing debt mountain.

  13. Steven Whitfield
    January 28, 2012

    “That’s too difficult for UK commentators to explain!”

    I disagree with John Redwood, it is not too difficult for them (the commentators) to explain. His factually correct analysis is ignored becuause it is ‘off message’ and doesn’t fit in with simplistic politically correct ideology – that our economic difficulties are caused by greedy fat cat bankers etc. (oppressors) attacking the blameless poor (the victims).

    Your message( that public spending is actually increasing and an overburdoned private sector is shrinking) is an unwelcome and inconvenient truth.

    The politically correct elite who run this country (and i sadly include the Conservative party) are deeply suspicious of any deviation from their own version of the truth.

    I have a question for John Redwood – is it conceivable that the coalition are quietely allowing public spending to increase ?….perhaps becasuse a very modest growth figure is less politically embarassing than higher than expected borrowing ?

    I heard yesterday that David Cameron boasted that ‘We have more people in work now than before the election’. He didn’t explain that in this period unemployment had gone up indicating almost all the new jobs had been taken by immigrants.

    His claims to ‘reduce the deficit in 4 years’ ,reduce net migration to ‘the tens of thousands’ are in tatters along with his credibility. He is Tony Blair MkII.

    1. Bob
      January 29, 2012

      Calling the current Tory Party conservative is a misrepresentation.
      They could more correctly be described as the Drunken Sailors Party.
      The conservative party is UKIP.

  14. Stephen W
    January 28, 2012

    I’d like to quote this at some other people. In order to do that may I ask what is the original source for these figures?

    Reply: The press release announcing the US official figures.

    1. Stephen W
      January 29, 2012

      Thank you.

  15. sm
    January 28, 2012

    UK Public spending growth but still queues on the Dartford crossing at Peaks and at other pinch points. A few extra crossings and linkages would be welcome particularly if the Boris Island takes off? A little to late for the Olympics though and for probably less than HS2 consultation costs.

    1. lifelogic
      January 28, 2012

      The queues at Dartford are mainly due to the tolls – get a proper electronic payment system or get rid of the tolls and put it on general taxation. Also another bridge at the Blackwall tunnel please.

  16. Derek Emery
    January 28, 2012

    Its easy to see why there is public sector growth. The coalition are borrowing more to keep the public sector growing. However all growth in the public sector has to be paid for by the private sector. The public sector contributes nothing to our exports and we need to achieve import/export balance of payments because the deficit has to be paid for. A country that imports more than it exports must either decrease its savings reserves or borrow to pay for those imports. This is a mathematical identity called the balance of payments. A long term continual balance of payments deficit like the UK has had for decades inevitably has to translate into ever-increasing debt. We are already one of the most highly indebted countries in the world. Labour about doubled spending on the public sector which has to be paid for by a combination of increased personal taxation and increased taxation on companies, all of which makes the UK less competitive in world markets making achieving balance of payments far more problematic. Increased taxation makes more companies unviable as they have to make a profit or die.

    1. lifelogic
      January 28, 2012

      Exactly but their time view is the next election only thee years away.

  17. uanime5
    January 28, 2012

    Given that the US mainly exports to Canada (19.4%), Mexico (12.8%), China (7.2%), and Japan (4.7%); while the UK mainly exports to the EU (53%) this may account for the difference regarding private sector growth. Especially since the Euro crisis and the slow growth in Europe is making it difficult to have an export lead recovery.

    Of course the difference could be due to the way the Governments are being run.

  18. Dinah Biglin
    January 28, 2012

    Great stuff.Really looking forward to read more.

  19. Phil Richmond
    January 29, 2012

    It would help if we had a Conservative Chancellor who understood economics in No.11 not someone just interested in doing what is right for political strategy.

    How did we get to this situation when Cameron is in No.10 & Osborne is Chancellor. Makes me want to cry!

  20. Breno
    October 16, 2012

    Please Sir I can explain it!!

    The article presents a misleading picture, there have been tough cuts in the UK particularly cuts which hit the poorest hardest, basically all the cuts have hit the poorest. This has resulted in no growth and indeed recession in the UK, so despite the cuts, ie cut to benefit payments, spending has increased because more people are out of work.
    The exact opposite has happened in the USA, Obama continued spending, he did not make any cuts like those in the UK that I am aware of. The result of that was USA unemployment went up so less people were on benefits and more taxes came.
    That is how the USA cut their spending, paradoxically by continuing spending!

    Most of the UK cuts are politically rather than economically based, they want to punish the poor for being poor and punish the unemployed for being unemployed and indeed punish the sick and disable for being sick and disabled.

    The rich, the people who by and large caused the problems, only got one cut, a tax cut!!

    The quickest way to get out of a recession is to redistribute wealth. Making the poor poorer mean they have no money to spend.

    The UK has more cuts for the poor planned thus it it a horrible downward spiral.

    Reply: Benefits were raised by 5.2% last year, far more than wages went up. The total benefit bill is up even though there are 1 million extra jobs under this government.

  21. Breno
    October 16, 2012

    The answer is in the quoted article below, in short Britain cut and had to spend more, the USA didn’t cut and ended up spending less.

    Redwood is either being dishonest or he is being stupid. The USA’s success is because they didn’t cut and got growth so they spent less. The opposite happened in the UK, we cut got no growth and spent more. Not only is Redwood dishonest or stupid but he is supporting failed policies which are dangerous, ie more cuts = less growth = more public spending = more cuts. A dangerous spiral.
    British-Style Spending Cuts Would Shock U.S. Budget — But Could It Work?
    Published October 24, 2010

    “Britain’s austerity program would surely shock U.S. senses, at a time when the Obama administration has taken a slow-and-steady approach to closing the deficit. To replicate in the United States what Prime Minister David Cameron’s government is doing in Britain, an economy one-fifth the size of America’s, Washington would have to propose a set of cuts well above anything proposed so far on Capitol Hill. But the exercise shows just how drastic an effort may be needed to keep the United States from going broke.

    “The Obama administration is showing no appetite whatsoever to do what the British are doing,” said Nile Gardiner, director of the Margaret Thatcher Center for Freedom at the conservative Heritage Foundation. But, he said, the U.S. has to “at the very least do what the British are doing” to avoid a fiscal calamity. ”

    Reply Try reading what I write, which shows you misunderstand the position. The UK has increased current public spending, whilst the USA at state level has cut current public spending. The main reason the US economy is doing better than the UK at the moment is they fixed their banks more quickly and have a set of private sector commercial banks capable of financing a modest recovery.

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