The attempt is nice and the point being made is true. And yet:
Statistical methodologies also count for much too. The Government has drawn fire for the worst economic performance in Europe. Part of that is down to being later and longer into a more stringent lockdown, and due to “social” spending counting for more than a fifth of UK household spending, compared to around 15pc across the rest of the G7.
But a big chunk is down to the way ONS counts output compared to other countries, leading to a well-documented distortion of the figures. Our statisticians count health and educational “outputs” in GDP so the impact of cancelled operations or lost school time worsens growth despite unprecedented health spending.
To walk back a few steps to explain this.
GDP is either all production, or all consumption, or all incomes. We also work with the idea that these are at market prices. Not because we’re all ghastly neoliberals (the very idea of counting GDP is a slightly un-neoliberal thing to do as part of the point is to enable planning) but because market prices are at least verifiable and objective. They also add up.
The consumer pays £100 for something, that then becomes some bit of profit, income to the capitalists, some interest, income to savers, the workers get paid, that’s income, the parts they buy from other people the same happens and if we add up all the incomes to everyone – for everything does become an income to someone – then we get to the same number we started with, all consumption. Or, of course, all final production. This is only true if we do use market prices.
This is all well and dandy except we’ve chunks of the economy that don’t work at market prices. Government being the most obvious. Here we therefore just do a kludge. The value of government output – NHS and state schools for example – is the cost of providing them. For some parts of government this is an underestimate. Rozzers and a court system contribute at least to being a generally peaceable nation and that’s of great value more generally. Race baiting diversity advisers do the opposite. But when we count we just average out that government is worth what it costs.
This is where the Office for National Statistics differs from everyone else. In this recent set of events they’ve adjusted GDP for the loss of output of schools and, a bit, the NHS. Thus the UK numbers are worse than everyone elses’ because they’ve not done this. And our bounce back will be bigger as the schools reopen.
All of that’s fine. But the Telegraph’s Economics Editor really should be able to do better than this:
Other countries take a less sophisticated approach and just count the money poured in – that is, “nominal” GDP. If we did the same, we’d be in the middle of the pack rather than bottom of the league. So let’s take our 10pc slump or thereabouts with a pinch of salt.
No. Nominal, with reference to GDP, is reserved for not adjusted for inflation, “real” here meaning adjusted for inflation. Yes, sure, we can see the concept he’s grasping for but that’s the wrong word.
Tsk. Sure, this is still better than most other papers but still. Tsk.