Right, I’ll see your double dip and raise you an economic black hole

Sunday, July 25, 2010
By Paul Martin

Sometimes expressions that dominate common parlance serve to cloud rather than to clarify the central issues. You cannot mention the huge level of government borrowing without someone saying, “So you mean that there is a fiscal black hole?”

By Roger Bootle
25 Jul 2010

Actually, I don’t see what is added to our understanding by colouring the hole any particular hue or by making an inappropriate association with the realm of theoretical physics. Similarly, you cannot mention the fragility of Western economies without someone saying, “So you mean that there is going to be a double-dip?” Actually, I don’t think that this is a very useful way of looking at things – although the underlying issue is real enough.

The first problem with the double-dip idea is that it refers to a decline in GDP, whereas in an economy that is normally growing, even a continued increase, if it is at a glacial pace, will deliver real pain, not least to those made unemployed. For in Western economies, to keep the level of employment constant, with normal increases in productivity, GDP must grow by 2pc-3pc. To absorb increases in labour supply from immigration or other sources, or to make inroads into the accumulated levels of unemployment, GDP must grow by more than this.
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