I was struck by this OBR graph showing the endless frayed string of failed of productivity predictions.
We keep hearing about the productivity problem, but nothing makes the picture clearer than this picto-nightmare of shattered d(atast)reams.
There’s plenty of good commentary from the likes of Wren-Lewis about the output and innovation gaps.
I imagine than in part that this comes down to some well-trodden macro-economics that Krugman et al have been extolling for years: the economy is in a liquidity trap. With interest rates at rock bottom, in the zero-lower bound, monetary policy is out of fuel. The only way out is with fiscal policy. Yet, not only are we not seeing this, we are looking at the reverse: deepening austerity.
The pinning of all blame on the liquidity trap may be like pinning the blame for a poisoned man’s ability to stand on the gorilla that is sat on him.
Someone else poisoned the man – productivity has been in a slump for years.
But it is pretty clear that when you trash investment into worthwhile things, strip people of their support networks and encourage them to point the finger rather than open their arms, it’s hard for them to get back on their feet.