U.K. GDP figures. The truth reckoning?

The U.K. GDP contracted worse than expected by a revised 0.3% according to the ONS. This means that the U.K. is technically in a recession. The figure is interesting for many reasons. The first published figure before this revision was a contraction of 0.2% and many right leaning economists doubted that figure, suggesting that the figure is subject to errors and at the end of the day we should expect a gain in GDP after the revision. Such arguments were not based on real facts but flimsy grounds of their "perceiving" an expected growth in consumer confidence. Other arguments were actually more unbelievable, suggesting that "it's just impossible to go into a technical recession". These results point to a forgone conclusion that austerity has failed. Some of these right-wing economists are too proud to admit the inevitable. Reliving Thatcherism is the only thing which gives them a sense of ideological supeority. These figures are a verdict on the U.K. government, especially George Osbourne's performance as Chancellor of the Exchequer.

As reality checks in, the search of the previously "non-existent Plan B" begins. The insights of Gordon Brown on how to rejuvinate the sluggish U.K. economy are now resonating. Even the I.M.F. is now against the pro-austerity mantra. The robust growth of the U.S. economy has exposed the different policies across the atlantic. Progrowth policies have rebounded the American economy. The U.K. needs to stop austerity and tax cuts for the rich but instead focus on expansionary policies such as more monetary stimulus in the form of more quantitative easing and/or reducing the base interest rate from it's record low of 0.5%. More government expenditure on things such as infrastructure construction and maintanance is needed.

But why did these right-wing guys always get it so wrong. A number of factors including arrogance is evident. Economic and financial policies highly depended on expectations are a major contributing factor. A "trick" used by these guys is to convince people that maximising the utility of the "elite" who are mainly the rich, business owners and top managers is more important if you are faced with a tradeoff of persuing policies which seek to maximise the utility of either the "elite" or the "others". How then are people convinced? By peddling falsehoods such as themselves as the only ultimate job-creators means that policies which favour the elite are "good" for everyone. Market decisions which are manifested by expectations of the rich are used as the gold standard on how economic policy and behaviour should follow. We have seen how governments such as Greece and Spain have been consistently bullied by bond holders into taking economic policies which hurt the ordinary people to benefit of the bondholders. By consistently arguing that they deserve the privileges they have because they have worked "hard" for them, the ordinary folks are kept hoodwinked by these guys.

It is good that the truth is finally reckoning. Therefore let's hope that the right policies will ensure a rebound in growth in mostly western countries to ensure financial stability in the world.