For those of us who have spent at least the past 5 years pointing out that the developed world has reached the end of growth, in other words the end of industrial age, cheap-fossil-fuelled-energy rates of economic growth, it’s no surprise to learn that the Chancellor of the Exchequer has today announced a halving of his December 2012 growth forecast for 2013, from 1.2% pa to 0.6% pa. That is one hell of a ‘tweak’ to a forecast. Indeed, it means that the previous forecast was – to use a technical term – wishful thinking.
Thereafter, economic growth is predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017. Indeed, Ed Conway (Sky News’ Economics Editor) has just tweeted that ‘the OBR thinks growth will be 2.8% [in 2017]. Let’s not forget that 3 years ago it forecast growth of 2.9% this year. Now that’s 0.6%’. Anyway, the OBR’s forecast is great because it means that by 2016 the UK economic growth rate will be slightly higher than the trend rate of economic growth in the UK since the 1950s. The tricky bit is that the inflation-adjusted price of oil (in particular) is now some 4 – 5 times more expensive than it has been since the second half of the 19th century up to mid-2008 (when oil hit $147 per barrel). So, with mankind’s most important and critical source of energy – oil – now prohibitively expensive, with other energy costs rising all the time and set to continue rising (billions of human beings want to be middle-class), and with energy being defined as ‘the ability to do work’, it will be interesting to see how we shall actually be doing enough affordable, profitable work to grow the economy at an annual rate of 2.7% by 2016.
Put simply, the UK government’s economic growth forecast for the period to 2017 is – to use that technical term again – wishful thinking. That’s all. The government must forecast those rates of growth for no other reason than to justify state borrowing and spending between now and 2017. If the government made a realistic, end-of-cheap-oil forecast of economic growth rates to 2017 then the government would look at the figures and say, “Fuck me, we’re bankrupt!”. So, the government crafts economic growth rates to justify state spending. That’s how it works.
OK, I’ll now go on record as follows … Moraymint’s forecast for economic growth over the same period is: 0.3% in 2013; 0.7% in 2014; 1.2% in 2015; economic contraction in 2016; anybody’s guess in 2017. Having looked at my forecasts and run them through the ‘Moraymint Model of State Spending’, I am able to conclude “Fuck me, we’re bankrupt!”
See you down the pub.
Oh, and by the way; Scientific American has just published this Q&A article, ‘Will Fossil Fuels Be Able to Maintain Economic Growth?’ You decide … http://tinyurl.com/ccwldzr
Also posted at the ‘Renegade Economist’: http://tinyurl.com/czkdgny