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By HaleStewart May 23, 2014 8:20 am
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The Failure of Austerity: UK

Recently, the UK government has used UK's economic turnaround as proof that austerity works.  However, a closer look at the data reveals this to be far from the truth. 

Let's start by looking at GDP from several perspectives:

Above is a chart of GDP growth.  Notice that on three occasions between 2010 and 2013 it was negative -- hardly a ringing endorsement for the then currently implemented policy.

From 2010-2013, the annual rate of GDP growth was declining -- again, not exactly the strongest endorsement for the then used policy.

And it is only recently -- five years after the recession -- that GDP in constant prices is approaching pre-crisis levels.

But there are other metrics that show the weakness of the UK's austerity policy.

The unemployment rate remained at high levels -- hovering around 8% -- for three years.

Industrial production's year over year percentage change was negative for three years from ~2011-2013.

PMI was declining from 2011-2012 and remained at depressed levels for another year 2012 after that.

Simply put, the data above indicates that policies implemented during the 2011-2013 period depressed economic growth, leading to high unemployment.  While the above information is nuanced -- and therefore outside the traditional bounds of political discourse -- they clearly refute the "austerity was a success" narrative.

Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer 

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