Everything we thought we knew about the economy was wrong

“There are no facts, only interpretations”, Friedrich Nietzsche once said. One needn’t be a nihilist or a relativist to be bemused at the latest radical rewriting of history from our official number-crunchers. Everything we thought we knew about the British economy’s performance over the past 15 years or so now turns out to be wrong. Endless articles, books and academic papers have become worthless at the stroke of the statisticians’ pen.

The reason, needless to say, is that the rules have changed, yet again. The way the national accounts, the GDP statistics and the rest are calculated has been torn up. International statisticians are making a greater effort at including the output of the sex and illegal drug industries and of charities; they are also changing the way research and development and elements of defence spending are accounted for.

The implications from all of this are huge. The peak-to-trough collapse in output as a result of what has been called the Great Recession has been substantially reduced: GDP collapsed by 6pc, not the 7.2pc previously thought. That is still a very big drop, of course, but it is now almost identical to the recession of the early 1980s, when GDP fell by 5.9pc as Lady Thatcher sought to wean Britain from its high inflation


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