End of a decade: the Big Zero
"We got through the first decade of the new millennium without ever agreeing on what to call it. The aughts? The naughties? Whatever."
More important, though, was what happened. And his answer?
"From an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true."
As John Authers wrote in the FT recently,
"For the US, still by far the world's biggest stock market, the noughties saw worse performance than the depression-hit 1930s, making this the worst decade since equity markets have existed in their recognisable current form."
But more importantly, Krugman also notes, again of the U.S. economy:
"It was a decade with basically zero job creation. O.K., the headline employment number for December 2009 will be slightly higher than that for December 1999, but only slightly. And private-sector employment has actually declined — the first decade on record in which that happened.
It was a decade with zero economic gains for the typical family. Actually, even at the height of the alleged “Bush boom,” in 2007, median household income adjusted for inflation was lower than it had been in 1999. And you know what happened next."
Many countries fared similarly. The FT again:
"Britain's economy grew more slowly in each year of the noughties than it did in any other decade since the war. The sluggish economic performance of the past decade took place against a backdrop of rising population - a factor that tends to boost output, not shrink it."
And we've said on a number of occasions how Britain's financial sector, booming for much of the decade, has crowded out other sectors - notably manufacturing. The result?
"Output in manufacturing actually contracted during the noughties, declining by an average of 1.2 per cent each year, according to data from the Office for National Statistics."
And in the 1970s and 1980s (when, as it happens, tax rates were far higher) manufacturing output in Britain. grew at average annual rates of 0.6 per cent and 1.0 per cent respectively.
Back to Krugman who adds, of the U.S. market:
"It was a decade of zero gains for homeowners, even if they bought early: right now housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade."
"Even now, it’s hard to get Democrats, President Obama included, to deliver a full-throated critique of the practices that got us into the mess we’re in. And as for the Republicans: now that their policies of tax cuts and deregulation have led us into an economic quagmire, their prescription for recovery is — tax cuts and deregulation.
So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing."
Time, then, for some genuine new thinking as a new decade begins.