As ThinkProgress has explained, the U.S. has rebounded from the 2008 financial crisis quicker than Europe, in part because it embraced stimulus measures, while several Eurozone countries have implemented (or been pushed into) austerity. One of those countries is the UK, where growth has essentially flat-lined.
According to new data from economists Moritz Schularick and Alan Taylor, the U.S. has done better than should have been expected, considering the nature of the Great Recession. The same can’t be said for the UK:
The pink range indicates the expected recovery path. As we noted in our original column, the US exceeds expectations here. The US growth path manages to emerge from and stay above the predicted range by years 3-4-5 (i.e. 2010–12). In contrast, the UK path is disappointing, and can’t really be called a recovery yet.
Even using the maximal measure of excess credit based on bank and shadow bank data to bias the forecast path down as far possible, it is still not possible to account for the UK’s dismal performance. The UK was on a similar path to the US in years 1-2 (2008–09), but falls well behind the US in years 3-4 (2010–2011), only to drop below the forecast range in year 5 (2012).
As the U.S. was at least attempting to stimulate the economy — despite the protestations of Congressional Republicans — the UK adopted the Tories’ austerity package. Now it seems that only the Olympics are providing any bright spots for the UK economy.