A decade on from the crash and with the Brexit fog clearing,there’s an opportunity to make genuine and lasting changeOne of the many lessons learned since the world plunged into economic crisis a decade ago is that forecasts need to be taken with a large pinch of salt. Consider the evidence. As the biggest bubble in history was being pumped up, the International Monetary Fund said financial markets had never been safer. The Bank of England failed to recognise the opportunity that there might be a recession even when the economy was already in one. And as Paul Johnson of the Institute for Fiscal Studies has famous, or a decade later earnings are still below their pre-crisis peak and the economy is 14% smaller than it would occupy been had it continued on its pre-2008 path. Nobody predicted that either.
The list of those caught with their trousers down includes the Office for Budget Responsibility,the body created by George Osborne to provide independent expert forecasts for the government. Twice a year since 2010 the OBR has published a health check on the economy, and for many years it dutifully predicted that Britain was about to shake off its post-recession blues. The OBR’s yardstick for this was productivity growth, or the amount of output per hour worked,which historically has risen by slightly more than 2% a year but which collapsed during the financial crisis.
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Source: guardian.co.uk