Cover of MoneyWeek magazine issue no 702

Russia's land grab: What it means for your money

31 July 2014 / Issue Upcoming

Tensions are rising between the West and Russia, and this will impact the economy. Prepare to protect your investments, says John Stepek. Read this week's cover story here.

‘Tesco tax’ won’t save the high street
Moneymen gush about virtual reality
Should you defer your state pension?

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Merryn Somerset WebbEDITOR'S LETTER

Merryn Somerset Webb

Not much of a milestone

Last week everyone got a bit excited. The UK’s GDP, we were told, had finally hit its pre-crisis peak. We are now – hooray – as big as we used to be. David Cameron and George Osborne called it a “milestone” and most papers reported it with happy exclamation marks. No one mentioned that the US hit the same milestone in 2011.

But if this announcement gave you great joy, perhaps it’s worth looking at just what GDP is. It is not a snap shot of an economy’s balance sheet. It doesn’t tell us our wealth. It measures the flow through an economy – the things created in any one year. So if you knocked a city down and built it again to exactly the same specifications, you would see no rise in real wealth. But you would see a sharp rise in GDP.

What else? GDP doesn’t factor in the size of the black market – the UK’s statisticians recently added a bit on to our GDP for drugs, prostitution and the like but I think we can all agree they didn’t add quite enough (if they had captured the whole black economy, GDP would have risen by 20% not 5%).

It doesn’t distinguish between good growth (such as the output of entrepreneurial manufacturing companies) and bad growth (such as the bomb-making bonanzas that come with war).

That isn’t to say that rising GDP is a bad thing…

• Read the full editor’s letter here: Not much of a milestone