Why Belgium’s economy has performed better than the UK
11:24 am - August 17th 2011
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In the past nine months the UK economy has grown by 0.2%. Belgium, meanwhile has grown by 2.2% – a very healthy performance. In the second quarter of this year it racked up quarterly growth of 0.7% – putting it near the top of the Eurozone growth league.
What’s the secret of the small state’s recent faster growth? Oddly enough, the answer appears to be its lack of functioning government.
But before the small state libertarians open the champagne – the connection isn’t the one they might expect and hope for.
It’s not that the lack of an intrusive, interfering government has set the forces of enterprise free – instead the political paralysis afflicting Belgium has meant that, unlike most Euro-area governments, it has not embarked on an austerity drive.
As the FT reports the lack of absence of austerity (and the fact that Belgian salaries and pensions are indexed to inflation) is providing a boost to growth.
Belgium can’t avoid austerity forever, public debt to GDP stands at over 100% (much higher than the UK) but in the short to medium term it is certainly outperforming its neighbours. The FT quotes a perplexed economist from ING:
“In the case of public spending, the short-term gain is paradoxical. It makes it more and more clear that we will have to undertake deeper austerity measures in the future.”
I don’t think this is paradoxical at all – nor do I agree that an effective short term stimulus now necessarily means deeper austerity later. As Christine Lagarde argued yesterday, the right policy mix for most states is a short term stimulus to get growth moving coupled with a medium to long term programme to balance the budget.
Belgium, in the absence of a functioning government, lacks the ability to commit to a credible medium term plan – hence the recent market pressure on its bond yields, but in the short term its current policy mix is certainly generating growth – as of result of which the government’s deficit narrowed from 4.6% of GDP in 2010 to an estimated 4.0% this year.
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Duncan is a regular contributor. He has worked as an economist at the Bank of England, in fund management and at the Labour Party. He is a Senior Policy Officer at the TUC’s Economic and Social Affairs Department.
· Other posts by Duncan Weldon
Story Filed Under: Blog ,Economy
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Reader comments
Is this not cherrypicking statistics? I’m sure I can find countries where growth is down amidst government stimulus (ahem, the US) and then I could draw the opposite conclusion.
And didn’t we already have a stimulus in the UK as the credit crisis hit? And isn’t government spending still rising in the UK? And why should taxpayers underwrite borrowing from bondholders for “stimulus spending”? What happens when these bondholders turn against us (as they have done against much of the rest of Europe)? The policies advocated by yourself and this website, and echoed by Labour, worry me intensely. More and more and more debt.
Belgium is in the euro. Its businesses don’t have to pay the enormous extra cost burden of having a basket case currency to make itself feel important.
Nonsense!
I live in Belgium and there is no way the Belgian economy is in a healthy state.
The so-called stability of the Belgian economy testifies to the ability of Belgians to lie to themselves about the truly disastrous state of its economy and to convince others that the lies are true.
#tbm. No doubt you perceive problems in Belgium, and I’m sure they are there. But the fact is that, unless the statistics are outright lies, then Belgium is doing eleven times better than UK.
This is a most extraordinary and useful post. Thanks for pointing it out.
The bankruptcy of mainstream conventional economics & government policy on this is just staggering.
Belgium’s 2.2% could have been us if the LibDem members had not been blackmailed into approving a cuts first & foremost Tory-led coalition by the Quislings Clegg & David Laws. They in turn were probably blackmailed by Gus O’Donnell. A sorry sorry tale. Osborne and the LibDems must be made to pay for this catastrophe – and so should the top of officialdom.
#tbm. No doubt you perceive problems in Belgium, and I’m sure they are there. But the fact is that, unless the statistics are outright lies, then Belgium is doing eleven times better than UK.
This is a most extraordinary and useful post. Thanks for pointing it out. The bankruptcy of mainstream conventional economics & government policy on this is just staggering.
Belgium’s 2.2% could have been us if the LibDem members had not been blackmailed into approving a cuts first & foremost Tory-led coalition by the Quislings Clegg & David Laws. They in turn were probably blackmailed by Gus O’Donnell. A sorry sorry tale. Osborne and the LibDems must be made to pay for this catastrophe – and so should the top of officialdom.
@AnotherTom – I fear this is going to have be said many times over, but the US is not an example of a country practising stimulus, but a country practising austerity. The Obama stimulus – though quite effective on its own merits – barely even cancelled out the impact of shrinking state budgets across the country which has seen state and local government resorting to such pathetic measures as closing police stations, switching off street lighting and digging up paved roads in some parts of the country.
This year, as the federal stimulus has started to end, and predictably, growth – which never recovered sufficiently – has begun to wither again.
It is simply not true that the US has avoided the austerity route.
So i guess the libertarians will just have to wait a few more years before opening the champagne then.
I have friends who live and work in Belgium. I visited some of them two weeks ago, as London burned and seethed. Compared to the UK, Belgium is a veritable paradise on earth and a testament to what you can do when you effectively abolish the government – though not the state, as such.
They are growing their way out of their deficit, which is exactly what we should be doing. We are re-learning the lesson of the 1930s that you can’t cut your way out of a deficit.
They also have a highly efficient, mutualised health service consisting mainly of a mix of non-profit providers, funded through taxation. On the down side, their police are even worse than ours, but in many other ways, we should be copying Belgium.
Reactions: Twitter, blogs
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Liberal Conspiracy
Why Belgium's economy has performed better than the UK http://t.co/N40vM24
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Hides Name
RT @libcon: Why Belgium's economy has performed better than the UK http://t.co/G0nLQvS
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DPWF
Worth reading: #Belgium 's lack of government has led to no #austerity and #cuts and therefore much higher growth. http://t.co/5uSHmJC
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Ben Mitchell
Why Belgium's economy has performed better than the UK http://t.co/N40vM24
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Hamish Allan
Why Belgium's economy has performed better than the UK http://t.co/N40vM24
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overhere
RT @libcon: Why Belgium's economy has performed better than the UK http://t.co/OS9PAZ6
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Emile Todoroff
Why Belgium's economy has performed better than the UK http://t.co/N40vM24
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Why Belgium’s economy has performed better than the UK | Redhill Coalition Against Cuts
[…] Read more on liberalconspiracy.org. […]
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Noxi
Why Belgium’s economy has performed better than the UK | Liberal Conspiracy – http://ow.ly/65i5W http://ow.ly/65i6f #austerity #falseecon
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TP recommends...
Why Belgium's economy has performed better than the UK's – @DuncanWeldon on @LibCon http://t.co/I8q7Wdi
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w.m o'mara
Why Belgium’s economy has performed better than the UK | Liberal Conspiracy http://t.co/1mm25kd via @libcon NB Osbsorne!
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conspiracy theo
Why Belgium's economy has performed better … – Liberal Conspiracy http://t.co/parNhqd
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Joluni
Why Belgium’s economy has performed better than the UK | Liberal Conspiracy http://t.co/jqbivlJ via @libcon
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Joanny Stewart
Why Belgium's economy has performed better than the UK http://t.co/N40vM24
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andrew
Why Belgium's economy has performed better … – Liberal Conspiracy: In the past nine months the UK economy has … http://t.co/9OUJnxL
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milian
Why Belgium’s economy has performed better than the UK
http://t.co/j7ZLOcM
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David Davies
Why Belgium’s economy has performed better than the UK ~ http://t.co/lTMT0C4 #NoGovernment
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Jan Volbrecht
@abeelec http://t.co/lFL4hqB (zegt niks over lange termijn, das waar) 🙂
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Daphne Desser
Belgium outperforms rival economies. Why? No government = no austerity meausures = growth http://t.co/ZLNcrzh
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