UK out of recession first says leading economist
10 years ago economist Paul Krugman warned of the problems that would lead to the current crisis in his book The Return of Depression Economics; his work earned him the Nobel Prize for Economics in 2008.
Krugman is indeed one of the winners to come out of the current recession for his sharp and accurate economic insight, and it will come as welcome news to those in the UK that Krugman sees this country coming out of recession before both Europe and the US.
In an interview with the Credit Suisse website Krugman says:
"I am convinced that the UK will be the first of the major European economies to emerge from the recession. As the country is not part of the eurozone, it has seen a much greater depreciation of its currency, a factor that is going to be very much to Britain's advantage over the next year."
The UK will not only be aided by the flexibility of the Sterling but also by a rigid labour market.
"One thing that is clear, however, is that although the decline in GDP looks similar on both sides of the Atlantic, the human cost is disproportionately great in the US.
"This is above all due to the weakness of the US social safety net and the lack of employment protection.
"True, time and again we hear how important it is to have a flexible labor market, but when a crisis of this magnitude comes along, a certain degree of rigidity in the labor market is something of an advantage. For all these reasons, the Americans are suffering much more than Europeans in the current crisis," says Krugman.
In the same interview Krugman also warned that China will not be the economic locomotive of the near future that many other economists are banking on.
"If we go by the estimates of purchasing power parity, the Chinese economy is already half the size of the US economy, and maybe even bigger. However, the market value of Chinese GDP is substantially less than that.
"So, even a large rise in Chinese economic growth, while obviously helpful, wouldn't change the fact that China isn't even remotely big enough to act as the world's locomotive just yet. In 20 years it may be a different story, but not now."