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Most people don’t know what GDP growth is

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We’ve got the message. Liz Truss, Britain’s new prime minister, is interested in growth in GDP. “I have three priorities for our economy: growth, growth and growth,” she said He said In her address to the conference last week. She hinted that the market’s negative reaction to the finance minister’s “mini” budget – which led to a drop in the pound and an increase in mortgage rates – would be worth it. “As the past few weeks have shown, it’s going to be tough,” she said. “Whenever there is change, there is disruption. Not everyone will be in favor of the change. But everyone will benefit from the outcome.”

There are two problems with this strategy. The first is that most people don’t know what GDP growth is, let alone care about it. Nobody stands outside Downing Street with a loudspeaker chanting “What do we want? 2.5 per cent annual GDP growth. When do we want it? In the medium term.”

in study For the public’s understanding of the economy funded by the National Statistics Office in 2020, GDP was one of the economic concepts that people don’t understand very much. Less than half of the British public were able to correctly select the definition of GDP from a list of options. It was common for people to confuse it with the value of exports or the pound.

In the focus groups, people did not know what kind of economic growth rate could be considered normal, good or bad. When the growth was said to be 1.3 percent, the most common reaction was silence or indifference. “It means absolutely nothing to me,” said one participant. Another said, “It’s not tangible to us, we can’t touch it or feel it.” “You’re kind of your bubble, right? Just worrying about what you have… your own economy.”

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Truss is not the first confess himself “Economy freak” in politics. It was Gordon Brown once make fun of him As a shadow advisor to mention “Post-Neoclassical Endogenous Growth Theory” in a speech. And to be fair with Truss, she at least recognizes that people need some help understanding why growth is so important. In her talk, she explained that growth would mean higher wages, more jobs, more money to fund public services, etc. But if you have to spend seven sentences explaining the meaning of your logo, it might not be the best choice in the first place.

This does not mean that the public is ignorant of the economy or indifferent to it. The study found “pockets of general economic experience” where people were well informed, often in areas they felt were most relevant to their daily lives. Interest rates have been one metric that people have understood and followed closely, which is not surprising given their impact on mortgage rates and consumer credit. “We live by the interest rate. “If the interest rate goes up, your quality of life will go down,” said one focus group participant. People have understood inflation well, too, often associating unconvincingly with whether or not it has outpaced wage growth. When asked how they judge whether the economy is doing well, people tend to mention interest rates, the availability of decent jobs, public streets, the cost of living, and the quality of public services.

This brings us to the second problem of gears. While she and her advisor Kwasi Quarting worked to protect families from rising energy bills, the market’s reaction to unfunded tax cuts affected things like mortgage rates that really matter to people. The “mini” budget degrades the parts of the economy that people understand and care about, in pursuit of a goal that people neither understand nor care about.

This is not just bad policy. It’s also bad economics. I am not in the Anti-Growth Alliance. Of course faster economic growth would be a good thing. But it doesn’t help to start trying to boost the economy with a shock that makes people feel poorer and more anxious. Many already view the economy as an unpredictable and dangerous externality. In the study, members of the public spoke of it as a threat “constantly hanging on us”; Others said they were “beaten” or “beaten in the face” as a result.

The language of “disruption” works well in the startup world. It does not work in the world of economics, which is really just the realm of people’s real life. There were no easy choices facing Truss and Quarting, but the ramifications of their “mini” budget made their task even more difficult.

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If the UK economy is to grow faster, people will need to be more willing to invest, start a business, train for something new, and make a move in pursuit of an opportunity. People don’t want to be disturbed. They take risks when they are not afraid.

sarah.oconnor@ft.com

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UK regulator to investigate rising mobile phone and broadband prices

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The UK’s telecoms regulator has launched an investigation into whether telecoms companies were upfront with customers about price increases in a contract after complaints of a lack of transparency.

Ofcom will study whether mobile and broadband service providers made customers who signed a deal with the company between March 2021 and June 2022 sufficiently aware of changes to their pricing terms.

As inflation soared as the cost-of-living crisis intensified, telecom groups collapsed audit From the regulator and politicians about whether they acted enough to support struggling families and broke the rules of transparency. UK inflation hit a 41-year high of 11.1 percent in October.

Most operators chose to significantly increase their prices above the rate of inflation earlier this year, which boosted core revenue. For example, BT, Vodafone and EE raised their prices in line with the CPI, plus 3.9 percent.

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Ofcom He said he was concerned that such intra-contract price differences were not “sufficiently prominent or transparent” at the point of sale, as required by the regulator’s rules. If cases of non-compliance are identified, Ofcom may initiate an investigation into said operators.

said Lindsey Fossell, group director of regulator networks and communications.

Ofcom’s latest affordability report, published on Thursday, found that 32 per cent of households had problems paying for phone, broadband, pay TV or broadcast bills – more than double the level of April 2021.

It also found that 17 percent of households are currently cutting back on other spending, such as food and clothing, to afford telecom services — up from 4 percent in June 2021.

Dana Toback, chief executive of Hyperoptic, a broadband provider that chose not to raise its prices above inflation rates this year, said Ofcom’s investigation was “a huge step forward in preventing the consumer from harm caused by higher mid-price contracts”.

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This year’s Hyperoptic survey found that 60 percent of people were unaware that the price of their broadband would increase mid-decade.

“We work hard to make sure that the annual price increase is clearly defined and discussed at each registration or renewal,” said BT, which also owns EE, adding that the company also showed customers how price changes worked in the contract.

“We follow industry best practices, and will participate fully in the Ofcom programme,” she said.

Vodafone did not immediately respond to a request for comment.

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Georgieva of the International Monetary Fund to discuss the economy and Covid with Chinese authorities via Reuters

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© Reuters. International Monetary Fund Managing Director Kristalina Georgieva attends a press conference following a meeting at the Federal Chancellery in Berlin, Germany on November 29, 2022. REUTERS/Michel Tantosi

NEW YORK (Reuters) – International Monetary Fund Managing Director Kristalina Georgieva said on Thursday that she will travel to Beijing next week with heads of other international institutions to discuss China’s economic outlook and COVID-19 policies with the country’s leadership.

“This is the first time, and we hope we can sit down together and discuss the very pressing issues facing China and the world,” Georgieva told the upcoming Reuters conference.

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Dutch minister defends trade relations with China

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A senior Dutch minister has defended the country’s deepening trade ties with China and vowed not to overreact on high-tech exports as the Biden administration pushes its European partners to harden their stance on Beijing.

The Netherlands remains “very positive” about its relationship with China, Micky Adriansens, the economy minister, said, saying Dutch companies operating there are providing a boost to innovation and trade.

As the United States presses its partners to tighten controls on exports of high-end semiconductor equipment to China, it has insisted that the Netherlands and Europe “must have their own strategy.”

“We have to think about this through – what are the risks of doing business with China in terms of certain products and value chains,” she told the Financial Times. “In general, we in the Netherlands are very positive and always have good relations with China. We do a lot of business with China. There are a lot of Dutch companies operating.”

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China accounts for 11 percent of Dutch imports, second only to Germany, and about 5 percent of exports.

The minister said that the relationship “gives a real boost to innovation and trade which is fundamental for Europe. We must cherish that as well.”

The remarks appear to contradict those of US Secretary of State Antony Blinken this week, who said he has seen “growing rapprochement” between the US and its allies on China. Blinken’s comments follow the US decision in October to impose strict export controls aimed at slowing China’s development capacity and preventing it from obtaining advanced semiconductors that could be used for military purposes.

The Netherlands is home to ASML and ASM International, two world-leading manufacturers of chip equipment.

The United States is now trying to persuade the Netherlands and Japan, another big player in the global chip industry, to strike a three-way deal that would further limit China’s access to chip-making tools.

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US sanctions, which prevent companies from sending many US-made products to China, have already hurt Dutch industry. ASMI He said This week they will affect about 40 percent of sales to China, which accounts for 16 percent of the group’s revenue.

Adriaansens declined to comment on the possible time frame in the semiconductor talks, saying it’s “not a simple yes or no,” but a matter of examining many aspects of a very complex production process. “You have to be very clear about which aspect of the production process is the most important issue for China,” she said.

“The Netherlands and Europe should have their own strategy,” she said, when asked about the US talks. At the same time, they needed to be aware of the risks associated with “specific technologies”. She added, “You don’t want to overdo it, but on the other hand, you don’t want to open your doors where safety is the number one issue — it’s a balancing thing.”

She also warned that it may not be possible to prevent China from acquiring advanced technology. “The development cycle is going very fast in China. We must not be naive.”

Adriaansens said the US’s separate actions to provide massive green technology subsidies to local businesses are troubling The Hague.

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The European Union said that a large part of the $369 billion in tax breaks and tax support in the United States Inflation Reduction Act discriminatory and violates global trade rules, and is in talks with Washington.

“The law to reduce inflation has an impact on industry and the economy in the Netherlands and the EU as a whole,” said Adriaansens. Combined with lower energy prices, it would deter investors and hurt European business competitiveness.

The minister added that the West should have a level playing field and “the same set of rules”. I compared it to the upcoming World Cup match with the United States. “We would like to have the same goal size and the same lines on the field in both halves.”

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