Here's an interesting graph from that McKinsey report I mentioned yesterday. The dark blue line represents UK GDP to 2030, assuming trend (2.5%) growth. The mid-blue line shows what would happen if we had a double dip, followed by a return to trend growth in 2013. The light blue line shows what would happen with sustained, below trend growth.
![](http://www.old.adamsmith.org/wp-content/uploads/mckinsey-chart.jpg)
What is interesting (and obvious) on this graph is how economic stagnation and sclerotic growth (think Japan) hurts the UK far more in the long run than a double-dip followed by renewed growth.
This is not just idle speculation either. There is a strong case for saying that efforts to prevent a double-dip recession (propping up failed banks, fiscal and monetary stimulus) prevent the market adjustments – liquidation of bad investments, restructuring of debt, reallocation of resources in line with changed consumer preferences, and so on – that make a return to strong growth possible.
Reflationary policies (as favoured by Keynesians and most monetarists, but not by the Austrian school) may spare the short term pain of a double dip recession. But if you take the long term view, are they really doing us any favours?