Why Britain is stagnating
By the end of World War II, Britain had been the wealthiest country in Europe for a century and was still the second wealthiest on earth after the US, says Ed West. We began to fall behind after the war, but after decades of relative stagnation GDP per capita converged with the US, Germany and France in the 1980s and our relative wealth peaked in the early Tony Blair years. If our growth had continued along the trend set in the years 1979 to 2008, average income today would be £41,800 – it’s actually just £33,500.
It’s time Britons woke up to just how poor their country is. Many regions are “near outliers in western Europe on poverty”, and the “few foreign visitors who go outside the historic heritage cities are shocked by how run down our towns are”.
How did we fall so low? Some blame a lack of strategy and state spending. But state investment would face the same barriers and high costs that existing infrastructure projects face. The real reason, as Ben Southwood, Samuel Hughes and Sam Bowman argue in their essay “Foundations” (available at ukfoundations.co), is that the British system makes it hard to invest, and expensive and legally difficult to build. A Leeds “supertram” was given the go-ahead in 1993, and there is still no sign of it, to give just one of many notorious examples.
Even before Russia’s war with Ukraine, the industrial price of energy had tripled in under 20 years. Per capita electricity-generation in Britain is just two-thirds that of France and a third of the US, putting us closer to developing countries such as Brazil and South Africa than to other G7 states. Transport projects are absurdly expensive. Productivity growth has stagnated. No wonder annual real wages for the median full-time worker are 6.9% lower than in 2008. On current trends, Poland will be richer than the UK by the end of the decade.
Britain’s economy lacks the infrastructure to enable people to move house and access prosperous areas. “Agglomeration” is the key because no individual by themselves can create much value. Countries become rich when its people are able to move to the most dynamic areas. But in Britain today, only the richest can afford to do so, literally leaving the poorest behind. Our “deep and worrying” social problems have their roots in this economic malaise. Yet what we must do to reverse all this is simple, say the essay authors. We just need to remove the barriers to investment, such as restrictive planning rules. With the foundations in place, “growth and dynamism will follow. We have done this before. We can do it again.”
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