This article reminds me of the book "the moral consequences of growth" by Ben Friedman. Its thesis is that when growth stops societies become harder crueler (and crazier ) as people start to scramble for piece of the stagnant economic pie. The silent economic collapse of Britain described in this piece helps me understand how what I have always thought of as a fundamentally sensible people have turned into a morass of political nut cases
I was lucky to have for quite a few years the opportunity to work with David Godfrey, the British physicist that discovered the hexagonal big spot on Saturn's North Pole (https://en.wikipedia.org/wiki/Saturn%27s_hexagon). He did his PhD in the meteorology of Saturn. However, when I met him, he didn't work in the field any longer.
But one of the reasons why he emigrated to Canada, besides family ones (maybe that was an opportunity), was the appalling stratification of British society, stratification that had no base on merit. (he did work for some years for the Home Office on the Statistics realm) but seem to rely entirely of the ability of turds from certain gene pools to come floating on top.
That, and the destruction of the Grammar Schools in Britain, which Godfrey said were able to give a nobody like him an opportunity and a solid education (solid enough to make astrophysical discoveries and study Saturn meteorology).
one perhaps independent explanatory variable missing from the above list of charts is immigration/emigration legal and illegal. But, given the ugliness in the anglosphere on all matters racial (that's commonly spelled as "Rupert Murdoch") i shudder to raise this point bc it will not get calm sane humane viewing.
The availability of cheap low skilled labour shifts investment away from improvements in productivity and towards expanding the work force. It also shifts investment away from industries that rely on improving productivity to increase profits towards industries that rely on increasing the workforce to increase profits.
Precisely - high immigration keeps the price of labour artificially suppressed relative to capital. I forget the exact figures, but supposedly in 2000 2/3 carwashes in the UK were automated and 1/3 were men with buckets, while by 2020 the ratio had flipped. A better illustration of immigration discouraging investment in productivity-enhancing capital is hard to think of.
I suppose the counter-argument would be that other rich countries have high immigration also, so I'd be interested to hear how different immigration systems have played out. If we discount the US/Canada/Aus who probably attract the top-tier immigrants in any case, how does it work in e.g. France? Do they just have less immigration? Is it harder for new arrivals to compete on the labour market (legally or otherwise) with natives?
If you import the Third World - surprise surprise - you become the Third World. The peoples from the nonwhite world want into the white countries (now formerly white countries) because life in our world is so dramatically much better. Why is that? Economically, white people, collectively, are far far more productive/valuable. These nonwhites throw up their hands in resignation over the possibility of their own peoples making their countries anywhere near as good as the white world, and they seek to relocate to a white country. Because we are currently in thrall to an insane bolshevist racial egalitarianism, they are welcomed with open arms. But implacable reality will not be mocked. When they reach our lands they do not become us. To the extent that they come to us, our societies, via their immigration, become them.
Mate, you should come to Australia, or the US, or Canada. Well, actually, maybe you should not because the last thing we want is people with your attitude harming our attractiveness to those youth of the world who want to take advantage of the opportunities that Australia or the US or Canada offers people who study hard and work hard. Once it was the underclass from Ireland, the UK and Europe who were propelled to take this journey, now the people with those attitudes may have darker skin, but they are the same type of people. The UK is perhaps oddly still an incredibly attractive destination as well. Achieving a greedy immigration policy like Australia's is one of the most obvious potential benefits of Brexit. It's greedy because Australia. Candada, USA are stripping the source countries of great talent. If the UK doesn't want to compete on that, too bad for the UK.
I can only echo this. A working class Grammar School boy, I graduated with a first in Maths (Statistics) and it quickly became apparent that the "chaps" with their unparalleled ability to quote Latin and Greek were in total control. I emigrated to Canada and have never regretted it, although I do feel guilty about the Brit taxpayer who payed for my education. You should add the caste system to any explanation of long term decline of UK.
As a Canadian, let me assure you that we are far from the UK in terms of the economic and social outlook. Our problems have more to do with an aging population and the difficulties in getting well-educated immigrants into the work force fast enough. Meritocracy still has its place and we are pleased to have people like David Godfrey discover the charms of a relatively non-violent and open society. We punch above our weight class and hold our own with the US and Mexico. We are polite and hardworking and Canadian youth have good work and educational opportunities. People from all walks of life want to live in Canada but it seems to me that only the desperate seek to live in the UK.
Klanadia is not even a real country by definition of free movement of trade between it's own boarders. As an immigrant into Klanadia you have no meritocracy to speak of as all new comers lack "Canadian experience" what ever that is! I would surmise using a porta potty at -45C as a true Canadian Experience. But we defiantly have the best Iranian brain surgeons driving taxi's and delivering pizza. Canadian intellectual class live in smug bubble of total distain for their fellow low income countrymen. look at your elected black face ruler decrying your country has no culture or identity to speak of. To say you hold your own with the US and Mexico shows you are drinking the CBC Central broadcasters cool aid that nothing is wrong here and we don't have government bodies encouraging our veterans to take assisted suicide rather than pay for a disability ramp. Klanadia has Massive structural political corruption through all strata's of society the next few years when the debt comes due we will see just how free Klanadia is. I Say Klanadia not Canada because you people voted 3 time for a former T.V reality star with nice hair who has more incidents of black face than the third Reich, who invoked full war measures acts on a bunch of delivery drivers. de-nile isn't just a river in Egypt. put the smugness away and wake up to the fact that lunatic's are running everything into the ground and we gave them the keys to do it. peace
Godfrey said that the youths in Canada are order of magnitude more polite than the British louts. And one can see glimpses of that in British drama series and movies... They are sooo smack-able.
It would be a mistake to base your views on British youth - or indeed any aspect of Britain - on the depictions by the BBC, Channel 4 or whoever. The mirror they hold up to Britain has been a distorting one for many years.
That gives a fictionalized depiction of what my colleague told me, from his lived experience, for those that have not experienced on their own such things...
Hello Rob. Why is Canada going down the same path? The article mentions austerity, Brexit and excessive financialisation. How does this apply to Canada? The chart on median income per person shows Canadian growth second only to US.
I do not think the surface has even been touched here in what is an unusually rambling and unfocused essay (except perhaps on the topic of how Britain sees itself in decline, which is not that interesting). The classic productivity graph that shows the anaemic ongoing productivity growth in the uk that started after the financial crisis never get’s properly explained by economists - and is not explained here either…. Is it because the city no longer generated super profits after the financial crisis and the North Sea dividends started waning and the high employment of this period was low quality and simply due to there being lots of coffee shops for people to work in? It would be good to see beneath this chart and look at productivity by sector perhaps, to get a further understanding of why has Britain completely lost its dynamism
I think you're exactly on the money -- literally. Looking at an economy from 30,000ft is neat -- the charts are cool. But you've got to connect it to actual (business) outcomes.
Imagine you're a late-stage private market investor looking to write a billion-dollar check in a competitive market. One company comes and gives your investment team a pitch. They end their deck with a slide on competition. It describes the last few years as having "deconvergent outcomes." How could you do anything but laugh?
The UK has presided over the dismantling of its ~mercantilist-industrialist empire and the attempt to replace it with a financial one. Ignoring the obvious ethical-culture-war points, navigating this successfully would be a momentous undertaking in its own right. Navigating it unsuccessfully should be the expectation!
And so. All the old mercantile centers (ports) have been in gradual decline to the extent that they relied on industrial exports or consumptive imports -- offset at the national level by natural consumer inflows and feed for the great London machine. The old industrial heartland is now a wasteland, again offset in the national stats. But London's financial engine groaned -- and the nation labors under the belief that if it just keeps on BelievingInBritain then national growth & international relevance will once more "converge" on their expected trends.
But growth is not the default case for any institution. The UK used to run a national economy fueled by the global economy. Now it's left trying to run a national economy, with the expectations of being able to provide a certain level of infrastructure & government services, fueled by financial flows through a single city.
I pray the UK will be successful. But like "Incognito" elsewhere in the comments, I've no desire to see the conclusion up close & in person.
The 30000 feet point is valid, but also for Brexit reviews. From 30000 feet Brexit looks like a bad decision. But when you zoom in to the communities that strongly supported it, less so, perhaps. For people who no longer have to compete with lots of low skilled immigrants from Eastern Europe, Brexit has the potential to be redistributive. Covid may have screwed that up, but in 2016 I can imagine that supporting Brexit was a rational decision for many UK voters, even if that gets lost in the averages seen at 30000 feet. I remember a Guardian article trumpeting the trouble a seafood processing plant was having with getting workers (at the old wage rates) post Brexit. The Guardian was trumpeting this as way of showing how stupid pro-Breixt business owners were in supporting Brexit. It was a strange "gotcha". The people in that area voted heavily for Brexit, and almost none of them were the owners of businesses. They were mostly workers. For them, the new-found labour shortage meant higher wages. Basically, the situation described in the article was what was predicted. So this may not be a case of Brexit voters ignoring expert opinion, but instead understanding that the effects on them would be specifically favourable (putting aside the market access effects on seafood exports!). Maybe it is bad for voters to put their own interests first. Maybe it is bad to take a short-term perspective. But there are plenty of voters in the rich south of England who do the same thing.
Interesting article, thanks. I agree that the UK is in a dire position, but I don’t think you’ve identified why. Personally, I consider that tax and redistribution created Hunt’s “doom loop” decades ago.
I was a Guardian-reading lefties throughout my 20s, until experience working in the criminal justice system exposed me to the “bottom third” of society. Gradually I realised that many of these people were irredeemable: we were throwing good money after bad. Later, I changed career and began working in the City. It only took one year of paying taxes at the 45% Additional Rate (then £150k+) before I emigrated. Many of my colleagues have done the same. Others have simply gone part-time, taken lower paying jobs, or for the more senior ones, retired early.
One rebuttal to your argument would be that there are successful high income countries (my preferred measure is GDP per hour worked) where income taxes are high and poverty is low. You discuss Norway but Denmark and Sweden fall into this bucket, and they don’t have oil. Australia also has amazingly high MTRs, well over 50% once you count payroll tax and the Medicare levy. But I agree with the broad thrust of your argument - at some point the deadweight losses and disincentives of the welfare state outweigh the benefits of misery reduction and it may be Britain has passed that threshold. A combination of land use reform and replacing welfare benefits with earned income tax credit would probably help.
Good comment, thank you. I have updated my article at the link above to include comments on Scandanavia (mostly plagiarised from better-informed people than me). I used to believe that it was a model to emulate but I distinctly remember being berated in 1996 by a Swede who complained that I was parroting both an inaccurate and out of date stereotype only believed in certain English-speaking Western countries. Here's what I've added to my summary:
"THERE IS NO MODEL OF "SUCCESSFUL SCANDINAVIAN SOCIALISM", MUCH LESS ONE WHICH THE UK COULD EMULATE
The following section is included to pre-empt rebuttals from those who have been misled into believing that Scandinavia offers an example that the UK could emulate.
Summary: (i) by the 1960, Scandinavian countries were already successful, normal capitalist countries; (ii) in the 1970s and 1980s, they experimented with radical socialist ideas; (iii) by the 1990s, these had clearly failed and were reversed; (iv) they now have broadly conventional welfare states, their radical experiments well behind them (except in the minds of ill-informed Left-leaning foreigners); and (v) they now suffer the same problems as all European welfare states: they punish productive citizens (who simply work less, retire early or emigrate), and they exacerbate - not mitigate - the problem of unproductive/parasitic citizens (who grow larger both in number, and in their demands).
• Left-leaning pop stars, politicians, journalists, political commentators and academics have long praised Scandinavian countries for their high levels of welfare provision and for their economic and social outcomes. It is, indeed, true that they are successful by most reasonable measures.
• However, Scandinavia's success story predated the welfare state. Furthermore, Sweden began to fall behind as the state grew rapidly from the 1960s. Between 1870 and 1936, Sweden enjoyed the highest growth rate in the industrialised world. However, between 1936 and 2008, the growth rate was only 13th out of 28 industrialised nations. Between 1975 and the mid-1990s, Sweden dropped from being the 4th richest nation in the world to the 13th richest nation in the world.
• As late as 1960, tax revenues in the Nordic nations ranged between 25 per cent of GDP in Denmark to 32 per cent in Norway - similar to other developed countries. At the current time, Scandinavian countries are again no longer outliers when it comes to levels of government spending and taxation.
• The third-way radical social democratic era in Scandinavia, much admired by the left, only lasted from the early 1970s to the early 1990s. The rate of business formation during the third-way era was dreadful. In 2004, 38 of the 100 businesses with the highest revenues in Sweden had started as privately owned businesses within the country. Of these firms, just two had been formed after 1970. None of the 100 largest firms ranked by employment were founded within Sweden after 1970. Furthermore, between 1950 and 2000, although the Swedish population grew from 7 million to almost 9 million, net job creation in the private sector was close to zero.
• Scandinavia is often cited as having high life expectancy and good health outcomes in areas such as infant mortality. Again, this predates the expansion of the welfare state. In 1960, Norway had the highest life expectancy in the OECD, followed by Sweden, Iceland and Denmark in third, fourth and fifth positions. By 2005, the gap in life expectancy between Scandinavian countries and both the UK and the US had shrunk considerably. Iceland, with a moderately sized welfare sector, has over time outpaced the four major Scandinavian countries in terms of life expectancy and infant mortality.
• Scandinavia's more equal societies also developed well before the welfare states expanded. Income inequality reduced dramatically during the last three decades of the 19th century and during the first half of the 20th century. Indeed, most of the shift towards greater equality happened before the introduction of a large public sector and high taxes.
• The development of Scandinavian welfare states has led to a deterioration in social capital. Despite the fact that Nordic nations are characterised by good health, only the Netherlands spends more on incapacity related unemployment than Scandinavian countries. A survey from 2001 showed that 44 per cent believed that it was acceptable to claim sickness benefits if they were dissatisfied with their working environment.
• Other studies have pointed to increases in sickness absence due to sporting events. For instance, absence among men due to sickness increased by 41 per cent during the 2002 football World Cup. These shifts in working norms have also been tracked in the World Value Survey. In the 1981-84 survey, 82 per cent of Swedes agreed with the statement 'claiming government benefits to which you are not entitled is never justifiable'; in the 2010-14 survey, only 55 per cent of Swedes believed that it was never right to claim benefits to which they were not entitled.
• Another regrettable feature of Scandinavian countries is their difficulty in assimilating immigrants. Unemployment rates of immigrants with low education levels in Anglo-Saxon countries are generally equal to or lower than unemployment rates among natives with a similar educational background, whereas in Scandinavian countries they are much higher. In Scandinavian labour markets, even immigrants with high qualifications can struggle to find suitable employment. Highly educated immigrants in Finland and Sweden have an unemployment rate over 8 percentage points higher than native-born Finns and Swedes of a similar educational background. This compares with very similar employment rates between the two groups in Anglo-Saxon countries.
• The descendants of Scandinavian migrants in the US combine the high living standards of the US with the high levels of equality of Scandinavian countries. Median incomes of Scandinavian descendants are 20 per cent higher than average US incomes. It is true that poverty rates in Scandinavian countries are lower than in the US. However, the poverty rate among descendants of Nordic immigrants in the US today is half the average poverty rate of Americans - this has been a consistent finding for decades. In fact, Scandinavian Americans have lower poverty rates than Scandinavian citizens who have not emigrated. This suggests that pre-existing cultural norms are responsible for the low levels of poverty among Scandinavians rather than Nordic welfare states.
• Many analyses of Scandinavian countries conflate correlation with causality. It is very clear that many of the desirable features of Scandinavian societies, such as low-income inequality, low levels of poverty and high levels of economic growth, predated the development of the welfare state. It is equally clear that high levels of trust also predated the era of high government spending and taxation. All these indicators began to deteriorate after the expansion of the Scandinavian welfare states and the increase in taxes necessary to fund it."
Is it any wonder some people have to rely on the state when they're paid so poorly in sh*tty jobs and everything is so expensive and houses are unaffordable. You argue we subsidise them, but aren't we all just subsidising the corporations that don't pay them enough, and landlords who own property and demand a return? That would be another way of looking at it. But instead you think welfare should be cut? What would be the implications for society?
"Pay people more" is an emotionally appealing argument, isn't it. Here's one rebuttal:
"Something that every economist takes for granted, but noneconomists find uncomfortable, is that to a first approximation differentials in wages reflect differentials in productivity: people are more or less paid what they are worth. Of course, we are all aware of glaring instances where this is not the case: some people are paid far more than they are worth and others too little. But if employers made large systematic mistakes in matching wages to productivity, they would go bankrupt. So the key issue becomes not whether but why workers in high-wage countries are so much more productive than workers in low-wage countries."
- Exodus: Immigration and Multiculturalism in the 21st Century, Paul Collier, Location 1830.
Collier's analysis is obviously correct. To use a trivial example: if Caffè Nero decided to halve the salaries of all its workers, they would resign and apply for jobs in, e.g. Starbucks. If on the other hand - as I suspect you might wish that they would - Caffè Nero *doubled* salaries, they would have to vastly increase the cost of their coffees and pastries, and would rapidly go out of business. There is therefore a natural level of productivity.
The left-wing answer is to demand an increase in minimum wages. There are a multitude of responses to that, but the most powerful are that: (i) for the reasons articulated by Collier above, wages have a natural floor anyway, so low minimum wages are purely performative; and (ii) above that natural floor, they merely 'price people out of jobs', that is to say that they render employing people too expensive. The obvious example is the proliferation of self-service machines in both airport check-in areas, and McDonalds - both are doing jobs which in the past were done by humans.
I disagree therefore that low salaries are the problem. Rather, I would criticise the following:
1. Taxes. Cut taxes so that people keep almost everything that they earn. Preferably, also have a cap on the maximum tax confiscated from people which reflects the amount of services they receive from the state. i.e. *you* pay for what *you* get. If some people want to indulge in redistribution they can do so voluntarily, through charity.
2. Central banks should have their powers to print money (i.e. QE) vastly curtailed. The Fed, BoE and ECB are responsible for the inexcusable growth of asset prices, including housing, over the past 15 years. You are right to be angry.
3. Landlords. Your anger is misplaced, as landlords serve a purpose. The larger issue however is the lack of social housing: that was an avoidable mistake by Thatcher.
Locations are the equivalent of page numbers. Amazon introduced them because digital books don't have page numbers - the amount of text on a page varies depending on the device screen size, font size, etc.
I will be more careful in future and specifically say, e.g. "Kindle page location:" rather than just "Location:".
Curious if you considered the decline in British education standards as a cause or effect. I lived in London around the inflection point in most graphs (2004/5) and was shocked at the numeracy of retail workers (was always clear a migrant was at the till when they could manage cash without a calculator). My wife taught in the education system, which had moved in recent years from clear, high standards towards vague, uncritical evaluation in the public system (not to mention the entire "English dept in an English school was populated by Canadians and Americans). We could sense something akin to stagnation/decline was happening around us...
I wonder if there's a cultural component here. I've heard that being an engineer is a much less cool profession in the UK relative to other countries like Germany or USA. ICT work seems particularly low status. I was talking to a software engineer who escaped from the UK to the US. He told stories of a woman backing away from him in the bar as soon as she learned about his job, and companies desperate for ICT workers who still wouldn't raise wages because it wasn't a respected career. I'm sure that these cultural factors affect the career choices that young people make. It'd be fascinating if "The IT Crowd" (2006 premier) put a measurable dent in Britain's GDP.
The country just got into a fit of panic because the chancellor suggested teaching mathematics a bit longer. Read Simon Jenkins on mathematics to see where the problem lies.
Fascinating article. Thank you. The Burn-Murdoch chart suggests that not much has changed for the capitalist-conservative alliance since the 1920's: austerity/financial repression is a primary weapon to control labor and accumulate a larger share of GDP. It just seems that in the UK case, it is backfiring a bit. By the way, Professor Mattei's book, The Capital Order, was fascinating (if a bit repetitive).
What I love is that despite every graph in this article showing that every economic problem we face today clearly proceeds Brexit, the author cannot help repeat unsubstantiated claims about the 'damage' Brexit has supposedly done to this economy. Brexit-brain is clearly a terminal illness.
A very interesting article. Let me go a little bit meta here. I'm going to talk about commies. Back until about the first half of the 1970's there was a strong intimation among western leaderships that the Soviet Union and the European countries associated with it all had dynamically growing economies; Krushchev's "We will bury you (pass you by)" was still a real fear. But by the second half of the Seventies, the economic growth of all these countries appeared to have shrunk to match their low population growth numbers. In other words, per capita incomes in those countries had stagnated. Famously, the Communist systems in those countries were within a decade-and-a-half of complete collapse.
Now I read here that per capita stagnation or worse is happening to two key western economies, those of the UK and Italy. What's most troubling about what's happening in the UK and Italy is it could be the start of a trend. Japan of course has been undergoing per capita stagnation for close to three decades now.
The point here is, the Eastern Europe/USSR example shows that the political results of system-wide stagnation can be (from the point of view of established ruling elites) quite dire, and can come to fruition rather quickly.
Obviously, the economic and political dynamics in the Western Europe/USA complex are quite different from those in the USSR and Eastern Europe during the 1970's through '80's. Nevertheless there are harbingers of quite adverse political possibilities in all the major Western Europe/USA complex of countries. The matter may be quite urgent indeed.
The picture does indeed appear bleak. What would a bull case look like? The UK's Venture Capital industry is the biggest in Europe by miles - there are clearly assets worth investing in (though not on the public market). Unsurprisingly this money is concentrated around the Golden Triangle due to the UK's research excellence, but there are some good emerging regional hubs too. Creative industries are almost always overlooked by economic pundits (and the public) who prefer the solidity of manufacturing - but the UK's creative sector is genuinely world leading and big business too. A final issue is around immigration. Most of these articles also tend to look at Brexit and its associated politics and assume the UK is shooting itself in the foot by not being more open to foreign labour - but despite the rhetoric immigration into the UK has been at unprecedentedly high levels for 20-25+ years now. The UK is clearly still a country worth coming to, economically, for many around the world. And so on...
The Economist's graph in Hix's tweet appears to show that US median income per person, after taxes and transfers, was falling for roughly 13 years between 2003 to 2014, then increased by 30% under the late Obama-Trump years between 2015 to 2020.
Did this actually happen? It seems odd that this hasn't been commented on elsewhere, as it seems like a major feature of 2015-2020, if so.
Median household income after taxes and transfers seems like a somewhat strange choice to index fundamental economic growth, as large scope for this to be impacted by income transfers to the middle, while neither income transfers to the bottom, or overall growth seen everywhere but the middle would show up.
I would be interested in seeing an analysis of the causes and effects over the past 20 years in this article with the Israeli economy over the same period and commonalities and differences. Certainly the results are quite different.
The global economy is controlled by an elite with more money than Croesus. Anyone who has played Monopoly will realise that mixing thousands of years of global economy with power hungry psychopaths can have no other result. Of course many cannot see the wood for the trees.
Govt presents an unprecedented series of tools of abuse for the criminal class to usurp - if this is not openly recognized and spoken to in the daily activities of such a potentially dangerous social construct, it will ALWAYS devolve into genocide.
I am literally on the other side of the world but the housing theory of everything seems like a good explanation. The fact that skilled workers in the nation’s largest city can’t actually afford to live in nice accommodation in the city proper is surely a red flag. https://www.worksinprogress.co/issue/the-housing-theory-of-everything/
Ok. The UK has suffered lower growth but what is the consequence? The employment remains consistent. The pound is weaker but what are the consequences that would kead to a change in policy?
Someone or some group must have benefitted from the austerity. For example did the national debt or deficit go down? Did land owners or the City benefit from austerity? Manufacturing and farming do not seem to have benefitted, but then who or what *did* benefit from austerity?
If no one benefitted, why was it done and more importantly why has it not been changed or any course correction?
This article reminds me of the book "the moral consequences of growth" by Ben Friedman. Its thesis is that when growth stops societies become harder crueler (and crazier ) as people start to scramble for piece of the stagnant economic pie. The silent economic collapse of Britain described in this piece helps me understand how what I have always thought of as a fundamentally sensible people have turned into a morass of political nut cases
Yes, the fear of loss drives emotions much harder than the (political) prospect of gain. Ultra-conservativism becomes mainstream.
I was lucky to have for quite a few years the opportunity to work with David Godfrey, the British physicist that discovered the hexagonal big spot on Saturn's North Pole (https://en.wikipedia.org/wiki/Saturn%27s_hexagon). He did his PhD in the meteorology of Saturn. However, when I met him, he didn't work in the field any longer.
But one of the reasons why he emigrated to Canada, besides family ones (maybe that was an opportunity), was the appalling stratification of British society, stratification that had no base on merit. (he did work for some years for the Home Office on the Statistics realm) but seem to rely entirely of the ability of turds from certain gene pools to come floating on top.
That, and the destruction of the Grammar Schools in Britain, which Godfrey said were able to give a nobody like him an opportunity and a solid education (solid enough to make astrophysical discoveries and study Saturn meteorology).
one perhaps independent explanatory variable missing from the above list of charts is immigration/emigration legal and illegal. But, given the ugliness in the anglosphere on all matters racial (that's commonly spelled as "Rupert Murdoch") i shudder to raise this point bc it will not get calm sane humane viewing.
How does immigration reduce productivity? The only way I can think off is that cheap labor leads to employers hiring more people than they need.
The availability of cheap low skilled labour shifts investment away from improvements in productivity and towards expanding the work force. It also shifts investment away from industries that rely on improving productivity to increase profits towards industries that rely on increasing the workforce to increase profits.
Precisely - high immigration keeps the price of labour artificially suppressed relative to capital. I forget the exact figures, but supposedly in 2000 2/3 carwashes in the UK were automated and 1/3 were men with buckets, while by 2020 the ratio had flipped. A better illustration of immigration discouraging investment in productivity-enhancing capital is hard to think of.
I suppose the counter-argument would be that other rich countries have high immigration also, so I'd be interested to hear how different immigration systems have played out. If we discount the US/Canada/Aus who probably attract the top-tier immigrants in any case, how does it work in e.g. France? Do they just have less immigration? Is it harder for new arrivals to compete on the labour market (legally or otherwise) with natives?
If you import the Third World - surprise surprise - you become the Third World. The peoples from the nonwhite world want into the white countries (now formerly white countries) because life in our world is so dramatically much better. Why is that? Economically, white people, collectively, are far far more productive/valuable. These nonwhites throw up their hands in resignation over the possibility of their own peoples making their countries anywhere near as good as the white world, and they seek to relocate to a white country. Because we are currently in thrall to an insane bolshevist racial egalitarianism, they are welcomed with open arms. But implacable reality will not be mocked. When they reach our lands they do not become us. To the extent that they come to us, our societies, via their immigration, become them.
Mate, you should come to Australia, or the US, or Canada. Well, actually, maybe you should not because the last thing we want is people with your attitude harming our attractiveness to those youth of the world who want to take advantage of the opportunities that Australia or the US or Canada offers people who study hard and work hard. Once it was the underclass from Ireland, the UK and Europe who were propelled to take this journey, now the people with those attitudes may have darker skin, but they are the same type of people. The UK is perhaps oddly still an incredibly attractive destination as well. Achieving a greedy immigration policy like Australia's is one of the most obvious potential benefits of Brexit. It's greedy because Australia. Candada, USA are stripping the source countries of great talent. If the UK doesn't want to compete on that, too bad for the UK.
I can only echo this. A working class Grammar School boy, I graduated with a first in Maths (Statistics) and it quickly became apparent that the "chaps" with their unparalleled ability to quote Latin and Greek were in total control. I emigrated to Canada and have never regretted it, although I do feel guilty about the Brit taxpayer who payed for my education. You should add the caste system to any explanation of long term decline of UK.
Funny you mention Canada as it seems Canada is going down the same route as the UK
As a Canadian, let me assure you that we are far from the UK in terms of the economic and social outlook. Our problems have more to do with an aging population and the difficulties in getting well-educated immigrants into the work force fast enough. Meritocracy still has its place and we are pleased to have people like David Godfrey discover the charms of a relatively non-violent and open society. We punch above our weight class and hold our own with the US and Mexico. We are polite and hardworking and Canadian youth have good work and educational opportunities. People from all walks of life want to live in Canada but it seems to me that only the desperate seek to live in the UK.
Klanadia is not even a real country by definition of free movement of trade between it's own boarders. As an immigrant into Klanadia you have no meritocracy to speak of as all new comers lack "Canadian experience" what ever that is! I would surmise using a porta potty at -45C as a true Canadian Experience. But we defiantly have the best Iranian brain surgeons driving taxi's and delivering pizza. Canadian intellectual class live in smug bubble of total distain for their fellow low income countrymen. look at your elected black face ruler decrying your country has no culture or identity to speak of. To say you hold your own with the US and Mexico shows you are drinking the CBC Central broadcasters cool aid that nothing is wrong here and we don't have government bodies encouraging our veterans to take assisted suicide rather than pay for a disability ramp. Klanadia has Massive structural political corruption through all strata's of society the next few years when the debt comes due we will see just how free Klanadia is. I Say Klanadia not Canada because you people voted 3 time for a former T.V reality star with nice hair who has more incidents of black face than the third Reich, who invoked full war measures acts on a bunch of delivery drivers. de-nile isn't just a river in Egypt. put the smugness away and wake up to the fact that lunatic's are running everything into the ground and we gave them the keys to do it. peace
I like that, only the desperate LOL
The truth is, Canada is a more comfortable place to live, the UK a more interesting one…
Only if you can afford it.
Godfrey said that the youths in Canada are order of magnitude more polite than the British louts. And one can see glimpses of that in British drama series and movies... They are sooo smack-able.
It would be a mistake to base your views on British youth - or indeed any aspect of Britain - on the depictions by the BBC, Channel 4 or whoever. The mirror they hold up to Britain has been a distorting one for many years.
I based my view on what real people that I trust told me, not on movies and TV shows.
“ And one can see glimpses of that in British drama series and movies... ”
That gives a fictionalized depiction of what my colleague told me, from his lived experience, for those that have not experienced on their own such things...
Hello Rob. Why is Canada going down the same path? The article mentions austerity, Brexit and excessive financialisation. How does this apply to Canada? The chart on median income per person shows Canadian growth second only to US.
I do not think the surface has even been touched here in what is an unusually rambling and unfocused essay (except perhaps on the topic of how Britain sees itself in decline, which is not that interesting). The classic productivity graph that shows the anaemic ongoing productivity growth in the uk that started after the financial crisis never get’s properly explained by economists - and is not explained here either…. Is it because the city no longer generated super profits after the financial crisis and the North Sea dividends started waning and the high employment of this period was low quality and simply due to there being lots of coffee shops for people to work in? It would be good to see beneath this chart and look at productivity by sector perhaps, to get a further understanding of why has Britain completely lost its dynamism
I think you're exactly on the money -- literally. Looking at an economy from 30,000ft is neat -- the charts are cool. But you've got to connect it to actual (business) outcomes.
Imagine you're a late-stage private market investor looking to write a billion-dollar check in a competitive market. One company comes and gives your investment team a pitch. They end their deck with a slide on competition. It describes the last few years as having "deconvergent outcomes." How could you do anything but laugh?
The UK has presided over the dismantling of its ~mercantilist-industrialist empire and the attempt to replace it with a financial one. Ignoring the obvious ethical-culture-war points, navigating this successfully would be a momentous undertaking in its own right. Navigating it unsuccessfully should be the expectation!
And so. All the old mercantile centers (ports) have been in gradual decline to the extent that they relied on industrial exports or consumptive imports -- offset at the national level by natural consumer inflows and feed for the great London machine. The old industrial heartland is now a wasteland, again offset in the national stats. But London's financial engine groaned -- and the nation labors under the belief that if it just keeps on BelievingInBritain then national growth & international relevance will once more "converge" on their expected trends.
But growth is not the default case for any institution. The UK used to run a national economy fueled by the global economy. Now it's left trying to run a national economy, with the expectations of being able to provide a certain level of infrastructure & government services, fueled by financial flows through a single city.
I pray the UK will be successful. But like "Incognito" elsewhere in the comments, I've no desire to see the conclusion up close & in person.
The 30000 feet point is valid, but also for Brexit reviews. From 30000 feet Brexit looks like a bad decision. But when you zoom in to the communities that strongly supported it, less so, perhaps. For people who no longer have to compete with lots of low skilled immigrants from Eastern Europe, Brexit has the potential to be redistributive. Covid may have screwed that up, but in 2016 I can imagine that supporting Brexit was a rational decision for many UK voters, even if that gets lost in the averages seen at 30000 feet. I remember a Guardian article trumpeting the trouble a seafood processing plant was having with getting workers (at the old wage rates) post Brexit. The Guardian was trumpeting this as way of showing how stupid pro-Breixt business owners were in supporting Brexit. It was a strange "gotcha". The people in that area voted heavily for Brexit, and almost none of them were the owners of businesses. They were mostly workers. For them, the new-found labour shortage meant higher wages. Basically, the situation described in the article was what was predicted. So this may not be a case of Brexit voters ignoring expert opinion, but instead understanding that the effects on them would be specifically favourable (putting aside the market access effects on seafood exports!). Maybe it is bad for voters to put their own interests first. Maybe it is bad to take a short-term perspective. But there are plenty of voters in the rich south of England who do the same thing.
Interesting article, thanks. I agree that the UK is in a dire position, but I don’t think you’ve identified why. Personally, I consider that tax and redistribution created Hunt’s “doom loop” decades ago.
I was a Guardian-reading lefties throughout my 20s, until experience working in the criminal justice system exposed me to the “bottom third” of society. Gradually I realised that many of these people were irredeemable: we were throwing good money after bad. Later, I changed career and began working in the City. It only took one year of paying taxes at the 45% Additional Rate (then £150k+) before I emigrated. Many of my colleagues have done the same. Others have simply gone part-time, taken lower paying jobs, or for the more senior ones, retired early.
I think the UK is on an irreversible decline towards being a European version of Argentina. I compiled my thoughts here: https://london2050.wixsite.com/miscellaneous-musing/post/uk-prognosis
Very happy to read any constructive criticism.
One rebuttal to your argument would be that there are successful high income countries (my preferred measure is GDP per hour worked) where income taxes are high and poverty is low. You discuss Norway but Denmark and Sweden fall into this bucket, and they don’t have oil. Australia also has amazingly high MTRs, well over 50% once you count payroll tax and the Medicare levy. But I agree with the broad thrust of your argument - at some point the deadweight losses and disincentives of the welfare state outweigh the benefits of misery reduction and it may be Britain has passed that threshold. A combination of land use reform and replacing welfare benefits with earned income tax credit would probably help.
Good comment, thank you. I have updated my article at the link above to include comments on Scandanavia (mostly plagiarised from better-informed people than me). I used to believe that it was a model to emulate but I distinctly remember being berated in 1996 by a Swede who complained that I was parroting both an inaccurate and out of date stereotype only believed in certain English-speaking Western countries. Here's what I've added to my summary:
"THERE IS NO MODEL OF "SUCCESSFUL SCANDINAVIAN SOCIALISM", MUCH LESS ONE WHICH THE UK COULD EMULATE
The following section is included to pre-empt rebuttals from those who have been misled into believing that Scandinavia offers an example that the UK could emulate.
Summary: (i) by the 1960, Scandinavian countries were already successful, normal capitalist countries; (ii) in the 1970s and 1980s, they experimented with radical socialist ideas; (iii) by the 1990s, these had clearly failed and were reversed; (iv) they now have broadly conventional welfare states, their radical experiments well behind them (except in the minds of ill-informed Left-leaning foreigners); and (v) they now suffer the same problems as all European welfare states: they punish productive citizens (who simply work less, retire early or emigrate), and they exacerbate - not mitigate - the problem of unproductive/parasitic citizens (who grow larger both in number, and in their demands).
• Left-leaning pop stars, politicians, journalists, political commentators and academics have long praised Scandinavian countries for their high levels of welfare provision and for their economic and social outcomes. It is, indeed, true that they are successful by most reasonable measures.
• However, Scandinavia's success story predated the welfare state. Furthermore, Sweden began to fall behind as the state grew rapidly from the 1960s. Between 1870 and 1936, Sweden enjoyed the highest growth rate in the industrialised world. However, between 1936 and 2008, the growth rate was only 13th out of 28 industrialised nations. Between 1975 and the mid-1990s, Sweden dropped from being the 4th richest nation in the world to the 13th richest nation in the world.
• As late as 1960, tax revenues in the Nordic nations ranged between 25 per cent of GDP in Denmark to 32 per cent in Norway - similar to other developed countries. At the current time, Scandinavian countries are again no longer outliers when it comes to levels of government spending and taxation.
• The third-way radical social democratic era in Scandinavia, much admired by the left, only lasted from the early 1970s to the early 1990s. The rate of business formation during the third-way era was dreadful. In 2004, 38 of the 100 businesses with the highest revenues in Sweden had started as privately owned businesses within the country. Of these firms, just two had been formed after 1970. None of the 100 largest firms ranked by employment were founded within Sweden after 1970. Furthermore, between 1950 and 2000, although the Swedish population grew from 7 million to almost 9 million, net job creation in the private sector was close to zero.
• Scandinavia is often cited as having high life expectancy and good health outcomes in areas such as infant mortality. Again, this predates the expansion of the welfare state. In 1960, Norway had the highest life expectancy in the OECD, followed by Sweden, Iceland and Denmark in third, fourth and fifth positions. By 2005, the gap in life expectancy between Scandinavian countries and both the UK and the US had shrunk considerably. Iceland, with a moderately sized welfare sector, has over time outpaced the four major Scandinavian countries in terms of life expectancy and infant mortality.
• Scandinavia's more equal societies also developed well before the welfare states expanded. Income inequality reduced dramatically during the last three decades of the 19th century and during the first half of the 20th century. Indeed, most of the shift towards greater equality happened before the introduction of a large public sector and high taxes.
• The development of Scandinavian welfare states has led to a deterioration in social capital. Despite the fact that Nordic nations are characterised by good health, only the Netherlands spends more on incapacity related unemployment than Scandinavian countries. A survey from 2001 showed that 44 per cent believed that it was acceptable to claim sickness benefits if they were dissatisfied with their working environment.
• Other studies have pointed to increases in sickness absence due to sporting events. For instance, absence among men due to sickness increased by 41 per cent during the 2002 football World Cup. These shifts in working norms have also been tracked in the World Value Survey. In the 1981-84 survey, 82 per cent of Swedes agreed with the statement 'claiming government benefits to which you are not entitled is never justifiable'; in the 2010-14 survey, only 55 per cent of Swedes believed that it was never right to claim benefits to which they were not entitled.
• Another regrettable feature of Scandinavian countries is their difficulty in assimilating immigrants. Unemployment rates of immigrants with low education levels in Anglo-Saxon countries are generally equal to or lower than unemployment rates among natives with a similar educational background, whereas in Scandinavian countries they are much higher. In Scandinavian labour markets, even immigrants with high qualifications can struggle to find suitable employment. Highly educated immigrants in Finland and Sweden have an unemployment rate over 8 percentage points higher than native-born Finns and Swedes of a similar educational background. This compares with very similar employment rates between the two groups in Anglo-Saxon countries.
• The descendants of Scandinavian migrants in the US combine the high living standards of the US with the high levels of equality of Scandinavian countries. Median incomes of Scandinavian descendants are 20 per cent higher than average US incomes. It is true that poverty rates in Scandinavian countries are lower than in the US. However, the poverty rate among descendants of Nordic immigrants in the US today is half the average poverty rate of Americans - this has been a consistent finding for decades. In fact, Scandinavian Americans have lower poverty rates than Scandinavian citizens who have not emigrated. This suggests that pre-existing cultural norms are responsible for the low levels of poverty among Scandinavians rather than Nordic welfare states.
• Many analyses of Scandinavian countries conflate correlation with causality. It is very clear that many of the desirable features of Scandinavian societies, such as low-income inequality, low levels of poverty and high levels of economic growth, predated the development of the welfare state. It is equally clear that high levels of trust also predated the era of high government spending and taxation. All these indicators began to deteriorate after the expansion of the Scandinavian welfare states and the increase in taxes necessary to fund it."
Good assessment, but Scandinavia might be good role model now. The last 30 years have been pretty good and non-socialist
Is it any wonder some people have to rely on the state when they're paid so poorly in sh*tty jobs and everything is so expensive and houses are unaffordable. You argue we subsidise them, but aren't we all just subsidising the corporations that don't pay them enough, and landlords who own property and demand a return? That would be another way of looking at it. But instead you think welfare should be cut? What would be the implications for society?
"Pay people more" is an emotionally appealing argument, isn't it. Here's one rebuttal:
"Something that every economist takes for granted, but noneconomists find uncomfortable, is that to a first approximation differentials in wages reflect differentials in productivity: people are more or less paid what they are worth. Of course, we are all aware of glaring instances where this is not the case: some people are paid far more than they are worth and others too little. But if employers made large systematic mistakes in matching wages to productivity, they would go bankrupt. So the key issue becomes not whether but why workers in high-wage countries are so much more productive than workers in low-wage countries."
- Exodus: Immigration and Multiculturalism in the 21st Century, Paul Collier, Location 1830.
Collier's analysis is obviously correct. To use a trivial example: if Caffè Nero decided to halve the salaries of all its workers, they would resign and apply for jobs in, e.g. Starbucks. If on the other hand - as I suspect you might wish that they would - Caffè Nero *doubled* salaries, they would have to vastly increase the cost of their coffees and pastries, and would rapidly go out of business. There is therefore a natural level of productivity.
The left-wing answer is to demand an increase in minimum wages. There are a multitude of responses to that, but the most powerful are that: (i) for the reasons articulated by Collier above, wages have a natural floor anyway, so low minimum wages are purely performative; and (ii) above that natural floor, they merely 'price people out of jobs', that is to say that they render employing people too expensive. The obvious example is the proliferation of self-service machines in both airport check-in areas, and McDonalds - both are doing jobs which in the past were done by humans.
I disagree therefore that low salaries are the problem. Rather, I would criticise the following:
1. Taxes. Cut taxes so that people keep almost everything that they earn. Preferably, also have a cap on the maximum tax confiscated from people which reflects the amount of services they receive from the state. i.e. *you* pay for what *you* get. If some people want to indulge in redistribution they can do so voluntarily, through charity.
2. Central banks should have their powers to print money (i.e. QE) vastly curtailed. The Fed, BoE and ECB are responsible for the inexcusable growth of asset prices, including housing, over the past 15 years. You are right to be angry.
3. Landlords. Your anger is misplaced, as landlords serve a purpose. The larger issue however is the lack of social housing: that was an avoidable mistake by Thatcher.
You lost me when you quoted someone from 1830.
Ha ha - apologies if that wasn't clear. I quoted Paul Collier, who is very much alive: https://www.bsg.ox.ac.uk/people/paul-collier
Location 1930 is a reference to the location in Kindle version of the book I cited: https://www.amazon.co.uk/Exodus-Immigration-Multiculturalism-21st-Century-ebook/dp/B00ELXQYM0
Locations are the equivalent of page numbers. Amazon introduced them because digital books don't have page numbers - the amount of text on a page varies depending on the device screen size, font size, etc.
I will be more careful in future and specifically say, e.g. "Kindle page location:" rather than just "Location:".
Curious if you considered the decline in British education standards as a cause or effect. I lived in London around the inflection point in most graphs (2004/5) and was shocked at the numeracy of retail workers (was always clear a migrant was at the till when they could manage cash without a calculator). My wife taught in the education system, which had moved in recent years from clear, high standards towards vague, uncritical evaluation in the public system (not to mention the entire "English dept in an English school was populated by Canadians and Americans). We could sense something akin to stagnation/decline was happening around us...
I wonder if there's a cultural component here. I've heard that being an engineer is a much less cool profession in the UK relative to other countries like Germany or USA. ICT work seems particularly low status. I was talking to a software engineer who escaped from the UK to the US. He told stories of a woman backing away from him in the bar as soon as she learned about his job, and companies desperate for ICT workers who still wouldn't raise wages because it wasn't a respected career. I'm sure that these cultural factors affect the career choices that young people make. It'd be fascinating if "The IT Crowd" (2006 premier) put a measurable dent in Britain's GDP.
The country just got into a fit of panic because the chancellor suggested teaching mathematics a bit longer. Read Simon Jenkins on mathematics to see where the problem lies.
Fascinating article. Thank you. The Burn-Murdoch chart suggests that not much has changed for the capitalist-conservative alliance since the 1920's: austerity/financial repression is a primary weapon to control labor and accumulate a larger share of GDP. It just seems that in the UK case, it is backfiring a bit. By the way, Professor Mattei's book, The Capital Order, was fascinating (if a bit repetitive).
What I love is that despite every graph in this article showing that every economic problem we face today clearly proceeds Brexit, the author cannot help repeat unsubstantiated claims about the 'damage' Brexit has supposedly done to this economy. Brexit-brain is clearly a terminal illness.
A very interesting article. Let me go a little bit meta here. I'm going to talk about commies. Back until about the first half of the 1970's there was a strong intimation among western leaderships that the Soviet Union and the European countries associated with it all had dynamically growing economies; Krushchev's "We will bury you (pass you by)" was still a real fear. But by the second half of the Seventies, the economic growth of all these countries appeared to have shrunk to match their low population growth numbers. In other words, per capita incomes in those countries had stagnated. Famously, the Communist systems in those countries were within a decade-and-a-half of complete collapse.
Now I read here that per capita stagnation or worse is happening to two key western economies, those of the UK and Italy. What's most troubling about what's happening in the UK and Italy is it could be the start of a trend. Japan of course has been undergoing per capita stagnation for close to three decades now.
The point here is, the Eastern Europe/USSR example shows that the political results of system-wide stagnation can be (from the point of view of established ruling elites) quite dire, and can come to fruition rather quickly.
Obviously, the economic and political dynamics in the Western Europe/USA complex are quite different from those in the USSR and Eastern Europe during the 1970's through '80's. Nevertheless there are harbingers of quite adverse political possibilities in all the major Western Europe/USA complex of countries. The matter may be quite urgent indeed.
Could the UK simply be exhibit A of Mark Blyth's "Austerity: The History of a Dangerous Idea"?
The picture does indeed appear bleak. What would a bull case look like? The UK's Venture Capital industry is the biggest in Europe by miles - there are clearly assets worth investing in (though not on the public market). Unsurprisingly this money is concentrated around the Golden Triangle due to the UK's research excellence, but there are some good emerging regional hubs too. Creative industries are almost always overlooked by economic pundits (and the public) who prefer the solidity of manufacturing - but the UK's creative sector is genuinely world leading and big business too. A final issue is around immigration. Most of these articles also tend to look at Brexit and its associated politics and assume the UK is shooting itself in the foot by not being more open to foreign labour - but despite the rhetoric immigration into the UK has been at unprecedentedly high levels for 20-25+ years now. The UK is clearly still a country worth coming to, economically, for many around the world. And so on...
The Economist's graph in Hix's tweet appears to show that US median income per person, after taxes and transfers, was falling for roughly 13 years between 2003 to 2014, then increased by 30% under the late Obama-Trump years between 2015 to 2020.
Did this actually happen? It seems odd that this hasn't been commented on elsewhere, as it seems like a major feature of 2015-2020, if so.
Median household income after taxes and transfers seems like a somewhat strange choice to index fundamental economic growth, as large scope for this to be impacted by income transfers to the middle, while neither income transfers to the bottom, or overall growth seen everywhere but the middle would show up.
I would be interested in seeing an analysis of the causes and effects over the past 20 years in this article with the Israeli economy over the same period and commonalities and differences. Certainly the results are quite different.
The global economy is controlled by an elite with more money than Croesus. Anyone who has played Monopoly will realise that mixing thousands of years of global economy with power hungry psychopaths can have no other result. Of course many cannot see the wood for the trees.
Govt presents an unprecedented series of tools of abuse for the criminal class to usurp - if this is not openly recognized and spoken to in the daily activities of such a potentially dangerous social construct, it will ALWAYS devolve into genocide.
Exactly as intended.
https://moderntowerofbabel.blogspot.com/2020/01/the-modern-tower-of-babel.html
I am literally on the other side of the world but the housing theory of everything seems like a good explanation. The fact that skilled workers in the nation’s largest city can’t actually afford to live in nice accommodation in the city proper is surely a red flag. https://www.worksinprogress.co/issue/the-housing-theory-of-everything/
Ok. The UK has suffered lower growth but what is the consequence? The employment remains consistent. The pound is weaker but what are the consequences that would kead to a change in policy?
Someone or some group must have benefitted from the austerity. For example did the national debt or deficit go down? Did land owners or the City benefit from austerity? Manufacturing and farming do not seem to have benefitted, but then who or what *did* benefit from austerity?
If no one benefitted, why was it done and more importantly why has it not been changed or any course correction?
British people benefit from austerity because, as you can tell if you've met any of them, they love being miserable and actively seek it out.