UK economic performance since 2008 suggests that we don't know how to get growth but that repeating the same ideas (export more, deregulate, etc) isn't working.
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The recent 900k net immigration number was a bit of an outlier, we had 500k asylum visas from Ukraine and Hong Kong over 2 years, approx 900k left the workforce during covid due to long term sickness, and 100k per year fewer UK citizens leaving since 2021 loss of FOM
Even immigration is struggling to make up the shortfall in growth anymore.
These levels are neither sustainable or desired but the public aren't ready to accept the inevitable trade offs and economic downsides a crackdown on it would yield in the short term.
Inevitably when you reduce the pool of countries you can recruit from easily i.e. they rock up and show their passport down to 2. But we just don't have the same start up culture as in the US.
Demographics
Many people in poor health and out of workforce after Covid
Lack of large scale innovation c/w US
and the mother of all clusterf**ks - Brexit
If current and past treasury thinking cannot resolve the economic doldrums, surely rethinking wealth tax, nationalising utilities and applying to rejoin the EU should be front and centre in the government's considerations. We haven't tried everything until we've tried everything.
The framing of the problem is strange: it is - even in UK - very well known why 2008-2024 did not produce growth (demographics, austerity, Brexit, attempted deregulation, etc)
It is far harder to determine what will bring growth.
I believe that somewhere in No10 there's a big red button which, when pressed, will cause economic growth.
Unfortunately the evil Tories have concealed its location from Sir Keir.
There seems to have been endless research over the last few years into "how to get growth". I remember this project at the LSE which involved a few big names in academia. https://cep.lse.ac.uk/lse-growth-commission/
100%. Whilst we know technocracy is a busted flush, Labour don't know what to replace it with. So rather than obsessing over the big number perhaps we focus on specifics? Addressing child poverty, housing, green transition etc. But all this was blindingly obvious BEFORE the election??
Uk performance post-2008 was comparable to other countries until 2010. It was austerity which is the root of the problem. It is that which failed, and that for which the Tories 2010-2024 will be remembered. Add Brexit to the mix and the Tories effectively kneecapped us.
Realise how many people want some other answer, but I struggle to get beyond demographics as the major problem we're going to have to solve in the coming years. Which although often mentioned is rarely seriously discussed.
Are there many successful models for an economy that has an ageing population and a declining workforce?
The immigration debate has never been explained in those terms to the population in a grown up way, much like our inability to discuss taxation
Politicians always overestimate their ability to influence growth in the short term and underestimate it in the long term. The favourable factors that drove growth until 2008 have fallen/been kicked away, or gone into reverse. Immensely foolish to base your election pitch on delivering growth.
I think about this daily. Unfortunately with an ageing population, low birth rate, more years in retirement, ever increasing pensions and healthcare costs, hoarded wealth.. taxes are only going one way
There are some interesting ideas in replies to my posts, and something I'm conscious of (but may or may not be much of a factor for growth) is a weaker policy debate in recent years, where covid, social media, and populism have all played a part.
Having just been stretching my understanding for an upcoming column, I do find the complex world v simplistic debate highly problematic, and would frankly welcome a whole lot more serious discussion, exciting though the ups and downs of instant commentary may be.
To generate growth you need 1. Customers, with the disposable income or corporate power to buy your products - Brits have limited disposable income & we have many foreign owned businesses
2. Capital - banks won't lend without personal quarantees, which exclude all rentiers & those with low equity
3.Competitive advantage - that is either a killer idea or a better way of doing something, generally through technology. Using AI & tech is capital intensive & doesn't fit with tax rules as investment.
4. Skills & labour - education is orientated to regurgitating not research & systems thinking
5. Growth needs a stable regulatory environment with clarity on standards. Until it is clear that the UK will mirror all EU standard there is ambiguity. We are excluded from the service market to meet EU needs
6. Align & rejoin the EU SM 🇪🇺 & many opportunities open up.
7. Govt needs to innovate.
The UK has an economic theoretical model that wants to ape the US but in real terms outside of the EU is a regulatory supplicant. Reeves has no policies that will generate growth as she's ideologically opposed to rolling back Brexit. The UK is already in stagflation.
This is basically Sandel's framing. There is no deterministic do X and Y happens (e.g. technocracy) that works as intended. Just a series of debates about moral choices (democracy), which once taken send out unforeseeable ripples.
Economic growth isn’t that complex though.
You need to invest broadly in the factors of production & productive + emerging growth sectors.
Public investment where it’s needed, reduce barriers to private investment where possible…
But after 2008 David Cameron followed ‘austerity’, which was code for withdrawing direct public investment in production factors (infrastructure, health, education, amenities etc) & support for private investment.
The wealth class accepted it because low tax & trading property is good for a while.
More and better investment public and private. + Education for skills. None of this is easy of course. How’s it paid for? Which investments? Etc , etc. Worst of all it takes time. Economists’ joke from Ireland: “the first 70 years are the hardest”.
Dublin is also one of the biggest data centre hubs in Europe, we have a direct shipping route to the US, a very well-educated workforce & US immigration pre-clearance at Dublin & Shannon airports (passengers arrive in the US as domestic passengers). New routes launching in 2025.
I think it’s also a trend for rich, educated society’s to have less kids. I think it’s healthy in some ways- I don’t see how the environment can support a forever growing population of rich people- but it means we have to get better at automation and tech…
Demographics is clearly a causal factor but it is one of so many, it's not one that if solved will unblock economic growth by itself.
Education is another, although to what extent is uncertain. Placing the cost of further education on the individual rather than employers or the State is a factor.
was struck by this when i was unemployed after undergrad, couldnt do an apprentiship as i had a degree, even though id been unemployed for 9 months... we NEED people to do x, no not you, other people
Can't have you escape the box your late teen & early adult choices put yourself into?! That'd be... chaos!!!🙄
It might be slightly understandable if education was entirely state funded, but with students paying for tuition etc, it really should be only their business how they use their investment.
Health, especially mental health is another factor but again to what extent is unclear. There are so many possible factors it seems impossible for experts or politicians to really get to grips with them all as a cohesive whole that could ultimately make a difference.
What over-rides any consideration of what to do about these factors is simply the question "Where is this growth going to come from"? What is it that the UK economy can actually do in terms of production of goods or delivery of services that will generate growth and economic benefit for the ...
maximum number of people in society in the face of job exporting, job deskilling and job mechanisation and automation. I don't think anyone has any real idea, not just the politicians. People assume that if the underling factors are resolved it'll take care of itself. I'm confident it won't.
There clearly isn't just one reason. The 2008 crash and brexit are clearly major contributors. Another possibility is the impact of decarbonisation. Our economy is gradually replacing fossil fuels with more expensive alternatives. What's the economic impact of ever rising cost?
UK economic performance since 2008 has gone exactly as the textbooks say it should. The UK has implemented contractionary fiscal policies (austerity) and as a result growth has been constrained.
in 2008 the bubble burst. The previous 20 years of economic growth was not real, mostly just bubble blowing. The 20 years before that was the UK catching up with the rest of Europe after joining the EEC. Brexit will kill 20 years of economic growth in less than half that time.
25 years ago, one of my macro-economic profs told us there was a Nobel waiting for anyone who could figure out how to generate economic growth in a negative demographic growth environment. I haven't heard of anyone collecting that Nobel yet.
Consumption must match production. Massively increasing production capacity without finding a source of consumption is a recipe for recession. Children consume (a lot) while contributing little to production.
indeed - if we can answer "when to start", we can can go some way to understanding the problem.
Also not a particularly British problem in my view, and to some extent not even a question of headline growth.
smoothing out the GFC bubble and crisis, has UK growth materially dropped off compared to 2nd half of 20th century or versus other mature economies (perhaps with exception of US)? I think the problem is something else.
You can argue post war was catch up growth, and 90s was leveraging increased supply in many ways, simplistic but there is truth to it. In which case, neither obviously exist now.
If the cost of housing wasn’t in a bubble people would have more money to spend in the economy.The extraction of profit offshore &the driving down of wage income has made this lack of money to spend in the economy worse.Dumping of product from China stifles U.K. production.These things can be fixed.
Simple answer is redistribution of wealth so the average person has money to spend in the economy and rejoining the EU to remove trade barriers. These will not happen due to a small number of greedy people that control the media and our politician. So stagnation is here to stay Ad infinitum
Investment in people and plant, surely? That’s how to increase productivity and thereby growth. It isn’t at all that easy of course, but building better things more cheaply might be a start. But UKGOV seems addicted to opex and scared of capex. Presumably because risk? Deary me
The economy is strangled when ordinary people don’t have money to spend on economic activity. So downward pressure on wages and income only makes it worse.(Deregulation makes this worse)The housing crisis is a dead weight on economic activity.Solve these two things and there will be plenty of growth
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(immigration is arguably the main driver of growth)
These levels are neither sustainable or desired but the public aren't ready to accept the inevitable trade offs and economic downsides a crackdown on it would yield in the short term.
Brexit of course hasn't helped but the problems go back to 2008 rather than 2016.
https://www.lse.ac.uk/News/Latest-news-from-LSE/2024/f-June-2024/Urgent-need-for-a-lasting-growth-strategy-to-revive-stagnant-UK-economy-%E2%80%93-new-CEP-report#:~:text=The%20authors%20say%20that%20a,parties%20in%20recent%20policy%20announcements.
Many people in poor health and out of workforce after Covid
Lack of large scale innovation c/w US
and the mother of all clusterf**ks - Brexit
Removing barriers for demographics, currently prevented from contributing.
Investing in efficiencies within public services, allowing smoother access and as a result better outcomes
It is far harder to determine what will bring growth.
Unfortunately the evil Tories have concealed its location from Sir Keir.
https://cep.lse.ac.uk/lse-growth-commission/
So for example a high speed train between Glasgow and Edinburgh may increase productivity in both cities by 15%.
Do it.
Maybe simplistic (Versailles Treaty), but interesting.
https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Fiscal-Policy
The immigration debate has never been explained in those terms to the population in a grown up way, much like our inability to discuss taxation
2. Capital - banks won't lend without personal quarantees, which exclude all rentiers & those with low equity
4. Skills & labour - education is orientated to regurgitating not research & systems thinking
6. Align & rejoin the EU SM 🇪🇺 & many opportunities open up.
7. Govt needs to innovate.
Improve planning and NHS, strengthen governance, raise taxes to pay for it, better immigration policies would all help - in an incrementally slow way.
Sandel…
Which Sandel?
You need to invest broadly in the factors of production & productive + emerging growth sectors.
Public investment where it’s needed, reduce barriers to private investment where possible…
The wealth class accepted it because low tax & trading property is good for a while.
The “and” is meant to connect to the “withdrawing”, not the “for”.
Realised it’s ambiguous after posting.
But Brexit made everything worse. Why invest into the UK if they’re not the gateway to the European market?
The UK gov spent a decade trying to resolve Brexit (an impossible task), meaning it had to ignore loads of other priorities.
Their most vulnerable sector now appears to be pharma because it exports to the USA.
Factors?: Common language, legal system, EU membership, 'special relationship' and tax.
Need to ask why we have an aging pop. - many things loop back to lack of investment/poor productivity making it expensive to have kids
So I would also say lack of investment has hit productivity begats an aging population
Education is another, although to what extent is uncertain. Placing the cost of further education on the individual rather than employers or the State is a factor.
It might be slightly understandable if education was entirely state funded, but with students paying for tuition etc, it really should be only their business how they use their investment.
https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Fiscal-Policy
Brexit, adding barriers to accessing a major export market, didn't help.
How to get growth is well known: it’s the opposite of what the UK spent the 15 years post 2008 doing.
Hey Stuart, nice to see you here.
Good to see you. 👍
If the UK could veto our own EU membership application then I'm not 100% sure that it wouldn't. 😂😭
We don't have either the desire or the skill to do that and that and until it changes we are stuffed.
not that hard, actually
:)
Business investment has been lacklustre for many, many years.
Maybe training too.
I know these are radical ideas.
but where I work, almost all of my coworkers find AI valuable in their day to day work
and if you follow people like @erictopol.bsky.social you learn that if not today, then soon, AI will be helping cancer patients
& helping cancer patients seems like a good thing?
Also not a particularly British problem in my view, and to some extent not even a question of headline growth.
🏅