The Economist June 11th 2022 Leaders 15C
onservative mps’halfheartedvotetoendorseBorisJohn
son as prime minister, on June 6th, betrayed how deeply
Britain’s ruling party fails to confront hard choices. A defeat for
Mr Johnson would have ushered in a new government, with a
chance to prove itself before the next election. A resounding vic
tory would have given him a fresh mandate to show that he had
put his transgressions behind him. The irresolute blow the re
bels inflicted leaves Britain in the hands of a washedup cabinet
mouthing grandiloquent promises it cannot honour.
This newspaper has long argued that Mr Johnson ought to
have resigned for lying repeatedly to Parliament about whether
he broke his own laws. But hypocrisy and deceit do not begin to
capture the wider problem that he and his country face. Britain
is stuck in a 15year rut. It likes to think of itself as a dynamic,
freemarket place, but its economy lags behind much of the rich
world. There is plenty of speechifying about growth, and no
shortage of ideas about how to turn the country round. But the
mettle and strategic thinking that reform requires are absent—
another instance of Tories ducking hard choices.
Britain’s stagnation also holds lessons for other slowgrow
ing countries, many of them in Europe. Lower gdp means de
clining global influence, faltering faith in free markets and less
money for public services. A struggle over fixed resources fires
the populism that turns politics into an ugly
fight about identity. The shortage of funds for
investment entrenches tired and inefficient in
stitutions. Worst of all, the lack of growth limits
Britons’ scope to flourish.
The idea that Britain has a growth problem is
not new. But few realise how deep a hole it is in.
Whereas average annual gdp growth over the
decade preceding the global financial crisis of
200709 was 2.7%, the new normal is now closer to just 1.7%.
Plenty of countries suffered from the financial crisis and co
vid19. But Britain’s problems run deeper. In 2022 gdp per head
will be more than 25% lower than America’s, measured at pur
chasingpower parity. Britain has been declining against Amer
ica and Germany since the mid2000s. Average wages now lag
behind America’s by about as much as Poland’s do Britain’s.
Underlying this is feeble productivity. In the decade to 2007,
British productivity growth was second only to America’s in the
g7. In the decade to 2019, growth in output per hour worked
stalled to just 0.7% a year, making Britain the secondslowest in
the g7; only Italy was slower. Had Britain’s productivity growth
rate not fallen after the financial crisis, gdp per person in
would have been £6,700 ($8,380) higher than it is.
At least in the short run, Brexit has made matters worse. Busi
ness investment is lower than when the referendum took place.
Since the end of 2020 firms trading with the European Union
have faced extra paperwork, customs delays and higher taxes. In
the last quarter of 2021 Britain exported 16% less than at the end
of 2019. Global goods trade, by contrast, grew by nearly 6%.
The outlook is poor, too. The oecdpredicts that next year gdp
in Britain will be stagnant. Official forecasts show that real take
home pay will be lower in five years than it is today, eaten awaybyhighertaxesandconsumerpriceinflation that, at 9%, is the
highest among big rich economies.
Part of the problem is that boosterish politicians talk so much
nonsense about growth. The statistics are noisy and complex
enough for a clever civil servant to find a number that paints
Britain in a favourable light. Don’t be fooled. Selfdelusion sti
fles fresh thinking about policy, one reason Britain’s economic
debates have been tangential to growth, harmful even. For most
of the 2010s politicians obsessed about cutting deficits. Budget
discipline is important, but hardly a cure for Britain’s ills. In a
speech this week Mr Johnson was to propose unlocking growth
by letting people use housing benefits to buy houses.
“Levelling up”, a theme of this government, could in theory
focus on raising the productivity of workers and capital in Brit
ain’s leftbehind regions. In practice, it seems to put redistribu
tion before output. That may be the just thing to do, but it is na
ive to expect that sending pots of public money to Britain’s poor
er places will increase the size of the national pie.
When it comes to growth, Britain’s politicians will the ends
but not the means. They run scared of the homeowning elderly,
who turn up to vote and make up a growing share of the elector
ate. So tax rises are heaped on businesses and workers instead,
further harming the economy. The government has likewise wa
tered down its plans for reforming the planning
system—because elderly homeowners object.
A change of government may not fix the
problem. Parts of Labour grasp the challenge.
But the party is fixated on outbidding the Tories
over levelling up, and is less likely than the
Conservatives to reform public services in a
way that will lower costs and taxes.
Britain has been here before. In 1979, in op
position, Margaret Thatcher lamented its declining economic
standing. “Travel abroad, and see how much better our neigh
bours are doing,” she urged Tory supporters. Her uncompromis
ing reforms led to nearly three decades in which British living
standards closed on those in the rest of the rich world.The stagnation nation
Over the coming months we will look at growth in Britain and
how to fix it. Some solutions are familiar but politically difficult,
like solving the housing crisis in southeast England and boost
ing trade with the eu. Others involve fresh thinking to harness
the potential of the country’s universities and lifesciences
firms, and to expose managers to competition.
Britain’s advantages, from the English language to the com
monlaw system, have not gone away. However, under the dis
honest, unserious—and now politically wounded—Mr Johnson,
Britain is at threat from rising barriers to trade, an ageing elec
torate and rigid planning. Britain suffers from complacency,
born of centuries as a firstrank economy, and Johnsonian blus
ter only exacerbates it. If Britain is to avoid a bleak future it must
grasp reform. That will require a onceinageneration show of
political courage, persuasion andpolicyingenuity. Just like four
decades ago, there is no alternative.nIt’s not just Boris Johnson. Economic decline has become a chronic British diseaseBritain’s real problem
Economic growth