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- Herausgeber: Biteback Publishing
- Kategorie: Geisteswissenschaft
- Sprache: Englisch
The UK has, in recent years, been suffering from what is nothing short of an economic crisis. Growth has now completely stalled in those western democracies, the UK included, where high government spending and high taxes have steadily burgeoned, decade after decade. Free-market economies now threaten to leave us behind in terms of wealth, opportunity and standards of living. At the end of Rishi Sunak's 2024 government, expenditure was at 45 per cent of GDP and taxes were 36 per cent and rising – yet still nowhere near sufficient to cover public expenditure. The government's net annual borrowing is now a completely unsustainable 4.4 per cent of GDP, with our overall national debt growing rapidly and alarmingly. In this arresting and powerful manifesto for economic change, Jon Moynihan analyses the UK's decades-long stagnant economy and looks at what can be done to resuscitate it. Combining rigorous research with unparalleled business experience, he explores the key dynamics affecting economic growth, ranging from government borrowing, expenditure, tax and regulation to the way national resources are deployed on non-productive and futile, growth-stifling endeavours. Ultimately, Moynihan shows that unless we act now to reverse the decline, by radically restructuring our economy to stimulate economic growth, the UK risks stagnation, financial collapse and a long-term disintegration in our standard of living. Ignore his warning at your peril.
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Veröffentlichungsjahr: 2024
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i“A must-read for any would-be Chancellor. It is a compelling blueprint for how to end decades of economic malaise.”
Andrew Pierce
“A trenchant, eye-opening and controversial tour de force from one of our foremost economic brains. Anyone who wants growth and wonders why it has become so elusive in western social democracies needs to pick up ReturntoGrowthand take urgent note. Jon Moynihan shows, in crystal-clear and accessible prose, that you can either have ever greater government expenditure or you can have decent levels of growth. Contrary to cakeism, you can’t have both. Rising public-sector expenditure brings greater debt, inflation and ultimately, if it is not controlled, national bankruptcy. A smaller state which does not crowd out the private sector is better able to preside over higher economic growth, which raises standards of living for the country as a whole. If the analysis of how we got into our current economic predicament is sobering, Moynihan’s meticulously elucidated prescription offers a more hopeful way forward for those brave enough to take it. ReturntoGrowthis an essential and compelling read for policymakers and general readers alike.”
Justin Marozzi
“Jon Moynihan is right – it’s time for a fresh look at how our economy should work. Growth and aspiration will only return when private-sector entrepreneurialism is allowed to thrive in a low-tax, free-market setting. More hard work and less regulation is the way forward.”
Lord Bamford
“If Rachel Reeves is serious about her growth agenda, she should buy herself a copy of Jon Moynihan’s book. Lucid, passionately argued, contemptuous of the groupthink that landed our country in debilitating stagnation; here is a manifesto to get Britain motoring.”
Allison Pearson
“Since the election, Conservatives have been desperately looking for a solution to Britain’s economic malaise that isn’t just a retread of the failed policies of the past twenty-five years. They need look no further. This book is the answer. Future governments will ignore it at their peril.”
Toby Young
ii“Jon Moynihan combines serious business acumen with a firm grasp of the political big picture. Return to Growth is an important and timely book – a route map to a more dynamic, secure and prosperous Britain, by someone who knows what works.”
Liam Halligan
“In terms that the economic layman can understand, probably because he’s not a professional economist himself, Jon Moynihan lays out the economic, political, but also moral basis for how Britain can get growing again. These ideas are so practical, achievable, logical and overdue that his thesis is frankly unanswerable. It represents nothing less than a manifesto for national revival and has profound implications for economies beyond the UK too.”
Andrew Roberts
“This may well be the most important economics book of recent years. Moynihan’s book is an urgent appeal to stop the decline and set western economies on the road to growth and prosperity.”
Matt Ridley
“Moynihan challenges the bovine assumptions of ‘social democracy’ that will inexorably lead to fiscal collapse. No doomster, he asserts convincingly, ‘We needn’t keep doing things this way. We needn’t keep digging our own graves.’ Clear, readable, riveting and vividly illustrated.”
Lionel Shriver
“Moynihan reviews three enemies of growth: high expenditure, high taxation and high regulation. His inescapable – and well-supported – conclusion: raising taxes, bloating spending and bureaucratic meddling just make things worse. I love this book.”
Art Laffer
v
vii
And now referring the well set Reader to the History it selfe, where satisfaction lyeth ready to receive him, and expectation desirous of deserved thankes. I come to talke with the scelerate Companion: If thou beest a Villain,a Ruffian,a Momus,a Knave,a Carper,a Critick,aBubo,a Buffon,a stupid Asse,and a gnawing Worme with envious Lips, I bequeath thee to a Carnificiall reward, where a hempen Rope will soon dispatch thy snarling slander, and free my toylesome Travailes and now painefull Labours, from the deadly Poyson of thy sharpe edged calumnies, and so goe hang thy selfe; for I neither will respect thy Love, nor regard thy Malice: and shall ever and always remaine,
To the Courteous still Observant:
And to the Criticall Knave as he deserveth.
W. M. Lithgow (1640) viii
Contents
Readers who connect with this QR code can access web links to the referenced works in this book
Caveat to the Reader
An important note about this book: I am not an economist. The book is about the UK’s economy and the economic steps that governments can do, and sometimes do or don’t do, to make it grow faster. On occasion, I slip into economist’s language, appearing to be talking like, or even thinking I am, an economist. I’m not. Any authority I have to say the things I say in the book, I derive from my careful research into what economists have concluded and written about on the topics in this book; from my decade or more working closely in the markets with the traders who actually deal with the financial commodities – currencies, exchange rates, tax rates, surpluses and deficits, regulations – that governments try to control and impact; from the knowledge gained in my many decades of interacting (until recent times) with economists at MIT Sloan School – particularly the much-lamented Rüdiger Dornbusch – where I served for over twenty years on various advisory committees; and, above all, from having spent fifty years in business advising, starting and building firms that had to deal on a daily basis with the consequences of decisions made by governments over that time.
I hope that is enough to make my conclusions in this book sensible and acceptable. I have throughout the writing of it benefited from research work, and advice and reaction, from the economics xiiconsultancy CEBR. All mistakes and misstatements are, of course, my own fault.
Volume Two will review the importance of free markets, free trade and sound money and will sketch out an action plan for how a ‘return to growth’ programme could be implemented.
PART I
REASONS WHY GROWTH IS CRUCIAL
A GOVERNMENT HAS BOTH A MORAL AND A PRACTICAL DUTY TO PROVIDE ECONOMIC GROWTH FOR ITS CITIZENS 2
Prologue
Two Centuries of Fast Growth Followed by Almost Two Decades of Bust
The debate over growth in the UK, always contentious, has recently become even more heated. Wages, economic growth and economic opportunities have skidded to a halt this century, a period where the UK was mostly inside, but is now more recently outside, the EU. During the past two decades, the UK economy has joined that select group of economies around the world that have had poor to no economic growth, have increasing household distress, and, in particular, have annual increases in real wages that, over a fifteen-year period, have actually turned negative (particularly, but not only, as a result of a spurt in inflation), averaging -0.3 per cent per annum. The compounding result of that average annual drop, as shown in Chart 1.1, is that real earnings in the UK are now 4.8 per cent lower than they were in 2008.i
4Chart 1.1: Real Average Weekly Earnings, UK Economy, Total Pay
Using consumer price inflation, seasonally adjusted, in 2015 prices
In 2023, real earnings are almost 5 per cent lower than in 2008.
Source:OfficeforNationalStatistics1
Since the year 2000, government expenditure has oscillated but, in general, expanded. It is now at some 45 per cent of the economy, up from 35 per cent in 2000 (see Chart 1.2).
Chart 1.2: UK Public Spending as a Share of GDP 2000–2023
UK government expenditure has risen from around 35 per cent of GDP at the turn of the century to some 45–50 per cent, two short decades later.
Source:OfficeforBudgetResponsibility2
5An article in The Economist, late in 2022, bemoaned that the west has fallen ‘out of love with the economic growth’.3 The article seemed confused as to whether to blame left-wing ‘unsophisticated’ politicians, right-wing ‘reheated Reaganism’, ‘growth champions’, NIMBYs, or overdemanding electorates. It offered various sensible pointers for restimulating growth yet sneered at those who had tried to implement those sorts of policies and implied (for no stated reason) that something like ‘another financial crisis’ might be necessary to put the west back on a pro-growth path. It did not contemplate the possibility that the prospects for future growth in the UK might be as poor as they have been in, say, Venezuela in recent decades – a one-way path. How did the UK and other, similar countries get into the state shown in Charts 1.1 and 1.2? Is our current economic direction – low growth and stagnating wages, accompanied by governments that are ever-increasing in size – inevitable? Are we on our way back to having to live, possibly permanently, with the ‘British disease’ of the 1970s: namely, stagflation, unemployment and social unrest?
To answer these questions, we have to first look at the UK’s longer-term economic history and review how we got to where we are.
THE UK’S HISTORY OF GROWTH AND SUCCESS OVER THE PAST MILLENNIUM: THEN AND NOW
For many centuries after the Norman invasion of 1066, life for most Britons was a soul-destroying pattern of uniformity and conformity, bearing out Thomas Hobbes’s famous description of life outside society: ‘solitary, poor, nasty, brutish and short’.4 At that time, something that many are unaware of, a majority of the population of the UK were not free: about 10 per cent of the population recorded in the Domesday book were shown as slaves and over 70 per cent as serfs (a state of semi-slavery, which encompassed unfree peasants such as villeins, 6bordars and cottars).5 In the mid-1200s, serfdom was legalised and continued for some centuries thereafter (the last serf was freed in 1574).
Even after that, and regardless of whether they were free citizens or not, for most, the position they were born into was the position they held for the rest of their lives, and their children, at best, would continue to hold that same position. The best that the vast majority of citizens could hope for between 1000 and 1800 was to be free, get a job, keep that same job and remain with unchanging status, wage and standard of living for the rest of their lives. The summit of most people’s aspiration was to live modestly and unchangeably, stay out of trouble and avoid falling into penury. The opportunity for self-improvement or advancement, was, for most people, zero. The average life expectancy was thirty. If you didn’t work or have someone looking after you, you would starve and then die.
Chart 1.3: UK Wages 1600–2000
Real average weekly earnings, 2015 GBP
After centuries in which workers could never expect to earn more than a standard – fluctuating but not overall rising – remittance, real wages between 1800 and 2000 had risen some sixteen-fold.
Source: Bank of England6
And then, towards the end of the eighteenth century, there was a 7sudden, startling change that completely transformed possibilities and personal ambition for the average citizen. It was precipitated by the Enlightenment’s scientific discoveries, the humanistic and individualistic approaches of thinkers such as Adam Smith and the bold entrepreneurial spirit of some enterprising Britons. These discoveries led to the simultaneous emergence of technological breakthroughs and individual freedom. This, in turn, resulted in an explosion of industrial entrepreneurship, which drove the creation of new jobs across the economy, with major increases in the size of the wage that employers could, and did, pay for a given job. Suddenly, growing wealth and social mobility became the norm. Between 1800 and 1950, the average wage quadrupled; it quadrupled again over the following half-century. By the year 2000, the earning power of the average Briton was, in real terms, sixteentimesas much as it had been in 1800.
Between 1900 and 2022, the number of jobs in the UK doubled from 16.7 to 33.2 million (see Chart 1.4); the amount paid in the national wage bill was at least thirty-two times what it had been in 1800.
Chart 1.4: Employment in the Twentieth Century and Beyond
Total employment in the UK (including self-employed) 1900–2023
Since 1900, the number of jobs has near-doubled too.
Source:BankofEngland,OfficeforNationalStatistics7
8And the extraordinary range of novel goods and services that the modern citizen can now buy with their money gives them a standard of living and choice well beyond anything that even the very richest people of Britain in 1800 could ever have dreamed of.
These advances in jobs, wages and standards of living were, as we know, accompanied by major improvements in education, health, longevity and – with universal suffrage – democracy.
Over the past two centuries, the average Briton’s conception of what they can expect to learn, experience and achieve over their lifetime has changed dramatically. In the western democracies, the generally held view over the past few decades has been that every citizen has the right, or at least a reasonable hope, to:
Live up to eight or nine decades, mostly in good health.Fulfil themselves by finding ever-increasing work responsibilities, challenges and opportunities that stretch their potential and improve their life satisfaction.Receive annually higher real pay, whether or not their job responsibilities have increased – a function of productivity improvements, mostly brought about through investment of capital – and better working conditions.Have the opportunity to fulfil, over their working lives, their best possible personal potential in terms of life, health, achievement, prosperity, human relationships and happiness.There is a general understanding in modern democracies that all who are willing to work and who want to better themselves should have the opportunity to do so and, through that, to experience personal success and happiness. As noted earlier, all this is something new; before 1800, any such attitude would have been met with 9astonishment. Citizens now see themselves as having the right to expect that:
enough jobs are created to prevent more than a minimal level of unemploymentan individual’s annual wages increase steadilyprosperity, in general, grows at a sufficient pace to pay for ever-improved schooling, ever-better healthcare, ever-better housing and ever-improving living standardsAcross western Europe, however, including the UK, the larger economies have seen, over the past half-century, a steady deceleration in economic growth and, in the past two decades, its disappearance. As can be seen in Chart 1.5, growth in these countries has dropped dramatically.
Chart 1.5: Real Average Annual GDP Growth in Major Western European Economies 1960–2019
Declining growth over the past half-century can be seen right across the advanced economies of western Europe.
IMF advanced economies with annual GDP over $1 trillion
Source:International Monetary Fund8
10And, of course, for any country, the key measure is not GDP, but GDP per capita. What matters most is whether additional wealth and opportunities are accruing to the individual and their family – rather than whether the country as a whole is getting wealthier.
Chart 1.6 shows how the four great twentieth-century powers – the US, UK, Germany and France – have each performed against national expectations to grow their GDP per capita. In the early 1930s, all had similar levels of GDP per capita – the first two somewhat higher than the latter two. Over the next century, that changed dramatically. In the US, GDP per capita has bounded ahead, decade after decade, so that its GDP is now massively higher than that of the other three. Within those other three, post-Second World War, Germany rebounded from military and economic catastrophe to outperform the UK and France – who have both done worse.
Chart 1.6: Real GDP Per Capita for the UK, US, Germany and France
1929–2023, in Constant 2011 Prices
Margaret Thatcher’s policies improved economic growth for several decades, but now the UK economy has been falling further and further behind
Source:MaddisonProject,InternationalMonetaryFund9
11The 1970s was the nadir of this story for the UK. That decade saw inflation, the three-day week, the ‘Winter of Discontent’, and significant economic decline in the UK. The wrong prescription for the UK – namely, for it to join the European Common Market – was adopted; decline continued. What was actually needed was economic reform, which was finally provided by Margaret Thatcher in the 1980s. Her reforms reversed the decline of the post-war years, leading to economic growth through the 1990s and taking the British economy optimistically into the new millennium.
In the past decade and a half, however, growth in GDP per capita for western European economies has now slowed to a crawl. For all these countries, economic growth has declined in each decade. The slowdown expressed on a per-capita basis (Chart 1.7) is even worse than the drop in actual GDP growth.
Chart 1.7: Real GDP and Real GDP Per Capita Growth in Major Western European Economies 1960–2019
Even pre-Covid, annual GDP-per-capita growth had shrunk to 1 per cent or less in major Western European economies
Source:PublicFinancesinModernHistory10andtheMaddisonProject11
12Economist Thomas Piketty focused on this point, discussing whether growth in a particular country benefited the workers or the owners of capital.12 Piketty’s results have been pretty much discredited,13 and in particular it has been shown that there are more plausible reasons than Piketty’s for the specific phenomenon he observed, but in any event, the first issue is whether the economy per capita has grown and will continue to grow in the first place.14 Only once that has happened can we start talking sensibly about redistribution and improving the safety net.
Set against that measure, we’re not doing well. Not only has GDP growth been very low in the UK in the past three decades, but we have added over 10 million to our population since 1995.15 As a result, our GDP-per-capita growth has, as we can see in Chart 1.8, been almost non-existent in recent years.
Chart 1.8: Real GDP Per Capita Growth in the UK 1975–2024
Rapid increases in immigration this century led to major increases in population. The already anaemic level of GDP growth consequently becomes even worse when looked at as GDP-per-capita growth.
Source:InternationalMonetaryFundandMaddisonProject16
13As Chart 1.9 shows, there’s not only a general problem of growth among Europe’s advanced economies. More specifically in the UK, growth in household income has, over the past two decades, more or less ceased.
Chart 1.9: Median Household Income Per Person
Annual $,000 at PPP, 2019 prices
Source:OECD;JamesFransham,TheEconomist17
Note:Atpurchasingpowerparity(PPP).Incomeperpersonaftertaxesandtransfers
While GDP itself may increase as the working-age population grows, the mathematical relationship between GDP and GDP per capita is a function of population growth or shrinkage. This in turn depends on two things: the level of the indigenous birth rate and net migration.
Taking the first of these, since around the mid-1970s, birth rates in western Europe have collapsed to below the replacement rate (2.1 children per woman). See Chart 1.10.
Looking at Chart 1.11, we can see that any drop in the indigenous birth rate in the UK has been overwhelmed by the large size of net migration.14
Chart 1.10: Fertility Rates Versus Replacement Level Across Major Western European Economies 1960–2022
The average number of live births per woman has declined drastically over the last decades across western Europe and dropped below the replacement level.
Source: World Bank18
Chart 1.11: Long-Term Migration in the UK 1964–2023
Both immigration and net migration in the UK have skyrocketed since the end of the last century and particularly post-Brexit.
Themethodologyforestimatingmigrationwaschangedin2018
Source: HouseofCommonsLibrary19
15So, as Chart 1.12 shows, the UK’s population (as with other European countries) has increased significantly.
Chart 1.12: Population Growth in Major Western European Economies, 1960 Versus 2023
Between 1960 and 2023, as a result of high levels of immigration, populations across the major western European economies have grown on average by 37 per cent and in the UK by 28 per cent.
Source:World Bank20
Notably, the UK’s Office for Budget Responsibility (OBR) uses a model that predicts that the more immigration we have, the more GDP will rise. But, of course, the rise in GDP percapitawill not be commensurate with the rise in GDP overall. The OBR has, in the past, overstated the benefits of mass immigration.
The OBR’s previous stance explains why recent governments have allowed plentiful immigration. If a Home Office minister tells the OBR they want to reduce immigration, it responds that its report to the government will predict that the economy won’t grow as fast, so you won’t have much future ‘fiscal headroom’ – and as a result, you must cut back government expenditure on, say, welfare 16or increase taxes. In other words, don’t plan to reduce immigration. If you ignore this advice and press on, the OBR leaks your decision to the press (as is believed to have happened with Liz Truss’s mini-budget) to undermine your proposed approach.21 As a result, Chancellors keen to spend more on welfare or cut taxes could have seen themselves as having limited ability to restrict immigration. But, as even the OBR now agrees, not restricting migration is likely to result in lower, not higher, growth in GDP per capita.22
While our overall population has (through immigration) grown, we also face the problem, as shown in Chart 1.13, of an increasingly ageing population – even though the younger age of immigrants has managed to maintain the overall percentage of our population of working age.
Chart 1.13: UK Overall Working-Age and Retired Population 1970–2022
The UK’s population is rising, but ageing.
Source: OECD Library23
17And, as shown in Chart 1.14, as a result of slower growth decade after decade, along with a growing population due to higher and higher immigration, the UK is now – shockingly – only just in the upper half of GDP per capita among OECD countries.
Chart 1.14: GDP Per Capita in the Thirty-Eight OECD Countries* 2022
In PPP Terms, Current Dollars
The UK is no longer a stellar economic powerhouse.
*Plus Singapore (non-OECD)
**LuxembourgandIreland,aspass-throughlocationsforthewashingofcorporateprofitsintheirlow-taxjurisdictions,haveartificiallyhighGDPs,butthemoneywashingthroughbenefitsthecitizensofthosecountriesverylittle.SwitzerlandandSingaporehavethesamebuttoalesserdegree.•Source:WorldBank24
Part of the cause of that is, as we have seen, our immigration policy. Chart 1.15 shows the empirical result: higher immigration is clearly associated with lower individual wealth because, as the chart shows, even if GDP were to increase through immigration, GDP per capita doesn’t.18
Chart 1.15: Average Population Versus GDP Per Capita Growth 2005–2019
On average, higher levels of immigration are associated with reduced growth in GDP per capita.
Source:International Monetary Fund, moyniteam analysis25
Obviously, the more or less productive the immigrants are that come into a country, the more or less GDP will grow, assuming not too many remain unemployed. But immigration has a negative impact on GDP per capita, and when the additional negative impacts and demands on housing, health, emergency services, schools and infrastructure are taken into account, there are significant negatives to having such a high immigration level – unless, as in the US, you can, by having a relatively light social safety net that is not offering 19them much in benefits, put most of the new immigrants speedily into the workforce (much of which will be in the ‘informal’ or ‘black’ economy). In the US, that proposition is being put to the test by the astonishingly high level of immigration across the Rio Grande – at least 6.3 million since Biden became President.26
So – after that short detour to review the additional issues raised by looking at GDP rather than GDP per capita – to summarise, since the mid-1700s, for some 200–250 years, there has been in western countries a regular trend of ever-more jobs and ever-higher wages. But for the UK, and for many of the most advanced western economies, that trend has, in the past fifteen to twenty years, vanished. In western Europe at least, growth in GDP per capita has almost disappeared. The vanishing of growth in these countries is because of a double whammy: growth is very low, while population is still, due to immigration, growing rapidly. Addressing this problem, should we wish to do so, seems to have been made more difficult by declining economic understanding among politicians, pundits and the electorate; a return to social justice-style debates; the increasing demand for ‘equity’ (equality of outcome) and redistribution; and eco-style arguments that condemn growth out of hand and that have led to frequent claims that our country’s economy should not grow at all – or even that it should shrink.
• • •
Those arguing forgrowth believe it is not just something that is nice to have but that it’s both morally desirable and essential. Growth has brought enormous contentment and prosperity to the people of our country, to the people of other developed countries 20and, prospectively, to almost the entire world. In the UK, we all live lives that benefit hugely from the economic growth that has taken place since the late eighteenth century. But now, our economy seems to have lost the knack of growing and a focus on economic growth no longer takes pride of place in the economic agenda.ii Our main political parties, whether or not they pay lip service to growth, initiate policies that are, bemusingly, anti-growth. Political movements, some pseudo-religious in their beliefs, preach that growth is bad and must be stopped; or preach philosophies that, even if they do not overtly admit to it, effectively mean an end to any future growth.
In any event, given the general (and, it seems, prevailing) levels of either indifference or hostility to economic growth, the case for growth now has to be remade.
A recent paper by the Centre for Policy Study’s Robert Colvile set forth the moral case for growth.27 I gratefully borrow some of Colvile’s ideas. Benjamin Friedman from Harvard University and Tyler Cowen from George Mason University have separately written extensively on the matter in recent decades, pointing out the many benefits that make it a moral imperative for governments to seek growth.28
In Part I, I present that case for growth. In the following pages, I review a series of both moraland practicalarguments for economic growth.
21Growth is morally desirable because:
Aspiration is a central feature of human existence.Without growth, all economic conversations necessarily become about redistribution because there is no ‘extra’ to go round for all.Growth has accomplished and continues to promise enormous benefits to the human race and the planet.Growth is essential because:
As the electorate demands that the state do ever more, growth is the only reliable and sustainable way of funding these increased services.Without growth, developed countries must eventually, in any event, go bust.In the following chapters, which elaborate on these points, some of the arguments may seem commonplace; yet they often, particularly recently, seem to have been lost in the cut and thrust of the political debate around the desirability, or otherwise, of higher or lower taxes, bigger or smaller government, higher or lower (or no) growth in the UK. So, if you find any arguments in what follows to be obvious, bear in mind that these points are nonetheless rarely made, so to others they may be novel. Also bear in mind that experience shows that the case for growth, for whatever reason, needs to be made over and again.22
NOTES
1 Office for National Statistics, ‘X09: Real average weekly earnings using consumer price inflation (seasonally adjusted)’, https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/x09realaverageweeklyearningsusingconsumerpriceinflationseasonallyadjusted
2 Office for Budget Responsibility, ‘Data’, https://obr.uk/data/
3 ‘How the West fell out of love with economic growth’, The Economist, 11 December 2022, https://www.economist.com/finance-and-economics/2022/12/11/how-the-west-fell-out-of-love-with-economic-growth
4 Thomas Hobbes, Leviathan (Penguin Classics, 1651)
5 The National Archives, ‘Great Domesday Book’, https://beta.nationalarchives.gov.uk/explore-the-collection/explore-by-time-period/medieval/domesday/441
6 Bank of England, ‘A millennium of economic data’, https://www.bankofengland.co.uk/-/media/boe/files/statistics/research-datasets/a-millennium-of-macroeconomic-data-for-the-uk.xlsx
7 Bank of England, ‘A millennium of economic data’, https://www.bankofengland.co.uk/-/media/boe/files/statistics/research-datasets/a-millennium-of-macroeconomic-data-for-the-uk.xlsx; Office for National Statistics, ‘Number of People in Employment (aged 16 and over, seasonally adjusted):000s’, https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/timeseries/mgrz/lms
8 International Monetary Fund, ‘Real GDP Growth Rate, percent’, https://www.imf.org/external/datamapper/rgc@FPP/DEU/GBR/SWE/CZE/BEL/GRC/FRA/ITA/PRT/NLD/CHE/ESP. Majorwestern European economies are considered those included into the IMF advanced economies list, with an annual GDP over $1 trillion. A 2019 cutoff is used to exclude the effects of the Covid-19 pandemic.
9 University of Groningen, ‘Maddison Project Database 2020’, https://www.rug.nl/ggdc/historicaldevelopment/maddison/data/mpd2020.xlsx; International Monetary Fund, ‘World Economic Outlook (April 2024)’, https://www.imf.org/en/Publications/WEO/weo-database/2024/April
10 International Monetary Fund, ‘Public Finances in Modern History’, https://www.imf.org/external/datamapper/rgc@FPP/FRA/DEU/ITA/NLD/ESP/GBR
11 University of Groningen, ‘Maddison Project Database 2023’, https://www.rug.nl/ggdc/historicaldevelopment/maddison/data/mpd2020.xlsx
12 Thomas Piketty and Arthur Goldhammer, Capital in the Twenty First Century (Harvard University Press, 2014), https://www.amazon.co.uk/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X
13 Daron Acemoglu and James A. Robinson, ‘The Rise and Decline of General Laws of Capitalism’, Journal of Economic Perspectives, vol. 29, no. 1, winter 2015, pp. 3–28, https://www.aeaweb.org/articles?id=10.1257/jep.29.1.3
14 Douglas McWilliams, The Inequality Paradox: How Capitalism Can Work for Everyone (Abrams Press, 2019), https://www.amazon.co.uk/Inequality-Paradox-Capitalism-Work-Everyone/dp/146831498X#:~:text=In%20his%20illuminating%20new%20book,even%20as%20worldwide%20poverty%20drops
15 International Monetary Fund, ‘Population’, https://www.imf.org/external/datamapper/LP@WEO/GBR
16 International Monetary Fund, ‘Public Finances in Modern History’, https://www.imf.org/external/datamapper/datasets/FPP; University of Groningen, ‘Maddison Project Database 2023’, https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/maddison-project-database-2023; International Monetary Fund, ‘Public Finance in Modern History’, https://www.imf.org/external/datamapper/datasets/FPP
17 ‘Britain’s economic record since 2007 ranks near the bottom among peer countries’, The Economist, 15 December 2022, https://www.economist.com/britain/2022/12/15/britains-economic-record-since-2007-ranks-near-the-bottom-among-peer-countries
18 The World Bank, ‘Data Bank: Population estimates and projections’, https://databank.worldbank.org/source/population-estimates-and-projections
19 Georgina Sturge, ‘Migration Statistics’, House of Commons Library, 24 May 2024, https://commonslibrary.parliament.uk/research-briefings/sn06077/
20 The World Bank, ‘Data Bank: Population estimates and projections’, https://databank.worldbank.org/source/population-estimates-and-projections
21 Peter Walker, ‘Liz Truss blames “groupthink” for economic damage under her watch’, The Guardian, 18 September 2023, https://www.theguardian.com/politics/2023/sep/18/liz-truss-denies-crashing-economy-and-attacks-media-and-bank-groupthink
22 Will Hazell, ‘Migrants’ boost to economy overestimated, claims think tank’, Daily Telegraph, 23 March 2024, https://www.telegraph.co.uk/news/2024/03/23/migrants-boost-to-economy-overestimated-claims-think-tank/
23 OECD Library, ‘Demography’, https://www.oecd-ilibrary.org/social-issues-migration-health/demography/indicator-group/english_5f958f71-en
24 The World Bank, ‘GDP per capita, PPP (current international $) – OECD Members’, https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?end=2022&locations=OE-AU-AT-BE-CA-CL-CO-CR-CZ-DK-EE-FI-FR-DE-GR-HU-IS-IE-IL-IT-JP-KR-LV-LT-LU-MX-NL-NZ-NO-PL-PT-SK-SI-ES-SE-CH-TR-GB-US&start=2022&view=bar
25 International Monetary Fund, ‘World Economic Outlook (April 2024)’, https://www.imf.org/external/datamapper/datasets/WEO
26 Muzaffar Chishti, Kathleen Bush-Joseph and Colleen Putzel-Kavanaugh, ‘Biden at the three-year mark: the most active immigration presidency yet is mired in border crisis narrative’, Migration Policy Institute, 19 January 2024, https://www.migrationpolicy.org/article/biden-three-immigration-record
27 Robert Colvile, ‘The morality of growth’, CAPX, 13 January 2023, https://capx.co/the-morality-of-growth/
28 Benjamin M. Friedman, ‘The Moral Consequences of Economic Growth’, https://scholar.harvard.edu/files/bfriedman/files/the_moral_consequences_of_economic_growth.pdf; Tyler Cowen, Stubborn Attachments 442(Stripe Press, 2018), https://tylercowen.com/dd-product/stubborn-attachments-vision-society-free-prosperous-responsible-individuals/
i According to the Office for National Statistics, real weekly earnings (total pay) declined from the February 2008 peak of £532 to £506 in January 2024 (in 2015 prices), which is c.4.8 per cent lower and implies an annual growth rate of c.-0.3 per cent. See Chart 1.1.
ii Since I originally wrote these words, growth is – at least rhetorically – coming back into fashion. Even the Labour Party, possibly surprisingly, adopted a rhetoric of growth being ‘at the heart of its policies’. See ‘Sir Keir Starmer: UK needs growth, growth, growth’, BBC News, 25 July 2022, https://www.bbc.co.uk/news/av/uk-62292281
Chapter 1
Aspiration is a Central Feature of Human Existence
Contemplating the issue of whether or not growth is a good thing can be challenging, when one considers the often plausible-sounding exhortations of the anti-growth campaigners. Their arguments appeal to grand, albeit challengeable, concepts, such as (alleged) global ecocide or the need to ‘decolonise the atmosphere’.1 It is not always easy to discern the truth or potential impact of such approaches, nor the claims as to likely future outcomes – or to cost these allegedly affordable approaches. The average person, quite reasonably, sometimes feels inclined to agree with these anti-growth arguments; by doing so, they imagine themselves to be on the virtuous side of what is presented as a moral dilemma. Agreeing with the anti-growth campaigners is a relatively painless approach, since agreeing with such arguments usually comes with very little personal cost, at least in the short term.
Turn the conversation around, however, and ask yourself: ‘Do I personally want to achieve, to do better bit by bit, as I go through my life? Do I want to have a slightly better flat or house, a better car, a happy retirement, overseas holidays from time to time?’ And if you have children, or plan to have them: ‘Do I want to provide 24for my children, give them a better life, a better education, a better (or as good an) upbringing than I was able to have?’ If your answer is ‘yes’ to any of that, then you implicitly believe in growth, and if you believe the average person is entitled to think the same way as you, then again you are, even more explicitly, pro-growth. And that’s before you get to the 80 per cent of the world that is outside our fortunate circle of highly developed economies. For the rest of the world to catch up with us, to have a better life, major economic growth is the only feasible path.
A growth agenda is not anti-planet. It considers that increasing wealth and improving technology is the only practical way of addressing the problem of the amount of carbon dioxide we put into the air. And growth has the added benefit of giving the average human being an opportunity to fulfil their life ambitions.
All human beings are born with aspiration – the desire to use their abilities to the utmost, to achieve for themselves and for their families, to experience and enjoy success. In a successful society, a child’s ambition expands and flourishes as they grow to adulthood, so that the mature citizen is able to deploy their talents to the full and into personal success that leads to the reinforcement of ambition, further success, fulfilment and satisfaction. Fulfilling the individual citizen’s need to feel free, to exercise their drive to succeed in their chosen path of life, is nowadays seen by most as an essential component of a just government.
Communist ideology imposed on the citizens of communist countries (although not on its leaders) the belief that humans can be made selfless, with satisfaction and fulfilment coming from self-sacrifice and helping the commonweal. This approach has, over the past century, been tested to destruction, in a vast range of countries and economies. The outcome has alwaysbeen an impoverished 25populace, an enriched ruling caste, increased totalitarian control over the individual, and repressive violence to preserve the ruling caste. The final phase of that outcome has been, at best, the ultimate collapse of the country’s political and economic system.i These outcomes were inevitable because the communist approach is at odds with human nature, core components of which are the desire for personal freedom and autonomy and the need to succeed on our own terms. A major reason for the failure of the communist approach is that virtually all striving individuals – even those of a socialist bent – want and work to see a good part of their endeavour and ambition accrue to themselves and their families; such striving is what produces economic growth. Indeed, Adam Smith showed how ‘selfish’ self-interest – as much as moral sentiments like empathy – was necessary for the commonweal to prosper and for economic growth to take place.
In short, economic growth is morally essential for each human individual to fulfil their aspirations as they interact with society.
NOTES
1 Rikard Warlenius, ‘Decolonizing the Atmosphere: The Climate Justice Movement on Climate Debt’, The Journal of Environment & Development, vol. 27, no. 2, 9 December 2017, https://journals.sagepub.com/doi/abs/10.1177/1070496517744593?journalCode=jeda
i A few socialist/totalitarian countries have to date succeeded, through state violence, in keeping their repressive regimes in place (but only for now).
Chapter 2
Without Growth, All Economic Conversations Become about Redistribution
Without growth, the deeply embedded and unalterable human aspiration to strive and be free cannot be universally fulfilled. The average UK citizen wants, reasonably enough, a family, enough cash to meet basic needs, a house or a flat, a vehicle, a smartphone and the like, holidays abroad and other such relatively modest trappings of a successful life in a twenty-first century developed economy. To achieve this, these citizens need a job that pays well (and increasingly well over time, as their and their families’ needs expand) and a job that grows, so that they can grow in turn – in wealth, in capability and in knowledge of the world and of themselves. Without growth, all this disappears because if the economic pie stays the same size, one citizen can only get a larger portion if another citizen gets a smallerone – successful striving would require that others be impoverished. Growth is necessary because if striving results in no reward, aspiration withers and dies.
If there is no economic growth, the pie does not expand and no new wealth is generated. In such circumstances, every citizen, often with a growing family and thus a growing financial need, can 27only achieve that by taking something away from other members of society – whether from richer citizens or poorer ones. Citizen is necessarily set against citizen as each strives to better themselves individually. To point out a truism: this is the case even for socialistic politicians and their civil servants; without growth to pay for their own higher wages and benefits, they must necessarily have to tell everyone else in the country to be condemned to a standard of living that is lowerthan what the average would otherwise have been. And the more benefits these politicians and civil servants award themselves over time (which they do), the less there will be for anyone else.
To want to better yourself is not reprehensible; it is natural and often necessary, if only to feed, clothe and house one’s growing family. But few of us want to accomplish that betterment just by taking from another’s plate. For all striving humans to be able to make a better life without creating a worse life for their fellow citizens, there has to be a growing pie, from which each can take a growing share.
In an interesting essay in the FinancialTimes, John Burn-Murdoch discusses what growth looks like if you have a ‘zero-sum’ mindset.1 If one group increases their prosperity, this thinking goes, another group will be commensurately impoverished. This profoundly pessimistic view flies in the face of what has actually been achieved in the past two hundred years – yet it is gaining traction. Scientific solutions to our various problems are growing at an exponential rate, yet the ability of these breakthroughs to create growing prosperity for all is handicapped by such thinking. The more people believe that the future is zero-sum, the crazier (and more redistributive) are the policies such people embrace.
The economic growth that is needed for a non-zero-sum future 28has to be real– that is, it has to be above inflation. And as discussed, it has to be percapita. In countries that have a growing population, such as the UK, if there is little or no economic growth, the end result is negative growth per capita. The UK’s population has grown by over 10 million (16 per cent) in the past three decades. In recent years, it has grown by half a million souls or more each year because of our (sometimes inadvertent) pro-immigration policies. This growth in population creates the need for real annual economic growth of around 1 per cent just to keep the real GDP per capita constant(ceteris paribus). Any increment to national wealth perhead will only accrue when there is real economic growth beyond that real c. 1 per cent level. Less than that, and if GDP and wages track each other, the average real wage is going to be declining steadily – as has happened in the UK in recent years (see Chart 1.1). Real hardship, and a downward adjustment of living standards, is the result. It is hard to see any of that as a morally desirable outcome.
One key, and often underappreciated, foundational underpinning of the moral argument for growth is the magic of compounding. Even a small amount of extra growth per annum will make an enormous difference to a country’s and its citizens’ wealth as it compounds over the years.
The following example illustrates the point. In 1870, the real GDP per capita in the UK amounted to $5,829, which was over 21 per cent higher than the $4,803 level recorded in the US (all measured in constant 2011 prices), as shown in Chart 1.16. In the 150-year period 1870–2019, the US economy grew on average at an annual rate of slightly over 1.6 per cent, while the UK’s growth rate averaged a little less at 1.3 per cent per annum. This small divergence resulted in US citizens, whose GDP per capita in 1870 was in fact 17.6 per cent lessthan that of UK citizens, drawing level with the UK by around 291930 and accelerating past the UK in subsequent decades. By 2019, US citizens were enjoying a GDP per capita of $56,469, which is 44 per cent higherthan the $39,113 per capita GDP in the UK. This trend has not stopped: year after year, the US continues to grow its GDP per capita faster than the UK. A recent article emphasised the practical upside for the US in terms of actual salaries and the downside for the slower-growing UK.2 In Alabama (the poorest US state) a car wash manager earns over £100,000, compared with £33,000 in the UK; a surgeon £220,700 versus £82,600 in the UK. These gaps continue to widen each year.
Chart 1.16: Real GDP Per Capita in the UK and US
1870–2019, in 2011 prices
Small differentials in growth rates, compounded over long-term periods, lead to substantial differences in the wealth levels of different nations.
Source: Maddison Project3
So, as demonstrated here, the GDP-per-capita pre-pandemic gap between our two countries is $17,356. That translates into an even higher gap in wages for individual jobs, but even if it translated just one for one from GDP per capita to wages, the resulting $17,356 30extra in annual wage for the average worker (and with lower taxes to boot) would not only put to bed most concerns in the UK about wage poverty for workers, it would likely, along with a concurrent increase in corporate profits, provide enough extra tax revenues to eliminate the UK’s annual budget deficit. Our lost opportunity to grow even just slightly faster each year in the modern era therefore has had major economic and political repercussions for the UK. If we could have grown our economy faster, we would have been able to offer improved material and financial benefits to workers in the economy; improved state benefits in terms of health, education, housing and other ‘entitlements’; and sounder, less destabilising financials for our country.
In short, economic growth is morally essential if self-betterment is not to be accomplished at the expense of others.
NOTES
1 John Burn-Murdoch, ‘Are we destined for a zero-sum future?’, Financial Times, 22 September 2023, https://www.ft.com/content/980cbbe2-0f5d-4330-872d-c7a9d6a97bf6
2 Eir Nolsøe, ‘Why the United States keeps getting richer – with Britian lagging ever further behind’, Daily Telegraph, 23 April 2023, https://www.telegraph.co.uk/business/2023/04/23/us-richer-than-uk-finance-inflation-taxes/
3 University of Groningen, ‘Maddison Project Database 2020’, https://www.rug.nl/ggdc/historicaldevelopment/maddison/data/mpd2020.xlsx; International Monetary Fund, ‘World Economic Outlook (April 2024)’, https://www.imf.org/en/Publications/WEO/weo-database/2024/April
Chapter 3
Growth Has Accomplished Enormous Benefits for the Human Race and the Planet
Economic growth is a sine quanon for improved job prospects and improved personal prosperity for our country’s citizens. For those who see themselves as concerned about or even involved in the job of expanding human happiness, growth has a further large moral dimension – of course, for the impoverished populations of developing countries but for the comparatively wealthy populations of advanced countries, which themselves will always have the capacity for continued growth.
As we show in the following pages, growth is the raw material for a huge range of life-enhancing improvements:
Standards of living: higher wages satisfy more of our needs, wants and happiness.Personal and national opportunities: increased growth in the economy means new businesses, new industries and therefore new opportunities for individuals.Resilience: growth gives us a better ability to adapt to global events, whether natural, political, economic or technological. 32Public services: a larger economy can afford higher per-capita spending when providing public services to its citizens.Solutions to global issues: growth and technological innovation go hand in hand. Together they can resolve the world’s problems, from global poverty to war and famine to ecocide and more.STANDARDS OF LIVING
It is easy to belittle the impact of improvements in standards of living over time, but they have transformed opportunities for humans to live productive lives – and they continue to do so, even for developed economies such as the UK. Few of our citizens would want us to go back to even just seventy years ago, with an expectation of living around fourteen fewer years or of living a far less healthy life.1 Beyond that, even just on the materialistic side, few would be interested in no longer enjoying the enormous benefits that growth and innovation have, even just recently, created for humankind. Post-Second World War, laundry machines, dryers and dishwashers liberated housewives. Before the 1970s (see Chart 1.17), other household goods that today seem basic were either non-existent or at best, were the preserve of a lucky few. Growing national wealth has now allowed those goods to become widespread, everyday possessions; it is hard to imagine a UK today where most people don’t possess them or indeed where they give them up.
Some feel that technology can replace growth: if we all become more virtual, we can enjoy the benefits of travel without travelling, of performance without visiting concert hall, even, one day – some say – sex without, um, sex. But all that is far in the future. Britain’s growth should be not so much about (the probable chimera) of virtualising the UK but more about developing advanced technology and 33market capabilities and then bringing them, through exports, to the rest of the (currently, mostly underdeveloped) world: there are many decades, probably centuries, before the world significantly transcends its physical needs and is able to produce everything it needs without the massive needed investments that themselves power growth.
Chart 1.17: Ownership of Household Goods 1970–2022
Percentage of households with durable goods
All kinds of goods that until recently were, at best, the preserve of a fortunate minority are now treated as commonplace or essential.
Source:OfficeforNationalStatistics2
The many life-enhancing improvements in our material standard of living – itself the result of investment, invention and innovation – affect enormously how we live. For example, the trauma of losing an infant has come to hit less than one third as many people in developed economies than it did forty years ago because the child mortality rate in England and Wales has declined from twelve per 1,000 live births in 1980 to 3.7 per 1,000 live births in 2021.3 All this has come from economic growth.34
Economic progress propels scientific research and advances in technology, food and agriculture: yields in wheat crops quadrupled to eight tonnes per hectare in the second half of the twentieth century, maize crops increased five-fold and still climbing, chickens grow to maturity in half of the time they used to.4 All this provides enormous benefit to the entire world.
UK citizens are also more able to travel abroad. Fifty years ago, any foreign travel was a rarity for almost all of the population but now it’s commonplace. Even in recent years, from 2001 to 2019, the number of holidays abroad by UK residents has risen from under 40 million (one trip a year only and on average, only for two out of every three citizens) to nearly 60 million (on average, one for each citizen).5 A generation previously, the large majority of the population had never (except in war) travelled abroad. All this has come from economic growth.
Let me try to bring this point to life. You, as you read this, probably possess a smartphone – an iPhone, say. It provides more and more benefit for you the longer you have it. Being in touch with friends and family, getting better news, making your life more efficient, possibly playing games – whatever. As Chart 1.17 showed, the majority of your fellow citizens (assuming you reside in the UK) are in a similar position to you. But around the world, that’s not the case. Billions of people don’t have their lives enriched by possession of a smartphone.i
