Section 1: A Decaying Economy
Britain is in deep long-term economic difficulties.
We can see this when we look at the standard indicators used to measure economic health. The overall picture is one of stagnation, inequality, stark and growing regional disparities, and widespread social decay.
“The British people have been widely let down by the economic model that was installed in the 1980s, and by the political leadership that continues to hold in place and maintain a failing model through persistence with outdated and damaging public policies.”
The British people have been widely let down by the economic model that was installed in the 1980s, and by the political leadership that continues to hold in place and maintain a failing model through persistence with outdated and damaging public policies – something that has been true no matter what the party composition of the government of the day.
It is important to emphasize that this is true not only when viewed through the lens of alternative progressive frames of reference such as Wellbeing or the Human Development Index but also when the performance of Britain’s economy is looked at through the orthodox measurements by which the system prefers to measure itself.
GDP and Beyond
The health of an economy is usually evaluated using a set of conventional measures of economic performance that include growth, employment, productivity, wages and incomes, inflation, and poverty.
A degree of caution is required in the use of such measures.
As the gap widens between headline economic numbers and how ordinary people are experiencing the economy in their everyday lives, conventional indicators are increasingly recognized as inadequate and insufficient, leaving out many important measures of societal health and wellbeing. Many of them were in fact never intended for the widespread policy uses to which they have continually been put.
In National Income 1929-32, the first calculation of what became gross domestic product (GDP), the authors (including Simon Kuznets) cautioned that “the welfare of a nation can, therefore, scarcely be inferred from a measurement of national income as defined above.”[19]
Among the famous limitations of the calculation of GDP are that only products or services transacted in the market are included, whereas factors such as household production, volunteer work, income from barter, and subsistence work are excluded.
Moreover, market prices determine the contribution of a product or service to the total, regardless of any consideration of social value. Every pound spent on tobacco and alcohol, bombs, or oil spill clean-ups provides the same contribution to GDP as a pound spent on education, food, or housing, when there is clearly a vast difference in their social value.
The value of natural and man-made assets available to an economy and society are also not considered in GDP. When a country clear-cuts a forest, the value of the resulting timber is counted as a positive contribution, while the loss of the forest itself (and all the ecosystem services it provides) is absent from the accounting.
Nor does GDP include any information on social equity: it is silent on income distribution, poverty, and much else besides. GDP also does not include any information on non-economic factors that affect collective and individual quality of life, such as health, freedom, physical and financial security, and political empowerment.[20]
There is also a deep academic and policy literature on both the ecological and social limits to growth, dating back to the 1970s.[21]
“The British people have been widely let down by the economic model that was installed in the 1980s, and by the political leadership that continues to hold in place and maintain a failing model through persistence with outdated and damaging public policies.”
For all these reasons, we should be sceptical of the value of the conventional set of purely economic measures as a definitive gauge of societal health and wellbeing. That said, these measures remain useful as indicators of some of the long-run trends as to how well an economy is functioning overall (and for whom), and thus remain important to consider.
In particular, they demonstrate that the economic model that has remained dominant in Britain (as elsewhere) over the past several decades is comprehensively failing – even when looked at on its own terms and using its own preferred measurements.
When looked at using these common economic indicators, Britain’s economy is mired in serious long-term difficulties.
1.1 Growth
Chief among conventional economic indicators is growth – and specifically growth in GDP.
In Britain, as in many countries, GDP growth has become both a catchall indicator of how the economy is performing, and the holy grail of economic policymaking for governments of all party political stripes to pursue.
Prior to winning the July 2024 UK general election, the Labour Party under Keir Starmer set out a target of 2.5% annual GDP growth, aiming to produce the highest per capita growth in the G7.
There is little reason, based on the long-run growth data on the British economy and the limitations of the kinds of measures contemplated in current UK policy frameworks, to think that such a target is anywhere near realistic or achievable.
In fact, the data suggest the opposite – that, absent major structural interventions or a radical change in the direction of economic policymaking, the UK’s elusive quest for growth is likely to prove the continuing unsuccessful pursuit of a chimera.
Britain has experienced a clear and significant decline in economic growth since the 1970s. During that decade, as well as the 1980s, average annualized GDP growth per capita was around 2.5%. In the 1990s it fell to around 1.8% and in the 2000s it was just 1.1%. The 2010s saw a slight uptick to 1.3%, primarily due to the recovery from the 2007-2009 Great Financial Crisis in the early years of that decade, but still well below averages from the 1950s through the 1980s. From 2015 to 2024, average growth was just 0.8% per capita.
Relying upon increased economic growth for improved economic and social outcomes, on Britain’s current trajectory, is a policy illusion – a persistence of the fallacy of “trickle-down” neoliberal economics, for all the disclaimers from politicians to the contrary. Half a century of experience points in the other direction. With the exception of the 2010s, Britain’s economic growth has been lower than the preceding decade for every decade since the 1970s.