Is Britain doomed (again)?

Pity the poor Brits.  They just can’t catch a break.

After years of reporting of lying Boris Johnson, a change to a less colourful PM in Rishi Sunak has resulted in a smooth media pivot to an end-of-empire narrative.  The New York Times, no less, amplifies suggestions that Blighty will soon fall behind Poland or even – get your atlas ready – Slovenia.  So dire is the situation we are told that even a reversal of Brexit may not be enough to save a once-proud nation.

And indeed looking at Britain’s position, there is probably agreement that you wouldn’t want to start from here.

But it might be useful to start by looking at things from a European perspective.  Or more particularly, that of our favourite European, Wolfgang Munchau of Eurointelligence.

He argues that policy unsustainability is not a British, or even a Brexit, problem; it’s a European one. At the heart of it, is recent low growth in economic productivity (particularly in the public sector, he might usefully have added).

He quotes National Institute of Social and Economic Research figures: between 1974 and 2008 UK productivity growth was 2.3% p.a., after that it averaged 0.5% p.a..

And this less-than-stellar performance after the global financial crisis puts the UK bang in the middle of its G7 comparators for growth in output per worker – behind France (0.6% p.a.) but ahead of Germany (0.3% p.a.) and Italy (-0.3% p.a.!).

Now there’s nothing wrong with low productivity growth – just as long as you don’t mind not getting richer. And not having the money for more health, social spending and decarbonisation.

The New York Times thinks that the UK’s policy problem has been austerity.  But rising levels of government debt are not consistent with that theory – indeed they suggest that the austerity is yet to come.

Munchau, on the other hand, thinks the answer is public investment, including using Brexit freedoms to channel this to private businesses, on the lines of the Biden administration’s selective subsidies for (some) energy and pharmaceutical businesses.

Others might think that the answer is government letting businesses and workers respond to unpredictable market signals, and trying itself not to over-react when called upon to help clear up the unforeseen consequences.

Ironically, this might well be PM Sunak’s preference – if he were not so constrained by the political pressures resulting from 15 years of low productivity growth.

The alternative to Sunak’s fear of the right policy is dogged commitment to the wrong policy.  Keir Starmer’s opposition Labour party, now scenting power, has shifted from openly seeking to rejoin the EU to suggesting that it doesn’t matter so much because it will be closely aligned with the EU’s policy approaches anyway.

The Brits do of course have a good record of doing the right thing.

But usually after trying all the wrong things.

So it looks like Poland and Slovenia might have the chance to do a bit more catching up yet.