Why the UK's Economy is Awful

That still doesn't in any way justify over 40 years of capture by the most pernicious economic ideology outside of communism.

Blair ignored a fantastic opportunity to restore some more equable policies, but I've never been totally convinced of his leftish principles. He was a bit reminiscent of Grouch Marx's "Those are my principles, and if you don't like them... well, I have others"

GROUCHO Marx (I think I've lost control of my fingers today )

I preferred John Major as a PM. Obviously he had to get through a recession caused by the late eighties boom and had inherited things like the poll tax, but when he lost the election in 1997, the country was in a much better state than in 1990. I think he even had a little dig at Thatcher when he said this in his resignation speech.
Major to me, like Jim Callaghan, was an ordinary, decent man who'd come from a very humble background and no university education to become the most powerful man in the country. He didn't cause the same adverse reactions to people that Maggie did and the bitterness in politics seemed to evaporate as the nineties went on. Yes his government was unpopular and way behind in the polls, but most people seemed to like Major as a person.
I think his main achievements were to turn the economy around after 1992 and sharply reduce interest rates, inflation and unemployment. He ended the very unpopular Poll Tax and replaced it with a much fairer property based system. Also he started the Northern Ireland peace process and internationally helped to end the war in Bosnia, and the first Gulf War ended without the terrible outcome of the one in 2003.
On the whole, I'd rate Major as one of our better PMs and one who left the country in a much better state than when he started. Also the whole Cool Britannia and Britpop thing in his last 2 years in office made people feel more optimistic.

There was that era from 1995 to 2007 where things generally seemed to go OK for the country and politics was quite moderate, with extremists left on the fringes. I can remember there being low inflation, lowish unemployment, steady economic growth and public services improving.
This era wasn't perfect as a lot of the growth in the economy was based on credit and ever rising house prices, and there was the war in Iraq that worried people. However, it was generally a good time and things we take for granted now like mobile phones and the internet were growing in popularity.

With deregulation it was “loads of money” big bonuses, self authorized loans, 120% mortgages. Every caution was removed from the economy and the bubble burst, it cost £137 billion to rescue the economy.
Good old Gordon Brown he created the bubble, we didn’t recover before Brexit then Covid and Ukraine made it worse. Disaster 4 times over.

You are correct, David about the effects of deregulation but I think you should cut poor old GB a bit of slack. He was, after all, merely playing from the neoliberal economic playbook (introduced bt Thatcher, as I have already pointed out, and followed by all her successors up to the present day). The playbook is based on homo economicus, here described by Investopedia:

^ Homo economicus is a theoretical abstraction that describes a rational human being. As such, neoclassical economic theories represent people as ideal decision-makers with complete rationality, perfect access to information, and consistent, self-interested goals.^

Neoliberalism calls for minimal state intervention, particularly regulation, as it interferes with the perfect workings of the Market, which, in the hands of said homo economicus, will create perfect equilibrium to the benefit of all; both the market operators and consumers.

You cannot defend the current economic orthodoxy and then condemn a Chancellor and PM who follows it.

At least we have to be thankful that Brown and Darling acted promptly to rescue the banks from their folly, which was about to leave their customers with empty bank accounts. Their actions were subject to international praise for saving the UK from what could have been an economic disaster.

What is more, The UK was coming out of the GFC caused depression when the tories were foolishly voted into power and implemented Osborne’s economically illiterate’Austerity’ which slowed our recovery, left public services in the appalling state we struggle with today and was a highly significant factor in the disastrous Brexit vote.

There’s nothing non mainstream about my judgement of austerity. Even the IMF judged it to be a mistake…

In reality Cameron’s government was held to ransome by his own right wing, that wanted cuts in public spending and a Brexit vote. In he same way Starmer has a problem with his MPs..
Despite Brown neglecting control of the banks he did at least stay and sort out the problems, it wasn’t that difficult, in 2008 the UK only borrowed 40% of GDP, he doubled it to 80% and borrowed our way out of trouble.

We are still trying to work our way out of that crisis, the incompetence of so many politician's is simply staggering, it gives me very little confidence that it’s going to improve soon.

It’s not incompetence, David, it’s clinging to an economic ideology which bears no relation to reality. Do you think that homo economicus, the very bedrock of that ideology bears any resemblance to actual human behaviour?

MaizieD

It’s not incompetence, David, it’s clinging to an economic ideology which bears no relation to reality. Do you think that homo economicus, the very bedrock of that ideology bears any resemblance to actual human behaviour?

Not sure about human behavior, unless you mean “greed” wanting more and more for less and less. Which is what caused the GFC. Governments are supposed to control the populations aspirations.

Politicians must be incompetent because most end up failing to control the economy, even Thatcher and Blair both serving several terms failed because they didn’t provide a stable economy.

Politicians must be incompetent because most end up failing to control the economy, even Thatcher and Blair both serving several terms failed because they didn’t provide a stable economy.

I utterly disagree with your contention tat it is politicians who are incompetent. They may be ignorant which is an entirely different matter, but if they adhere to an orthodoxy based on falsehoods they are bound to fail.

Doesn't the very fact that neoliberal, market based, economics has been implemented for the past 45+ years, with the result you note, instability, tell you something about the shortcomings of neoliberalism?

Or do you prefer to defy the definition of insanity and let our government do the same things over and over again in the hope that 'this time' there will be a different result?

I know you don't like analogies, but I'd say that you're never going to reach the next floor up if you persist in using the 'down' escalator...

I’ll accept ignorant, but it’s hardly a desirable qualification for national leaders.

Neo liberalism works for a productive economy, the nation has money coming in from the goods it exports, states like Korea and especially China where a controlled population have to accept party policy.

The UK and many other states are not productive economies they are service economies and have consistently failed, borrowing ever more feeding inequality in income. The solution would be to become more productive, which is Starmers policy but I don’t expect him to achieve much.

Can we opt out of neo liberalism.? Is this what Trump is trying to achieve with tarrifs.

I’ll accept ignorant, but it’s hardly a desirable qualification for national leaders.

They are most of them ignorant when it comes to running an economy. Even those with a smattering of economic theory gained in a PPE degree because they are taught an outline of the dominant neoliberal economic theory. They are supported by advisors and consultants taught neoliberal economic theory and the Bank of England and the Treasury are staffed with similar personnel. It's inevitable. You won't get a job if you're heterodox and universities tend not to teach heterodoxy because their graduates won't get jobs.

Can we opt out of neo liberalism.? Is this what Trump is trying to achieve with tarrifs.

Trump is up there with the best in terms of ignorance. I would imagine that his grasp of any sort of economic theory is zilch. He's not trying to opt out of neoliberalism, he's just looking at the US economy from the standpoint of a business man, and a failed one, it that.

Of course we could opt out of neoliberalism. It wouldn't affect our international trade and a return to Keynesianism would be beneficial. Not the 'New Keynesianism' which some economists espouse at the moment but the Keynesianism that drove the US New Deal in the 1930s and the UK's post WW2 recovery and implementation of the NHS, nationalisation, and the welfare state.

Keynes had a far more realistic understanding of human economic behaviour and the workings of a money based national economy than do the neoliberals.

Doodledog

I can't follow YouTube links as I am in company and anything with volume would be intrusive, so I am answering without having seen the video.

I do think that London steals the wealth of the country, and find it particularly galling when Londoners point out how much tax etc is paid by those living there, as (IMO) that just proves my point. You just have to look at the figures for how much investment goes into London compared to huge areas of the rest of the country. Also look at things like school achievement, unemployment and health outcomes. It's blatant and apparently unashamed.

Apart from that, there is very little geographical mobility, as house prices are so skewed to London and the SE. This has gone on for so long that whole generations are massively advantaged if they inherit. Graduates from areas outside London and the SE can struggle to find internships or to live on low salaries whilst they build careers, so again, mobility is seriously hampered, and it is not the 'best' people who get on, but those who can get a start somewhere that pays well.

'Downsizers' from London and the SE colonise whole areas where housing is still cheaper, but in so doing price out locals and make it difficult for them to 'move up' the housing ladder, as the better houses have been bought up by people selling much smaller ones elsewhere. There is no longer the chance for those with ambition to start in a smaller home then work to move up as their families grow. And don't get me started on second home owners.

Then there is the fact that groups such as the WI, U3A, local societies and so on tend to have over-representation from this who have been able to retire early because of 'downsizing', and their views on their new home towns can be jaw-droopingly patronising. Honestly, if I have listened to one person tell me how 'backward' the new town people have chosen to relocate to is in comparison to London, I have heard a hundred, and the same applies to what is left of my professional life, where the same prejudices play out in a different way.

None of it takes account of simple things like buying a council house on the Mile End Road and making a million from the sale. Or of how the fact that some people can do that, whilst others lose everything when their mother goes into care and the entire value of her house is used to pay for it means that the playing fields are not just wonky but in separate hemispheres.

Not only that, but local accents can be assumed to be inferior, and those from London and the SE as 'posher'. Seriously, more than once I have had Londoners with Eastenders-type accents tell me that they have been deferred to because they speak differently from locals. It's as though a London accent is classless and neutral, and people are assumed to be 'yokels' in their own home towns.

Added to all of that, if someone like me speaks out (as in this post) we are accused of having chips on our shoulders.

I am far from being at the bottom of the privilege pile by any sensible standards, and am very aware of that, so don't want to appropriate anyone else's situation. There will be worse things than house prices, career opportunities and so on that I haven't mentioned as it would be inappropriate to do so (obesity, benefit dependency, addiction for instance), and if anyone suggests that my rant was inspired by the 'politics of envy' I will explode. There is such a thing as politics of fairness, too.

Excellent post, Doodledog.

We've been blessed to marry young, remain married, purchase a home at reasonable rate - paid mortgage before we were 40, never a costly move, no job loss or change. Stability in a low cost area.

Of course we could opt out of neoliberalism. It wouldn't affect our international trade and a return to Keynesianism would be beneficial. Not the 'New Keynesianism' which some economists espouse at the moment but the Keynesianism that drove the US New Deal in the 1930s and the UK's post WW2 recovery and implementation of the NHS, nationalisation, and the welfare state.

Keynes had a far more realistic understanding of human economic behaviour and the workings of a money based national economy than do the neoliberals.

Keynes advocated investing in a productive economy but were not in the 1930s we have full employment, we don’t have the destitution that existed then. We do need to improve infrastructure, we just don’t have the workforce available to do that in addition to the housing targets we have set.

The Great Depression only ended in 1941 when US entered WW2 but it needed conscription of military and civilian workers to achieve changes. Ironically China uses the same methods today, very successfully.

I do agree about universities putting students in an economic straightjacket, it’s very difficult to change anything when everyone thinks the same way

Keynes advocated investing in a productive economy but were not in the 1930s we have full employment, we don’t have the destitution that existed then.

No, we don't have quite as much destitution as in the 1930s because we have state welfare which was implemented post WW2 by way of Keynes' economic policies. This reduces the economic impact as it keeps money circulating in the economy.

We do have around 20% of the UK population living below the poverty line, and I note that our unemployment figure is rising.

It is also worth noting that the UK working definition of 'employment' is based on counting as 'employed' all those who have had 2 hours or more paid employment in the course of 2 weeks. This is a very low bar considering that 2 hours of paid employment in 14 days is never going to generate enough earnings to support basic living conditions (unless one is a very highly paid professional)

If the UK is not actually experiencing an official depression we are tottering on the brink of one with declining growth and increased basic living costs.

I cannot find that the neoliberal economic 'orthodoxy' is worth defending in any way.

“The OBR have forecast that, on our given trajectory, UK public sector debt could reach 350% of GDP within 50 years.”

That’s a pretty gloomy prediction although it’s not going to affect many on GN currently, we will not be alone many other states will be the same.

The UK badly needs to become more productive to export more and reduce imports

@David

Here's a link to a video called 'Deficits aren't the problem; it's neoliberalism'

It's made by Prof. Steve Keen, a neo Keynesian (though not quite like the ones I spoke of earlier). It's quite long, 35 minutes, but he explains where neoliberal economists go wrong and how it affects a national economy, using his modelling software, which is based on double entry bookkeeping, to demonstrate. (I hope that, as a businessman you'll appreciate the absolute necessity for double entry accounting to trace the movement of money in a system.)

What I post isn't a direct reproduction of what Keen is saying, I have read plenty of other heterodox economics, too, who say much the same things, and done some thinking.

www.youtube.com/watch?v=NJ2puKiKBdE

(of course, anyone can watch this if they have the time and the interest)

At last someone who talks my kind of economics, it’s obvious that mainstream economists are wrong, but very few will speak out.
There is nothing wrong with borrowing, as long as it’s borrowed for the right reasons with a prospect of paying back the capital at some point. The UK has not been borrowing to improve GDP, most has been used for social enhancement, resulting in borrowing growing to a point where interest payment is a problem and paying back capital cannot be done.

Reeves has stated in her policy aim that revenue should pay for government spending, implying that additional borrowing should drive GDP growth. So far the opposite has happened, business costs have been increased and we are already seeing increased unemployment

The money that is being thrown at education and welfare are not resulting in the benefit intended, graduate jobs are difficult to find and 24% of 18 to 67 yr olds are not economically active.

It’s not just economists that are wrong, polititians are also wrong

Is that a response to watching Keen’s video, David?

If it is, you astound me. Keen says nothing about ‘borrowing’.

You seem to have a problem with comprehension, Keen speaks all the time about borrowing, deficits, interest and bonds and how governments don’t need to borrow. But that is not the world we live in democracies cannot run their finances in that way, because polititians abuse the system to win elections.

At the end Keen uses China as a shining example of how to run an economy, their government has created money to provide high growth, their banks and businesses use outside finance to fund their development. China is not a democracy the population have to be obedient and follow orders, there are communist party police in every work place and every street to make sure they do. Individuals are allowed to accumulate wealth and the division between richest and poorest amongst the global highest. China also has a fixed exchange rate with the US$ so it can’t devalue.

That is not the world the UK and other democracies live in.