Voters have not understood the reality of a zero growth economy
Since 2019, UK national income per head has grown by just 0.1 per cent a year on average. In other words, essentially zero growth. It means that the resources available to the economy, whether for private or public use, do not change, says Paul Ormerod
Does life imitate art? Evelyn Waugh’s comic masterpiece Vile Bodies, is set in the period between the two world wars and features a portrait of a Prime Minister.
Outrage, Waugh’s fictional PM, is stood alone at a reception feeling both pompous and hard done by. “Poor Mr Outrage, thought Mr Outrage; poor, poor old Outrage, always frustrated…. Prime Minister, bullied by his colleagues, a source of income to low caricaturists”.
For a time, the politicians of the day did indeed live in a fantasy world, refusing to address the need to rearm in the face of the rise of German and Italian fascism. They revered the international treaties signed immediately after the First World War, seeing these as sufficient protection.
In the 1931-35 Parliament the Conservative government sat on its hands. The Labour leader, George Lansbury, campaigned actively against rearmament. Only a few mavericks such as Winston Churchill took up the cause.
But the stance of the political class as a whole hardened considerably as the 1930s progressed. Even the much maligned Prime Minister Neville Chamberlain, who returned from a meeting with Hitler in 1938 waving a piece of paper and promising “peace in our time”, boosted defence spending considerably before the Second World War broke out.
This is where the analogy ends, in dramatic fashion. The UK currently faces not just one but several major problems. But there is little sign of any willingness by politicians to try to make the electorate confront reality.
The need to spend a lot more on defence urgently is uppermost in the minds of many.
But the weakness in our defence is not just the responsibility of Keir Starmer and Rachel Reeves. It goes all the way back to Gordon Brown’s long, iron grip on the public finances as Chancellor in the late 1990s and 2000s. It was easy then to believe in the “end of history”, to believe that capitalism and liberal democracy would triumph across the globe. No need for priority to be given to defence spending, because it would not really be needed.
Stark reality
Since 2019, UK national income per head has grown by just 0.1 per cent a year on average. In other words, essentially zero growth.
It is hard to overstate the importance of this number. It represents the worst six-year period for growth in normal peace time since the start of the Industrial Revolution over 200 years ago.
The electorate has simply not understood the implications of a zero growth economy. It means that the resources available to the economy, whether for private or public use, do not change.
Yet politicians do not seem willing to give a lead on this matter.
In the same way, there is great reluctance to talk about the stark fact that the rise in world energy prices makes the UK as a whole, as an oil and gas net importer, worse off. There is no sleight of hand, no clever move, which can remove this problem.
The public finances are constantly on the verge of a serious crisis. The rate of interest on UK government bonds is substantially higher than those of France, Germany and Italy, reflecting the lack of confidence which financial markets feel.
Yet there is no meaningful effort to reduce the level of public sector debt relative to the size of the economy. There is always a promise to reduce the debt burden, but only in the fifth year of the plan, a moving feast
Waugh’s novel is brilliantly funny. But in the last few pages, it becomes very sombre, world war having been declared. Do we have to wait for a major blow up before politicians address the critical problems which face us as a nation?
Paul Ormerod is an Honorary Professor at the Alliance Business School at the University of Manchester. You can follow him on Instagram @profpaulormerod