With every passing week it becomes clearer that the British economy is in crisis. Not the ‘here today, gone tomorrow’ sort of crisis that bedevils the financial markets, but rather the deep-seated, slow-burning crisis of a progressive, life-threatening disease. ‘I am totally 100 per cent on it, and it is going to be okay and we are going to get through this,’ the Prime Minister promised last week. If so, he’s got his work cut out.
The economic performance of the UK economy has deteriorated sharply over the last decade-and-a-half compared to its performance beforehand. On key measures, such as output per hour worked, the UK was a poor performer even before the recent deterioration.
Unfortunately, there are few serious grounds for optimism. Unless there are fundamental reforms of the economy, the most likely scenario is that the UK staggers on with very low growth. As a result, living standards will barely improve and the country will inevitably slide down the international economic league tables. A weakening of British influence in world affairs seems likely.
It has become obvious that this economic crisis is at the centre of our wider woes. Without a much stronger economy, the ambitions of politicians of all parties for a better future for our citizens will come to nought.
Our economic problems can be summed up in a single word: productivity. There is widespread cynicism about this situation and an especial pessimism about what governments can achieve. Yet there are many examples in post-war history of countries that have achieved an economic transformation.
It is true that some economic transformations have occurred without an explicit plan by government. No one set out the Industrial Revolution in the 19thcentury, for instance. And in the post-war period, the phenomenal success of Hong Kong occurred without a government blueprint.