Britain does not have to accept economic oblivion

I understand the widespread disbelief. The underlying problems of our economy can easily seem daunting. Yet countries can sometimes manage change.

Over the past 50 years, leading examples have been Asian countries that have undergone growth spurts as they industrialized and gained a full share of the global economy – China, Korea and Taiwan – or other nearby countries such as Poland. The Destruction of Communism.

Admittedly, England has a very different starting position. It is already a developed economy, very advanced in many ways. Its challenge is how to regain its mojo.

In his book „The Rise and Fall of Nations,” economist Mankur Olsen argued that economically successful nations are always in danger of regressing because their successes distort institutional structures and reduce their ability to cope with difficulties or seize new opportunities. . To prevent this, he argued, they needed a deep shock each time, often delivered by defeat in battle.

Two good examples of this are Germany and Japan. In both countries, the defeat of World War II brought complete restructuring not only of the economy but also of society. In contrast, the UK was not only concerned with the costs of war, but also with the burdens of victory.

In fact, we had an Olsonian moment a little later. During the 1970s, when Britain seemed ungovernable, we experienced the equivalent of defeat in war. This made possible Mrs Thatcher’s radical reforms in the 1980s.

Like her or hate her, you can’t help but be in awe of the severity of her governments. She set out to arrest and reverse Britain’s economic decline. And, for once, she won.

The secret of his success was more than courage. She and those around her had ideas hammered out in opposition. They thought about sorting out. They wanted to reduce taxes drastically but they realized that this could not be done immediately. Reducing inflation and putting the public finances in good shape must come first – even in the 1979 budget they managed to pay under structural tax reform, they cut the top tax rate from 83pc to 60pc and increased VAT from 8pc to 15pc. .

Circumstances are different now, and the example of the Thatcher years cannot be replicated even if we wanted to. Nevertheless, there are things we can learn from that experience.

You don’t need a comprehensive plan to achieve rapid economic growth. After all, no one planned the Industrial Revolution in the 19th century.

But in today’s world, you need a strategy that is similar to the one Hong Kong adopted during its long period of rapid economic growth — namely to reduce government intervention in the workings of the market and to make government as efficient as possible. .

Since the government’s influence is already enormous in all the failing aspects of the economy, we need to do more. But what to do? And in what order?

Answering these questions is the task I have agreed to chair a new division at the think tank Policy Exchange to analyze our economic underperformance and develop a policy plan to raise the UK’s productivity.

I know it’s ambitious, but it seems to me that it’s crying out to be done. It is not enough to simply accept the decline of our country.

Roger Bootle is a senior independent consultant in capital economics