Over the past few decades, growth has been relatively anaemic, worker productivity has lagged behind other advanced countries, and the levels of business investment dreamed of by supply-side policy makers has failed to materialise. The sad result is stubbornly high poverty rates, lagging social outcomes, and a sustained fall in international quality of life rankings.
None of this is surprising or even counter-intuitive any more. Despite media voices that were surprised by the supposed irony of the IMF director scolding the UK government – long thought a paragon of economic strength – for its reckless economic mismanagement in a tone that is often reserved for the ‘economic basket-cases’ of the developing world, the failures of the UK economic model is an obvious reality that has been clear to most for some time.
Indeed, spend any time outside the London bubble or leafy shires of the Tory heartland in southern England, and it soon becomes almost offensive to speak of the UK’s economic performance with any pride.
To their credit, the last two Conservative prime ministers seemed to have detected that ignoring this reality was no longer tenable. Cue the slogans: ‘Levelling Up’, ‘Growth, Growth, Growth’, and their implicit acknowledgement of the last decade and a half of socio-economic failure.
The mini-budget fiasco
The entire situation seems to have come to a head in the form of the mini-budget fiasco, a panicked move by a panicked government, a Hail Mary pass deep from the supply-side playbook, desperately hoping to shock some life into the system in the face of growing social pressures.
It backfired spectacularly. The execution of the announcement and lack of communication with the Bank of England, in addition to the subsequent U-turns, provided a textbook example of humiliating technocratic mismanagement and government incompetence. But it was the content of the budget itself that spooked the markets the most and laid bare the root of the problem.
The policy prescription of more tax cuts for the wealthy in the hopes of promoting a rising tide of economic growth would not only not work, but would in fact double down on the core of the problem in the first place. A casino gamble that would eventually force the government to cut social spending to balance the books as the fabled investment and growth failed to materialise, driving up inequality, economic pre-carity, and poverty rates.
This would in turn undermine worker productivity and erode any hope of creating a dynamic middle class capable of driving innovation and demand in the economy – a self-inflicted negative cycle of fiscal austerity and low economic growth that has dragged down the UK economy for the last decade and a half.
In short, the UK remains in the grip of an outdated economic model from the 1980s that is as much responsible for its current problems as it is incapable of solving them.
Social well-being is essential to economic strength
Meanwhile, most of the rest of the developed world has moved on, creating modern, resilient, and dynamic economies that have provided levels of material security and well-being that most citizens in the United Kingdom could only dream of. As a result, they are also increasingly outperforming the UK on macro-economic indicators.
Source: Commons Library UK Parliament
Crucially, of the countries in the Eurozone that are zooming ahead in terms of GDP growth, nearly all have either similar or higher top tax rates than the UK. Indeed, it’s clear to nearly everyone, save those hopelessly stuck within the Westminster echo chamber, that tax rates are not the problem.
The problem is that, in contrast to most developed countries, the UK has failed to create a robust social security system that can properly invest in its population. Instead, social spending is viewed suspiciously by default, and social security systems are imagined as essentially large-scale government-run charities meant to temporarily sustain those who, for whatever reason, have found themselves outside of the free market’s favour.
This conception is as wrong and antiquated as it is exceptional for a developed European country. In countries such as Ireland, Denmark, Norway and the Netherlands, social spending is treated as an essential investment in human capital; a commitment to a healthy, secure, and happy population that is inseparable from the broader economic goals of productivity, innovation, and growth.
They have flipped the old orthodoxy on its head and demonstrated that it is social well-being that is essential to economic strength, rather than the other way around. A failure to invest in a robust social security system is as economically illiterate as it is morally callous. They’ve embraced this truism many years ago and are now reaping the rewards.
Scotland within UK is being dragged into a failing economy
Meanwhile the UK limps along, chaotically lashing about in a desperate search for answers as social unrest builds and their neighbours move on without them. Brexit, Boris, the mini-budget: a succession of chaotic spasms of a dying system whose every move seems to only sink it deeper and deeper into the quicksand that it wilfully wandered into.
Thus is the frustration of Scotland, looking on with impatient urgency as their similarly-sized neighbours move forward into the 21st century whilst they remain stuck in the past with the United Kingdom.
“They are among the most successful societies the world has ever known,” Nicola Sturgeon recently remarked in reference to these Nordic neighbours, “and it is their success – not a failing UK economy – that Scotland should aim to match.”
Indeed, this was the main pillar of the Scottish First Minister’s speech to the SNP conference last week, attempting to seize the initiative around the economics of independence and change the risk calculus of voters on what is undoubtedly the key issue of the campaign.
“Independence is not a miracle economic cure. But let this message ring out today. We can do better than this. We can do so much better than this.”
At some level this is where Sturgeon and Truss agree: an economic cure is needed, as there is something deeply, fundamentally wrong.
Who will Scottish voters hold responsible for this? And who will they most trust to fix it?
Go with independence and the Scottish government’s plan to modernise the nation’s economic model, or stick with Westminster in the hope that the United Kingdom will somehow be able to wiggle itself free from the quicksand and pull off an economic miracle?