How the UK became one of the poorest countries in Western Europe

Derek Thomson

The past few months have been rough for the United Kingdom. Energy prices are soaring.

National inflation has breached double digits. The longest-serving British monarch has died. The shortest-serving prime minister has quit.

You probably knew all of that already. British news is covered amply (some might say too amply) in American media. Behind the lurid headlines, however, is a deeper story of decades-long economic dysfunction that holds lessons for the future.

This calamity was decades in the making. After World War II, Britain's economy grew slower than those of much of continental Europe.

By the 1970s, the Brits were having a national debate about why they were falling behind and how the former empire had become a relatively insular and sleepy economy.

Under Prime Minister Margaret Thatcher in the 1980s, markets were deregulated, unions were smashed, and the financial sector emerged as a jewel of the British economy.

Thatcher's injection of neoliberalism had many complicated knock-on effects, but from the 1990s into the 2000s, the British economy roared ahead, with London's financial boom leading the way. Britain, which got rich as the world's factory in the 19th century, had become the world's banker by the 21st.

When the global financial crisis hit in 2008, it hit hard, smashing the engine of Britain's economic ascent. Wary of rising deficits, the British government pursued a policy of austerity, fretting about debt rather than productivity or aggregate demand.

The results were disastrous. Real wages fell for six straight years. Facing what the writer Fintan O'Toole called "the dull anxiety of declining living standards," conservative pols sniffed out a bogeyman to blame for this slow-motion catastrophe.

They served up to anxious voters a menu of scary outsiders: bureaucrats in Brussels, immigrants, asylum seekers—anybody but the actual decision makers who had kneecapped British competitiveness.

 A cohort of older, middle-class, grievously nostalgic voters demanded Brexit, and they got it.

In the past 30 years, the British economy chose finance over industry, Britain's government chose austerity over investment, and British voters chose a closed and poorer economy over an open and richer one.

The predictable results are falling wages and stunningly low productivity growth. Although British media worry about robots taking everybody's jobs, the reality is closer to the opposite.

"Between 2003 and 2018, the number of automatic-roller car washes (that is, robots washing your car) declined by 50 percent, while the number of hand car washes (that is, men with buckets) increased by 50 percent," the economist commentator Duncan Weldon told me in an interview for my podcast, Plain English.

 "It's more like the people are taking the robots' jobs."

Derek Thompson is an American journalist, this opinion piece was first published in The Atlantic