Economic panic is rather like moral panic, only with slightly less hysteria. We’ve had economic panics for years but, since the financial crisis, they seem to be getting louder and more frequent. Not only is the country going to hell in a handcart because of loose morals, it is also well on the way to becoming an economic basket-case because of government overspending, lack of investment, too much regulation, too little regulation, too much welfare, inflated wages, the City sucking the blood out of the economy, crap transport, poor education, idiotic trade unionists, idiotic managers, the European Union, hard-working foreigners under-cutting British workers or lazy foreigners scrounging benefits. Whereas moral panics tend to be a right-wing phenomenon, economic panics are fuelled by both right and left in an attempt to prove that it is the other lot’s policies wot done it.
So the publication last week of a projection by PwC which showed the UK sliding down the economic league table, to be overtaken by Brazil, Mexico and Indonesia by 2050, was grist to the mill. PwC’s press release claimed that, unless the UK gets its finger out and breaks into new markets, it risks ‘playing in the slow lane of history‘. This prompted ‘We’re buggered’-style headlines in newspapers on both the right and the left.
The report itself, though, is less sensationalist and the figures tell a slightly different story. As this graphic from the Guardian data blog shows, all the European countries, even Germany, are projected to fall behind too. The UK’s position relative to France and Germany remains pretty much the same.
Some of the UK’s decline, then, is part of the greater story of Europe and the West’s relative decline; what some have called the Great Rebalancing of the world economy, or the return to the historical norm.
Globalisation is a term that didn’t come into common use until the late 1980s but the process began when Magellan’s expedition circumnavigated the world and the Spanish Empire became the first on which the sun never set. Decisions made in Madrid had a direct impact from Cuba to the Philippines. Other European countries quickly got in on the act. Colonialism, followed by the industrial revolution, allowed Europe to become politically and economically dominant until, by 1900, its empires ruled the world. This period is now seen by many historians and economists as a blip. Globalisation, the process started by Europeans, will now see their economies decline in relative terms to where they were before 1700. China and India will, once again, be the richest and most populous parts of the world, as they were for a thousand years before the colonial period.
Against this background, anything that British policy-makers and business leaders can do is likely to be little more than damage limitation. The suggestion that if we put more effort into exploiting new markets it will help us keep our current position in the league table is fanciful. We have already fallen from 4th place since the middle of this decade. That process is unlikely to be reversed.
None of this is to suggest that we don’t need to seek new markets, invest more, build a better transport infrastructure and improve the standard of our education system. All these things help to maintain the UK’s competitiveness. But they won’t stop our relative economic decline.
We are living through a turning point in history, one of the consequences of which is the eclipse of Europe and the West by Asian, Latin American and possibly even some African economies. Pretending we can stop this from happening is delusional.