Against the coping of the Europoor
Plus: debunking MMT and more u-turns please
In today’s newsletter:
Your questions answered
What campaigners get wrong about wealth taxes
Professor Juan Castañeda appointed to IEA board of trustees
The recent IEA report ‘Attitudes to Economic Growth’ showed that most people are simultaneously too negative and too positive about the state of Britain.
On the one hand, two thirds of respondents rate the state of the economy as ‘poor’, and two thirds think things are getting even worse. When asked what they thought the main strengths of the British economy were, the single most common response is that it does not have any.
At the same time, though, respondents vastly overstate how rich Britain is compared to other economies. Only 43% of respondents realise that Britain is not as rich as Switzerland. Another 16% think the two economies are about on a par, and as many as 33% (!) think that Britain is the richer country. (This is comically untrue. Switzerland is more than a third richer than Britain.) Only one in three respondents, respectively, realise that Britain is poorer than Singapore, Australia, Germany and the United States. In the aggregate, respondents think Britain is richer than all US states bar six, when the truth is that Britain is poorer than all 50 of them.
When respondents are shown the true figures, the most common reaction is a mix of shock, disappointment and embarrassment. Which is good. I want people to be shocked, if that’s what it takes to shake them out of their complacency. Complacency breeds bad policy choices, and that’s what Britain’s relative economic decline is: a choice.
On social media, though, the responses have been rather different. Every time I post an excerpt from the report, my notifications fill up with people listing all the things they dislike about America.
This has become a common genre, not just in response to our report, and not just in Britain. All over Western Europe, people respond to the growing income gap between Europe and America (or in some versions, Dubai) by reassuring themselves that while Europe may be poorer in material terms, we are spiritually, culturally and socially richer. We have a higher quality or life, and better vibes. Eat your GDP, yanks. I'm off to my lovely Mediterranean wine bar, or my stylish Paris cafe, or my cosy Germanic Bierkeller, to enjoy life.
This a coping mechanism, and it is completely missing the point.
Nobody is suggesting that Europe should become a replica of America (let alone Dubai). The point is simply that they are doing better than us in some areas, because they have made better policy choices. Their labour markets, their financial markets, their energy markets, and in parts of the country (there is a huge amount of variation), their housing markets, have outperformed most of their European counterparts (although there is obviously a huge amount of variation within Europe as well). If we sorted out our issues in those areas, we might become 'more American' in terms of some macroeconomic aggregates, but Europe would very much still be Europe. We would still have our wine bars, cafes and Bierkeller. We might actually have more of those, stocked with better wine, better coffee and better beer.
But in order to get there, we need to stop romanticising our own economic decline. Strangulating our economies does not make us culturally superior to anyone.
Kristian Niemietz
Editorial Director
The best way to never miss out on IEA work, get access to exclusive content, and support our research and educational programmes is to become a paid IEA Insider.
IEA Podcast: Senior Policy Fellow Lord Frost and Editorial Director Kristian Niemietz are joined by Senior Economist Valentin Boboc to discuss is Britain really has a housing shortage, the early success of the government’s infrastructure bill, and the fiscal drag in asset prices that Reeves is relying on - IEA YouTube
Your questions answered!
To celebrate 200 episodes of the weekly IEA podcast, Lord Frost, Kristian Niemietz, and Callum Price answered your questions in a special bonus episode of the podcast
🏛️ Has big government reached the end of the line?
💰 Is inflation always a monetary phenomenon?
🌍 What are the free market solutions to climate change?
News and Views
“Britain’s problem is not that wealth inequality is too high, or that taxes are too low. Britain’s problem is that the economy is not growing.” Kristian Niemietz dismantles the wealth tax hype in CityAM
The demand for growth is there — politicians just need to speak to what it means for real people writes Callum Price in ConservativeHome
More u-turns please, Valentin Boboc lists a few more u-turns he would like to see from the Government, CapX
“If ministers can drop rent controls and water down pension mandates in the same week, they can look again at any number of mistakes. The list is long, and U-turns alone won’t fix everything overnight. But small, deliberate steps can improve the state of the economy and public finances. All it takes is a few more U-turns.”
In defence of Palantir, Matthew Lesh writes the case for the tech-firm delivering for the NHS, The Telegraph
“Last time the NHS tried to build its own technology at this scale, it was a disaster. The NHS National Programme for IT, a project with similar goals in the 2000s, cost taxpayers around £10bn-£12bn but was so dysfunctional that it was ultimately abandoned. By contrast, Palantir’s contract is worth £330m over 7 years – coming to just £200,000 per year per organisation. This is a minuscule cost compared to any imaginable alternative. The Treasury’s infrastructure authority, NISTA, rates it green, a status achieved by only around 15 per cent of major government programmes. Over 123 trusts are already using it, and 80 have reported benefits.”
IEA appoints Professor Juan Castañeda to board of trustees
Professor Juan Castañeda, Director of the Vinson Centre for the Public Understanding of Economics and Entrepreneurship, Professor of Economics at the University of Buckingham, and new IEA Trustee said:
‘It is an honour to join the board of trustees of the Institute of Economic Affairs. I have admired the IEA since I was an Economics student, reading its publications rooted in Classical Liberalism, and later on in my academic career I have had the opportunity to contribute to its agenda. We seem to have forgotten how we achieved the levels of growth and prosperity we have enjoyed over the last two centuries. It is the expansion of the markets and free enterprise what leads to greater economic growth and prosperity over the long term. The values the IEA stands for couldn’t be more needed today, and I am looking forward to working with Linda Edwards, my fellow board members and the staff in furthering the mission of the IEA.’
Linda Edwards, Chair of the Board of Trustees, said:
“We are delighted to welcome Juan to the board. He brings deep expertise in monetary economics and central banking at a time when those questions are central to the UK’s economic prospects. His long association with the IEA — through the Shadow Monetary Policy Committee, the Academic Advisory Council, and the Journal of Economic Affairs — means he arrives with a thorough understanding of our mission and values. We look forward to the contribution he will make at this exciting time for the IEA.”
“We also want to extend a warm and heartfelt thank you to Professor Martin Ricketts for his exceptional length of service and contribution to the IEA. He is intellect and belief in the ideas that the IEA was founded on have been vital to the work of the Institute, our partners at the University of Buckingham, and beyond. He will always be a part of the wider IEA family”
Events and Opportunities
 | A guest post by
|
Thank you Kristian. I believe the IEA (and classical liberalism) has a tough struggle to get its message to the general public. I also believe words can matter, and I make the suggestion that in discussing the UK economy "growth", for many an abstract concept, should be replaced where appropriate by "prosperity", which is more relatable, warm and fluffy.