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On 7 October, the IEA organised a panel discussion entitled “Restoring Britain’s Dynamism: Removing Barriers to Economic Growth [ [link removed] ]” at the Conservative Party Conference in Manchester. The IEA’s Editorial Director Kristian Niemietz was one of the panellists. The article below is based on his opening remarks.
The fact that we’re even having this event, under this title, is itself an indication of the problem.
There was a time when you would have thought: isn’t virtually all economic policy ultimately about economic growth, directly or indirectly? Why do you need to specifically single that out? Why would you put that in the title? Unless you are talking to an audience of Degrowth fans: can we not just take as a given?
But the title makes sense today. For the simple reason that we’ve barely had any growth for a long time.
Last time I checked, average wages were about 4% higher in real terms than they had been in 2007. Britain is not a noticeably richer country today than it was in the final days of Tony Blair’s government.
That was 18 years ago. If you are a young adult today, you have basically spent your entire life in a nearly stagnant country. If you are a Millennial or a Zoomer, and you entered the labour force after 2007, you have spent your entire career in a stagnant economy. You have never known what it’s like to be part of an economy where things are on the up.
Well – not quite. There’s one thing that has been on the up: housing costs. We are getting to a situation where we have the economy of Greece or Portugal, but the house prices of Luxembourg or Switzerland. That’s not a great combination. That needs to be the other way around.
Think about the psychological impact of all that. We know from empirical research that people who spend their formative years in prolonged recessions are more likely to adopt a zero-sum mentality. They are more likely to think of economic life in terms of distributional conflicts.
That has spillover effects into the marketplace of ideas. It stacks the odds against those of us who believe in the market economy.
Even at the best of times, it is difficult to convince people of the benefits of capitalism. Instinctively, almost everyone is an anti-capitalist. We just don’t like capitalism. It feels wrong. It rubs us up the wrong way. There’s something in our DNA which rejects it.
But as long as a capitalist economy clearly delivers the goods, enough people will be prepared to ignore that impulse. When it doesn’t – they won’t. A generation that has only ever known economic stagnation is never going to be pro-capitalist.
Which is exactly what we see in all the survey data [ [link removed] ]. Millennials and Zoomers are way to the Left of the generations before them. With Millennials, it hasn’t always been this way. If you look at surveys from the early 2010s [ [link removed] ], you won’t get the impression that British Millennials are a particularly left-wing generation. They weren’t, at the time. But they very much are now. Instead of going through a youthful socialist phase, and then growing out of it, they started out soft-liberal or apolitical, and then they belatedly grew into socialism in their late 20s or their 30s.
This was entirely avoidable. It was their experience of the economic conditions of the 2010s – the combination of stagnant wages and rising housing costs – which drove them to the left.
Why did this happen?
It was not supposed to happen. If you look at conventional measures of economic governance, such as the World Bank’s Ease of Doing Business Index, or the Fraser Institute’s Economic Freedom Index, you don’t get the impression that this is a terribly badly run country. Britain’s scores on these measures range from very good to at least OK. There is no way you would look at those numbers, and think, ‘This country seems completely dysfunctional, I bet they haven’t grown in 18 years.’
Regarding taxes: of course they’re too high, of course they’re too distortionary – but not more so than in lots of other economies. It’s bad, but not 18-years-of-stagnation bad. It’s not the bottleneck.
The bottleneck is something much simpler than that. It is that Britain systematically deprives itself of the key input factors for economic activity: buildings, infrastructure and energy.
Our residential housing stock is about four million short of the European average. I haven’t seen comparable figures for office space and other kinds of business premises, but it must be the same thing; I have seen rent level comparisons which look just like those for residential housing.
Our road network is about a third shorter than the EU average, and our electricity generation is a third below the EU average as well. They’re much further behind the US level. That’s why nothing grows here. We’re simply not giving it the space to grow.
Britain’s economy is like a bonsai tree, a tree that is not naturally small, but that is artificially kept small, because it is constricted by a tiny flat pot where its roots can’t grow. That pot is the land use planning system, it is NIMBYism, it is all the environmental and building regulations that make it impossible to build things here.
None of this is new. I am quite aware that I haven’t said anything original today. You have all heard variations of this many times before. You can find it in government White Papers and expert reviews from 5 years ago, 10 years ago, 15 years ago, 20 years ago… the Barker Review, which already made a similar case, is from 2003 and 2004. You can find think tank reports on it going back much further.
Politicians talk about the need to build more, but they only do so in the abstract. Never when there is any kind of resistance from NIMBYs. Never when it matters. I wish pro-development, pro-growth politicians had more of a Michael O’Leary attitude. There’s that famous quote from Michael O’Leary: “People say the customer is always right, but you know what – they’re not. Sometimes they are wrong and they need to be told.”
The same goes for NIMBY voters. They may hate development, but if you give them what they want, they will hate the consequences of that even more: they will hate the economic stagnation, they will hate the political upheaval it causes. And even though they asked for it, they will still hate you for giving them what they want.
So don’t give it to them.

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