This week’s general election finds the United Kingdom at a critical juncture. With real wages declining and the health-care system in a dire state, the next government must invest heavily in infrastructure and higher education to reverse the economy’s prolonged decline and ensure long-term growth.
LONDON – I recently spent ten days in the United Kingdom, driving through the English countryside and occasionally giving lectures. My journey included visits to historical landmarks like the majestic Durham Cathedral, completed in 1133, and the little village in Lincolnshire where Isaac Newton was born. But I also saw, in London and across the country, signs of urban decay and neglect, as well as homelessness, poverty, and despair.
Having grown up in India reading the Brontë sisters, Arthur Conan Doyle, and P.G. Wodehouse, and having been a student in London in the 1970s, I was somewhat familiar with both sides of the UK: the opulence of its imperial past and the pockets of entrenched poverty. Indians’ deep familiarity with British culture is rooted in the rich and complicated shared history between Britain and India. Legend has it that when the great Indian writer Nirad Chaudhuri, known for his photographic memory, arrived in London from Kolkata for the first time, he could direct the taxi driver through lanes the driver was not familiar with.
Although I relished the landscapes and the conversations with strangers, I could not help but notice an atmosphere of widespread discontent and social turmoil. Everywhere I went, people spoke about job scarcity, declining real wages, the dismal state of the health-care system, long wait times for medical treatment, and crumbling infrastructure. Trains frequently ran late and often were canceled, despite government reforms aimed at improving service quality.
Official data support such anecdotal evidence that the British economy faces significant challenges. UK GDP grew by 0.7% during the first quarter of 2024, pulling the country out of recession and providing Prime Minister Rishi Sunak with some good news ahead of the general election on July 4. But despite this slight uptick, real household disposable incomes remain 0.6% lower than they were in late 2019, indicating that the benefits of economic growth have not reached the average citizen.
While the UK has been hit hard by the COVID-19 pandemic and the war in Ukraine, its economic difficulties can be traced back to poor decisions over the past quarter-century, particularly in the past 14 years, with Brexit being the most prominent. With the exception of 2021, when GDP increased by 8.7% thanks to the post-pandemic rebound, the UK’s growth rate has remained below 4.5% since 2000.
With polls showing that Sunak’s Conservative Party is headed for a historic defeat, Labour Party leader Keir Starmer will likely become the next prime minister. But regardless of who wins the election, the next government must go beyond the important short-term policy imperatives and develop a long-term growth strategy. In addition to expansionary fiscal and monetary policy, this strategy must rely on two main pillars: infrastructure and higher education.
The newest issue of our magazine, PS Quarterly: Age of Extremes, is here. To gain digital access to all of the magazine’s content, and receive your print copy, subscribe to PS Premium now.
Subscribe Now
The UK must invest heavily in physical infrastructure such as roads and railways, as well as the severely underfunded National Health Service. Given that the benefits of infrastructure investments are often difficult to quantify and take a long time to materialize, they cannot be left to the private sector. As Oxford economist Paul Collier recently pointed out, the economic short-termism of British policymakers has led to an “annual scramble to scale back spending,” leaving “no voice for the future.”
Likewise, the UK must devote far more resources to higher education. While public British universities were once global leaders, attracting the best and brightest from around the world, they are now facing the risk of an “irreversible decline.” But with increased investment and a carefully crafted plan for allocating it, the country’s higher-education system could regain its global standing.
To be sure, funding these investments would require tax increases. But given that the UK’s tax-to-GDP ratio was 35.3% in 2022 (the latest year for which data are available), compared to 39.3% in Germany and 41.9% in Denmark, the next government would have room to maneuver.
While mobilizing the financing for large infrastructure investments would be challenging, ensuring that these funds are spent effectively is critical. Governments have a tendency to overlook the returns on such investments since, unlike private investors, bureaucrats do not have any direct stake in the game. Therefore, it is necessary to draft a comprehensive detailing how the money will be spent, even if returns take a long time to materialize. Although government investments in infrastructure and education could take more than a decade to yield significant returns, the next government must act urgently to foster long-term growth.
This week’s election finds the UK at a critical juncture. The stakes are enormous, because putting Britain on a path toward a prosperous, sustainable future requires bold government action. Unless policymakers can muster it, the country will continue to decline.
To have unlimited access to our content including in-depth commentaries, book reviews, exclusive interviews, PS OnPoint and PS The Big Picture, please subscribe
Labour leader Keir Starmer’s incoming cabinet has more people of working-class origin than any British cabinet that came before it, and this remarkable feature will surely bear on policymaking. However, various countervailing forces will moderate any latent impulse to veer sharply to the left.
explain how the socioeconomic backgrounds of Labour’s cabinet members will, and will not, bear on policymaking.
If Russia, Saudi Arabia, and the world’s other large oil producers were to shift away from settling their oil trade in dollars, the implications for other commodity markets, global trade patterns, and financial stability would be enormous. But how plausible is this scenario in the foreseeable future?
considers whether Saudi Arabia would ever move away from invoicing its oil trade in US dollars.
Log in/Register
Please log in or register to continue. Registration is free and requires only your email address.
LONDON – I recently spent ten days in the United Kingdom, driving through the English countryside and occasionally giving lectures. My journey included visits to historical landmarks like the majestic Durham Cathedral, completed in 1133, and the little village in Lincolnshire where Isaac Newton was born. But I also saw, in London and across the country, signs of urban decay and neglect, as well as homelessness, poverty, and despair.
Having grown up in India reading the Brontë sisters, Arthur Conan Doyle, and P.G. Wodehouse, and having been a student in London in the 1970s, I was somewhat familiar with both sides of the UK: the opulence of its imperial past and the pockets of entrenched poverty. Indians’ deep familiarity with British culture is rooted in the rich and complicated shared history between Britain and India. Legend has it that when the great Indian writer Nirad Chaudhuri, known for his photographic memory, arrived in London from Kolkata for the first time, he could direct the taxi driver through lanes the driver was not familiar with.
Although I relished the landscapes and the conversations with strangers, I could not help but notice an atmosphere of widespread discontent and social turmoil. Everywhere I went, people spoke about job scarcity, declining real wages, the dismal state of the health-care system, long wait times for medical treatment, and crumbling infrastructure. Trains frequently ran late and often were canceled, despite government reforms aimed at improving service quality.
Official data support such anecdotal evidence that the British economy faces significant challenges. UK GDP grew by 0.7% during the first quarter of 2024, pulling the country out of recession and providing Prime Minister Rishi Sunak with some good news ahead of the general election on July 4. But despite this slight uptick, real household disposable incomes remain 0.6% lower than they were in late 2019, indicating that the benefits of economic growth have not reached the average citizen.
While the UK has been hit hard by the COVID-19 pandemic and the war in Ukraine, its economic difficulties can be traced back to poor decisions over the past quarter-century, particularly in the past 14 years, with Brexit being the most prominent. With the exception of 2021, when GDP increased by 8.7% thanks to the post-pandemic rebound, the UK’s growth rate has remained below 4.5% since 2000.
With polls showing that Sunak’s Conservative Party is headed for a historic defeat, Labour Party leader Keir Starmer will likely become the next prime minister. But regardless of who wins the election, the next government must go beyond the important short-term policy imperatives and develop a long-term growth strategy. In addition to expansionary fiscal and monetary policy, this strategy must rely on two main pillars: infrastructure and higher education.
Secure your copy of PS Quarterly: Age of Extremes
The newest issue of our magazine, PS Quarterly: Age of Extremes, is here. To gain digital access to all of the magazine’s content, and receive your print copy, subscribe to PS Premium now.
Subscribe Now
The UK must invest heavily in physical infrastructure such as roads and railways, as well as the severely underfunded National Health Service. Given that the benefits of infrastructure investments are often difficult to quantify and take a long time to materialize, they cannot be left to the private sector. As Oxford economist Paul Collier recently pointed out, the economic short-termism of British policymakers has led to an “annual scramble to scale back spending,” leaving “no voice for the future.”
Likewise, the UK must devote far more resources to higher education. While public British universities were once global leaders, attracting the best and brightest from around the world, they are now facing the risk of an “irreversible decline.” But with increased investment and a carefully crafted plan for allocating it, the country’s higher-education system could regain its global standing.
To be sure, funding these investments would require tax increases. But given that the UK’s tax-to-GDP ratio was 35.3% in 2022 (the latest year for which data are available), compared to 39.3% in Germany and 41.9% in Denmark, the next government would have room to maneuver.
While mobilizing the financing for large infrastructure investments would be challenging, ensuring that these funds are spent effectively is critical. Governments have a tendency to overlook the returns on such investments since, unlike private investors, bureaucrats do not have any direct stake in the game. Therefore, it is necessary to draft a comprehensive detailing how the money will be spent, even if returns take a long time to materialize. Although government investments in infrastructure and education could take more than a decade to yield significant returns, the next government must act urgently to foster long-term growth.
This week’s election finds the UK at a critical juncture. The stakes are enormous, because putting Britain on a path toward a prosperous, sustainable future requires bold government action. Unless policymakers can muster it, the country will continue to decline.