Reversing the United Kingdom’s Death Spiral

A review of Return to Growth: How to Fix the Economy by Jon Moynihan.

Our politicians – and that means all of us (we are all politicians now) – should read a fascinating article: Michaela C. Schippers, John P.A. Ioannidis and Matthias W.J. Luijks, ‘Is Society caught up in a Death Spiral? Modelling Societal Demise and Its Reversal’, Frontiers in Sociology 9 (2024). These authors suggest that our current disastrous situation is not to be explained by ‘mass formation’ or ‘groupthink’: of course, some of us have entered an altered psychological state and many of us exhibit a tendency to follow the consensus. But Ioannidis – you have heard of him – and his colleagues suggest that these do not do full justice to what is going on.

What is going on is that we are caught in a death spiral: the phenomenon by which ants, acting in ways that are usually good, continue to act in that way through disaster and destruction to death.

Our politicians should also read an important book. This is Jon Moynihan’s, Return to Growth. It came out in September, and a copy of this book should be on the desk of every politician, every civil servant, and every journalist. If Schippers, Ioannidis and Luijks have come with the bad news, Moynihan comes with both bad and good news. The bad news is that the United Kingdom has been in an economic death spiral for 20 years. The good news is that it can be reversed.

I should say that Schippers, Ioannidis and Luijks think that the death spiral can be reversed: by open society, resilience, compassion, willingness to change, avoidance of blame, “civil and intelligent disobedience” and “constructive deviance”, but most importantly by decreasing inequalities. This is alright as far as it goes, but, unfortunately, it plays into the language of the death spiral. For who is it, if not the death spiral politicians, who have themselves used the language of resilience, compassion, etc. and especially the language of “decreasing inequalities”? This is the sort of language that used by death spiral politicians and death spiral civil servants to justify more intervention, and distracts even sensible commentators into thinking that we have to tax the corporations, adopt a digital currency, enforce a universal basic something or other, maybe income, maybe shares. The answer to this is “No”. Not robust enough.

Moynihan offers something robust, and thinkable. He is not advocating some ivory tower remedy, or gesturing at utopia, like Varoufakis or Graeber. On the contrary, he is in the tradition of the most sensible and balanced thinkers who ever put pen to paper, the enlightened Scots David Hume, Adam Smith, John Millar and my own favourite Adam Ferguson: and, like them, he suggests that we look at our system of politics, finance and commerce in the most rational way possible. Not rationalist, but rational. We should be cool, calm, collected and concentrate on what is actually going on: call spades spades.

I shall try to summarise the argument. The next paragraph is the most important one.

His observation is that the British economy experienced growth in GDP per capita for two centuries, but for the last two decades has not. He calls this ‘bust’ but what it actually is is declining growth: the economy is increasing a bit, but not much, not as much as it did, and not as much as other economies do. We are in a situation in which there is too much government, too much tax, and too much regulation. His suggestions are, obviously enough – and memorable since there are three of them – that we should cut government, cut tax and cut regulation. He supports these suggestions with not only extremely close consideration of the facts, but also close examination of the economic theories that support his claim. His book is long, but can be read in a few hours if one reads it with the right attitude. And even a politician or civil servant should be able to make sense of the summaries of the argument which Moynihan conveniently places at the beginning and the end of the book.

I have said before that I am no economist. And so I have to take a certain amount on trust. Keynesian quantitative easing is a bewildering subject (Moynihan scoffs on p.160): and since our majority economic consensus since the Second World War has been that this is the way to deal with all problems, that requires some counter-argument which it does not receive here. On p.89 Moynihan observes that some economists (on the Left) think that economic downturn causes increased government spending, while some other economists (on the Right) think that increased government spending causes economic downturn. Oh, causality! Let the economists argue. But I think the causality is irrelevant: the argument stands on moral and political grounds: because increased government spending is intrinsically demoralising: it creates a cult in which we strip out of ourselves not only common sense but also civilisation. And it is also depoliticising: everyone knows the politicians can hardly breathe in Westminster. I found very persuasive the view of Moynihan that “austerity” was simply a form of language designed politically to make it impossible to enable us to reverse the death spiral. He has a chart that shows that Osborne’s “austerity” only managed briefly to reverse the second half of Brown’s spending increases. So much for “austerity”. Blair was more austere than Osborne. In fact, “austerity” is death spiral language, a term of abuse to stop us saving the state. For what we need is austerity, austerity of mind: and Moynihan shows it in exemplary form here. His tone throughout is reasonable: he lacks any inclination to indulge in scorn or contempt, though scorn and contempt are deserved by many of his subjects.

I learnt much from the book. Let me quote it for a bit:

• Western European economies… adopted the ‘social democratic’ model (high government expenditure, high taxes, high regulation) [and] are barely growing at all.

• Since the year 2000, government spending has… expanded. It is now at some 45% of the economy, up from 35% in 2000.

• The Office for Budget Responsibility uses a model that predicts that the more immigration we have, the more GDP will rise. But the rise in GDP per capita will not be commensurate… The OBR has… overstated the benefits of mass immigration.

• The U.K. is inexorably being swallowed up bit by bit by its Debt.

• The UK’s level of expenditure is now 15% higher than it was pre-Covid.

• In a social democracy, big government, high taxes, and a big welfare state are fundamentally democratic but are, in practice, controlled by disparate extractive groups such as political elites, bankers, senior (retiree) voters, large corporations, semi-monopolistic state enterprises and civil servants.

• The larger the government, the greater the opportunity for rent-seeking.

Basta! as D.H. Lawrence liked to say. That’s enough. Except, perhaps, for the point that our ruling order exhibits “ignorance”, “naivety” and “overexuberant spending”.

The book is a collection of good judgements. He argues that future economic growth is likely to be less than 1% per annum, which is not enough to cover the cost of the immigrants coming in, since we need growth of 1% just to cover that cost. He shows that ‘core’ government expenditure is only 12% of GDP, or 20%, if we include health. But current government expenditure is 46% of GDP. Core = police, judicial, prisons, defence, diplomacy, education, highways, sewage, sanitation, environment. That 12% is close to the tithe that is advocated by Dominic Frisby. This core state is the old law-and-order state of the Victorians. The ‘core’, even if we include the grotesque NHS, is only 44% of current government expenditure: that is, 44% of 46 per cent of GDP: i.e., 20% of GDP. The rest we could do without. Together with health (and in relation to health he shows that we spend £25 billion more than comparable countries), social welfare accounts for half of government expenditure. The third largest expenditure is servicing the debt, which is 12% of government expenditure (£128 billion last year).

The welfare state is the state which exists as a surplus to the core-expenditure-state or what we might call the law-and-order-and-education state. This welfare state is responsible for much of the death spiral: and its toxicity can be seen when we see that 54% of people in the U.K. receive more in benefits than they pay in taxes. How about that for rent-seeking? We have a rent-seeking population living like Morlocks beneath the rent-seeking Eloi of the civil service and far below the rent-seeking Icaruses and Daedeluses of the cloudcapitalist corporations.

Moynihan shows that the greater part of “social welfare” is taken up by pensions. Now, I have never tried to understand the “triple lock”. But it turns out that the “triple lock” is a conspiracy against all sense: it has locked us into a situation where pensions always increase in the most magnificent way possible, leaving inflation way behind. No one is telling the truth about pensions: Moynihan speculates that much is hidden, as the bodies have been buried in the future (under the ground where our children will toil). As the old increase in number and in age this pension expansion has spectacular consequences: sufficiently absurd for us surely to call in question the capacity for making sense in all governments of the past 20 years. “There has never been any discussion of this,” says Moynihan. Well, it should be discussed. The U.K. is indebted to the future to the cost of £2.6 trillion. No funds have been set aside for this. It is unfunded.

For those who want to read the book, it is fairly dry, though devastating, until around p.130. Until that point it is full of charts and numbers. And facts, which I hope I have not got wrong in the repeating of them. (For those who want equations, they have to wait until the appendices.) But from p.130 onwards Moynihan writes with suppressed derision of the ‘mental health’ cult and other follies: though his tone remains forensic rather than polemical. He observes that extra health spending in the last 20 years has gone into funding NHS “apparatchiks”: the dreaded administrators that have afflicted every branch of activity, including, disastrously, the universities. The universities have a grievance since they are relatively under-funded, he says, compared to universities in other similar countries. (Not good, to have an educated class with a grievance, an entitled grievance: they are educating our youth into this grievance.) Moynihan suggests that we take the top 30% of earners out of the NHS, and refuse the service to immigrants for the first six years. Sounds sensible to me. Moynihan is sensible about universities too: that they are a national institution, and so the majority of places should be reserved for the British: otherwise we educate the world, which is pleasant, but, again, demoralising for the death spiralists who remain on the island. He laments the arrival of ‘woke’ in the Ministry of Defence. He suggests that we should spend more on defence, but not on diversity-in-defence.

Then there is the state, the public servant state. Hegel called civil servants “the universal class”: he saw them as a sort of Coleridgean clerisy that put the interests of the state above their own interests. This only worked because the Hegelian state was objective: for everyone. But our modern state is not a Hegelian state: it has become a Marxist state: a state which extracts rents, taxes, etc. from the people. The way it works in modern conditions is that it pays what used to be a quarter of the workforce in 1997 but what is now a third of the workforce. ’Sblood! A third, one out of three, of the workforce is on the state shilling. Who is going to be able to vote for a change in this system of extractive politics when a third of the workforce will always vote to continue seeking its rents?

Moynihan has read the books of these civil servants. Not civil. Not servants. His verdict: “Self-regard, complacency, and little self-awareness.” His account is devastating. The entire civil service took more than two thousand years off “sick” in 2022. (See p.229 if you doubt.) We are being governed by what Julie Burchill calls mental elfs: working four-day weeks, working at home on furniture bought by the state, constantly pulling ‘sickies’, etc. His verdict is that the civil service is an “extractive institution”. Paint that on the walls in Whitehall, Banksy, you coward.

Moynihan makes much of “Wagner’s Law, first formulated in the 1860s: public expenditure [in a democracy] increases as national income increases”. He shows that expenditure has not only increased, but is paid for in Byzantine manner. Brown and Osborne both contributed to the elaboration of the tax code, which, I did not know, is – the longest in the world. The state cannot even take its cut very sharply: the United Kingdom has the bluntest scissors in the world. Needless to say, the European Union helped blunt them, but we did most of the blunting ourselves.

Shall I summarise the argument again? His book is full of detailed practical suggestions. But the argument is three-barrelled. Cut government. Cut tax. Cut regulation. These are necessary for economic growth. If we do the opposite we demoralise ourselves by concerning ourselves with redistribution, by trying to tax the rich, by stunting genuine activity, by importing false imperatives into an entirely rent-seeking system: a system defended by a vastly expanded civil “service” which serves itself and does so by exploiting a language of “crisis” and “exclusion” and “deprivation” to support its salaries and pensions. He doesn’t say, though he could, that the system encourages mediocrity. When there is a scare (which they call a “crisis”), everyone says “Something must be done, money must be spent, laws must be passed”. They should not say this. If they are allowed to say this we suffer the consequences: which, he says, are “extremist, absolutist and nonsensical”. And we suffer from mediocre moralising in the form of Net Zero, DEI, ESG, Stonewall, etc. McKinsey is wrong: diversity does not increase profits. Increasing tax rates does not necessarily increase tax revenues.

Moynihan believes, he says, in the rule of law, low corruption, suppression of extractive institutions, free markets, free trade, sound money. But at root the message is simple: minimise government, lower taxes, cut regulation. I found nothing to disagree with in the entire book.

If I were to criticise the book, it would be along Burkean lines. The late historian J.G.A. Pocock showed that though Edmund Burke agreed with Hume, Smith et al in many regards he came to suppose that their belief that commerce civilised us was in fact the opposite of the truth: that, in fact, commerce depended on a prior civilisation. Hence the need to talk about religion and history, as Burke did: our history. Moynihan takes the Smith line, not the Burke line. And it is possible to ask whether our common culture in the 21st Century has enough in it to enable us to reverse the Fabian habit of thinking that only a maximised state can be trusted to solve all political problems. I think we need a bit more Bible and Shakespeare in our schools.

But let me end with Adam Smith. In The Wealth of Nations, that universally admired book of 1776, he wrote the following small poem:

A progressive state is happy.

A stationary state is dull.

A declining state is melancholy.

Smith’s example of a stationary state was China. The irony! Moynihan’s basic claim is Smith’s: that a progressive state – a state experiencing growth – is happy. But for the moment it is China that is the progressive state, and the United Kingdom may well be that dread thing, a stationary state. If so, at least it’s only dull, and not yet melancholy.

Dr. James Alexander is a Professor in the Department of Political Science at Bilkent University in Turkey.