Will the UK be the first post-developed nation?

Sam Storr

The Riots of 2011 shocked the UK with images that had been thought improbable (Photo Credit: Urban Geographics)

As we enter the fifth year of the ‘Great Recession’ in the developed world, it has become more normal to question the ebullient Anglo-American economic model of the previous decade. Crisis is a natural breeding ground for all kinds of frantic speculation, but this should not undermine the legitimacy of the questions it provokes, some of which have been long in coming. The UK – small, resource poor, unproductive, rich – in many ways demonstrates the some of the more extreme features of an advanced economy. As our stalled progress reveals the paucity of our politics, it is time to ask, does the UK risk becoming the first of the post-developed nations?

The semantics of our complacency are clear: ‘developed’ implies a final ideal of human organisation. It is best characterised as a state of prosperity within which vibrant, open societies can flourish towards the fulfilment of human rights. However, many argue that the pursuit of growth in shallow GDP terms has become too singular a focus, revealing now just how exposed our society has become to economic hardship. The continued pursuit of growth for the sake of growth has made the condition of being ‘developed’ a process rather than a finality. It is clear that the UK must plan for a different future, and this is even clearer once the historical forces behind our rise are considered.

The UK became powerful by seizing the opportunities available to it, often to the detriment of others that are only now realising their strength. The first was the ability to exploit others, first through conquest and colonialism, and later through the scandalously cheap labour afforded to advanced and consumerist economies by globalisation. The second was through technology and expertise, from industrialisation to the growth of the service sector and the knowledge economy.

The third was reform; the creation of the welfare state and the infrastructures that allowed people to work in security and in better-paid jobs. Since the 1980s, reform has been focused on de-regulation and privatisation, aimed at facilitating investment and allowing the UK to become a leading financial centre. Most famously, this has encouraged a two-tier financial system, in which a few are able to accrue large sums of wealth with disruptive consequences, whilst access to credit and the proceeds of business is restricted to the rest, and the real economy declines.

And of course, these three factors would be of little consequence were they not carried by the wave of cheap fossil fuels.

The problem for the UK is that these wells are running dry. The existing perspective of ‘boom and bust’ disguises a general slowing-down in growth in OECD economies over the last four decades. Moreover, other nations such as China or India are providing competition in the more advanced sectors of the economy; the service and the high-technology sectors. They also have the capital to do so, unlike the debt-ridden UK with its crumbling infrastructure.

Of course, the crisis in the developed world may be the result of a long-overdue global rebalancing of power, in which the world becomes altogether more equal in economic activities. For example, the average wage in China has increased at a greater level than productivity since the reforms of the 1990s, demonstrating a general trend in which developed countries can find new markets and become more competitive in exports. Though this might spell the expiration of our high-growth model, it also provides opportunities to rebalance our economies and rebuild the more important aspects of being developed. As Christine Lagarde argues, the world needs ‘a different kind of growth – inclusive and not simply the fallout of unfettered globalization’. This insight applies to all economies.

However, the UK is simply not ready for this emerging world. The British Chamber of Commerce for example notes that all the current good news in the economy comes from the service and financial sectors, with the rebalancing of the economy towards exports being ‘disappointingly slow’. As David Cameron’s caravan of shame frequently demonstrates, developing nations have no particular preference for our commerce. A recent McKinsey report argue that even advanced economies such as the UK won’t see future growth until education is improved, with higher-level job openings already going unfulfilled despite high unemployment levels. At the same time, greater pressure will be put on commodity prices and the environment, which can both seriously impact our economic potential.

If excessive de-regulation and financialisation of the economy was a last desperate attempt to find more easy growth, it has come with a terrible hangover. Given the challenges that remain to consolidate our position in a more competitive and constrained world, the UK must come to terms with the fact that it currently lacks the strength to maintain the living standards on which it depends.

Along with many European countries, we are struggling to keep up with our own demands. Electricity shortfalls, housing, failing infrastructure, falling relative education levels, the costs of an aging population, our reliance on others for food and fuel; all will hit the country hard in the next few decades. The intellectual and material underpinnings of the welfare state have been seriously eroded, and austerity policies have yet to demonstrate their full destructive power. Meanwhile, deregulation has allowed great wealth to enter the country, but left society poorer for the inequalities that it has entrenched. Further degradation in the living standards we have come to expect could cause great unrest in a nation where civic participation and political engagement is so low.

As others have argued, one must place hope in the ability of society to rejuvenate itself, to play to its old and long-dying strengths. Joe Guinan, for example, provides a good overview of the civil society movements and business cooperatives that have emerged in response to the crisis. However, for the nation as a whole, piecemeal adaptation will be inadequate.

It is still early days for austerity, but the virulent politics it has thus far bred suggest that the post-developed world could be truly dystopian. Of course, it would be self-possessed to assume that life in a post-developed nation would be any worse than in one that has not yet developed, but it would be very different, and that leaves plenty of space for fear. Without political innovation and direction of the kind that is so completely absent now, the social contract will disappear; who knows what new contracts might take its place.

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