The Real Reason UK Growth Collapsed After 2008 with Tyler Goodspeed | IEA Live

Join us for the IEA Ralph Harris Centenary Lecture featuring Tyler Goodspeed, former Acting Chairman of the Council of Economic Advisers, who delivers his analysis of the UK's economic challenges. Goodspeed reveals that the UK is approximately 40% poorer per person than the US, with British workers producing less in a full year than American workers do by August. He explains how the 2008 financial crisis triggered not just a temporary downturn, but a fundamental change in the UK's growth trajectory, largely due to the different regulatory responses in the UK versus the US.

The lecture goes on to examine how the UK's institutional structure - from banking to planning laws - has constrained growth. Goodspeed highlights that while US businesses get 80% of their external financing from venture capital and private equity, UK firms still rely on banks for 80% of their funding. He also discusses how green belt restrictions, energy policy, and tax structures create barriers to economic efficiency.

The event includes a discussion with IEA Executive Director Tom Clougherty, Editorial Director Kristian Niemietz, and Professor Christian Bjørnskov, who explore these themes further. The panel examines why many UK problems stem from regulatory accumulation rather than any single ideology, making them harder to combat than the economic challenges of previous decades. The discussion concludes with audience questions covering topics from environmental policy to cultural attitudes toward entrepreneurship, offering practical insights into how the UK might return to stronger economic growth.

[azar]

It has become a norm in the UK to compare our economy, our health system and everything else to that of the US, Germany or France. I think it will help greatly if we add one of the smaller but more successful countries to the mix, for example, the Netherlands or Denmark. We can learn a lot from these two countries.

[arnoldkiel]

Mr. Goodspeed overlooks one factor: mix. Declining (rather productive) industrial jobs are being replaced by less productive low-skill services. Ex factory-workers cannot migrate to banking, advertising, or entertainment. As a consequence, the total amount of non-financial capital employed decreases together with per-capita GDP. Mass-immigration of below-average skills (from other continents including family) improves GDP, but further dilutes it per-capita.

[Jeremiah]

You only need to understand why the soviet economy failed. Overcentralization breeds weakness. Distributed wealth, you unlock the computational capacity of people fighting for their own interests via economic output. UK soviet economy: risk averse, people doing as little as possible and receive their pay.

Over centralization leads to multiplying the negative effects of bad decisions. But when you have a free market, distributed system; failure is weeded out and taken care of and does not cause economic heart attacks to the entire economic body.

We cannot have businesses "too big to fail".

[webMonkey_]

Almost all us growth in USA since 2008 has been funded by the deficit.

[Crimeajewel-meme]

Taxing the productive into the ground is not a good idea. You just get more people with incentive to do less.

[stumac]

Look at the quality of our MPs and it all makes sense.

[gregoryjames]

It is not economic growth that matters, it is economic growth rates per capita. And that has been declining since Blair came to power in 1997.

[monir]

Uk had grown since 2008. What I think your title needs to say is the real reason productivity flatlined since 2008. UK growth has only been rising as government has been spending and the over reliance on low skilled labour that also get benefits. This shows up in the rise of national debt. It is fake growth and voters fall for it time and time again.

[quantarrow]

Don't simply retire from something; have something to retire to. Start saving, keep saving, and stick to investments. Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments

[scallamander]

Elephant in the room: inequality; 'In the UK, while the government claimed that all must share cuts to living standards, inequality rose further. Between 2008 and 2012, the richest 1, 000 people increased their wealth by £155 billion, more than enough to pay for the government deficit of £119 billion.' - economist Guy Standing, in 'A Precariat Charter'

[edwardlyons]

The IEA contributed massively to the decline with its support for Austerity, Brexit and Truss's disastrous budget.

Post war UK economic history has been an exercise in self destruction that accelerated after GFC. The only relief came thanks to Thatcher's reforms in the 80s-90s. Policy failure since 2010 has been spectacular yet elite opinion blames this all on Brexit!

[Focus]

The UK imposed austerity on itself post GFC to appease markets and due to misled ideology. Orientating away from our banking comparative advantage is similarly misled but only because we didn’t spin up a new one while the political tide meant banking regulation was necessary.

So why didn’t we lean into a new comparative advantage? Because that would’ve meant borrowing at record low interest rates (shock horror) and ideology didn’t permit that. By comparison, the US government peruses economic stimulus post crash then continues making use of its competitive advantage with Silicon Valley and in tech.

Another interpretation of the graph at minute 16:57 is that the markets initially liked the plan of austerity over the US stimulus plan (see UK credit peak in 2010 with new Tory government attracting more credit than the US). However this reversed when the US government stimulus proved to be working in helping pull the US out the ditch while the UK was left stagnant.

Austerity meant the population had stagnant expendable income (bad on the demand side) but the lack of vision and gov funding for a UK comparative advantage has also left us looking a bit silly imo

[GIZMO]

Frankly you can't compare USA w UK. USA can print USD out of their problem. USA has the population that is at least 4X of UK. One thing though UK has plenty of people who talk n talk a lot but does not much 😂.
And USA has both technology and military industry that UK are far behind esp cloud app and cloud technology like Amazon, Facebook, and many more. Where is UK equivalent?

[steveunderwood]

He mentioned the UK still has strength in life science research. I think that's true. However, when most people try to commercialise their research they find they need to go abroad to get anything done. When people look at the high net immigration in the UK, they don't talk enough about who exactly is on the outward flow side.

[paris-panda]

Ah, yes, more advice from the IEA - The same people who advised Liz Truss on her splendiferous Economic budget the sent everyones mortgages through the roof... Yes, please dispense more of your sage advice to use.

[grodesby]

The mention that the structure of UK democracy nowadays mostly consists of MP's trying to curry favour with the PM, rather than seeking to advocate for their constituents was interesting. Maybe the UK should figure out a way of separating executive and legislative concerns more cleanly.

[bennymarshall]

Moral relativism between the UK and USA, please! People are not bank balances they are living organisms with feelings, health needs and aspirations. If the USA is so superior, why is the life expectancy lower even though more per capita is spent on healthcare? Why are so many people living out of cars? I have never met a person in the UK who has to live out of a car. Why is the the murder rate so much higher? Why is a higher proportion of the population obese? Why are more people on anti anxiety and anti depression medication? Why are people travelling to Mexico for medications? Because pin-striped douchebags have monetised money and forgotten that people are not bank balances. People are living organisms with feelings, health needs and aspirations.

[myroseaccount]

This was a frustrating debate and frankly perhaps shows the problem. There is a lack of clarity on how we get economic growth. The IEA really needs to do better. Growth is a moral imperative and needs much more focus as a matter of urgency in the UK

[stevealba]

🎯 Key points for quick navigation:

00:00 *🇺🇸 Economic Disparity Between UK and US*
- Comparison of economic situations between the UK and the US.
- Analysis of business financing sources in both countries.
- UK tax system and its implications on high earners.
02:18 *🎓 Introduction of Tyler Goodspeed*
- Overview of Tyler Goodspeed's academic and professional background.
- Setting the stage for a discussion on UK economic growth.
03:01 *🇬🇧 UK Economic Growth Challenges*
- UK is significantly poorer per capita compared to the US.
- Historical context of UK economic productivity and growth.
04:39 *📉 Growth Hypothesis for the UK*
- Exploration of two types of economic growth.
- Degradation of UK's ability to utilize inputs efficiently.
06:03 *🏗️ Constraints on Productivity*
- Inefficiency in utilizing land, energy, capital, and labor.
- Green belts and regulatory constraints on urban expansion.
09:13 *💰 Capital Markets Comparison*
- UK's banking sector versus the US venture capital and private equity norms.
- Restrictions inhibiting the UK's economic growth potential.
12:00 *📊 Growth Trends and Financial Crisis Impact*
- Analysis of growth trends before and after the 2008 financial crisis.
- UK vs. US economic recovery trajectories and the effect of regulatory responses.
15:14 *🔍 Analysis of Economic Shocks*
- Examination of shocks affecting different economic sectors.
- Specific impact on banking and energy sectors.
22:45 *🚀 Proposed Economic Solutions*
- Lessons from past economic policies to drive future growth.
- Importance of not impairing areas where the UK has a comparative advantage.
25:34 *🎯 Leadership and Policy Direction*
- Emphasis on the importance of political leadership for economic growth.
- Concentration of political power around the Prime Minister and its implications.
28:32 *🌟 Call to Action for UK Growth*
- Urging a commitment to making the UK grow economically.
- The UK's potential to regain global economic standing.
29:52 *🏗️ UK's Growth Hurdles*
- UK's growth stagnation attributed to policy barriers limiting construction and infrastructure development.
- Housing stock and energy production in the UK lag behind European averages, impacting economic mobility and productivity.
- Lack of investment and development in key infrastructure, including airports and roads, hinders regional development and economic growth.
35:17 *📊 UK vs. Global Productivity*
- UK labor productivity growth is significantly lower than that of the US and Denmark.
- Successful large welfare states like Denmark combine state support with a highly capitalist private economy.
- UK political choices from both major parties have not supported an economically free private sector, stifling productivity.
40:22 *💼 Structural Changes in Finance*
- Post-2008 credit crunch and differences in financial regulation affect productivity and growth.
- US banking structure with numerous banks contrasts the concentrated UK banking sector, impacting financial flexibility.
- UK faces difficulties in restructuring financial markets to boost productivity.
45:17 *🌍 Growth Economics and Regulation*
- Economic growth research has dwindled in the UK, compared to more active debates in the US and other countries.
- Challenges in reversing restrictive regulations that impact various sectors, from planning to finance.
- Opportunities arise in bipartisan coalitions for liberalization to overcome regulatory barriers.
54:00 *🔍 Challenges of Bureaucratic Response and Entrepreneurial Spirit*
- Difficulties in bureaucratic systems during emergencies, highlighting inefficiencies,
- Discussion on fostering an entrepreneurial spirit in the UK akin to the US by understanding cultural and historical contexts.
56:16 *🌱 Optimism in British Economy*
- Emphasis on the UK’s strong fundamentals and institutions, especially in education and scientific research,
- Potential for technological innovation by creating hubs similar to Silicon Valley.
57:30 *🌍 Growth and Political Challenges*
- Debates on growth beliefs among politicians and the influence of public choice,
- Exploration of sustainable energy solutions and economic policies that promote real growth versus government-led fixes.
59:06 *⚖️ Taxation and Tariff Discourse*
- Examination of different forms of taxation and tariffs, understanding their impacts,
- Importance of fair tax policy that supports economic growth while minimizing market distortion.
01:03:04 *🏺 Historical Narratives and Modern Growth*
- Exploration of historical identity issues impacting present economic sentiments in the UK,
- Discussion on how perceived historical wrongs might hinder economic progress today.
01:05:08 *🏦 Financial Structure and Growth Solutions*
- Reflection on potential solutions to financial sector issues, questioning the structure of large banks,
- Inquiry into societal complacency towards growth and what might shock a shift in focus towards proactive economic improvements.

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