books development economics

Going South, by Larry Elliott and Dan Atkinson

I saw the title of this book, and I figured I ought to read it. In full, it reads Going South – why Britain will have a third world economy by 2014. Sure, it’s a sensationalised title, but it echoes some theories I’ve written about on the blog before.

We don’t appear to have noticed yet, but most of the things that drove economic growth in the last decade before 2007 have been exhausted – the housing market, consumer credit, government spending. Add in the high price of oil, the chaos in the Eurozone and our own failure to regulate the banks after the last crisis, and the economy is unlikely to grow anytime soon.

Going South argues more or less the same thing, taking 1914 as its starting point. This was the beginning of the end for Britain. At the start of WW1 Britain was the world’s only superpower, the world’s leading exporter, and a major military power. A century later, we’ve experienced a relative decline as our national prestige has waned and other countries have caught up and overtaken us. We’ve had no particular strategy as a country, we have allowed a series of imbalances to develop, and there’s no obvious way out of it. The economy is “slow-growing, unproductive, unequal, unbalanced and living beyond its means” say the authors. If we don’t fix it, the future looks “shabbier, meaner and poorer”.

This central premise is pretty much correct in my opinion, and a rather urgent message considering how complacent we appear to be. Unfortunately, the book itself leaves a lot to be desired.

Going South divides roughly into thirds, and only the middle third of it is actually any good. It begins by lamenting Britain’s new ‘third world’ status, a hundred pages of whining about how things aren’t how they used to be. There are some good points here, but some of it is just downright silly. More on that in a minute.

The middle pages are the useful bit, where the authors look at the post-WW1 history of Britain’s economy. This is a good overview, showing the strategies and government initiatives to stimulate the economy, the efforts to pick winners. Some of these failed, like trying to compete with the US on aviation (see Concorde). Others succeeded, like the Thatcher government’s championing of the City. Taking us up to the present, the book then looks at a series of problems that Britain faces in the coming years, and it is here that it is at its best. It includes the balance of trade, the pensions deficit, energy security, household debt and banking instability. It’s convincing, and lives up to the chapter title of ‘the great reckoning’.

Then comes part three, where there is a tentative look at what we could do about it. Essentially, they argue that Britain ought to choose a development model and then stick to it, rather than wavering back and forth between American style capitalism, the German model or the Scandinavian approach. The authors suggest Britain has two choices: a social democracy like Sweden, or a ‘freeport’ capitalist model that would basically turn the whole country into an export processing zone. They then describe how Britain might look under each of these development paths. The former is a fairly attractive portrait, the latter a crass caricature that’s more extreme than any other capitalist project yet conceived anywhere in the world. Why they think these are the only two options, I don’t know. It’s clear that they think Britain should pursue the Scandinavian model more closely. They should just say so, rather than attempting to make the point with a false alternative.

My biggest problem however, comes back to the opening section and the argument that Britain is becoming a ‘third world country’. The authors recognise that the ‘third world’ tag is used “routinely in pub and kitchen table conversation in response to railway strikes, political sleaze, to the council’s failure to empty the rubbish bins.” They insist that they “are not using the expression in that way”, but then repeatedly do, referring to “Britain’s banana republic transport system”, or the police tactics of “third world Britain.”

As someone who grew up in an actual third world country, this just comes across as blusterous overstatement. You feel like telling the authors to go and visit a dentist, an airport or a post office in Madagascar, and then come back and see how those casual phrases read.

Once they’ve chosen their angle though, they just can’t stop themselves. Everything becomes evidence of Britain’s new third world status. The list includes our politicians’ search for a ‘big idea’, bureaucracy, tax breaks for business, and an overcomplicated public service. Then it gets worse – the fact that we have a ‘tourist strategy’, the National Lottery, or the desire to host the Olympic Games. Or consider this: “the large numbers of people employed to stand on pavements handing out leaflets, cheap telephone cards and free newspapers, or attempting to sign up customers for various services, is a sure sign of incipient third world status.”

Wait, the Sky HD salesman on the high street makes us a third world country? Am I reading the Daily Mail? Oh I remember now, Dan Atkinson is the economics editor at the Mail on Sunday. I know some people like this sort of thing, but the tone of tabloid indignation undermines the very serious points made later in the book, where that style suddenly disappears.

More than that, I think the idea that Britain is becoming an undeveloped country rather misses the mark. Our national decline isn’t about development somehow peaking and then reversing back to third world status. It’s more that we’re an over-developed country. We’ve achieved a decent standard of living for everyone, but our economy still rests on economic principles developed at a time when poverty was very real, and growth was necessary and urgent.

The economists that formulated those techniques knew that our challenges would be different from theirs. Adam Smith recognised that there would be a time when a country reached “its full complement of riches”. Keynes wrote about solving “the economic problem” and what you could do next. John Stuart Mill wrote about the end goal of development, a transition to social rather than material progress. Perhaps JK Galbraith identified the problem of overdevelopment best in his 1958 book, The Affluent Society.

The real challenge is not how to restart growth, but how an economy reaches maturity, stabilises, and progresses to qualitative rather than quantitative growth. This is the challenge Japan has been denying for the last 15 years, and the stage Britain is reaching now. Elliott and Atkinson are right to call time on our delusions of national grandeur, but they’re not nearly imaginative enough in describing where we go from here.


  1. “Elliott and Atkinson are right to call time on our delusions of national grandeur, but they’re not nearly imaginative enough in describing where we go from here.”

    Nobody knows where we go from here. And nobody has the imagination to imagine let alone invent it. THAT is the whole point of their book. “The cupboard is bare”, as they say. THIS is what makes Britain a potential (or actual) ‘third world country’.

    That and the fact that any and all money-making enterprises in Britain are now all owned by non-British. We have sold the family silver, along with the gold bullion.

    And so, what do YOU offer as a ‘solution’ ?

  2. I don’t have a ‘solution’, and there isn’t one to the problem that the authors describe. My point is that they misdiagnose the problem. There is no way to return Britain to its glory days, but that’s not what’s called for.

    As I hint at in my last paragraph, we need to let go of the idea of somehow ‘competing’ in an imaginary league of nations, and pursue qualitative rather than quantitative progress. That’s what maturing economies need to do, and economists of the past foresaw that time, as I mentioned.

    What does that mean in practice? Equality, education, participative democracy, civil liberties – prioritising good lives and not worrying about our place in the world.

    1. Just come to your site following search on Larry Elliott-almost finished reading ‘Going South’, and agree with much of your summary, however (there is always an however), the United Kingdom and its Government is now controlled by the European Union who in turn are controlled by big business, giant corporations and massively wealthy banking elitists-stale mate.. As you point out the nation has to accept that it cannot compete in any imaginary league of nations and indeed a qualitative rather than a quantitative structure should be sought but unlikely in the foreseeable future.
      In or out of the EU, Britain will still struggle either way and especially as it is now in an overpopulated state bringing an infrastructure groaning under such stress.

      1. We’re still very much in control of our own economic policy – the EU doesn’t dictate budget decisions to the UK. And big business influence starts right here, not at EU level.

        But I take your point, with or without the EU, Britain is not going to be a global leader in the 21st century the way it was in the 19th or 20th.

  3. “Others succeeded, like the Thatcher government’s championing of the City.”
    I’m assuming that you’re using “succeeded” in a very loose sense.

    1. Yes, the success lay in picking a sector in which they could be competitive. In no way an endorsement of all that the City has become!

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