A new podcast hosted by the founder of The Institute for Prosperity, John Mills, and Director Brendan Chilton is going live on all major platforms in the next few days. The Why the West is Failing Podcast discusses why the economies of Britain and other developed nations are stagnating, what needs to change to remedy this, and the policies that will make those changes possible.
The discussion will be conducted through the lens of JMI’s founder’s new book, Why the West is Failing. Each episode is structured around the topics discussed in each section of Mills’s new book. The first episode, which you can listen to below, discusses what’s gone wrong with the West’s economic model and the effects this has had on our society. Future episodes will discuss the sources of significant growth, the lessons history can teach us about growing GDP, and why and how we ought to aim for much higher growth.
The insights from the podcast and Mills’s new book offer a welcome perspective for The Institute for Prosperity. Central to the ideas in both is a belief in encouraging prosperity, growth, and equality in the UK, as well as improving economic activity and job creation in the country’s neglected regions outside the South East. Mills and Chilton make a clear case for the vital role of manufacturing in this endeavour and the need for a more competitive exchange rate to make it possible.
We are pleased to share the first episode, which you can listen to below. The rest of the podcast will be released every Monday, Wednesday, and Friday over the course of the next two weeks and will be available on all major streaming platforms.
Brendan: Welcome to the Why the West is Failing podcast. I'm Brendan Chilton, Director of the John Mills Institute for Prosperity, and I'm talking with John Mills, entrepreneur, economist, and businessman about his new book Why the West is Failing.
The UK economy is in dire shape, facing a cost of living crisis and a looming recession. If we don't tackle this problem, living standards will continue to fall and we won't be able to invest in our public services and pay for the costs of issues such as climate change and social care.
John's new book outlines the economic lessons we can learn and the policies we should adopt to re-energise our failing economy.
In this first episode, we will speak about the slow economic growth of Western nations, including our own, and inversely the rise of the Eastern economies.
John: Thanks, Brendan.
Brendan: Before we speak about policymaking and how economic growth is sparked, what factors do you think have led to the slow economic growth of Western nations?
John: Well, I think the really big problem that the Western nations have had is that they've allowed themselves to become uncompetitive with the East. The result is that manufacturing has decamped away from the West to Eastern nations, we've de-industrialised – even as late as 1970 – about 30% of our GDP, our national income came from manufacturing. Now it's down to less than 10%.
The problem is that most increases in living standards come from productivity increases in manufacturing. So the less manufacturing you have, the slower the rate of economic growth and that's exactly the problem that we've got.
As we've de-industrialised, the growth rate's gone down and down, and now we're in a situation where we've got barely enough economic growth to stop the economy actually contracting.
Although actually over the next year or so it probably will go down quite considerably, and I'm not sure it's gonna bounce back all that fast either.
Brendan: And John, do you think there's an appetite for the sort of changes that politicians need to adopt to get manufacturing back up, is there that interest in Westminster now to revive manufacturing?
John: Well, I think there is quite a lot of interest in the idea of reviving manufacturing. The problem is how to get it done. I think there's very little in the way of ideas in Whitehall or elsewhere in the academic world or the world of economists about how to do it.
But the book that I've written does cut through this and does provide a clear reason for why we've done so badly and what we need to change to get it back.
Brendan: How has the policymaking in the West encouraged this position, this stagnation that we're in right now?
John: Well, I think the real problem with the policymaking in the West is it's concentrated on trying to keep inflation down to a very low level, which it obviously hasn't done very successfully.
But the policies that you have to implement to do that are ones which stifle economic growth, and the reason it stifles economic growth is it pushes up the exchange rate, the cost base, the amount that we charge out in overhead costs for manufacturing in the UK to far too high a level, making us uncompetitive. The result is we lose share of world trade, we de-industrialise, and the growth rate goes down and that's the problem that needs to be tackled.
Brendan: And John, are you encouraged in any way by any of the announcements coming out of Whitehall at the moment? We've obviously got the leadership contest, we've got the Labour Party as well developing its policies. Is any party at the moment, making any comments about how we can reverse stagflation?
John: I think there's a real problem which is right across the political spectrum.
There's an aspiration to try and get the growth rate up, there's some interest in doing this by having a manufacturing revival, but there's very little idea about how to get that to happen. And I think the real problem that the British economy's got is that manufacturing is just unprofitable in the UK because the exchange rate's too high.
As a result, investment is pitifully low compared to what it is in many other parts of the world, we invest about 17% of our GDP every year, the world average is 25%. In China, it's well over 40% and as a result, they're growing far more rapidly than we are. That's our problem, and until we tackle it, until we make the British economy a competitive place to site new industrial capacity – we're never going to overcome these difficulties.
Brendan: So John, You've spoken a lot about investment and productivity. How do those two things interact to spark economic growth?
John: Well, it's a question of what produces economic growth. Some of it comes from better education and training, more patient capital, infrastructure, that kind of thing, but actually – very little, maybe half a percent or 1% per annum at best.
Most economic growth comes from investment, particularly in technology, mechanisation and the use of power. These are intrinsically things that tend to find their home in manufacturing, and this is why you need a reasonable proportion of GDP coming from manufacturing to achieve a reasonable growth rate.
Brendan: Well, John, that was a really interesting discussion. Thanks very much for your insight on these issues.
John: Thanks Brendan and thanks to everyone for listening.
If you want to buy a copy of my book, please go to whythewestisfailing.com.