The Saga of America and Britain’s Eerily Similar Self-Inflicted Collapse
Why Are Two of the World’s Richest and Most Powerful Countries in Such Deep Trouble?
Question 1: Where are you more pessimistic about, UK or USA? The UK economy is doomed — but as a society it’s still pretty civilised, US economy will remain strong but as a society it’s… not great.
Question 2: Last year you spoke a lot about the near-term collapse of the UK — food, healthcare, and so on. Where do things stand today in the UK regarding collapse and how does that compare to what you thought was going to happen?
America and Britain, Britain and America. The Romeo and Juliet of social collapse. Let’s talk about them for a second. That amazing chart is from the FT. It shows the slow collapse of the American middle class. And Britain, post-Brexit, is following hot on its heels.
When I speak to my British friends, they’re remarkably… blasé. Brits do this thing of just refusing to face reality, which is the basis of lot of good comedy, but in situations like this? Where does Britain go from here? The short answer to that is that it becomes an American Red State.
By now, you probably know all my predictions. About Brexit. The economy was going to tank. Etcetera. How bad is it? Britain is doing so badly, it’s actually mind-boggling.
I said that Brits were blasé for a reason. They’re avoiding facing this reality. Nobody much in British society really wants to admit it. Not Rishi “The Schoolboy” Sunak. Not Keir “He’s Not Exactly Luke Skywalker, is he?” Starmer. Not columnists (hi Piers!), not intellectuals, not…much of anyone, at least in the halls of power. So the average person knows things are bad, because, well, that’s how they feel. But how bad are they, really?
They are so, so bad. We have never, let me repeat never, seen a nation once in the upper leagues of development, prosperity, and democracy collapse like this. Apart from, of course, America, which I’ll return to.
Let me give you the facts. These are facts every British person should know. By heart. Be talking about, every afternoon, at the pub. Be able to recite, and challenge their moribund leaders with. To the economist in me? Seeing statistics like these is like watching a horror movie…a massive, highway wrecking crash…a jet go down in flames….it’s not just some kind of accident, it’s unique, historic, jaw-dropping. All these utterly breathtaking stats come from Britain’s own OBR — Office of Budget Responsibility.
Real household disposable income (RHDI) per person — a measure of real living standards — is expected to fall by a cumulative 5.7 per cent over the two financial years 2022–23 and 2023–24. While this is 1.4 percentage points less than forecast in November, it would still be the largest two-year fall since records began in 1956–57.
On a fiscal-year basis, RHDI per person, a measure of living standards, falls by 6 per cent between 2021–22 and 2023–24. And in 2027–28, real living standards remain around ½ per cent below pre-pandemic levels.
On trade and productivity, we assume that the volume of UK imports and exports will both be 15 per cent lower in the long run than if we had remained in the EU, reducing the overall trade intensity of GDP.
Business investment has stagnated in real terms for much of the period since 2016, such that on the eve of the pandemic it stood 16.2 per cent below our pre-referendum expectations (relative to its level in the second quarter of 2016).
We expect trade volumes to contract in the near term as the economy stagnates and growth in the UK’s major export markets weakens. In 2023, imports fall by 4 per cent, dragged down by lower consumption and investment, while exports fall by 6.6 per cent.
Now, maybe that doesn’t sound like much to you. More’s the pity, because Britain’s economists — are there any good ones left? — should be explaining to people how shockingly, mind-blowingly, hair-meltingly bad this all really is.
Exports falling by almost 7 percent in a decade would be a catastrophe. But in one year? Imports falling by 4% over a decade would be something of a calamity. But in, again, one year? These are unreal numbers. They’re the stuff of actual economic ruin. Outside of events like Latin American debt crises, I don’t think we’ve ever seen them, and certainly not in rich countries, with one exception, which is America, and we’ll come back to that.
So, your trade is falling by 7% in one year. But the problem of course hasn’t gone away. It’s still right there, which in this case, of course, is Brexit. Those decline are going to continue. Where will they end? It’s anyone’s guess. The British economy now has to reach a “post-Brexit equilibrium — a smaller one” I used to say. Here it is, doing just that. But even I didn’t think an economy — at least a developed, wealthy nation’s could do things like see trade fall by 7% a year. Imagine that kind of collapse goes on for a decade or so. What are you left with?
This isn’t just an abstraction. This is reality. Go to Britain, and what do you see? You see shuttered down stores and shells of what used to be thriving businesses. You see poverty having exploded right there, on the streets. You can see the pain and despair on people’s faces. You can experience nothing working anymore, not even the most basic social systems.
That is what “My God, I thought Brexit was going to be bad, but 7% in one year?” — cue teeth chattering — looks, feels, tastes, lives like.
It’s not going to stop. It’s going to just…roll on. Did my predictions bear fruit? Well, that depends. Me? Personally I feel miffed that I underestimated how fast the collapse would happen, but that’s just the cold economist in me. Sure, you can say I was “wrong,” if by wrong you mean “Mom!! Umair said it’d take a decade, and it only took five years!” What’s for sure is that we have never seen anything remotely like this stunning scale, scope, fury, speed of ruin, which again, let me emphasize, is completely off the charts, in nations at the top of the league of global development and power and wealth.
Except in one case, and that’s America. How bad are things in Britain? There’s been a huge surge of people buying American style “health insurance” from, LOL, literally American hedge-fund owned companies, because the NHS doesn’t work anymore — good luck seeing a doctor anytime soon. But of course American style “health insurance”…bled Americans dry.
Britain’s future is to become an American Red State. It already is. And America’s future is also, perhaps, to become One Giant Red State.
When I say “America’s Red States,” of course, Trumpist types think I mean that as a political judgment. Not really. Objectively, they’re terrible places to live. They have seriously, seriously low levels of what we’d consider modern development indicators. So things like maternal mortality or education or income or even as basic elements of a good life as longevity are…in dire shape. One famous statistic along these lines is that a kid born in Mississippi has worse life expectancy than one in Bangladesh now. That’s a comparison one shouldn’t stretch too far, but it sheds light on…
Living standards. America’s are — as we should all know by now — abysmally low. Compared to almost anywhere else in the rich world, and by now, many places in the world. Everyday life is marred by gun violence, debt is endemic, poverty is everywhere, life is a Darwinian struggle to best one’s neighbors who become rivals in a perpetual contest for basics, food, water, shelter. That of course goes on to shape social norms — and so America’s renowned for its cruelty and brutality, from “active shooter drills” to if you lose your job, and your home, well, you’re just left for dead.
But none of that makes for a very happy — or healthy society. Americans are profoundly unhappy, and the effect is worse the further down the generations you go, for the obvious reasons that if you’re young, growing up amidst this chaos and cruelty and nihilism, it hurts. Nothing matters in America but money. People have no intrinsic worth or value, life has no meaning, society has no purpose. Everything, and I mean everything, exists for one purpose, or is only allowed to exist for one purpose — “making” money from it, which piles up in the hands of billionaires, who use it to…LOL…perpetuate the madness of this vicious cycle. America’s a nihilistic society for this reason, and Americans often say “nothing matters” because nothing real — love, truth, beauty, justice, meaning, purpose, social bonds, life itself — is allowed to hold any value, because money monopolized existence itself.
That’s not some kind of moral judgment, again — it’s just reality. This set of values was institutionalized. Why are America’s living standards so low? Because America became the only rich society never to modernize. Unlike Canada and Europe, it didn’t build grand, leading-edge systems of public goods — healthcare, high speed transport, media, retirement, just go down the list of what are basic rights there, but not in America.
And it didn’t do that for a reason. Money. The idea was that the private sector would be more “efficient” at all these things, and so the economy would “grow” faster. Behind all this, there was an ugly undercurrent of hate. “I won’t vote for those people’s healthcare!! Those welfare queens! Even if it means I don’t get much of my own!” So the rich wanted this kind of anti-modern system, a social contract of no public goods — none — for money, and persuaded the middle and working class to go along with it for reasons of power. Those poor proles would at least have the feeling of being supreme, in a society without public goods, which force everyone to feel equal, to rub shoulders together, to walk besides one another, to share things in common.
But all that left America…devastated. Today, Americans have those abysmally low living standards because a lack of public goods turned out to be a triple whammy. One, Americans just don’t have things like high-speed rail or decent, stable jobs — this is an “incompleteness effect” in social science parlance. Two, those privatized public goods cost them outrageous sums — the canonical example, which makes the world shudder, is the million dollar medical bill, or getting charged for, LOL, crying in a doctor’s office. Three, all of that left America poor as a society.
Because Americans pay so much to the private sector, they have less and less left over to fund the public purse, and guess what — that’s right, the national debt exploded, because perpetual tax cuts were needed to keep this charade going. (And yes, at some point, America’s going to default, and then this whole game will be over.)
Are you beginning to see how the stories of American and Britain are linked? Let me make it clearer. Britain had it all. The world’s best healthcare system, not my opinion, objectively, it’s finest broadcaster, relative stability, a stable currency, the trust and good faith of the world, membership in the EU, the right to live and work across it. What are all those? Public goods — in fact, EU membership was a meta-public good, it gave Brits the rights to enjoy Europe’s grand systems of them.
And it threw all that away. Why? For more or less the same reason that Americans never chose to build public goods at all. The rich, smelling the scent of money, persuaded the average Joe and Jane that they’d be more powerful. If, instead of having all those things in common, they took them away. If they began to turn on Europeans — no longer cousins, friends, neighbors, but inferiors, hated enemies, lesser beings. If they began to despise the very immigrants who made up the NHS’s brave nurses, doctors, porters. If they began to regard themselves as superior to everyone else — Britain was only to belong to the “real” and “true” Brits — then they would be powerful again, and that sense of power, that thrill, that rush, would solve all their problems. That was more or less explicit in Brexit’s slogans — “take back control,” “Britain First,” “the will of the people,” the whole nine yards.
America and Britain’s stories are eerily similar. The rich sensed money in the absence of public goods — how much money does a nation of tens of millions of people paying through the nose for healthcare every single month, procedure, illness, instead of having it effectively for free, funded by all for all, add up to? Shockingly huge amounts, which is more or less how America’s rich became super rich, then ultra rich, now giga rich — just expand it across finance, real estate, politics, even tech, any industry, really. Sensing the immense fortunes to be made, the rich told the middle and the poor that they would have something worth more than money — power. If only they began to turn their backs on the modern values of truth, beauty, justice, peace. If they embraced spite, hate, bigotry, supremacy, rage, and even violence instead.
You can see where that’s led. But can you really see it yet? Britain’s having the most intense, violent, jaw-dropping meltdown probably since the Weimar Republic. 7% in a decade would be…bad…but in a year? Cue crazed laughter. Who can even grapple with that?
And so Brits are still in a daze, half-seduced by the demagogue’s spell, the killing pain of this particular hangover leaving them bewildered. America, meanwhile, is on the road to another Trump Presidency, and this time, should it happen, that’s the end of American democracy, full stop. That’s after he led a coup.
Most of us don’t see yet — at all, really — where the path America and Britain chose has led. Perhaps not you, dear reader — but in our societies, by and large, there is little to no understanding how gravely bad things really are. But they are, from our stagnant economies to our moribund politics to our societies, riven by hate and lies.
Consider how in America, neither side backs any form of public goods, from universal healthcare to affordable education — and then consider how in Britain, both sides, LOL, still back the lunacy of Brexit. This is like standing before your house, which is burning down, giggling, yawping, and pouring gasoline all over it.
And the places they end in are eerily similar, too. Britain’s not a wealthy country anymore — that’s a certainty now. But America’s hardly one, in the true sense, either. Have you read a Dickens novel? That’s where the story is going. To a kind of futurized Dickensian dystopia. Tiny Tim begs for money to pay for healthcare online. Oliver Twist dreams of growing up to be a hedge fund tycoon. Nicholas Nickleby’s out there churning out AI-generated “content” to make ends meet. Meanwhile, Scrooge and Uriah Heep are counting their billions. Gently drop a little Aeschylus on top — the moment of hubris, that led to the downfall. Add a dash of Orwell. Big Brother’s watching, and he says All This Will Make Us Great Again! And a sprinkling of JG Ballard — how thrilling does it feel, the car crash — and you’ve got the taste of it. The lure of it. The sexualized seduction of it, the rush of hate, the smell of money, the twisting heat of colliding metal. That’s why it happens. Happened. Keeps happening.
Britain doesn’t have a future. America, every time it gets a chance, gives up one all over again. Where does that story end? My friends, why do you think stories of human folly have been written, for so many millennia?
Umair
May 2023