I’m a farmer, but I cannot deny that, as necessary as we are to producing food, the reality is that for us to become a more prosperous nation, we have to follow the history of the Industrial Revolution that started in Britain:
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Whether it’s roads, rail or nuclear reactors, Britain’s cost to build them is often multiples (not just a few percent) more than peer nations.
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Despite our economic differences the same rule applies here, as Sean Sweeney, former boss of the City Rail Link, showed in a shocking presentation in late 2023, New Zealand is the most expensive country in the world to build new infrastructure.

Given my primary focus on the USA I’ve been a bit surprised at how often my attention has been drawn to Britain since Brexit. I thought that was the only thing really interesting that’s happened in that sclerotic island nation since Thatcher’s day, and that Britain would drop back into boringdom.

But the reasons for continued attention are the economic similarities between us and the Mother Nation.

Starting with New Zealand, courtesy of the blog Down To Earth Kiwi, by economist Robert MacCulloch here’s a graph showing NZ’s economic growth over the last thirty years compared to that of the East Asia and Pacific nations in terms of GDP per capita.

Sure it’s GDP, which is a pretty shitty measure but at least enables crude comparisons between economies over time, as long as you’ve plugged in the local costs to produce the PPP (Purchasing Power Parity) GDP.

Forget the usual comparisons to Europe, the USA or other developed economies. The bottom line is that our local area of the world is growing faster than we are and has been doing so for decades now. In the 1990’s we were about 6x better, now, 30 years later we’re only 2x better and so in another 20 years we’ll be the same as them or poorer.

Good luck hiring Phillipino nurses for aged care homes in NZ when that day arrives.

Our productivity is poor, has been poor for a long time, and looks to remain so.

MacCulloch’s post was actually headlined with worse news than that, with his headline actually saying that the World Bank confirms 150 developing nations are on track to overtake us, not just East Asia-Pacific. He also makes this point about the advantages we’ve had, and still have:

What’s most remarkable to me is that a nation brimming with natural resources; a nation that never had the energy shock of Europe, which was dependent on Russian gas at the start of the Ukraine invasion (whereas NZ industry runs from hydro power); a nation that was meant to have succeeded in keeping Covid out; a nation with enough food to feed 50 million people (so we export most of it); a nation with zero illegal immigration so suffers none of the problems of Europe & America in that regard; a nation with no troubling neighbors with conflicts raging on our borders; a nation with a mild climate; a nation with a largely decent, trust-worthy, friendly and, despite some poor stats, mostly literate & educated citizenry, can have been so badly led & managed that our abundant advantages have been wasted.

This is where Britain comes into the picture, because this long article, Why Britain has stagnated, immediately sounds familiar in describing their situation:

Real wage growth has been flat for 16 years. Average weekly wages are only 0.8 percent higher today than their previous peak in 2008. Annual real wages are 6.9 percent lower for the median full-time worker today than they were in 2008. This essay argues that Britain’s economy has stagnated for a fundamentally simple reason: because it has banned the investment in housing, transport and energy that it most vitally needs. Britain has denied its economy the foundations it needs to grow on.
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Britain’s biggest problem is its low productivity – that is, the value of the goods and services people produce per hour they work. 

This poor productivity, leading to poor growth, adds up over time:

To put the shortfall since 2008 into perspective, if Britain had grown in line with its trend between 1979 and 2008, it would be 24.8 percent more productive today. Assuming we continued working the same hours annually, that would mean a GDP per capita of £41,800 instead of £33,500, making the typical family about £8,700 better off before taxes and transfers. Tax revenues would be £1,282 billion instead of £1,027 billion, assuming tax rates are held constant.

That’s the thing about those little 1-2% improvements every year: they add up over time, and usually well within our lifetimes; see the comparison with the USA just since 2008. Moreover when you have other countries beating you on that measure it is going to hurt you sooner or later – as first your own people depart for more prosperous shores and then when even immigrants turn up their nose at you.

What’s really interesting about the article is that it highlights how other nations, not just the USA but places like France, with high regulation and taxes, have done better than Britain even so:

…since problems in immigration, crime, childcare, tax, and political institutions are also found in exactly the countries that have pulled away from Britain economically since 2008. Nor can austerity or the hangover from the financial crisis explain Britain’s malaise. The financial crisis was at least as turbulent in the United States as here. And austerity was at least as tough across Europe, which also had to fend with the euro crisis.

So if Britain can’t replicate the USA what about copying some aspects of the EU nations? Privatisation was done by Thatcher forty years ago (as here) and there isn’t much left to do in that area, so that’s not going to help:

But crucial parts of the economy were still left unfixed – notably land-use planning policy, which Thatcher’s Environment Secretary Nicholas Ridley had tried and failed to reform, and which Tony Blair’s government was unable to make a dent in either.

Sounds familiar to our RMA. The article boils Britain’s problems down to five crucial areas – and shows some surprising comparisons with a nation across the channel, especially with the first three:

  1. Housing and land use
    With almost identical population sizes, the UK has under 30 million homes, while France has around 37 million. 800,000 British families have second homes compared to 3.4 million French families.

    Remember that the next time people start yammering in NZ about all those “second homes”. There’s also a graph about the collapse of private home building after the passage of their “Town and Country Planning Act”, which has awful similarities to our Resource Management Act (RMA):
    “Overall, it moved Britain from a system where almost any development was permitted anywhere, to one where development was nearly always prohibited.”
  2. Energy
    Per capita electricity generation in the UK is just two thirds of what it is in France (4,800 kilowatt-hours per year in Britain versus 7,300 kilowatt-hours per year in France) and barely over a third of what it is in the United States (12,672 kilowatt-hours per year). 
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    Between 2004 and 2021, before Russia’s invasion of Ukraine, the industrial price of energy tripled in nominal terms, or doubled relative to consumer prices.
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    “By 1965, Britain had more nuclear reactors than the rest of the world combined…”

    NZ is a shade under 8200kWh per capita so we’re in good shape on that front, but only thanks to our hydro-power history. A future of wind and solar farms is not encouraging, as Britain is starting discover:

    You may have noticed (with some alarm) that UK electricity generation is to be fully decarbonised by 2030, which means we have to quadruple offshore wind from 15 to 60 gigawatts (GW), double onshore from 15 to 30 GW, and triple solar power to 40 GW. These are, they admit, hugely ambitious targets. They are in fact not only ambitious but run counter to everything we know about our weather and the orbit of the earth.
  3. Transport.
    The cost difference between Britain and Europe on cost-per-km of rail or light rail (“tram”) is extraordinary: 4-8 times and 2.5 times respectively. On roads an example is given of a proposed tunnel under the Thames connecting Kent and Essex where the application process alone is at £297 million, more than twice as much as it cost in Norway to actually build the longest road tunnel in the world.

    I haven’t dug into the data for NZ, but I’d like to think were more Europe than Britain. I did crack up at this piece of history:

    From the eighteenth to the early twentieth centuries, Britain had easily the best transport infrastructure in the world. In the eighteenth century, a total of 1,116 private companies built and renewed 22,000 miles of tolled roads, while other companies dug 4,000 miles of canals. The result was by far the best transport system in Europe. In the nineteenth century, Britain built a system of railways that is still impressive today, despite having hardly been added to since 1914.… London had an extensive underground railway system in the 1860s, almost four decades before the first underground metro line anywhere else in the world. In fact, the word ‘metro’ for underground railways comes from the Metropolitan Line, the world’s first.
  4. Healthcare.
    The National Health Service (NHS) is broken and becoming more so every day, despite taking an ever-increasing chunk of the nation’s wealth. Hence this article arguing that replacing it has become a matter of life or death, pointing out that the usual comparison to the USA (“people die because they have no money”) is strawman bullshit given that the Social Democrat EU nations don’t run their healthcare systems like Britain does:  “The NHS is a political organisation that delivers a mediocre health service as a sideline. The United Kingdom is run for the benefit of the NHS rather than the reverse, the reverse being how health services are run in other countries”.

    The article contrasts the just-announced Starmer ten-year plan to fix it, which follows the long-forgotten ten year plan of Tony Blair from over twenty years ago. As in that case the proposers will be long gone by the time the failures turn up.
  5. Education.
    “There is no consensus about what our higher education system is supposed to do, who should benefit from it, and who should pay.“
    Their school test results are not as bad as ours but not as good as Europe and their universities are holding up, as ours are not.

All of this is why Britain is falling behind, and although health and education play a role the article reckons that progress can be made faster with housing, energy and transport because all three suffer from the same flaw: it’s just too difficult and costly to do anything, build anything – and the people trying to do it are ill-educated and/or incompetent. The advantages that France has in energy (courtesy of nuclear power), housing and transport outweigh their high tax and union power (and even their own problems in healthcare and education). I loved the photo of French strikers:

…strikes are so common that French unions have designed special barbecues that fit in tram tracks so they can grill sausages while they march.

So what is to be done for Britain (New Zealand)? Start with this basic understanding:

No individual by themselves can create much value, no matter how gifted or hardworking they might be. They need to combine their efforts with machinery and other people to really succeed. Investment rates determine the amount and quality of the tools they can use; energy costs determine how they can use them; and agglomeration – including both housing and infrastructure – determines who they can use them with.

The article has an enormous amount of detail about all this, the details of which are specific to Britain, but there are lessons here for New Zealand, like this pictogram:

A cartogram (from the Office for National Statistics) of the number of jobs around the country. Dark red are highest paid, then light red, then grey, then light blue, then dark blue. The average job in dark red areas pays about double as much as the average job in dark blue areas.

I’m a farmer, but I cannot deny, that as necessary as we are to producing food, the reality is that for us to become a more prosperous nation, we have to follow the history of the Industrial Revolution that started in Britain, starting with a willingness to accept agglomeration:

It is inconceivable that Britain could have had the Industrial Revolution if it had banned workers from moving to the coalfields of South Wales and Yorkshire and the textile factories of Lancashire. It is not an exaggeration to say that Britain could be forgoing its role in another industrial revolution today – that of artificial intelligence, biotech, and related technologies – by making the corresponding mistake.

The article has another graph comparing the cost of residential land and the buildings on it – one of the things that leads to the graph above – across the US, Britain and EU nations, but also including Australia. The latter has the largest disparity between the cost of building a home and the cost of the land. Were NZ to be in that graph we’d be worse than Oz.

This is why Gen-Z kids can’t buy houses in NZ (and Britain, and TBF, increasingly the USA). The following is for the Socialist wankers of State Homes belief:

Same with transport:

That wasn’t done by the government:

If every property owner on the route of a railway can play holdout, it is extremely unlikely to be practicable to buy them all out voluntarily. Until the 1940s, these powers were created through private Acts of Parliament: a select committee considered requests for compulsory purchase powers from the project’s promoters, and if they believed the project was in the national interest, they created an ad hoc law giving the promoters the powers they needed to make it happen. This system was extraordinarily swift and inexpensive: the planning process for major national projects generally took months.

Useful government! There’s a whole section on this massive infrastructure development in the 18th-19th century that was entirely private sector.

Nowadays Britain has these issues (and note again the comparison to NZ)

  • “We gold plate designs…”
  • “We waste money on newt and bat surveys…” (the 18,000 pages, costing £32 million, on reopening just three miles of track for the Bristol-Portishead rail link, The Jubilee Line Extension’s environmental statement in the early 1990s was just 400 pages long.)
  • “Judicial review…”
  • “We often redesign projects multiple times…” (hello Dunedin Hospital)
  • “We have a ‘feast and famine’ approach.” Which leads to nasty business costs.

Whether it’s roads, rail or nuclear reactors, Britain’s cost to build them is often multiples (not just a few percent) more than peer nations. As a result the solution may be a lot more simple than all this complex pain would imply:

To do so, it need simply remove the barriers that stop the private sector from doing what it already wants to do: build homes, bridges, tunnels, roads, trams, railways, nuclear power plants, grid connections, prisons, aqueducts, reservoirs, and more.

The immediate effect would be large increases in employment in construction, energy, real estate, plumbing, factories, steelworks, cement production, surveying, architecture, design, and more. It would mean large inflows of capital to invest in these newly available opportunities.
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Get Britain building by removing barriers and lowering costs. If we can establish these foundations, growth and dynamism will follow. We have done this before [1930’s]. We can do it again.

Despite our economic differences the same rule applies here, as Sean Sweeney, former boss of the City Rail Link, showed in a shocking presentation in late 2023, New Zealand is the most expensive country in the world to build new infrastructure.

Replacing the RMA is start.