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Old 03-07-2023, 07:09 AM   #1
grumpyskeptic
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Why does the UK have almost zero economic growth?


Why does the UK have almost zero economic growth?

https://www.bbc.co.uk/news/business-64661791


In my opinion it is because -

1) In the UK people are considered to be morally bad nasty people if they strive to become wealthy. This would be correct if wealth were a zero-sum game, where getting wealthy meant making others poorer, but if that was true then we would all still be living in the stone-age without any new wealth ever having been created.

If only the state should create wealth, then places like the old Soviet Union and North Korea would be the wealthiest places on earth, and clearly they are not. Disregarding current politics and human rights, in China in recent years the large number of new billionaires and the rocketing living standards of the population is further confirmation that ambitious people create wealth both on the big scale and the small scale.

Another mistaken view is that things naturally get better all by themselves without requiring any effort or thinking by individuals, as if the world was a giant television soap-opera.

Note that rather than super-wealth being suddenly created overnight by some headline-grabbing invention, usually wealth is created quietly gradually and slowly over decades. And the details that directly affect people improve on a small scale by the investment and improvements of individuals, not just the bigger things done by companies or businesses.

2) Getting wealthy requires holding assets for many years or decades and then selling them. Holding working assets is a good thing because their users make use of them and benefit from them, not just the owner. An exception is storing old oil paintings or diamonds etc in a cupboard as an inflation hedge and never benefiting others by putting the money to work.

But the high UK capital gains tax of 40% (compared with 20% in the USA) means it is not worth holding assets for decades because the combination of high taxation and inflation (which you are also taxed on) means you end up being poorer in real terms than when you started. So why bother.

3) The bread and circuses ratchet. I have known many able people living entirely on benefits as a career without ever working - or welfare as I believe they call it in North America - and they have all lived in comfortable warm homes with good furniture and more free entertainment than you can shake a stick at. None of them have been underweight, the majority of them have been overweight. I read somewhere recently that 60% of the UK population receive more in benefits than they pay in taxes, and only 40% pay more in taxes than they receive in benefits. Of course if you are on benefits and you smoke, drink, gamble, keep dogs, drive a car, have a lot of subscriptions etc, then you are going to be short of money. Benefits are a ratchet as vote-seeking politicians do not dare lower them or make the eligibility criteria less generous.


Have we all got to be impoverished because politicians think a few voters might suffer from financial envy?

Last edited by grumpyskeptic; 03-09-2023 at 03:44 AM.
 
Old 03-07-2023, 10:01 AM   #2
hitest
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Quote:
Originally Posted by grumpyskeptic View Post
Why does the UK have almost zero economic growth?
Brexit comes to mind. Perhaps a course correction is needed in economic policy?
 
Old 03-07-2023, 11:25 AM   #3
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In answer to your subject only, and not the meat of your post: two things could be involved
  1. Brexit, for reasons that hardly need explanation.
  2. Over the last millenium Britain has colonised many lands and exploited the resources of those colonies. In fact Britain Inc. did make itself richer and those other countries poorer, and used things like the East India Company for the purpose. No examples are mentioned, because this is history, and nothing personal, but life wasn't good for those being colonized. Now those countries are no longer cash cows for the British economy - often the reverse.
  3. Both Ireland and Britain suffered collapse in the manufacturing sector in the latter half of the 20th century. At a certain point,Ireland repositioned itself and stopped seeking low skilled manufacturing jobs. Instead, Ireland invested significant amounts in internet connectivity, and courted technology companies, pharmaceutical companies, anyone in a highly skilled sector and certain niche markets. New University departments were founded and well equipped. Others were expanded. These issued degrees in Animation, for instance and trained on the latest software. Irish companies have been behind or involved in some big Hollywood films. Computer science has been pushed hard as a career option, as the pharmaceutical sector. So our qualified young can get jobs worldwide. A favourable tax regime attracted in the Corporate HQs of Apple, Google, Meta, and many more. England has not adapted as well, so the collapse of the manufacturing sector hurts England more. With good internet connectivity, an abundance of graduates, and a willingness to cater for a company's needs, Ireland does well. And it's in the EU - a big selling point.

Here's an example. In autumn 2022, England & Ireland announced generous budgets to cope with inflation. I don't know how much England borrowed, but the Irish Government blew the most of it's €6 Billion budgetary surplus, largely due to inflated corporate tax returns. They have some left over, and expect another windfall this year (but not thereafter).

Last edited by business_kid; 03-07-2023 at 11:28 AM.
 
Old 03-07-2023, 11:42 AM   #4
uteck
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Need to back further then Brexit https://en.wikipedia.org/wiki/Econom...lative_decline
It's like an avalanche, starts small and builds up over time.
 
Old 03-07-2023, 12:10 PM   #5
fatmac
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I'd say it was down to lack of decent living wages - the rich continue to milk the profits, instead of investing for the future.

The rot really set in in the 70s, when it was considered OK to grab everything you could for your own personal gain - the Thatcher era!

It's been downhill ever since - she gave the rich 59% off their tax bills - the Country went into steep decline, as the funds started to run out, & we are left in the state we are in now!
 
Old 03-07-2023, 12:32 PM   #6
business_kid
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Quote:
Originally Posted by uteck View Post
Need to back further then Brexit https://en.wikipedia.org/wiki/Econom...lative_decline
It's like an avalanche, starts small and builds up over time.
That link points at a long depressing but thorough list of reasons. It's required for all those with half a day to spare.
 
Old 03-07-2023, 05:32 PM   #7
dugan
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Quote:
Originally Posted by grumpyskeptic View Post
1) In the UK people are considered to be morally bad nasty people if they strive to become wealthy.
You seem to be implying that that's actually stopping anyone. What a strange thing to say.

And let me see if I understood the rest. You've observed that no-one in your country is visibly starving, you think that's a bad thing, and you think it would be better for "everyone" (by which you mean yourself) if that changed. I now have such a good picture of what your internal life is like.

Last edited by dugan; 03-08-2023 at 09:48 AM.
 
Old 03-07-2023, 09:51 PM   #8
ntubski
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Quote:
Originally Posted by grumpyskeptic View Post
2) Getting wealthy requires holding assets for many years or decades and then selling them. Holding working assets is a good thing because their users make use of them and benefit from them, not just the owner. An exception is storing old oil paintings or diamonds etc in a cupboard as an inflation hedge and never benefiting others by putting the money to work.
Can you give examples of working assets that one could sell at a profit? I think most working assets depreciate over time.
 
Old 03-08-2023, 02:13 AM   #9
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Wealthy people only borrow money when the investment they have in mind for those funds will have a positive return. Consumables they buy with cash so they aren't adding on the cost of interest as an additional loss.

People living paycheck-to-paycheck routinely must borrow (at often inflated interest rates such as for automobiles) sometimes nearly doubling the final total expenditure.

Yes the old adage "The poor have poor ways" is true but it extends way beyond silly choices, bad odds "investments" like lotteries, and even those are just a measure of desperation created by not having an income that can even approximate stability and security. Add to this the pressure to engage in contraband and other illegal activities because of the windfall profits, so compelling that even some wealthy individuals and governments are seduced by such returns, and the self-reinforcing damage that poverty can create gets clearer.
 
Old 03-08-2023, 06:01 AM   #10
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In fact there are a lot of ways in which the poor are penalised. For example, in the UK, most people pay their utility bills by direct debit from their bank accounts. But poor people, who often don't have a bank account, have to use prepayment meters. And, whaddyaknow! The rates for these meters are systematically higher than when you pay by direct debit, or even quarterly by cheque. Furthermore, if you do pay by direct debit but you run into debt, the companies will try to force you to have a prepayment meter installed. Until recently they were even breaking into people's homes to install the meters by force, though that has now been declared illegal.

Similarly, a middle class person who needs to borrow money can get good terms from a bank or building society. That after all is how most people buy their homes. But poor people are bad credit risks so they have to take out a high interest loan from a doorstep lender or visit one of those stores that rent out household equipment at extortionate rates.
 
Old 03-08-2023, 09:50 AM   #11
dugan
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Quote:
Originally Posted by ntubski View Post
Can you give examples of working assets that one could sell at a profit? I think most working assets depreciate over time.
One member here owns a website called LinuxQuestions.org. I would imagine that that's a good example.

Last edited by dugan; 03-08-2023 at 10:01 AM.
 
Old 03-09-2023, 11:39 AM   #12
leclerc78
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Because the Brits are smart.
They export their pollution elsewhere starting in the 1960.
NB: I am not anglo-saxon and not a fan of their lack of 'joie-de-vivre' culture.
 
Old 03-09-2023, 09:26 PM   #13
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I thought Jon Stewart's interview with Ian Hislop was most telling and likely quite accurate regarding the mistake of embracing Populism which apparently caused disastrous losses (as usual) just like it is here in the US.
 
Old 03-24-2023, 10:15 AM   #14
grumpyskeptic
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Correction - The CGT rate is lower than I thought it was, but still too high and twice what it once was under Labour. One of the bad things about CGT is that if you accumulate a small amount of gain per year over 30 or 40 years, then you get taxed as if you had all that gain in one year and every year.

Last edited by grumpyskeptic; 03-26-2023 at 08:16 AM.
 
Old 03-24-2023, 10:17 PM   #15
ntubski
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What do you mean by "every year"?
 
  


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