I recently came across some excellent articles discussing productivity issues in English-speaking countries. Paper with Ben Southwood, Samuel Hughes and Sam Bowman it begins by showing how the UK is lagging behind France in building things like housing, highways, subways, high-speed rail, nuclear power plants, and other types of infrastructure.
France and Britain are two particularly interesting countries to explore, as they have many similarities. Both have a population of between 65 and 70 million, and both have roughly the same GDP per capita. (The UK is slightly higher in nominal terms, France is slightly higher in PPP terms.) Both were important colonial countries, both had nuclear weapons, both were countries where a single dominant metro area played an unusually large role.
But there are also important differences. France is twice as large in terms of land area. France is also partially socialist. French workers are more productive, but work fewer hours, leaving the net per capita equal. Here is SHB:
France is well known for its taxes. Comparing employer-side taxes over and above what the employee actually sees, a French company would have to spend €137,822 in wages and employer-side taxes for an employee to receive a typical take-home salary of €100,000. 61,041. For a British worker to take home the same amount after tax (£52,715, equivalent to €61,041), a British employer would have to spend €97,765.33 (£84,435.6) on wages and employer-side taxes.
However, despite these high taxes, heavy regulations, and powerful unions, French workers are more productive than British ones – closer to Americans than to us. France’s GDP per capita is almost the same as the UK’s because French workers take more time off and work shorter hours.
What can explain France’s prosperity despite its high taxes and high business regulations? France can afford such a large, interventionist country because it does a good job of building things that Britain is blocking: houses, infrastructure again power supply.
Basically, Britain and France are doing one thing right and one thing wrong. Britain is fairly (and I emphasize slightly) good at encouraging people to work. France is very good at building capital. Within the EU, both countries are only in the middle of the pack in terms of GDP per capita.
So why is Britain so bad at building things? First of all, the latest problem. Britain used to excel in building houses and infrastructure.
It’s a long report, but there are three themes that come up over and over again:
1. Nimbyism
2. Excessive regulation and red tape
3. Wrong government production
The nimby problem that America faces in certain places like California and the northeast is a nationwide problem in the UK. And even if the projects are approved, Britain has the same kind of excessive regulation of new infrastructure and energy projects that we face in the US, which makes the costs very high. And finally, big governments tend to be more wasteful than local governments or private firms:
French cities pay 50 percent of almost all mass transit projects they are involved in, and sometimes 100 percent (with regional and national governments contributing the rest). Undoubtedly, they then fight hard to suppress inflation, and often succeed. The Madrid Metro, one of the best projects in the world, was fully funded by the Madrid region. The smaller and poorer London borough managed to fund 203 kilometers of metro extension with 132 stations between 1995 and 2011, almost 13 times the length of London’s Jubilee Line Extension at the time. Some countries still use private infrastructure delivery systems: Tokyo’s transport network is delivered, and constantly expanded, by private companies that finance development by speculating on the land around the stations. France’s excellent motorway system is built and maintained by private companies, which they manage with enthusiasm and financial discipline.
In Britain, the centralization of infrastructure delivery in national government has weakened this incentive. No public body will ever have a vested interest in cost control by a private individual. But the national government also has a weaker interest in it than the local government that is responsible for the finances, because the costs are shared by more voters.
The second article is Matt Yglesiasand shows how government regulation reduces the efficiency of the public sector. I suspect that these findings will surprise many people on the left and right, who (depending on your perspective) see government regulation as unduly crippling private industry, or preventing private industry abuses. Yglesias says they are both wrong, that regulations are more problematic in the public sector.
Some parts of the private sector are no longer really regulated (airlines), while others are tightly regulated (real estate), but the most regulated of all is the public sector. And this over-regulation of public companies is locking us in a bad mess. First, we make it more difficult for public institutions to do their job. Second, this leads public sector companies to develop a reputation for inefficiency. Third, the low public recognition of public sector work leads to a selective exodus of ambitious individuals. Fourth, elected officials in a hurry to act often seek ways to bypass existing public sector institutions and degrade them.
And what’s really needed isn’t more money or more take on how free markets are out of control or a new anti-growth paradigm.
What we need is a strong campaign to reform the public sector to increase the likelihood that, when elected officials want the government to do X, X will happen in a timely and cost-effective manner.
Yglesias discusses how many counterproductive government regulations only apply to the public sector, not the private sector. This includes well-known examples such as the “Buy American” procurement laws and the Davis-Bacon labor laws used by the public sector, but extends to many other lesser-known examples of governments shooting themselves.
It is interesting to compare the British study with the post of Yglesias. Both reports seem to be produced by pragmatic policy wonks who would like to see more things built. But I would describe Southwood, Hughes and Bowman as central, while Yglesias is central left. To be clear, both parties believe that there is an important role for both the public and private sectors, but SHB clearly emphasizes the benefits of privatization, while Yglesias emphasizes how reforms to facilitate construction can help restore faith in the power of government. to do useful things. This may partly reflect differences in the type of government officials are trying to influence.
What I love most about these two articles is how they challenge long-held myths. Ben Southwood has a sense of humor twitter thread they make fun of the idea that France is more civil than the UK. Yglesias often uses the same kind of humor when he urges his readers to think about words like ‘regulation’ and ‘neoliberalism’ in a radical way, a way that is more relevant to what is happening in the real world.
PS. I suspect that some of the problems mentioned in these reports are also happening in other Anglosphere countries such as Canada and Australia. I hope the commenters in those places will talk about the topic. Why do English-speaking countries find it so difficult to build things? Our legal systems?