Why is US GDP per head more than double the EU’s? Why have the EU economies including the Uk grown only half as fast as the US all this century so far? The EU and the UK’s pro EU establishment have been content for this disaster to unfold, watching US GDP per head reach $92,000 with the EU limping to $44,000. Why do they rarely ask what European policy makers are doing wrong and why double up on all their policy mistakes?
The present UK government won with an attractive pledge to make the economy the fastest growing one in the G7 , which it just happened to be for the first half of 2024 after a long period of slow European derived growth.
Since getting into office it has gone about destroying jobs with high taxes and high energy costs. It bans new oil and gas investment and soon will stop the manufacture of all new petrol cars. It has furthered a productivity collapse in the public sector. It has launched a series of attacks on farmers, small businesses, landlords and others who try to make something happen and seek to serve the public. Predictably unemployment has surged, young people cannot get jobs, growth has stalled and the cost of living crisis rumbles on.
The growing gap between the US and the UK/EU owes a lot to the US policy of cheap energy and more domestic fossil fuel extraction compared to the EU policy of dear energy and closing down fossil fuels. The UK has seen an accelerating spate of closures of high energy using businesses under this government, with two refineries, petrochemical plants, ceramics factories, steel blast furnaces, a big fibreglass plant, vehicle manufacturing and others sacrificed in the name of net zero. The UK then imports these products adding to world CO2 rather than cutting it. US industrial gas is one quarter the price of Uk, so it is no wonder we cannot compete.
The UK is sitting on big reserves of onshore gas which could be extracted with suitable environmental protections. You can drill and install well heads far away from homes and can reward local communities with royalties. The government even refuses to get out readily available gas in the North Sea where there are underused pipes and available platform production capacity to speed up delivery of new sources and cut the costs. Gas is a crucial feedstock for chemical production as well as an energy source.
The growth gap grows as taxes rise in Europe and fall under President Trump. Only Ireland in the EU bucks the trend by having a much lower corporation tax rate, giving it GDP per head twice the EU level and filling its Treasury with so much more business tax as a result. Investors are drawn to low tax places. The rich list of world countries alongside the USA is mainly a list of low tax or energy rich small states like Singapore, Norway and Bermuda.
Another key to US faster growth is technology. The US has produced the leading giants of the digital revolution, whilst the EU has specialised in regulating and taxing them more, jealous of US success. The US has a positive entrepreneurial culture, spinning more great businesses out of universities. The UK shares some of that but this government wants to tax and regulate them so much that the talent is now fleeing the country in large numbers. Common law systems are more fkexible and friendly to innovation. Codified EU law can block new ideas. Aligning more with EU rules is putting us in a slow growth prison. .
Lower taxes, cheaper energy and fewer regulatory restrictions are a simple formula for growth which the UK establishment has no intention of allowing and spends much of its time denying. The Bank of England and the Treasury add to the misery by favouring boom and bust policies which disrupt investment. The Exchange Rate Mechanism EU boom bust of the late 1980s to 1992 did much damage. The lurch from Latin American style money printing this decade to the Bank losing us a fortune selling bonds it paid too much for is very costly and destabilising .
The planned EU re set reinforces all of the old failings of EU/UK policy making. Higher carbon prices and tougher emission trading schemes will accelerate the decline of energy using industry. More regulating of digital and media industries will reinforce US domination. Large contributions to EU coffers mean higher taxes and more people and businesses with money leaving. More young people and migrants coming to the UK will lower average incomes and exacerbate shortages of homes, water, power and roadspace.
The EU re set will make the UK a colony of the EU again with no rights to change or object to their laws and taxes. The EU system makes Europe a colony of the US technology giants who control so many things about our lives and businesses. Not a great policy and not a good time to fall out with the US. There is no willingness by the government to do any of things we need to do to reverse the widening growth gap between us and America.