Why is the UK so poor compared to the US? | Hacker News Reader

Why is the UK so poor compared to the US?

sporadicmusings.substack.com

20 pointsbarry-cotter52 comments

The reason that the UK is poor is because it a) lacks the natural resources of the US (including land). 66M people live in the UK, but 60M of them live in England, meaning that England has 428 people kM^2 - California is 250 or so, the USA overall is 92.

but also b) which is that after the second world war there was a long period of under-capitalization for all elements of the economy apart from defence (arguably). Like the rest of Europe the UK was broke and devastated after WW2 - both in terms of fiscal and human capital. Unlike the rest of Western Europe the UK used its (very generous, TY USA!) Marshall payments to maintain it's navy during the collapse of the British Empire. You could pretend that this was something that kept order during the imperial fall... but the reality was that it was largely a vanity project by a British state that hadn't come to terms with the world as it was or would be.

This meant that the UK's infrastructure and industry were much weaker than the rest of Europe's for the period from 1955->1985 or so, and the UK's poor fiscal position was compounded by its lack of competitiveness. This was changed by North Sea oil which created a substantial recapitalization and brought the UK back into something approaching competitiveness.

You big up the generous Marshall plan without even registering it was the Anglo-American loan agreement that ripped the wheels off the British economy following the war. The US had a choice at that point about whether it wanted to keep the British Empire alive and it chose not to, only the insight of the Marshall plan prevented it from sliding entirely into ruin but its effectively the "same" hand behind both acts and I believe any "thanks" is diplomatic drivel for the sake of a world of US hegemony.

> a British state that hadn't come to terms with the world as it was or would be.

Brexit demonstrates this still isn't the case among the boomers who were brought up on post-war culture that celebrated the victories and "glory" of war which avoiding the ugly non-PG-13 parts that provide the much needed context of those pyrrhic victories.

Political union doesn't eliminate war, especially when it exacerbates economic tensions which create conflict.

Author choses to pick on the housing crisis as the reason but that's an issue in most European metro areas.

Local politicians make use of archaic NIMBY laws to justify not building new housing in order to ensure the continuous inflation of the value of existing homeowners which they're also part of.

Yes, But London is ridiculous. A few years ago I looked at a one room crappy apartment of about 250 Square-feet, 10 subway stops outside of Londons circle line, and they wanted 625£ a week. At the time that would have been 4000$ and that would have gotten me a something considerably larger and nicer in San Francisco. When you start thinking of San Francisco as a good value housing option you know something has gone horribly wrong.

I love London in many ways, and at one point I was considering moving, but now, its just not reasonable. San Francisco has many faults, but at least its _the_ place to be in tech, so if that what you want to do, it might be worth it. London doesn't have anything (Finance, arts) you cant get in other places.

Dunno, not being murdered is a big one.

SF is 6.5 per 100k people, London is 1.8.

This is nonsense. Housing regulations in England are so bad that I absolutely wouldn't consider buy a property built in the last twenty years even before Grenfell happened and proved that thousands of our apartment blocks are death traps.

The crisis that hundreds of thousands are now suffering is being unable to buy or sell an apartment because they can't prove that it's not a tinderbox. As bad as prices are they are actually a secondary consideration.

This is a problem caused by a lack of regulation.

The regulation was/is there, it is just circumvented.

I hear that the democratic republic of congo has one of the world's best legal constitutions.

I also have a bridge across the thames that you might be interested in buying?

Grenfell wasn't caused by lack of regulation but rather, a construction firm that knowingly defrauded the regulators, and regulators that were in turn incompetent and easily defrauded. There is quite some shocking testimony related to that case coming out in the last year.

I've followed every day of testimony and at no point has there been any evidence that fraud (in the legal sense) was committed or that the regulators did anything except what they were statuarily required to do (and by that I mean nothing).

The testimony and finger pointing is shocking but the regulations (such as they are) have achieved their goal of sufficiently diffusing blame such that no one party is responsible for any of what happened.

The industry is self regulating and there are no legal powers to punish the guilty.

It's basically the same setup that the ratings agencies had for the 2008 crash, "buyer beware" (we even privatized the regulator). Nobody went to prison then either.

This has been the case long ago and for a long time.

The American colonies led Great Britain in purchasing power per capita from 1700, and possibly from 1650, until 1774, even counting slaves in the population. That is, average purchasing power in America led Britain early, when Americans were British. The common view that American per capita income did not overtake that of Britain until the start of the 20th century appears to be off the mark by two centuries or longer.

https://www.nber.org/papers/w19861

IMHO America enjoys many advantages that predestine it for wealth.

'Our housing shortage is the principal cause of poverty, homelessness, and it helps to increase crime.'

OK, I've been homeless and I can say with some confidence that is not caused by a 'housing shortage'.

Yes, housing can be expensive but, at the lower end, there is a great deal of state-subsidy. If you are already at the lower end then you're propably already living somehwere at the expense of the sate.

The reason you end up homeless is because you make a series of bad decisons that result in you hitting the floor with a bump. The causes of this poor decision making are manyfold but shortage of housing isn't one of them.

Circumstances and dumb luck are almost as important as bad decisions, or much more depending on the situation.

That said, I agree that the situation is much better for poor people in the UK than say in the US.

Housing _is_ expensive – it's not really a matter of debate, even at the low end.

By "state subsidy" I assume you mean council housing or equivalent. The current waiting list in my London borough says:

"With over 24,000 people currently on the Council's housing waiting list, the wait for a property is a very long one. There is a severe shortage of all sizes of accommodation in the borough, and waiting times are usually measured in years."

This does seem to be indicative of a shortage of housing.

(Also, there are _loads_ of reasons you may end up homeless, and many of them are entirely unrelated to "poor decision making" – this is a dumb stereotype that helps to make the problem worse.)

The people on the waiting list are already homeless, you are assuming? I would assume they are currently living somewhere which isn't as good or they are living with parents/sharing with friends, etc?

Lots of privately rented property is also sunsidised, btw.

I apologise for my dumb stereotyping, though I fail to see how I am making the problem worse? Do you have some experience yourself?

UK was rich because of the fortunes "looted" (along with the term) from its foreign colonies. No doubt they are getting poorer since they no longer have their colonies to milk.

and the US is rich because all that wealth was transferred to them during the European wars which it arguably joined so it would be able to receive payment for the eventual debt.

For reference: Britain was already using US credit in 1916 only half-way through the first Great War. All of the liquid wealth got blown in the space of two years due to the unexpected scale of the conflict.

The U.S. is not as rich as it seems. It all comes down to the trade deficits. The U.S. runs a monthly trade and service deficit of $60 Billions. This means that the U.S. consumes $60 Billions worth of goods more than it actually produces - monthly. Currently every single american gets statistically a monthly credit of $160 from abroad.

The total accumulated deficits are shown in the International Investment Position which is currently at -13 Trillion Dollars which are owed to abroad. Mostly China.

Of course this is not sustainable. And of course the american consumer will not be able to pay back this amount of money. So the escape route will be to declare bankruptcy when renewal and prolongation from the creditors will cease. It will come in form decline of the USD exchange rate and subsequent high inflation in the U.S without adjustment of income.

The question is not if but when. My best guess is not in the next 5 but within the next 10-15 years.

https://www.bea.gov/data/intl-trade-investment/international...

From looking at the news, the US seems far poorer in day-to-day terms. For example, searching "living in cars" then "uk" or "usa" gives some results for each. The UK ones mostly talk about "hundreds forced to live in cars", while the USA ones often mention "thousands living in cars in California". The GDP of the UK and of California are pretty similar (around $2.8 trillion in 2019).

That's why the guy wrote the article. California has 60% the population of the UK, possibly lower as actually nobody really knows how many people live in the UK. The official population stats are biased low by the government's own admission. Thus GDP per capita looks quite different.

How much of this is due to the distorting effects of tech firms is unclear but, according to the article, if the UK were a US state it'd be the second poorest. That's a problem. I am not entirely sure if those stats are reliable, however. Having spent quite a bit of time in the UK and USA it doesn't feel like there's an obvious wealth gap, so how are these things calculated? As a commenter observes, it's possible a lot of the difference comes from healthcare spending.

Homeless people in Britain can't afford cars.

Considering some of the poverty-stricken ghettos, shanty areas and the general wealth divide in the US (whatever it's very many other benefits and positives), this is a very oddly titled essay.

As for the housing crisis, we should maybe consider looking at the number of empty ones and those used as purely a financial instrument rather than homes before giving the free for all building go ahead the author implies.

How do you define poor? Spending power is more important.

The UK is a very cheap place to live. Yes there is a housing crisis, and fixing it will absolutely make citizens of London and the south east richer, but in terms of the rest of the country, it's not as crazy.

Ultimately I don't think you can compare how poor citizens of one country are to another unless you factor in disposable income, and spending power.

The UK is definitely not a cheap place to live even if you discount London.

I can cope with the UK financials.

While we don't have as much extreme wealth the US has, it's far better to be poor in the UK.

From a Global perspective, nobody in the UK is poor.

That's hardly relevant to anyone who is actually struggling. Someone else halfway across the globe having it worse than you doesn't make things better.

True, but poverty is relative is the point I was making.

I always like to counter "somebody is poorer than you so you should be happy" with "does that mean I should be unhappy because there are people richer than me?".

But, as somebody living in 2nd world I do get what the person you're replying to said, our countries and poverty often gets ignored (or worse, exploited) by westerners.

That’s not really relevant, though. Knowing that someone in a random part of the world has it worse is cold comfort when you have to chose between heating and eating, or when you are freezing to death on a street.

But if you have really any professional job at all, you'll get shafted on salary compared to the US.

In software, developers get ripped off big time in the UK and all of Europe really. Even after accounting for cost of living and additional costs in the US, you can earn 200% more salary there.

It's really no surprise all of the top talent get out as soon as they can. If they stay in Europe they're willingly throwing away millions of dollars.

I'm sure it's true at the top end - if you are a $500k pa dev in the USA you are going to be massively better off.

But if you are in the <$300k range I think that you are pretty likely to be as well off in the UK even though your top line pay is 1/2 or 1/3 of the USA rate... especially if you have kids.

The reason is healthcare. In the USA you can (with bad luck) get royally screwed if you have a health incident - even with good insurance. And employers are very wise to this, and so ditch employees who have that liability (ie are not 25)

So - yeah, at the top... but further down the pecking order it's not so clear.

I don't know what you've been reading other than fear propaganda posted on reddit, but that is an extreme rarity. All major software employers provide full insurance coverage.

Healthcare is a non-issue for software developers. Why would you take half the salary to get the same or worse healthcare (for very specialised needs you're better off in the US healthcare system, prime example of collateral damage in the UK system is Alfie).

There are A LOT of counterfactuals that would suggest some significant problems with the hypothesis presented in this article, even for those of us who think property price inflation is generally problematic/ inefficient.

May I suggest having the world's reserve currency, main military/economic power after ww2, the house prices/shortages/sizes in the wealthiest parts of the US (and the rest of the western world), and differences in distributions of wealth/ income/services/lifespans, natural endowments, etc as rather big elephants in the room in any discussion on this topic...

All of which would suggest the true answer is far more complicated, and gives credence to the old saying about there being a simple and wrong answer for every problem.

As Solow put it - "once you have begun to think about economic growth, it is hard to think about anything else".

After reading a lot of economic literature on this topic, my gut feeling is that endowments trump policy. Bad policy can ruin an economy, but good policy cannot make it boom. Factors like geography, historical path dependency, economies of scale, who your neighbors are, demography, cost of energy, technology or "brand recognition" - all matter far more than policies.

Finland may just as well have the best policies and the best educational system, it cannot outweigh the fact that it's a sparsely populated sub-arctic island in the corner of the world.

Economists are in the business of selling policy proposals. Clearly saying "policy actually doesn't matter all that much" isn't in their interest.

I'm interested in understanding the real basis for the underlying cause (and spoiler, I don't think the thinly-veneered idea that planning is too regulated is the answer)

What's weird is that this article says basically "I assumed it's because there is too much regulation but actually it turns out there is less than all these richer countries! Guess there's not any point in exploring that any further."

The regulation argument seems weak to me for two reasons:

1. As the article itself notes, the UK may not be the heaviest regulated now but for much of the 20th century it was regulated into abject poverty by post-war socialist governments, a problem that took 10 years of Thatcher to fix (i.e. wasn't really fixed until start of the 90s) and arguably the UK is still very far from a liberally regulated state.

2. By the time the underlying problem was fixed the steady growth of the EU and transfer of powers meant that the UK was unable to really deregulate relative to its peers to any meaningful extent. The article claims the UK is less regulated than other places in the EU but this can only be a small difference because such a vast quantity of regulation came from the EU Commission directly and had to be implemented regardless of the wishes of the local governments.

So if you think that regulation retards growth, the article doesn't really argue against this belief, because going from really bad to about average will necessarily still leave you lagging behind where you could have been.

This will unfortunately take a long time to fix. Brexit is an enabler, but the UK population has been subjected to decades of pro-regulation propaganda by the EU and plenty of people believe that things like GDPR or cookie laws actually are beneficial, evidence of European moral superiority and totally worth the cost. It would be easy to find Americans who describe the torrent of this sort of regulation as wealth destroying and ineffective bureaucracy, but such people are much rarer in British culture.

I'm optimistic about the UK's future, however. Brexit does mean now that the UK can have meaningful debates about quality and quantity of regulation, a debate that was rendered entirely moot whilst in the EU as the EU doesn't do political debate of any kind, and has a deeply embedded culture of regulatory mass-production. With real deregulation on the table again, the UK can in theory begin to catch up with the USA. Especially true because the USA seems to be slowly losing its cultural bias towards free enterprise.

Whether the UK actually seizes this opportunity or not is whole other question - the current Conservative government is not especially libertarian and just destroyed the economy through lockdowns. On the other hand, it is strongly incentivised to demonstrate the benefits of Brexit, and just had a 'big win' in the deregulatory space through vaccine policy. So it could go either way.

This article randomly pick numbers and makes an unclear and poorly explained point... Certainly there isn't an "housing crisis" everywhere in the UK and it is hard to see what it has to do with growth, not least considering that the UK population has in fact grown fast in the past 20 years or so.

> Indeed, during the 2010s output per worker only grew by 0.3%

The UK has a productivity problem but it's not caused by any "housing crisis". Mainly the cause has been the multiplication of low-pay, low-productivity jobs fuelled by immigration. For example in France manual car wash and valeting is basically non-existent while here in the UK it's everywhere.

Another problem in the UK is desindustrialization and a very large gap between London/South East and the rest of the country. London/South East are doing very well, the rest of the country not so much and has been left to fend for itself since the 1970s. If anything the UK needs a long term development plan with heavy state investment to bootstrap it, not further deregulation and withdrawal of the state.

The UK is too London centric and that's its biggest failing. If industry and government were moved from there like it in in Germany then they might be in better shape. But outside London the country is much poorer.

To go by GDP per capita is to assume that's a metric that accurately defines "wealth". It doesn't, and beyond broad strokes has nothing to say about a country's living standards.

Poor is a very poor choice of words. On average maybe, but there are many more actual poor people (as in living beneath the minimal standard of living in the country) per capita in the US than the UK.

Perhaps housing shortages lead to greater inequality, and it is that which leads to lower aggregate wealth.

For example, It seems to me the more-equal nordic countries do quite well in comparison.

What a random cheery picking of numbers and conclusions...

I don't get it. By what metric would the UK be the second poorest if it was a US state? By GDP it would be the second richest.

GDP per capita.

I want to know what logic he is using to determine how wealthy countries should be, relative to others.

The author used GDP per capita as noted in the comments on the page. Why not use a less clickbait title like "why is UK's GDP per capita lower than US?", his piece would have sounded less intellectually dishonest.

I do not think that solves the question. What is the reasoning behind the assumption that GDP/capita in the UK should be equal to that of the US? And why should it not be equal to say, that of Italy instead?

The author is assuming a certain "natural order of things" and placing the UK a few ranks higher than it actually stands.

The headline here is terrible. At least, the actual one is better ( “why aren’t we richer” instead of the very bad “Why is the UK so poor compared to the US?”), even if the post itself is not great.

because of american's imperialism

they sue you, destroy you from the inside, or apply trade restriction is you try to compete with them

just look at china

just look at alstom

just look at nokia

I didn't see where "poor" and "poorer" was defined. Did I miss it?

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