Lessons from the Old Country

The British brought a lot of good (and bad) things to Australia, but perhaps the common law – an institution that governs how we interact with each other to this day – tops the good list. Back in 1914, American legal scholar Roscoe Pound famously wrote that:

"Perhaps no institution of the modern world shows such vitality and tenacity as our Anglo-American legal tradition which we call the common law. Although it is essentially a mode of judicial and juristic thinking, a mode of treating legal problems rather than a fixed body of definite rules, it succeeds everywhere in moulding rules, whatever their origin, into accord with its principles and in maintaining those principles in the face of formidable attempts to overthrow or to supersede them."

But while durable, institutions can decay, especially when the political incentives are to find ways around them. These days not all is well in the Old Country, and I think there are some lessons Australia can learn about what not to do if we want to avoid a similar fate.

Thankfully for us, the British are much further along the road to institutional decay than Australia, largely because it's the source of many of the bad ideas that caused it, and – as the proverb goes – a fish rots from the head down. But Australia is also the "lucky country", endowed with natural resources, vast amounts of space, and a more favourable climate, allowing us paper over many similar deficiencies – at least temporarily.

The state of Britain

Plenty has been written about how bad the economic situation in Britain has become, and why. So, it shouldn't have come as a surprise to anyone that after 14 years in charge of public policy, the Conservative government was recently turfed in favour of a new Labour government promising to reform problematic sectors such as housing.

Will it 'fix' the UK's broken housing market? I'm doubtful, given that it appears to be "tinkering within the current system, rather than attempting the sort of big change like introducing a zoning system that has helped increase supply significantly in New Zealand and some US cities".

Sometimes you just need to rip it all up and start over. A new study of British stagnation pointed the finger squarely at the government's prohibition "on investment in housing, infrastructure and energy" as the cause of its lacklustre labour productivity: GDP per hour worked has grown by 7% since 2007, or just 0.4% a year. For context, Australia – which has seen virtually no labour productivity growth over the past decade – still increased GDP per hour worked by nearly 15% over the same period, double the rate of the UK.

While Australians have made up for their lack of productivity by working more hours to maintain living standards (hardly sustainable!), the UK has not, with participation rates back at 1992 levels, never recovering from the Covid shock:

The Poms are also less healthy than they once were, and it's getting worse. Alcoholism is on the rise, and amongst the young "tens of thousands are moving straight from university into long-term sickness... attributed largely to an 'acceleration' of mental health conditions post-Covid".

In older age groups, the "heightened loneliness and depression suffered during the lockdowns by this cohort, as well as a decrease in exercise and – again – increased drinking", has persisted into 2024. Alcohol-related deaths are at all-time highs, and the number of "economically inactive" adults continues to rise:

If you combine all of that with the country's soaring electricity costs, inability to build homes where the good jobs are located, and extremely expensive (by global standards) transportation infrastructure, then Britain's stagnation shouldn't really be a surprise. Decline through institutional decay is a choice, and it's the one Britain's politicians have been making since at least the Great Recession, although its roots go all the way back to 1947.

Planning to fail

A lot of the problems in Britain today stem from the Town and Country Planning Act 1947, which empowered local communities to restrict development while also dulling their incentive to approve projects by preventing them from receiving much of the resulting increase in local taxes, with predictable results: