Is Albion sinking?

Questioning the decline of Britain

Even before Brexit, and especially afterwards we’ve seen many articles claiming Britain is in decline. Even articles questioning the narrative of British decline don’t seem to put much effort in contradicting it but just mention that British decline has happened before, or has been claimed before, and it might be reversible.

I don’t share any of those two positions. I think Britain is not in decline.

What kind of decline are we talking about ? Most commenters mention economic, technological and scientific decline, so I’ll focus on those.

First, this is a graph of GDP per capita PPP comparing the five largest West European economies and the US from 1990 to 2021. By 2021 France and the UK have almost the same GDP per capita, both clearly higher than Spain and Italy, but also clearly lower than Germany.

The UK is the orange line. Source: https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.KD?locations=GB-FR-IT-ES-DE-US

But decline implies a process in time, a decline from the 90’s maybe ? No. GDP per capita during the 90’s was lower than three other big European economies. A decline from the 00’s maybe? No. GDP per capita during the 00’s was on par with France’s and lower than two other big European economies.

If anything the UK economy seems to have done pretty well during this last 30 years compared to its peers, measured by GDP per capita PPP. Notice how during all that period of time Germany and the US had a clearly higher GDP per capita than the UK, but the fact that the UK didn’t “catch up” with them does not imply an economic decline in the last decades.

What about technology?

What a lot of comments seem to imply is that even though the economy of the UK keeps chugging along its strenghts are all in the wrong areas, not in the right areas: IT, technology, biotech, high value added industries in general. The only strong British industries mentioned are finance and entertainment. For the sake of brevity I won’t argue here that entertainment is a high value added industry, but I do think it is.

But besides finance the UK is a world leader in other high value added services. Three of the four largest professional services networks in the world are based in the UK.

The UK is also a world leader in industries that I wouldn’t consider as high value added such as Tobacco. Two of the five largest tobacco companies in the world are British, but who wants to say my country is a world leader in selling tobacco or my country is a world leader in selling arms ?

And maybe that’s part of the reason for the perception that the British economy is in decline or that it’s not focused in the right industries.

Like Razib Khan mentions in his podcast with Samuel McIlhagga (minute 44): “listeners to this podcast know about staff like the British Biobank and other things“. Razib knows the UK is not falling behind in his area of expertise, the area that he knows well, but he seems to assume that the general perception of decline must be correct for all the other areas of the economy (or research) that he doesn’t know as well.

I’ll try to keep this first post - my first in Substack ! - as short as possible, because… maybe no one will read it. And so I won’t delve into areas such as IT (Arm), the aerospace industry (BAE, Rolls Royce, etc…), science and research, and a few other particular subjects that I feel should be addressed to understand the causes of this perception of decline.

But I will mention the oil and gas industry.

As most people know, the UK is the fourth largest producer of natural gas and the third largest of oil in Europe, and British Petroleum is one of the largest oil and gas companies in the world. But oil and gas sounds like an old industry, the kind of industry a lot of people would be glad to see disappear in the next few decades, and quite a lot of people would be glad at its demise because it’s, well… dirty. Nothing at all like chip manufacturing, a high value added, clean, forward looking industry.

I beg to differ. This is what Iranian oil production looks like for the last 55 years (up until 2019).

You can see at least three big declines in production. And now this is the same graph for Venezuela.

The first decline in that graph corresponds with OPEC production cuts during the 70’s. The second is what you get when you don’t let people who add a lot of value to your products and to your natural resources do their job and create that value. Or when you don’t have access to those people because they don’t live in your own country and you are not making it easy for international oil and gas companies to operate, and bring their own employees, to work in your country.

High value added industries exist in countries where there’s a lot of “high value added people”, or at least enough to keep those industries going. If you don’t have those people you import them, or you hire them through the international services companies for which they work.

Even if you have a lot of “high value added people”, not letting them do their job properly and trying to overmanage them will affect the output of that industry.

Russian crude oil production (red) and crude oil exports (black). Source: Wikipedia. The wonders of central planning.

So what? Oil and gas is a high value added industry (if I managed to persuade you in the last few paragraphs….), and British oil and gas production is not very large in a world scale but sizable. Checking a few numbers for the industry it turns out that British Petroleum produces 2.19 million barrels of oil per day or 3.7 barrels of oil equivalent per day, and assuming a similar distribution between oil and gas for the former BG Group that should add a few hundreds of thousands more barrels of oil per day to the tally of British companies. But the UK’s production is only 744,965 barrels of oil per day, which means British oil and gas companies, staffed by British workers presumably, produce some two and a half more oil outside of British soil (or British waters) than is produced in British soil.

Someone must think the British workers of these British oil and gas companies are doing a jolly good job.

And it’s not just oil and gas production companies, but also exploration, and services companies. Out of the 92 oilfield services companies named by Wikipedia, 11 of them are British companies.

That is a lot of British workers in a very technology intensive industry exporting their work and their knowledge to countries that, apparently, do not have that human capital.

And with that I rest my case, for now. I have posted a follow-up to this article focusing on education, research and productivity, but even if you dear reader don’t come back for more I’m enormously thankful that you took the time to read this whole thing, my first post in Substack.