U OK, UK?

0:00N.P.R.

0:11This is The Indicator from Planet Money. I'm Waylon Wong, here today with Ilya Merritts, a longtime public radio reporter now based in London. Hello, Ilya.

0:21Leyla Doss:Hey, Waylon. So I have a rhetorical question for you, and really, it's a rhetorical question for your adopted country. You okay, U.K.? Oh, Waylon. Grown. And yes, that's a really good question. You are correct to ask that question because the UK economy is looking a little queasy right now. First, there was an IMF report saying the Iran war would hit UK growth hard. They later revised it up just a little. Then UK government borrowing costs hit a 28-year high. And then there was the news that a million young people are out of work. There is a rising sense of impatience here. Have you noticed they keep changing prime ministers?

1:02Leyla Doss:6 p.m. in 10 years. So if the citizens keep thinking that we're going to fix it in 18 months, and if we don't fix it in 18 months, we'll just get a new leader, that's a problem because it's not reasonable to expect that we can fix these problems so quickly. The current prime minister, Sir Keir Starmer, could soon face a leadership challenge from within his own party. Today on the show, a lot of advanced economies are feeling the stress of the Iran war with higher prices for oil and gas. But is the UK the country we should be worrying about? This message comes from NPR sponsor Charles Schwab with its original podcast on investing.

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2:38Leyla Doss:I brought all those negative headlines about the British economy to Helen Miller. She is the director of a think tank, the Institute for Fiscal Studies, IFS. And she told me these stories can be overwhelming, so it helps to look at them as symptoms of a single underlying issue. If there's one big picture thing that's happening in the UK, I think it's low growth. For many years now, the extent to which the economy is growing has been much lower than it was in prior decades. And that is underlying a lot of the government's problems. It's why it's hard to run the public finances, because we have a big debt pile.

3:14It's hard to pay off that debt if you haven't got a growing economy. It's hard to get people into work if the economy is not growing healthily. So I think underlying a lot of these things is just the problem of low growth.

3:24Leyla Doss:How long has the UK been in a low growth place? I think if you wanted to put a mark on the chart, you would start around the great financial crisis. Actually, if you roll back a bit before that, there were some early warning signs that productivity wasn't doing so great. Now, many advanced nations' economies experience sluggish growth after the 2008 financial crisis. But according to the IFS's own analysis, the U.K. grew slower in that period than both the U.S. and the EU on a per-person basis. One recent report described earnings growth as, quote, dreadful. Let's just name a few of the commonly cited reasons for this.

4:01One, Brexit.

4:02Leyla Doss:Britain's decision to leave Europe's big trading bloc knocked 6 to 8 points off GDP. Number two, austerity. Following the financial crisis, the UK made deep cuts to spending on public services, including healthcare and local government. Three, since the pandemic, many people have chronic health problems, and 800 ,000 of them have left the workforce. And four, chronic underinvestment in both the private and public sectors, from new technologies to infrastructure. But there's something else Helen Miller pointed to. We did this interview in her office in Marleybone, a prosperous part of London, which I don't think anyone would describe as stagnating.

4:41Right. London is still a capital of international finance, much like New York.

4:46Leyla Doss:So Miller told me I should get out of the capital because even more than most countries, the UK has high geographical inequality with a lot of wealth concentrated in London and the rest of the nation struggling. So I took a road trip, actually a rail trip, to the city of Sunderland, 270 miles to the north. The next station is Stadium of Light. If you've spent time in the American Rust Belt, it has a similar vibe. And I met up with another Helen, Helen Lawrence. She's a university librarian and a born and bred Sunderlander. Excuse me, she's a mackham. A local word that we used to describe somebody from Sunderland would be mackham.

5:25and that comes from, it's rooted in shipbuilding. So it would be, the idea is ships, Sunderland, make them.

5:35Leyla Doss:And where exactly do they mack the ships? Well, very close to where we're standing. We're looking at the river, river, where? Wea, W-E-A-R. Wea. Wea. So Sunderland is known for its distinctive accent and vocabulary. They are no longer macking ships here. The last shipyards closed a few decades ago. There used to be coal mines too, but those are gone now. Today, the big employers include Nissan. It's the UK's biggest auto manufacturing hub and the university where Helen works. Still, the main retail strip downtown has a lot of for rent signs. You wouldn't come to Sunderland if you really wanted to shop.

6:14You just wouldn't.

6:16Leyla Doss:Yeah. It's not a great. It's got other things going for it. Shopping's not one of them. When were like the glory days, if you can tell? Me personally, I'd say the 80s, but I think older people would probably say it was 60s, 70s. There was just a lot more kind of a lot more life and action in here. Walking around Sunderland with Helen, I did notice a beautiful new pedestrian bridge over the WIA that'll take Mackhams straight from downtown to the game. Oh, and Sunderland's football team just rejoined the Premier League. Helen is a huge fan. Go Black Cats. Or as they say here. Oh, how are the lads?

6:57Leyla Doss:How are the lads? They had a decent season. Finished seventh in the league. Go Black Cats. How are the lads? I didn't feel comfortable saying that in my Midwestern accent. Well, there is one sticky problem, though, which puts Sunderland on our radar. Income growth has stalled. One study by the Center for Cities found a typical Sunderland family would be about$17 ,000 richer if pre-2010 growth trends had continued. In fact, most UK cities saw the same thing. Since about the financial crisis, people's bank accounts are not growing much. And they feel it. You can't do the things that you would have just taken for granted.

7:36like to go out, so for four of us, my family of four, to go out for a meal, you're looking at kind of 80, 90 pounds just for a regular, to go out for a regular meal. That's 110 US dollars roughly. And it's more of a treat to do things that you would have considered to be quite basic, sort of 10 years ago.

7:58Leyla Doss:And do you think that that's making people grumpy? Yes. I put this to think tank Helen, Helen Miller. It's true that people are struggling. They are struggling in part because the cost of the things they want to buy are expensive. Sound familiar? Cost of living crisis? You hear that phrase a lot in the UK, the same way you do in the US. But Helen Miller says it is the wrong framing for the United Kingdom. My concern with calling it a cost of living crisis is that it feels like it's either it's kind of temporary, it's just to do with prices. Maybe the Bank of England can control it through inflation.

8:31Maybe you can just cap food prices. It leads you to think there's something easy you can do to fix it. Whereas I think our focus nationally needs to be, no, no, actually, we need more productivity. We need workers who can produce more, who can therefore command higher wages. That's what will give us a higher standard of living. And we need to be calling our politicians to do the kinds of things that get that growth rate up. It's that economic growth thing again. But how do you get to growth exactly? Just four years and two prime ministers ago, a new leader came along promising to turbocharge growth.

9:03Her name was Liz Truss, and her prescription was huge unfunded tax cuts.

9:08Leyla Doss:The bond market had a cow. She was out of the job in a record 49 days. Helen Miller from the Institute for Fiscal Studies took note. There is no magic bullet that's going to drive up growth. There's no one policy the government can do that's going to make everything better. So in part, the lesson is you have to do the hard yards across lots of policy areas, across tax reform, education reform, competition policy, planning. You have to do lots of things, and then that starts to move the dial. That is a harder sell to the electorate because it's not just the press this button, this will happen. She says it'd help if the Iran war came to an end soon, but that is not in the UK's control.

9:46Leyla Doss:One thing Brits can influence, though, is their own government. There have been six prime ministers over the past decade. In the next few months, Britain's ruling Labour Party may swap out PM Sir Keir Starmer for someone new. Helen Miller isn't taking a position on that, but she says political instability can be the enemy of sound long-term economic planning. Elio Meritz, thank you so much for bringing us this dispatch from across the pond. You are very welcome. Cheerio!

10:19This episode was produced by Cooper Katz-McKim with engineering by Jimmy Keely. It was fact-checked by Leila Doss. Kate McCannon edits the show, and The Indicator is a production of NPR. This message comes from Capella University. That spark you feel? That's your drive for more. Capella University's FlexPath learning format lets you earn your degree at your pace, without putting life on pause. Learn more at capella.edu. This message comes from Mint Mobile. If you're tired of spending hundreds on big wireless bills, bogus fees, and free perks, Mint Mobile is for you. Shop plans at mintmobile.com slash switch.

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