Britain's Economic Performance: A Tale of Two Ethics

Ireland's GDP per head has surged to third place in the EU, trailing only Luxembourg and Denmark, while Britain has risen from 11th to 10th place in the last decade. The UK's good employment record is contrasted with its poor productivity performance, which is partly due to low levels of capital investment. The article explores the dichotomy between the "Catholic work ethic" of low-labour input, high productivity, and the "Protestant work ethic" of high labour input, low productivity. It also examines the impact of economic policies, such as labour flexibility and foreign direct investment, on productivity and growth.

Key Takeaways:

• Ireland's GDP per head is 13% ahead of the UK's, with a growth rate of 13% over the last decade.
• The UK's good employment record is offset by its poor productivity performance, with British productivity 9% below the EU average.
• The Catholic work ethic, exemplified by Belgium, France, Ireland, and Italy, is characterized by low labour input (63% or less of the 15-64 age group employed) and high productivity (7% or more above the EU average).
• The Protestant work ethic, exhibited by Denmark, the Netherlands, Sweden, and the UK, features high labour input (70% or more of the 15-64 age group in work) and productivity per person employed at or below the EU average.
• The US's GDP per head has widened to 54% above the EU average, driven by high labour input and productivity.
• Catholic countries need to increase the supply of output by employing more women, younger, and older workers, while Protestant countries should improve productivity by enhancing training standards.
• International differences in productivity are more pronounced when measured per hour rather than per person employed.
• Labour input is influenced by the percentage of total population in the working age group, participation rate in the labour force, and employment rate.
• Unemployment rates vary significantly among EU countries, with the UK having a low 5.7% unemployment rate (counting only benefit claimants), compared to the EU average of 8.6%.

Statistics:

• Ireland's GDP per head is third in the EU, behind Luxembourg and Denmark.
• Britain's GDP per head has risen from 11th to 10th place in the last decade.
• The UK's employment rate is 72%, compared to the EU average of 63%.
• The US's GDP per head is 54% above the EU average.
• The annual improvement in UK labour productivity has been only 1.8% a year over the last decade.
• British productivity is 9% below the EU average.
• The UK's working hours are longer than in other major countries, resulting in lower productivity per hour.

Sources:

• Organisation for Economic Co-operation and Development's (OECD) chapter on Recent Growth Trends in its June 2000 Economic Outlook.
• Christopher Johnson, UK Adviser, Association for the Monetary Union of Europe.