The UK is a cautionary tale for the U.S.

“Be assured, my young friend, that there is a great deal of ruin in a nation.” — Adam Smith

The U.S. and the UK have one of the longest and most important relationships in all of history. The UK is America’s parent civilization, and even after the two diverged and had a period of rivalry, they came back together to more or less jointly craft the entire modern age. In terms of science, philosophy, government, and every other realm, the Anglo-American alliance was more than an alliance — it was a joint civilizational project.¹

That also means that the U.S. and UK are able to learn from each other’s mistakes. This is often a painful and fraught process, because it involves quite a lot of cross-Atlantic shouting and insults. If you bring up the UK’s flaws on social media, you’re going to get an earful about how America elected Trump, Americans have no health care, American kids are constantly dodging bullets, and so on, so Americans have no room to talk. This is unhelpful, but inevitable. It’s a defensive reaction by left-leaning British intellectuals and elites who are occupied with their own internal policy and culture-war battles with other British people. Any criticism from an American is seen as giving free ammunition to the local enemy, so the natural impulse is to screech “Shut up, Yank!!”.

But the Yanks must not shut up. Whether or not the Brits need our advice, we need to have our own internal discussion about what’s going on over in the UK and how we can use it to inform our own choices. And although there are still a few things to admire across the pond, the UK mostly now functions as a cautionary tale for the U.S. — yes, despite Trump, and guns, and high health care costs.

Whether you think the UK has been falling behind America economically for a decade or for two decades depends on which set of prices you use to measure living standards. If you use the two countries’ national price indices, the UK has been growing slower than the U.S. since the financial crisis of 2008; if you use PPP prices, as Paul Krugman prefers, the UK’s relative stagnation has come only since Brexit in 2016:

That controversy leaves an important question unanswered — whether 2008 or Brexit was ultimately more damaging to British growth. But it also obscures an even more important fact, which is that by any of these measures, the UK is much poorer than the United States:

A data point that gets thrown around a lot is that the UK is as poor as Mississippi. In GDP (PPP) terms, that’s true — Mississippi’s income per capita is about $56,000, roughly similar to the UK. That doesn’t mean life is equally as good in the two countries — Mississippi is more violent and less healthy than Britain. But unless you think that Britain had to sacrifice a significant portion of its material wealth in order to be safer and healthier, this is a bit beside the point. France and Germany, which are just as safe and healthy as the UK (if not more so), also have significantly higher incomes. This is from a Resolution Foundation report:

Middle-income Brits are now 20 per cent poorer than their peers in Germany and 9 per cent poorer than those in France. Worse, low-income households in the UK are now around 27 per cent poorer than their French and German counterparts. It’s important to comprehend just how material these gaps are: the living standards of the lowest-income households in the UK are £4,300 lower than their French equivalents.

A very deep principle in economics is that if two countries are roughly equivalent in terms of their basic institutions, they ought to converge to similar income levels. The fact that the UK and the U.S. have diverged rather than converged suggests that the former must have some institutional weaknesses relative to the latter. And that implies that there are cautionary tales here for America.

What are those cautionary tales? There are a number of good breakdowns of the UK’s problems, and you can learn a lot from observing the overlaps and disagreements between them. Ben Southwood, Samuel Hughes, and Sam Bowman have a long piece called “Foundations”, which basically makes a libertarian YIMBY argument; they claim the UK is over-regulated and can’t build housing, infrastructure, or really anything else. Jim Tomlinson has a rebuttal in which he argues that the real barrier to investment is the financialization of the UK economy. Ben Ansell argues that the UK is in a version of the “high-level equilibrium trap” — the UK is still fairly wealthy, so its politics center around how to divide up the pie rather than growing it. The Resolution Foundation’s report has lots of suggestions for how to get Britain growing again. Michelle Kilfoyle also has some recommendations. These are only a few examples.

But my favorite rundown is probably the recent Atlantic article by Idrees Kahloon. The article points out that it isn’t just private industry that’s broken in the UK; it’s also the effectiveness of the government institutions that many British people cherish. This includes the fabled National Health Service. Kahloon writes:

Taxation is at the highest level since World War II, yet public services have deteriorated. The National Health Service, the celebrated pillar of the British cradle-to-grave welfare state, has a backlog of 6 million patients—almost a tenth of the population—waiting for treatment. The health service now has to spend more money settling maternity-malpractice claims than it does on actually providing maternity care. Many Brits can neither obtain an appointment with a publicly funded dentist nor afford a private one; in a 2023 survey, one in 10 reported doing DI