In short, we get a policy that will over time make the UK poorer in a quest to keep it rich. Yet as damaging as it is to the country’s long-term economic prospects, nobody can bring themselves to end it. And so, logically, amid economic stagnation or reversal, if some groups can maintain or even grow their wealth and income, as is the case with the triple lock, others must experience falls in their living standards and life opportunities. So even amid tepid growth, degrowth has started for some — namely, those whose livelihoods depend on income from labor rather than proceeds from capital.

Mind you, this revived class struggle now brings a novel twist: the owners include not just the uber-rich but people with comparatively modest incomes, such as pensioners whose capital is tied up in the funds that are today among some of the world’s biggest investors. Nevertheless, their livelihoods require preserving asset values no matter how sluggish the growth. The inevitable outcome is that workers get squeezed, both directly and indirectly: directly through higher taxes on labor — out with free tuition, in with the triple lock — and indirectly through fiscal and monetary policies that ensure asset values rise faster than the economy.

At the heart of this deepening political rift between capital and labor, driving a resurgence of anti-systemic populism on both the Left and Right and a turn against democracy by young people, is a reality that few whatever their politics want to confront. The rapid economic growth rates of the postwar period, which made possible the expansion of the welfare state and promises of future benefits that presumed an endlessly rising supply of resources, are not returning — because, as with the pursuit of the triple lock, we’re now trapped in a cycle where the pursuit of growth produces degrowth.

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Western economies have been slowing for decades, and a handful of rich countries have crossed the threshold between growth to degrowth in per-capita terms: while gross domestic product has kept rising in Germany and Canada, real per-capita income has begun declining. Almost everywhere else in the developed world, including Britain, growth has been close to stagnant since before the pandemic. And even the supposed star performer of developed economies, the US, whose real per-capita income has continued rising steadily, hasn’t escaped this trend towards deceleration, because its added growth results from added debt. If you deduct debt from growth to come up with a true picture of the economy’s dynamism, the country would have already started going backwards.

This partly has to do with profound shifts in the world economy, and in particular the relative decline of the West compared to the rising global periphery. But increasingly, there’s evidence of endogenous forces which act to inhibit growth — something I refer to as the “Icarus effect”. Simply put, as an economy grows richer, its growth rate slows, because it encounters forms of natural resistance that slow and eventually reverse growth.

The growth-retarding effect of Covid-19, the first truly global pandemic in history, has been obvious, but the bigger threat will come from climate change, whose deleterious effects are already creeping up on us. With the average annual number of extreme weather events having so far increased sevenfold since the Sixties, not only will capital be depleted but inflation will remain permanently higher due to the rising costs of production (the recent Mediterranean storms being just the latest event likely to jolt food prices this winter).

Yet while such feedback loops inhibit growth for the whole world, there also appear to be changes which specifically affect the countries where growth has advanced the furthest: the rich ones. Because in addition to external pressures, we’re now starting to better understand changes which occur in the internal environment — which is to say, within us, as individuals and societies. As a society grows richer, it undergoes social, political and cultural changes which reduce dynamism, raise vulnerabilities and diminish resilience, all while increasing the cost of preserving wealth.

To begin with, fertility declines, which raises a society’s average age. From there, the economically productive share of the population declines. As a proportion of total economic output, consumption therefore rises and investment declines. Meanwhile, the investment which does occur shifts in character, becoming more focused on dividends rather than long-term growth (which favors legacy industries). It also becomes more risk-averse, one manifestation of which is a shift towards real-estate investment: and real estate, of course, produces nothing. Consider Canada, Germany and Italy, all which have been among the slowest performers, even as real estate now accounts for a third of fixed capital formation.

Adding to this, fiscal and monetary policies become increasingly oriented towards preserving asset values, through such measures as Nimbyism and the shoring up of asset values after market corrections with bailouts and easy money — real interest rates were kept near or below zero for years after the financial crisis — since any fall in asset values would hurt the growing share of the population which lives off them. The anti-growth measures which follow are thus more a symptom than a cause of the Icarus effect, but the consequent rising cost of capital makes it harder for new businesses to form, reducing dynamism in the economy.

In addition to these changes, vulnerability to external shocks rises as a society grows richer. For starters, the more capital you have, the more there is to be destroyed in natural disasters, and while mitigation measures can reduce risks, they further increase the price of wealth preservation. But just as importantly, and in contrast to the prevailing assumption that “rich is resilient” — the assumption being that wealth provides you with the resources needed to adapt to and bounce back from exogenous shocks — there’s compelling evidence that the reverse may be the case.

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The first hints of this came during the Covid pandemic, when it was widely expected that poor countries would do far worse than rich ones. The latter, so the theory went, could not only care for their sick but pay people to stay home and reduce transmission. In fact, on balance, poor countries emerged no worse from the pandemic than rich ones, and in many cases actually did better, all at a fraction of the cost borne by rich countries. For every dollar spent per capita in a developing country fighting the pandemic, developed countries spent 12; for all that money, the average death rate in the rich countries was only marginally better than in poor ones, while many of the poorest nations on Earth — especially in Africa — were star performers.

This probably shouldn’t surprise us. There’s a growing body of research in public health which suggests that regular exposure to disease prompts stronger immune response. Known as the hygiene hypothesis, this theory suggests that frequent exposure to natural shocks, from storms to floods, forces people to be adaptable and flexible. This research has been widened to look at societal resilience and finds exposure to shocks makes societies more resilient — in part because the weak states of poor countries make for strong societies, providing individuals with adaptive support through stressful times. Anyone who has lived in a developing country will be familiar with the community groups that form in neighborhoods or at churches, mosques and temples, and which provide everything from basic welfare and storm preparedness to watch groups in under-policed areas.

The upshot is that the mix of declining economic dynamism and resilience with rising vulnerability will mean rich countries take bigger economic hits from ecological feedback loops. Given their already slowing growth, moreover, this means they’re especially at risk of getting knocked backwards — when a country’s annual economic growth rate is around 1%, a shock like a pandemic or severe flooding can quickly tip it into recession.

Degrowth isn’t inevitable, but two things could make it so. The first is if Western countries try to carry on as we always have in the expectation growth will somehow return to past levels. That would only hasten the degrowth that has begun. The second is if we neglect the externalities of growth, especially climate change, in a quest to prioritize growth. That will produce the perverse outcome of accelerating our decline.

***

Icarus Economics: Why Rich Economies Are Struggling – and How to Fix Them (Atlantic Books) is out now.

I feel obliged to say that South Africa is a wonderful country, and a resilient one. For every horror story you see in the media — most recently the tragic blaze in Johannesburg — there are many things worthy of love. Nonetheless, three decades after the end of apartheid, it is obvious that the ruling African National Congress (ANC) has failed in its historic mission: to spread the living standards formerly enjoyed by the white minority to the broad mass of the population. It has, if anything, achieved the opposite, overseeing the dereliction of the infrastructure and human potential on which any such improvement would depend.

Metaphors for this failure are everywhere. Railways that took my parents to their summer holidays as children now lie rusting and abandoned. Supermarkets sell asphalt for drivers to fill in potholes for themselves (the product is marketed as gatvol, which means both “hole-full” and “fed-up”). Criminal gangs, their numbers buoyed by an unemployment rate above 30%, cut down traffic lights for scrap, steal transformers from power stations and collapse roads with illegal mining operations. Eskom, the national power monopoly, is so ravaged by corruption that daily blackouts now last as long as nine hours.

Especially since the reign of former president Jacob Zuma, politics has descended into a looting operation that extends from multinational businesses down to local mafias, even as the impoverished majority finds its taps running dry and its sewage systems spilling over. Anger is quelled with promises to expropriate farmland and wealth from white citizens. Crime is rampant and the police are widely regarded as useless. As I say, Brits are far removed from this. They were heavily involved in Southern Africa during the 19th and early-20th centuries, sending settlers, redcoats, and gold and diamond prospectors, but today they mainly send nervous tourists. The pathologies of South African society seem as exotic as the hot, dry climate and the wild animals on the veld.

But are they really? Lately I’ve been questioning if the gulf separating the two countries is as vast as I assumed. At first it was just small things, sotto voce echoes of South Africa protruding into British life. A man begging from cars stopped at the traffic lights. An epidemic of urban homelessness. Universities renaming buildings to repudiate links with the past. A steady trickle of stories about police no longer bothering to investigate crimes. Now, a prison escape in the capital and parents scared to send their children to crumbling schools. Once I started paying attention, though, the resonances grew ever deeper. The media loves to measure Britain against the GDP of American states, European healthcare and Australian quality of life. This is supposed to be self-deprecating, but maybe it is more flattering than we care to admit. Analogies to South Africa can expose things that comparisons with rich countries leave obscured.

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Consider the cloud of scandal and dysfunction which has settled over the UK’s privatised utilities, namely water, energy and railways. These services have increasingly been marked by cronyism, private gain, mismanagement and underinvestment, all familiar symptoms of corruption in South Africa. For years the water companies have been paying out huge dividends to shareholders, while racking up vast debt piles and spilling sewage on a daily basis. Last year, Govia Thameslink Railway was awarded a lucrative new contract, despite one of its subsidiaries, Southeastern, being caught defrauding the public purse of millions. Then again, bad trains may end up being the least of our problems, for the National Grid has warned that the UK may face power cuts in the coming winter, and is urging businesses to reduce their electricity use. There is a growing realisation that Britain does not have the grid capacity needed for the government’s decarbonisation plans.

It is becoming clear, in other words, that Britain’s post-Eighties regime of privatisation has led to a subtle form of the South African disease. The state fails to maintain and improve infrastructure, while allowing the asset-stripping of national wealth by private interests. Who needs criminal syndicates when you have hedge funds and private equity firms? There was something especially South African in ministers’ claims that Thames Water cannot be renationalised, despite its severe debt crisis, because doing so would scare away the foreign investors who prop up the UK’s economy.

Meanwhile, the Tory party does an increasingly passable impression of the ANC. Apparently convinced it will be in power forever, it has become little more than a vehicle for personal advancement and influence peddling, disguising its aimlessness with an occasional bout of populist rhetoric. This was especially evident during the Covid pandemic, when the genteel traditions of British corruption — peerages in exchange for political and financial support — gave way to the handing out of state contracts worth billions to politically connected companies, often lacking relevant experience.

The South African comparison also casts a revealing light on Britain’s social cleavages, though I am not talking about the kinds of ethnic tensions for which South Africa is infamous. It is true that the UK economy’s voracious appetite for immigration, an easy source of cheap labour and consumers, resembles South Africa’s habit of exploiting migrants from elsewhere in Africa. But one only has to look at the frequent anti-immigrant pogroms in South African townships to see that, for all the anxieties over integration, British society remains a relative picture of harmony.

The real issue is class. Brits often express shock that extreme inequality appears so normalised in South Africa, but an outsider to the UK could make a similar charge. In post-industrial Britain, working classes of all ethnicities are consigned to poverty wages in jobs such as cleaning, shelf-stacking and delivery driving, if they have not dropped out of the workforce altogether. London and its surrounding counties have become, like South Africa’s Western Cape, the luxurious facade Britain shows to the world; but other parts of the country are faring much worse, with healthy life expectancy trailing significantly in parts of Northern England, Scotland and Wales. Countless towns have fallen into abject poverty, regarded by polite society with little more concern than South African townships, their inhabitants ruled unfit for anything better by the very fact of remaining there. Social mobility, we are told this week, is at its worst in more than 50 years.

This wasted potential is tragic on its own terms, but it has wider ramifications, too. In South Africa, where 29 million people receive state welfare grants and only 7.4 million pay tax, the state is trapped in a doom-loop, with spending on social programmes hampering investment that could benefit the economy. But to look at projections for the British state’s ever-growing benefits, health care and social care bills, it seems we may be heading for a similar scenario. These parallels will doubtless seem absurd to many Brits, and doubly so to South Africans. Earlier this year, when I mentioned to some friends over there that the UK has its own problems with government incompetence, they literally laughed in my face.

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After the Cold War, the rubric of “developed” and “developing” countries implied that the Western model was the endpoint of economic progress across the world. Three decades later, the distinctive features of that model — nation-states with strong civic cultures, meaningful democratic conflict, economic growth and a commitment to broad-based prosperity — have themselves been eroded by globalisation. Hence developing countries provide an increasingly plausible model for the future of developed ones, rather than vice-versa. In this sense, at least, Britain remains at the vanguard of global capitalism. And making this explicit ought to help in countering complacency. For all their gallows humour, the British are used to counting themselves among the world’s most advanced and admired nations, and so struggle to grasp the possibility that, in 50 years’ time, this may no longer be the case. Which brings me to the most disturbing echo of South Africa I’ve noticed in recent years.

This is something more amorphous: a matter of mood and mentality. South Africans have come to regard their chaotic and inept state with a weary resignation that borders on ridicule. It is a burden to be negotiated when necessary, and fended off where possible. For some time now, Britain’s attitude to its own governing class has been moving in the same direction. New Labour alienated large parts of the traditional Left, and now Tory incompetence has led to similar cynicism among conservatives. With each perceived betrayal, more people enter the reservoir of citizens who have given up believing that Westminster can do anything remotely useful.

These feelings have real consequences for a country’s prospects. Why do so many people stubbornly resist house-building and planning reform? Why do they see it as common sense to reject society’s claims on their resources? Part of the reason is surely that, once we lose faith in the nation’s political authorities, appeals to compromise for the greater good ring hollow. Or to put it in terms a South African would understand: the British are gatvol.