Going South: Why Britain will have a Third World Economy by 2014 [Paperback]

Larry Elliott, the Guardian's economics editor, and Dan Atkinson, the Mail on Sunday's economics editor, have produced another fine book on Britain's economic ills. Their record is good: their 2007 book Fantasy Island warned that Brown's claim to have ended boom and bust was nonsense.

We have a chronic balance of payments deficit, a looming shortage of energy and food, a shrinking economy. We are a net importer of industrial products, food and energy. In 2010 our trade gap in goods was £98.46 billion. In finished manufactured goods, it was £59.8 billion, with deficits in everything from cars (£2.75 billion) to intermediate goods like components (£11.99 billion) to capital goods (£13.3 billion). In semi-finished goods, the deficit was £8.14 billion, in basic materials, £2.9 billion, in coal, gas and electricity, £5 billion, and in food, drink and tobacco, £17.36 billion.

Services had a £58.77 billion surplus, including financial services at £26.6 billion and insurance at £3.7 billion. The surplus on income earned abroad was £23.04 billion. The deficit in transfers was £20.08 billion, including £9.11 billion paid to the EU.

The authors point out, "The quick fixes with which we have sought to disguise our shrinking economic performance - imperial preference, European Community membership, North Sea oil, financial deregulation, asset stripping, and periodic property and house price bubbles - are all used up." They warn that our economy is in absolute decline.

Between 2009 and 2012 real incomes fell by 7 per cent. 6 million households have only five days' savings. Since 1979 the number of people of working age who are too sick to work has quadrupled to 2.1 million. The `self-employed', that is, those employed, if they are lucky, by a variety of employers, numbered 3.9 million in 2011, up from 2.7 million in 1985.

The workforce, `thanks to large-scale immigration', is too big for the economy's needs. 2.5 million non-UK nationals are now employed here.

Just 20 per cent of workers in Germany are low-skilled, 30 per cent in France and 60 per cent in Britain. In the OECD league table of education, we fell from 8th to 28th in maths, 7th to 25th in literacy and from 4th to 16th in science between 2000 and 2009.

The banks are still not investing, instead they are speculating in interest rates, property and commodities. In 2014 a huge wall of banking and commercial debt is due for refinancing, and the banks will be demanding more of our money to cover their gambling debts.

We need to protect our farmers, develop our energy sources and rebuild industry. To do this, we `need to break the power of the City over the economy, smashing up the big banks'.

The wheels came off the British economy in 2007, but that wasn't the beginning of the end for Britain, according to Elliott and Atkinson. The decline started a lot earlier than that - 1914 to be precise.

At the start of WW1 Britain was the world's only superpower, the world's leading exporter, and a major military power. A century later, we've experienced a relative decline as our national prestige has waned and other countries have caught up and overtaken us. We've had no particular strategy as a country, we have allowed a series of imbalances to develop, and there's no obvious way out of it. The economy is "slow-growing, unproductive, unequal, unbalanced and living beyond its means" say the authors. If we don't fix it, the future looks "shabbier, meaner and poorer".

This central premise is pretty much correct in my opinion, and a rather urgent message considering how complacent we appear to be. Unfortunately, the book itself leaves a lot to be desired.

Going South divides roughly into thirds, and only the middle third of it is actually any good. It begins by lamenting Britain's new `third world' status, a hundred pages of whining about how things aren't how they used to be. There are some good points here, but some of it is just downright silly.

The middle pages are the useful bit, where the authors look at the post-WW1 history of Britain's economy. This is a good overview, showing the strategies and government initiatives to stimulate the economy. Taking us up to the present, the book then looks at a series of problems that Britain faces in the coming years, and it is here that it is at its best. It includes the balance of trade, the pensions deficit, energy security, household debt and banking instability. It's convincing, and lives up to the chapter title of `the great reckoning'.

Then comes part three, where there is a tentative look at what we could do about it. The authors suggest Britain can go in one of two directions: a social democracy like Sweden, or a `freeport' capitalist model that would basically turn the whole country into an export processing zone. They then describe how Britain might look under each of these development paths. The former is a fairly attractive portrait, the latter a crass caricature that's more extreme than any other capitalist project yet conceived anywhere in the world. Why they think these are the only two options, I don't know. It's clear that they think Britain should pursue the Scandinavian model. They should just say so, rather than attempting to make the point with a false alternative.

My biggest problem however, comes back to the opening section and the argument that Britain is becoming a `third world country'. The authors recognise that the `third world' tag is used "routinely in pub and kitchen table conversation in response to railway strikes, political sleaze, to the council's failure to empty the rubbish bins." They insist that they "are not using the expression in that way", but then repeatedly do, referring to "Britain's banana republic transport system", or the police tactics of "third world Britain."

This just doesn't stand up to scrutiny, but once they've started they can't stop. Everything becomes evidence of Britain's new third world status. The list includes our politicians' search for a `big idea', bureaucracy, tax breaks for business, and an overcomplicated public service. Then it gets worse - the fact that we have a `tourist strategy', the National Lottery, or the desire to host the Olympic Games. Or consider this: "the large numbers of people employed to stand on pavements handing out leaflets, cheap telephone cards and free newspapers, or attempting to sign up customers for various services, is a sure sign of incipient third world status."

The Sky News subscription team in the mall make Britain a third world country? Seriously?

I know plenty of people like this sort of thing, but the tone of tabloid indignation undermines the very serious points made elsewhere the book. And that's a shame, because there's an important message amidst all the bluster.

There are quite a few books around at the moment about the financial crisis. This one is written by Larry Elliott of The Guardian, who has a done an excellent job in his newspaper columns of explaining the credit crunch etc to non financial experts like myself, and Dan Atkinson of The Mail on Sunday, which has the best financial pages in any of the uk's 'popular' press. A lot of the other books I've read (such as those by Vince Cable and John Lanchester) are 'how the hell did we get here' books, whereas 'Going South' is more of a 'where on earth are we going next' study.

So I was really expecting and hoping to enjoy this book, and it does make some very good points - such as that it is only in the last decade that average earnings in the uk haven't increased at the same average rate (about 1% a year) as the economy as a whole, and even explaining some of Enoch Powell's thinking - that Britain should stop pretending it could still be a major world power - that led to his notorious 'rivers of blood' speech.

However, the book goes off at annoying tangents too often, possibly as a result of the dual authorship, without really explaining the relevance to the main thesis. Too many of the side-tracks are of the 'why oh why oh why' variety that end up sounding like the sort of annoying people in pubs who get their opinions from the tabloids or bbc local radio, and insist on sharing them with you. Personally, I believe that smoking bans, health and safety regulations, and crackdowns on drink-driving are signs of a civilised first-world society rather than a third-world economy. Like a lot of 'ranty' books they twist any occurance to suit their opinions, even when they are mutually contradictory. For example, the authors claim that the prevalence of 'sandwich board' people on the streets of our cities are signs of a third-world economy, but if local councils brought in regulations to prevent these activities, they would no doubt claim that this interference in economic activity was also a sign of our third-world status. In the end, unfortunately, they end up undermining their own arguments.