Businessman looking out

Technical briefing - 11 July 2013

The bigger picture

Guest author: Mark Littlewood

Director General, Institute of Economic affairs

The world is seeing changes at a speed that many would never have predicted. That brings benefits, but it also creates challenges. Governments have a mountain to climb to balance the needs and wants of their citizens as the cost of providing services skyrockets.

That mountain is set against a backdrop of economic uncertainty. In post-referendum Britain we will have to decide how we create a prosperous, liberal country outside the European Union. This means taking the best examples in the world and incorporating them.

Taxation and spending will be two defining issues on which the creation of this brighter future will depend. In the West, despite the fact that the UK has never successfully raised more than 38% of GDP in taxation, we continue to insist on spending vastly beyond our means. For all the many issues they have faced, China and India recognise that the state should only spend around a quarter of GDP, which in part explains the growth they have experienced. There can be little doubt that the future will belong to those countries who keep government spending at around 30%, which is about the level that maximizes welfare according to our research.

In order to reduce spending, the west may need to learn lessons from abroad and rapidly change the way in which the state provides its services, in particular health and education. Government will become a facilitator rather than a provider, it won’t employ professionals but direct people to private providers. By 2037, it will seem inconceivable to many people that we ever provided services the way we do at the moment.

It’s likely that health and education services will be dispersed over a number of locations. Rather than going to one building for education, there will be small centers of excellence and it will be for parents to take control over which subjects are studied and for how long. It will be a pick and mix menu and it’s likely that it will include elements of home schooling and online courses as well as the more traditional educational opportunities. It’s also possible that schools won’t close their doors in the evenings or for long stretches over the summer, but will provide a more rounded educational service to communities not merely to enrolled students.

Any thoughts of the future can’t ignore the impact that technology has had on society. We are now a 24 / 7 society, able to communicate with anyone, anywhere in the world, at any time of the day or night, and so far the regulatory regimes of most countries have been woefully slow in keeping up with disruptive technologies. The 9am – 5pm job is a dying concept and in order to manage the work / life balance, employers and employees will become increasingly flexible.

This again will impact education because if hours for adults change then it’s inevitable that the hours for the children will as well. Schools will be become more like companies, open for business throughout the year and judged and remunerated based on their results.

A shift towards individuals having more responsibility has already started to happen in health. We now have drop-in centres where people go of their own volition rather than being told to. Health professionals will also have different challenges to face. I predict that there will be a massive culture shift with the use of recreational drugs. That shift will take us out of our current comfort zone. By 2037, nearly all recreational drugs will be legal and available to purchase on the high street. Modest drug use will become the norm and it will partly replace drinking alcohol.

By 2037, the distribution of wealth will be even more polarized, but the point of polarization will have changed. Instead of a gap between the ‘haves’ and the ‘have-nots’, the great divide will be between the ‘haves’ and the ‘have-yachts’, as the super-rich pull further away from the rich, even as overall inequality falls. This declining inequality will mean the middle classes will have more opportunities and more people will choose how much time they spend in different parts of the world without obviously calling anywhere home.

But what does that mean for those on lower incomes, those who are dependent on welfare? In 30 years GDP will have doubled so they will still be provided for, but I do predict a move towards greater self-reliance and the need to stand on their own two feet. A society in which truly vast swathes of people qualify for some form of state support or another will be a thing of the past.  

As already predicted with health and education, the vast majority of adults will need to be more self-reliant and have greater control of their own destinies.

Correct as of May 2017.

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