Exactly 42 years ago this week, Ronald Reagan stood in a grand hall at the University of South Carolina, confidently telling new graduates that ‘[there] are no such things as limits to growth, because there are no limits on the human capacity for intelligence, imagination and wonder’. Since that moment, the world’s GDP has increased eight-fold in real terms and four-fold per capita. Extreme poverty, which was experienced by 40% of the human race when Reagan made that address, is now experienced by less than 8% of the global population. An extra decade has been added to global average life expectancy.
Reagan was right to speak with such optimism, and he was right to push back against the gloomy anti-growth pessimists of his age. On the other side of the Atlantic, Margaret Thatcher was equally right to reject the inevitability of decline here in Britain, inspired as she was by a bold vision of national renewal.
The problem is, that optimism and sense of renewal has come to a shuddering halt on this side of the pond in recent years. Any lingering whiff of hope was extinguished last year soon after Labour came to power. The Government has targeted new taxes against investors, employers, savers and longstanding family businesses. It has unleashed billions more in spending with zero productivity gains, increased borrowing from an already-perilous position; and it is heaping on extra regulations – sometimes shutting down production altogether, for instance, in UK energy markets.
Last week, the ONS reported that there had been 0% growth in the UK economy in July. This week, the OBR has downgraded the UK’s productivity forecast, adding £9 billion to the Government’s fiscal black hole. Inflation is higher than in comparable economies and unemployment is rising.
That sense of decline has returned, and the effects on the nation’s morale are palpable. Just as Margaret Thatcher’s governments worked to roll back the frontiers of the state, unleashing the energies of the British people, other forces have moved to re-extend those frontiers in recent times, stemming the hope and optimism people might otherwise feel about our future.
In 1990, at the end of Thatcher’s premiership, total managed expenditure by the UK government accounted for just under 35% of GDP. That figure was replicated ten years later at the end of the millennium under Tony Blair, before Gordon Brown’s spending spree. Now, in 2025, it is close to 45%.
According to David Smith in ‘Spending, Tax and Economics’, the growth-maximising share of government spending for any given economy is in the range of 18.5-23.5%, and the welfare-maximising share is in the range of 26.5-32.5%. Even if left-wing commentators would instinctively reject Smith’s analysis, it is undeniable that current spending levels are far off the norms of a productive country. The current size of the state saps energy and crowds out productive parts of the economy.
Spending has not only increased, though. It is now more likely to harm growth. For instance, while investment spending is historically low, welfare spending has ballooned. Our current Government lacks the political will to see through reforms that might address this, fearful of upsetting their profoundly left-wing parliamentary party.
Tax policy has followed suit, and taxation looks likely to rise further in Labour’s next Budget, even though – as Arthur Laffer warned – any such rises are likely to be self-defeating, decreasing overall revenue due to their chilling disincentive effects. To paraphrase Churchill, it is as if Rachel Reeves is standing in a bucket and trying to lift herself up by the handle.
All the lessons of history appear to have been ignored. From Britain’s epitaph as the Sick Man of Europe in the 1970s to its veneration as a vibrant market economy worthy of international emulation in the 1980s; from currently-sclerotic European economies to bustling North America: Milton Friedman told us that ‘there is no alternative way of improving the lot of ordinary people that can hold a candle to the productive activities unleashed by a free-enterprise system’. It is the only known way to enfranchise the many in the economic life of the nation.
Until we are willing to grapple with the debilitating overreach of the state in this country and its suffocating effect on human flourishing, it will be impossible for any politician to proclaim those ceaseless tones of optimism that were expressed in a university hall across the pond four decades ago – at least through anything other than gritted teeth.
And this matters to our national psyche and self-confidence beyond sheer numbers. It is undeniable that the integrity of our country’s borders must be re-established as a national security priority in itself. However, there is an additional, more evocative component of uncontrolled immigration when British people are becoming poorer year on year as well.
The zero-sum reality of no growth also lends itself to the psychological desire for redistributive, zero-sum policies, which in themselves reinforce the zero-sum reality by further restricting growth. When the cake isn’t growing, it is easy to believe that every slice you haven’t claimed has been taken by someone else. This breeds a culture of narrow suspicion rather than one of open-minded optimism and makes us poorer in more than material terms.
That is why the moral imperative to roll back the frontiers of the state and unleash renewed optimism and human flourishing has never been greater.
On one hand, the task of reversing the current malaise is colossal, unpacking systemic reliance on the state in every part of our economic life. On the other hand, it is neither unfeasible nor unprecedented. Spending as a percentage of GDP had reached below 40% immediately prior to Covid. Returning to those levels at least would be a meaningful improvement. It is not beyond belief to imagine we might go even further in rebalancing our economy towards the productive private sector, returning to levels seen with Harold Macmillan or Tony Blair.
We want politicians to be able to stand up and assuredly declare there are no such things as limits to growth again. It will require immense political will, but at least we already know the answer. With the right approach and resolve, we can afford to hope again.
