A new briefing from the Institute of Economic Affairs (IEA), Buildings: In defence of ‘stupid growth, is written by Kristian Niemietz, the IEA's Editorial Director, and forms part of a forthcoming IEA book, The Great Stagnation: Why Britain Stopped Growing, which brings together contributions from multiple authors, each examining a different explanation for Britain's growth malaise over the last two decades.

"Stupid growth" is Niemietz's term for the much-derided extensive growth: expanding an economy simply by using more of the inputs it already has (more land, more buildings, more workers), rather than through the "smart growth" ideas favoured by many economics commentators. These ideas, however, have delivered low growth and precious little housebuilding.

Key findings:

Britain is not much richer today in real per-capita terms than it was in 2007: we have experienced nearly two lost decades, which is an anomaly by historic standards.

A large part of the reason for this stagnation is that it is simply too difficult to build anything in Britain, be it residential housing, office or business premises, infrastructure, or even reservoirs. An economy which does not build things does not grow.

This is not a new insight: the problem is extremely well-known. Governments have been publishing White Papers and expert reviews which say precisely that for over twenty years (without ever doing anything about it).

Britain does not just have a shortage of residential housing but a shortage of premises of all kinds, including business premises such as offices, retail outlets, laboratories for the biotechnology and life science sectors, etc. This raises the cost of doing business and lowers productivity by forcing firms into unsuitable premises.

Britain has a nationwide housing shortage, but the shortage is systematically worse in the most productive parts of the country. This constrains Britain’s growth centres, and traps people in less productive areas.

From the mid-19th to the mid-20th century, Britain’s housing stock used to grow by 1-2% almost every year. Housing affordability used to improve, and economic centres were able to expand. In the 1960s, these growth rates began to decline, until they stabilised at around 0.5% in the 1980s.

Britain is not ‘overcrowded’. In aggregate terms, Britain is almost empty. Only about one tenth of England is developed; nearly two thirds is farmland.

‘NIMBY vs YIMBY’ has become the most important ideological divide in Britain, arguably more so than ‘Left vs Right’, or even ‘large state vs small state’. The NIMBY side is able to cooperate across traditional political dividing lines. If the YIMBY side does not learn to do the same, the NIMBY side will keep winning, and Britain will not break out of its self-imposed economic stagnation.

This briefing is the second in a series published by the IEA on Britain's 'Great Stagnation', diagnosing Britain's growth problem. The next briefings in the series will be published in the coming weeks and will be compiled into a full book published in September.

The thesis of this briefing is that Britain has stopped growing, because the British economy is rubbing up against physical capacity constraints. We are trying to squeeze a twenty-first-century economy into the physical built-up environment we have inherited from the previous two centuries, and we refuse to expand that capacity to anything like the degree that is required.

Every fast-growing economy in history got that way partly by using more of what it already had: more land, more buildings, more space to work and live in. Ours stopped, because regulators, with mostly good intentions, built a system that lets NIMBY objectors veto growth while rationing land in a country that's ninety per cent undeveloped. Kristian shows that if we want the growth we were on course for in 1997, we need to think again about who gets to say no to a building.