AAccording to our politicians and most of the media, the main problem facing the UK economy is lack of growth. We are told that we need growth to pay for this or that public service or good wages or housing. Just this week it was reported that the chancellor is to plan further spending cuts as a result of the Office for Budget Responsibility downgrading the UK’s growth outlook.
But we should be careful not to consider lack of growth as the main pest. Either way, solutions to the growth problem have been tried and largely failed, be it the austerity of the Cameron years, the tax cuts proposed by Liz Truss and Kwasi Kwarteng or the promised innovation. by all governments since the 1990s. The current problems are truly novel and not enough to transform the UK economy, it needs to grow.
Since the Great Financial Crisis of 2008, the UK economy has grown very slowly by historical standards. This issue has been widely discussed by economists, who have pointed to stagnation in productivity, which means gross domestic product per person or hour worked. Low level of labor productivity growth, about 0.5% per year between 2008 and 2020; Is Indeed It is unprecedented in British economic history since the 18th century.
As far as the public discourse is concerned, however, this fall in productivity growth has long been masked by an illusory revival that the economy was so successful it could leave Europe and take over the world.
After the public perception that Brexit has made things worse, and that real wages for public sector workers are falling, along with the services themselves, that illusion seems to have died down – and political commentators are now bemoaning Britain’s woes. have returned Economics But as the economic historian Adam Toews has rightly pointed out, political analysis has yet to take into account the extraordinary longevity and recency of Britain’s stagnant productivity, or the isolated slight decline in living standards that many people have experienced.
Instead, we revert to outdated and inappropriate analyses. Politicians talk about the need to grow the metaphorical pie before we can all get a piece of it. The problem is that we need to update our analysis of the relationship between productivity growth and equality. They once grew together: As the economy grew, so did workers’ share of a rapidly growing pie. But this bond was broken in the 1980s. Whether the economy is in recession or booming, the rich have been consuming a bigger slice of the pie for decades.
Consider this thought experiment. One way to increase the growth rate of the UK economy and increase equality is to reverse the economic history of the last 50 years and return to the economy of the 1970s. Of course, this is not possible or desirable, but it shows that the dynamics of the economy have changed. In addition to the productivity crisis, we face a growing crisis of wealth inequality and income maldistribution, particularly in the highly unequal housing wealth that was partly driven by our economic growth model. This requires immediate action, regardless of whether the economy grows or not. Indeed, we may find that direct redistributive measures to counter these problems stimulate productivity themselves.
The old antidotes of decadence, so prominent in earlier periods of concern about growth, are with us again. In the past, as today, decadence was accompanied by calls for austerity, wage cuts, and workers’ rights violations. The demands of the cruel world apparently demanded that the belt be fastened. This is a key reason why I have long argued against the temptations of degeneracy for the left. But there are other more attractive decadent theses that are wrong, such as Rishi Sunak’s hammy proposal for compulsory maths education until the age of 18, or the need for more entrepreneurs, and more competition, and more globalisation, all of which Britain seems to be leading the way again. Our culture is full of stereotypes disguised as innovations. In fact, much of what has happened to the economy and society since the 1970s has resulted from old policies—tax cuts, policies to stimulate entrepreneurship—that were supposed to reverse the decline.
An even more serious problem than lack of growth is that we cannot afford more growth of the current kind. Growth in the 21st century still means more cars on the road, more flights, more concrete roads and runways, more plastic, and more greenhouse gas emissions. What is needed is change: fundamental changes in the size of various industries and in the nature of many industries. Are we ready to imagine a smaller aviation sector, fewer cars and fewer ranchers? The green industrial revolution means more of some jobs and less of others. Whatever the overall average growth rate, we need a structural change, a change from which there will be winners and losers.
Workers want a greener, more national economy, a more unionized workforce, and more attention to the everyday, basic economy. As Michael Jacobs has pointed out, its policies in these areas are much closer to those of Corbyn’s Labor Party than New Labour.
But the political presentation points in a very different direction. Labor has publicly adopted a stance of pro-growth and pro-austerity until we get it. The country has sung the praises of “sound money” and appears to have a bar in its dreams of achieving Britain’s leadership in high technology through entrepreneurship. It is claimed that what we have seen from the Conservatives in recent years is passivity, “politics of sticking plaster”. This is a very tempting thesis: it is true that, as opposed to the politics of spin and pointing, we need a politics of real change instead of hype, of building hospitals instead of lying about them. Truly decarbonisation rather than spin-off technical reform.
But the rhetoric of “sticky plaster” actually hides a serious problem for Starmer. The Tories have hardly been inactive since 2010: they have made massive cuts to the public sector (while recently increasing public spending) and completely transformed the country through Brexit. They were built on the policies of Margaret Thatcher, John Major and New Labour. In fact we need to understand that all governments since 1979 have been transformative – it is their actions, not a supposed lack of action, that we need to understand. What is needed now are different kinds of actions that point in different directions, not more pretending to be novel. Similar cases deepen our problems, not solve them.