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Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
Last weekend, when Rachel Reeves went to China to drum up business for Britain, Conservative MP Tom Tugendhat wrote that Taiwan would be a better economic partner. With only 2,500 words to play with in The Times, he decided the following fact didn’t rate a mention. Taiwan Annual Exit is 800 billion dollars. It’s Chinese 19 trillion dollars. Tugendhat, a good man, but also proof of how pukka accent and background can lead an empty vessel in the inert sea of British public life, is not the only one. Many Tories want the UK to keep China out. There is a security case for that. But why dress it up in economics? Why don’t they just admit that growth isn’t that important to them?
The problem with Britain is that almost everyone cites growth as a priority, but almost no one thinks so. There is always some other factor that takes precedence, be it geopolitical, environmental, cultural or egalitarian. The result is the worst of all worlds: no serious drive for economic success, but also no tacit national agreement that we should live in drama-free stagnation. Either would be an adult choice, with its own advantages and costs. It is the stupidity – which sees growth as desirable in the abstract but not the specific – that holds Britain in its gelatinous grip.
A thousand newspaper editorials will tell you that Britain lacks a “growth strategy”. If that means politics, then the UK has no shortage of such, and hardly ever has. What is missing might better be called a “growth preference”: the established view that when growth comes into conflict with another goal, growth must prevail.
Let me come at it from another angle. What has been America’s growth strategy over the past few decades? Under which administration was it published? Can someone send me the link? Whenever I ask these questions to “strategy” vendors, the best response I get is some vague bluffing about Darpa’s role. In the end, the most successful of all economies had no plan. What it had, apart from shale and other advantages, was an extremely strong tendency to grow. When growth faced other imperatives—tax cuts against income equality, corporate expansion against antitrust concerns, fracking with local sensitivities—the American bias was for growth, at least compared to the Western European average. A culture that doesn’t expect as much statutory paid leave can make dynamic decisions that Britain can’t or won’t.
Sir Keir Starmer this week outlined a plan to harness artificial intelligence to enrich the UK. The moment it became clear he wasn’t serious was when he said he would make artificial intelligence “work for all“. Almost no government reform worth a damn works for everyone. His line all but concedes that once AI upsets an interest group, he will relent.
If AI is half as transformative as the hype suggests, it implies job losses in the public sector: in the diagnostic phase of healthcare, for example. Unions want economic growth. But not so much. AI also has huge energy needs. Even with current levels of electricity consumption, the government’s goal of decarbonizing the grid by 2030 is at the outer limit of attainability. To meet new data center demand, those targets may have to shift. Reasonable environmentalists want growth. But not so much.
If Britain aims to lure the best AI talent, it may need to cut taxes on high incomes or capital gains. As soon as Starmer gets around to that idea, a think-tank like the Resolution Foundation will force him to submit to graphs of the effect on inequality. Offered the choice between being a social democracy with annual growth of 1.5 percent or a more stratified nation with 3 percent, some people choose the former. They want growth. but no. . .
There is another way. Britain could stop the conversion to growth. I’d hate it, but it wouldn’t be a shame if the politicians came up with the next intellectual bargain. The strong growth rate before 2007 was an anomaly, not the weak one since then. A return to that trend is feasible, but the necessary reforms to unemployment benefits and so on would cause social discord, with which the alleged growth should be neutralized. After all, Britain is not America. That’s France: the “poor rich nation” whose disproportionately large capital city and flair for Stem themes cover a multitude of cracks. Ideally? No, but what model is it? Economic success has not stopped the US from having the worst policies imaginable in the free world.
Or Britain could continue with the current charade. The Tories want growth, but not if it means building things, aligning with Europe or having a lot of exposure to China. Labor wants growth, but not if it disables unions, or “leaves people behind” or some similar NGO press nonsense. What growth policy is left then? The Minister of Finance asks her colleagues to propose bureaucracy for reduction. It would be stupid to even talk about firing Reeves. Yes, she chose to learn the hard way what had been clear all along: that referring to spending as “investment” does not mislead real investors; that “austerity” is not a problem in a country that has not run a fiscal surplus for a millennium. But Britain has no problem with Reeves. He has a problem with Britain. Deep down, we’re happier with 1.5 percent annual growth than we dare say.
