Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favorite stories in this weekly newspaper.
Last weekend, when Rachel Reeves went to China to launch a British business, Conservative MP Tom Tugendhat. wrote that Taiwan will make a better economic partner. With only 2,500 words to play with in The Times, he decided that the next issue was meaningless. Taiwan annual production it is $800bn. China is $19tn. Tugendhat, a good man, but also a testament to how far a pukka voice and character can take an empty ship in the dysfunctional sea of British public life, is not the only one. Many Tories want the UK to keep China at bay. There is a security case for doing so. However, why does it matter in the economy? Why don’t you just believe that growth is not that important to them?
The problem with Britain is that almost everyone cites growth as their priority, and almost no one does. There is always another idea that comes first, be it political, environmental, cultural or gender. The result is the worst situation in the world: there is no strong goal of economic success, but there is also no calm national agreement that we should sleep for an unstable low-level life. One of these can be an adult option, which has its own benefits and costs. It’s fudge – which keeps growth absurdly desirable but not in a distinctive form – that’s British in its gelatinous form.
A thousand newspaper editors will tell you that Britain has no “growth plan”. If that means policies, Britain has no such thing, and never has. What is missing might be called the “growth bias”: the firm view that, when growth conflicts with another goal, growth must prevail.
Let me come to the point on the other side. What was America’s growth strategy decades ago? Under what system was it published? Can someone send me the link? Whenever I ask these questions to a “strategy writer”, the best answer I get is a vague reference to Darpa’s role. Finally, the most successful economy of all was unplanned. What it had, apart from shale and other advantages, was a very strong growth option. As growth pitted itself against other priorities — tax cuts versus equity, corporate expansion versus antitrust concerns, recession versus domestic sentiment — America’s bias was great, at least not compared to the Western European average. A culture that doesn’t expect much from paid leave can make tough decisions that Britain can’t, or won’t, make.
This week, Sir Keir Starmer launched a plan to use artificial intelligence to enrich the UK. The moment it was clear that he was not serious was when he said that he would make AI “work everyone“. Almost no government reform should be made that works for everyone. His line simply believes that, once an AI offends an interest group, it must fall.
If AI is half as revolutionary as the hype suggests, it means the loss of public sector jobs: in the healthcare analytics sector, for example. Organizations want economic growth. But not necessarily. AI also has huge energy requirements. Despite current levels of electricity use, the government’s goal of reducing the grid by 2030 is on the verge of being achieved. To accommodate the new demand from data centers, those targets may have to slip. Sensible environmentalists want growth. But not necessarily.
If Britain is to attract the best AI talent, it may have to cut taxes on high wages or capital gains. Once Starmer approaches that idea, the Resolution Foundation-style think tank will force him to provide charts on the impact of inequality. It gave the choice of being a social democracy with an annual growth of 1.5 or a tribal society with 3 percent, some people prefer the former. They want growth. But not. . .
There is another way. Britain can stop the pretense of going big. I would hate it, but there would be no shame if the politicians could get to the next level of science. The strong growth rate before 2007 was a paradox, not a weak one since then. A return to that pattern is possible, but the changes required for severance benefits etc. would cause social discord, which the putative growth should be adjusted against. After all, Britain is not America. It is France: the “poor rich country” whose capital is disproportionately large and magnificent for the Stem news paper because of the many cracks. It should? No, but what is the pattern? Economic success has not stopped the US from having the worst politics in the free world.
Or Britain could continue with its current arrogance. The Tories want growth, but not if it means building things, aligning with Europe, or being too exposed to China. Labor wants growth, but not if it includes unions, or “leaves people behind” or other such NGO issues. What growth policy is left, then? The finance minister is asking his colleagues to suggest ways to reduce red tape. It would be wise to talk about firing Reeves. Yes, he chose to learn the hard way what was clear for a long time: that talking about the use of money as “investment” does not deceive real investors; that “attitude” is not a problem in a country that hasn’t had a financial gain since the millennium. But Britain has no problem with Reeves. It has a British problem. Deep down, we are more happy with the 1.5% annual growth than we are not.
