The Tories aren’t incompetent on the economy – they know exactly what they are doing | Economics

“There is no alternative” was the mantra of British politics from the 1980s to the very recent past. To bring about change it was necessary to unleash enterprise, or globalisation, or technology. Politics was about staying out of the economy, and coping with the social consequences. But there always was an alternative – it is just that the loudest voices denied it. As Adam Tooze has noted, the state never left the economy, it just changed its role, and its visibility. Since the 1980s the economy has been actively reshaped by a series of political-economic decisions by successive activist governments.

Over the years, the aims of British political-economic policy have changed. Once, the main concerns were the national rate of growth, the national balance of trade, reducing inequalities within the boundaries of the nation, and strengthening the nation compared with others. Since the 1980s, and by these measures, things have not got better. Neither under Thatcher nor under New Labour, let alone more recently, did the UK achieve the rates of GDP growth of the 1950s and 1960s. Since the 1980s the balance of trade has stayed systematically worse than in the 1950s or 1960s. In relation to goods it is at the previously unthinkable level of -6% of GDP.

Nor has the acquiescence to the supposed necessities of economic realism transformed the UK’s relative position. The levels of efficiency of the British economy are still lower than those of France and Germany, to roughly the same extent as in the 1970s. The UK manufactures less than Italy and France, and a third of what Germany does. Germany exports much more outside the EU than the UK, and, deliciously, its exports to the Canzuk countries (the fantasy potential British superpower of the dimmest Brexiters: Canada, Australia, New Zealand and the UK) are twice UK levels. The English north is poorer than the regions that used to make up communist East Germany, and the north-east is poorer than the poorest German province.

Nor has the new post-national economy thrown up transforming British entrepreneurs and firms. Where are the world-beating British firms to replace the supposedly dozy giants of past? There was lots of talk of startups and venture capital and all the rest. But after 40 years, where are the results? When pressed for examples of great entrepreneurs, I get given the same tedious list of an operator of airlines and railways, a maker of vacuum cleaners, a pizza chain owner and the designer of Apple phones.

And then there is ARM (which makes the crucial chips used in Apple phones and elsewhere, which was sold to the Japanese Softbank in 2016) – indeed a successful firm, but one with origins in the despised 1970s, perhaps the last moment of serious British creativity. Note too that British R&D was higher as a proportion of GDP in the 1970s than it is today. It was higher still in the early 1960s.

The object of political-economic policy since the 1980s has not been to make a better British national economy. It has been directed at changing the balance of power in the country, to open the economy up to the world, essentially to make the rich richer and more powerful. The Thatcher revolution was fundamentally a rulers’ revolt.

While inequality of all kinds was driven down by policy in the 1940s, 50s and 60s, it was pushed back up by policy from the 1980s. Similarly regional disparities, which had been huge before 1939, were reduced after the war. In the post-war years the state transformed infrastructure, from electricity to the telephone, from gas to housing, to an astonishing degree. Since the 1980s these public assets have been privatised, handed over to a new class of rentier capitalist to sweat and to extract monopolistic rents.

In 1954 the economist W Arthur Lewis published his theory of the dual economy, to describe the economic problem of underdeveloped countries, with a mass of workers who would work for very little, and a small rich sector, which liked it that way. The US economic historian Peter Temin has cheekily applied that model to the recent history of the US, where the mass of wages have been stagnant since the 1970s, the rich have got richer and the old middle class has shrunk. On a lesser scale something similar has been done to the UK. We now have the enclave economy of London with its rich professionals, with offshoots elsewhere, and for much of the rest of the country effectively a low-wage, low-productivity economy, where the minimum wage is often a maximum too. As Temin noted in the US, the hyper-rich control politics. This too has happened here. Indeed, as Peter Geoghegan shows, the Brexiteer-Thatcherites are the local British branch of US culture warriors, climate deniers and haters of the EU.

Brexit has exposed the political nature of the economy. But don’t be fooled into believing that the Brexiters will reverse the policies of the last 40 years. They are not economic nationalists, nor do they care about economic sovereignty or about rebuilding the nation. They are not Lexiters in disguise, rediscovering the 1970s Brexiter nationalist politics of Tony Benn.

They are radical Thatcherites, who have to believe that the British economy has been turned into a world-beating one by Thatcher’s policies. They have to deny the painful reality they are handing out contracts not to world-beating British firms but to shipping lines without ships, PPE suppliers without PPE, to crony, not creative, capitalists. But don’t be fooled either by critics’ talk of their incompetence or lack of ideas. They know what they are doing, and are succeeding. Their aim is to further change the economy, even at the expense of growth. Like Margaret Thatcher’s indifference to the waste of unemployment, and the 2010 coalition’s lack of concern about the ways in which austerity caused the economy to stagnate, the Brexit hit will in their view be a price worth paying. It’s the politics, stupid. It always has been.

• David Edgerton is the author of The Rise and Fall of the British Nation: a Twentieth-Century History

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