Open Editor's Digest for free
Rula Khalaf, editor of the Financial Times, 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 said: books That Taiwan would be a better economic partner. With only 2,500 words to play with in The Times, he decided that the following fact had not been reported. Taiwan Annual Output It is 800 billion dollars. China is $19tn. Tugendhat, a good man, but also proof of how far his Bucca accent and background can take an empty ship in the lethargic sea of British public life, is not alone. Many Conservatives want the UK to keep China at arm's length. There is a security case for doing this. Why wear it in economy, though? Why don't we just admit that growth isn't important to them?
The problem with Britain is that almost everyone considers growth a priority for them, and almost no one means it. There is always another consideration that takes precedence, whether it is geopolitical, environmental, cultural, or equality. The result is the worst of all: no serious drive for economic success, but also no tacit national agreement that we should move forward with a life of dramatic, low-level stagnation. Either of these options will be an adult's choice, and has its own benefits and costs. It is the trick – which makes growth desirable in the abstract but not in specific form – that has Britain in its gelatinous grip.
Thousands of newspaper editorials will tell you that Britain lacks a “growth strategy”. If this means policies, Britain lacks nothing of the sort, and almost never has. What's missing is what we might call a “growth preference”: a well-established view that growth should prevail when growth conflicts with another goal.
Let me touch on this point from another angle. What growth strategy has America adopted over the past two decades? Under what management was it published? Can someone send me the link? Whenever I ask these questions to “strategy” traders, the best answer I get is some vague deception about the role DARPA plays. In the end, the most successful economies didn't have a plan. What it did have, besides shale oil and other advantages, was a very strong growth preference. And when growth collided with other imperatives — tax cuts against income equality, corporate expansion against antitrust concerns, fracking against domestic sensibilities — the American bias was in favor of growth, at least compared to the Western European average. A culture that does not expect much from paid statutory leave can make dynamic choices that Britain cannot, or will not, make.
Sir Keir Starmer this week set out a plan to exploit artificial intelligence to enrich the UK. The moment when it was clear he wasn't serious was when he said he would make the AI ”work for him.” everyone“And there is hardly any worthwhile government reform that works for everyone. His line acknowledges that once AI bothers an interest group, it is vulnerable to capitulation.
If AI represents half the transformation that this hype suggests, it would imply job losses in the public sector: in the diagnostics phase of healthcare, for example. Unions want economic growth. But not much. AI also has enormous energy needs. Even with current levels of electricity use, the government's target of decarbonising the grid by 2030 is still at the outer limits of achievability. To accommodate new demand from data centers, these targets may have to be rolled back. Rational environmentalists want growth. But not much.
If Britain aims to attract top AI talent, it may have to cut taxes on high income or capital gains. Once Starmer gets close to this idea, a Decision Foundation-type think tank will bully him into submission with charts about its impact on inequality. When offered the choice between being a social democratic state with an annual growth rate of 1.5 percent or a more stratified state with an annual growth rate of 3 percent, some people chose the first option. They want to grow. But not. . .
There is another way. Britain can stop pretending to grow. I hate it, but it wouldn't be a shame if politicians came up with the next intellectual compromise. The strong growth rate before 2007 was an aberration, not the weakness since then. A return to this trend is doable, but the required reforms to unemployment benefits and so on would lead to social discord, which would have to be offset by the supposed growth. In the end, Britain is not America. It is France: a “rich-poor nation” whose disproportionately large capital and taste in science and technology subjects hide a multitude of cracks. ideal? No, but what is the model? Economic success has not prevented the United States from pursuing the worst policies in the free world.
Or Britain could continue the current charade. Conservatives want growth, but not if it means building things, aligning with Europe, or getting too much exposure to China. Labor wants growth, but not if it upsets unions, “leave people behind” or some NGO press release. So, what is the remaining growth policy? The Minister of Finance asks her colleagues to suggest some routine measures to reduce it. It would be ridiculous to even talk about firing Reeves. Yes, she chose to learn the hard way what has been obvious all along: that referring to spending as an “investment” does not deceive actual investors; “Austerity” is not the problem in a country that has not achieved a financial surplus since the millennium. But Britain doesn't have a Reeves problem. Britain has a problem. Deep down, we are happier with 1.5 percent annual growth than we dare to admit.
