A golden rule in politics is that anything labeled as “radical” or “bold” is the exact opposite. Tony Blair’s much publicized essay on the future of the country has left this rule intact. In keeping with the New Labor tradition, the essay calls for a transformation of the economy, but without fundamentally changing anything. Britain under Blair’s program would still be geographically unbalanced, dependent on high-value service exports and global finance to support a standard of living that we have not been able to afford for more than 50 years. This is a cosmetic economic strategy. The patient will still be terminally ill, but at least he will look a little healthier to keep up appearances on the global stage.
At the turn of the millennium, when the country was navigating a once-in-a-century expansion in financial services exports and riding the last legs of a consumer credit boom, this cosmetic economy might have been considered harmless. In an age where a fragile Britain faces significant financial and political challenges – and you are here – it is inexcusable.
Like much of Britain’s political class, Blair is obsessed with policy gimmicks that do not address the fundamentals driving our decline: our huge trade deficit, our deep dependence on global finance, the collapse of British business ownership and our inability to create decent jobs outside a handful of large urban centres. Blair, like much of Westminster, is focusing on marginal gains when the country is facing an existential crisis.
Get essay aggregator call center the AI revolution. It is clear that a technological revolution is taking place. However, the Office for Budget Responsibility estimates that the AU will increase our productivity by 2.3 percent over the next decade. The winner of the Nobel Prize in Economics, Daron Acemoglu, argues that productivity increases it can be even lower. Historically, general-purpose technological changes such as steam power, electrification, and ICT take a long time to generate significant economic benefits. The late Professor Nicholas Crafts, an expert on the Industrial Revolution, discovered that steam power alone contributed little to British productivity growth at 19th century. Perhaps AI will be more like the ICT revolution of the 1980s and 1990s, but even then the productivity gains were very short-lived and it was removed after 2005. Any improvement in productivity, however small, is welcome, but you can’t bet your entire economic future. In money terms, we’re looking at between £5-8bn in extra growth a year – or just over £100 per person. All of this assumes that these benefits stay in the UK and that AI is not just a financial bubbleas some in Silicon Valley predict.
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Or get another area. Deregulation planning. According to OBR, reforms in the planning system are likely to add only 0.4 percent to the size of the economy over the next decade. This fortune, equivalent to £20 per person, was predicted before the house-building collapse caused by more prosaic issues such as a shortage of skilled workers, the rising cost of materials and worries that people would not be able to buy new homes.
More revealing than what is in the essay is what is ignored. IMF predicts a current account deficit of 3.4 percent of GDP this year. In money terms, this means transferring £4,063 per household overseas to pay for our imports, cover our debts and profits to foreign investors. At the heart of this is our growing trade deficit, forecast to reach £46 billion a year by the end of the decade and driven by a £240bn goods deficitwhich is growing at an alarming rate. To plug this gap and provide the money we need to invest in infrastructure and new businesses, the OBR predicts we will borrow £447bn from the rest of the world in this parliament – the equivalent of 1.6 per cent of GDP a year. That’s more than our entire economy is projected to grow over the same period. Some data centers and some other corporate centers won’t make up for it.
In Tony Blair’s world and much of our enterprise, the food we eat, the goods we need and the finances we spend just arrive in the country. Like children on Christmas morning, they are too busy opening their presents to wonder where it all came from. In the real world, global capitalism forces those countries that cannot pay their way to hand over more and more of their income, their assets, and ultimately their future, in exchange for the dollars and euros we need.
These are not just abstract numbers. Our current account deficit means we must allow international investors free access to buy as much property as they want or risk spiraling inflation. These investors are increasing the price of assetsincluding housing, excluding working families from the market. Our dependence on overseas finance has led to a steady sell-off of British businesses, reducing investment and, as Mark Carney once said, making us dependent on the kindness of strangers “At a time when risks to trade, investment and financial fragmentation have increased”. That’s why whenever there’s a global shock, like the war with Iran, we fare worse than other countries.
It is these forces that are causing the political earthquakes that we are constantly experiencing. The decision to ignore our trade balance led to the deindustrialization of the country, which has emptied communities that are now willing to consider voting for anyone who can provide decent jobs and hope for future generations. The relentless rise in asset prices has seen at least two generations of young people locked out of the housing market and alienated from traditional parties.
All this is a sign of a political class that will not face this problems facing the country. The reason these big numbers are barely discussed in SW1 is because if they were, they would force an entirely different, darker, political debate. Instead of giving people discounted theme park tickets in the middle of a Middle East war, we should be debating how we can increase family savings. We would put every extra pound into rebuilding domestic manufacturing, rather than discuss another bid for the Olympics. We would certainly not waste time on another round of talk about reunification with Europe, which was neither the source of our problems nor the solution.
The frustrating thing is that the audience is already there. Listen to any focus group or survey any member of the public and they know the scale of the problems we face. People constantly use the word “broken” to describe the country because we are broken. They know that Britain has lived beyond its means for 50 years and that the road back will be difficult. What they want is a plan that is credible and that addresses the big issues. Judging by his essay, Tony Blair is not interested in that kind of plan. The real question is whether anyone will have the courage to level with the public?
(Further reading: A million Neet is a statistic but every Neet is a tragedy)
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