The parlous state of the British economy and its public finances shows us what happens when you defer to the ‘experts’. Rachel Reeves is a middle manager posing as chancellor. She exemplifies the managerial politician. She doesn’t make political decisions about what the country and its people need, so much as follow rules and procedures authored by experts – by those who supposedly know best.
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‘There are decades where nothing happens; and there are weeks where decades happen’, Vladimir Lenin is supposed to have said. But the globalised world order collapsing within the space of weeks would be momentous even by the Bolshevik leader’s standards. This is certainly what many international politics watchers think is happening.
Bronwen Maddox, director of the Chatham House think-tank, has said that the concept of the West as an alliance of liberal democracies is ‘probably’ over. Michael Clarke, a former director general of the Royal United Services Institute, has been more forthright. ‘The West is dead’, he said. Meanwhile Marc Chandler, chief strategist at Bannockburn Global Forex, has said that Trump’s policies will ‘end globalisation’.
The problem with these obituaries to the West, these valedictions to the world order and to globalisation, is that they assume that a decisive transition has taken place in recent weeks. But this is not what is happening. Rather these declarations express the dawning, and deepening, recognition by the west’s elites of the existing instability of global politics and economics, even though this has been so for some time.
In truth, the geopolitical and economic shifts and fractures that Trump has brought to the fore over the past few weeks have been taking place for years.
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Enough of the hyperbole about Trump’s tariffs. His tariffs are wrong, but so is the rest of the west’s obsession with Trump-driven trade wars. For a start the hysteria over Trump’s tariffs ignores, and distracts, from just how protectionist most mature economies have become. Protectionism in its many forms impedes the domestic business investments needed for productivity growth. And the parallel fear-mongering about a ‘trade war’ is clouding the bigger geopolitical, as well as the economic issues, at stake today.
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What sort of economy is the returning president Donald Trump inheriting? In otherwise polarised and uncertain times, a consensus stands out: the belief in US economic exceptionalism. America’s recent growth out-performance and its ever-climbing equity markets seem to make the country the exception to economic stagnation across the west. But America’s underlying productive decay is not that different to the other mature industrialised nations. The staying power of the narrative of ‘US exceptionalism’ points not to the US’s exceptional vigour but rather to some peculiar forces for resilience in the face of its long-running productive decline. These US-specific factors reveal America’s superior capacity to offset its moribund tendencies.
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Even before this week’s bond market turmoil, the newish Labour government tacitly acknowledged that not all was going to plan, with the economy continuing to stagnate. Over the Christmas period, in an apparent act of desperation, UK prime minister Keir Starmer, chancellor Rachel Reeves and business secretary Jonathan Reynolds wrote a letter to the UK’s biggest regulators to ask for help with its growth plan. Regulatory bodies such as energy watchdog Ofgem, water regulator Ofwat, the Environment Agency and the Financial Conduct Authority were urged by the government to submit proposals on how best to boost the economy.
Of course, government ministers should always be engaging with their functionaries for advice. But to openly admit they have had to beseech them for help to meet their central policy commitment of ‘growth, growth, growth’ was an extraordinary testament to Labour’s lack of ideas.
We shouldn’t hold our breath waiting for Starmer’s administration to deliver on his pledge to get rid of regulation ‘where it is needlessly holding back the investment we need to take our country forward’. The reality is that his government, like its predecessors, will only add more to the regulatory burden. Indeed, Labour’s manifesto explicitly promised tougher systems of regulation on a huge spread of businesses.
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Phil Mullan 