Economic growth

The economic change we need won’t come from Labour

philmullan Creative destruction, Economic growth, Economic policy, Politics, State intervention

Following the UK Labour Party’s annual conference, which wrapped up last week, we now have a better idea of its economic plans. Though plenty could still change before the next General Election, it’s clear that Labour is not planning to offer an alternative to the existing Conservative economic programme. Essentially, what leader Keir Starmer and shadow chancellor Rachel Reeves are promising is the same old muddling through, but without the Tory ‘instability’ and ‘chaos’.

Indeed, in content, Labour’s policies are very similar to those already in operation. And since these policies have done much to keep Britain stuck in an economic depression, this portends a dismal financial future for most of the population. At the heart of the problem lies the quest for ‘economic stability’.

Read the full article here.

Phil Mullan will be speaking at the Battle of Ideas festival in London in the session, ‘Bouncing back or basket case? The state of the UK economy’, on Saturday 28th October.

The fall of China? Don’t bet on it

philmullan China, Economic growth, Geopolitics

For years Western experts have been talking of China being on the verge of financial and economic ruin. So far it has survived. But China’s uneven post-Covid recovery has brought Western gloom about its economic prospects to new heights this year.

This dismal thinking draws on real economic problems. China slipped into price deflation in July, as growth in retail sales and industrial output slowed. And in August, Country Garden, a major property developer, missed payments on some of its debt. To cap all this off, Beijing announced last month that it will stop publishing youth-unemployment figures, after reporting record highs – a sign that the authorities are keen to bury bad economic news.

So, might the dire expectations from Western economists finally come true this time? Certainly, economic growth has slowed substantially since those heady days during the 1990s and 2000s, of growth rates of more than 10 per cent per annum. But since China has survived all the previous portents of ruination, it would probably be wise not to hold our breath. Gloomy predictions of China’s imminent economic collapse say more about the West than they do about China.

Read the full article here.

The slow decay of the British economy

philmullan Creative destruction, Democracy, Economic growth, Politics, The longest depression

The sense that Britain isn’t working anymore has too many facets to shrug off as undue gloom and doom, as the current government tries to do. The significant thing about all the shocks that have hit Britain’s economy in recent years is its relative lack of resilience. Compared to its developed peers, Britain has been less able to cope with external blows, and been slower to pull through.

Why is the British economy stuck in this rut? The historical economic explanation is not hard to fathom. Britain’s peculiar decrepitude is founded upon a greater dependence on aged capital in both the public and private sectors. But this historic atrophy in production and wealth creation doesn’t explain why so little political effort has gone into attempting to shake up its unusually outdated structures. Specifically, why has Britain’s political class of all stripes been so reluctant to make the hard choices needed for a better future?

Read the full article here.

The problem with Hunt’s ‘back to work’ budget

philmullan Economic growth, Economic policy, Employment, Investment, Productivity

In January, prime minister Rishi Sunak announced his five key priorities for 2023. Conveniently for him, his first priority was something that is very likely to happen regardless of what his government does. Sunak’s top pledge to ‘halve inflation’ came a few days after just about every new-year economic prediction said that inflation would fall by at least half during 2023. Chancellor Jeremy Hunt adopted a similar hollow ploy in his budget statement yesterday, setting himself up to take credit for something that is already happening anyway.

Alongside all the familiar, disingenuous boasts about promoting growth and business investment, Hunt also placed a distinct emphasis on this being a ‘back to work’ budget. He highlighted the importance of ‘tackling labour shortages that stop [businesses] recruiting… by breaking down barriers that stop people working’. Yet ever since the threat of further pandemic shutdowns lifted last year, people have already been returning to work, pretty much as normal. So why the focus on getting people back to work now?

Read the full article here.

How not to grow the economy

philmullan Creative destruction, Economic growth, Economic policy, State intervention, Zombie economy

Despite the many legitimate criticisms of the short-lived Liz Truss administration, it did leave one exceptional legacy. It put the question of economic growth, and the importance of raising productivity, back on the mainstream political agenda.

It took an extraordinary triple whammy – the pandemic lockdowns, the post-lockdown disruptions to global supply chains, and the war in Ukraine – to finally force the British political class, in the shape of the Truss administration, to acknowledge the dire state of the economy.

Hence, over recent months, Conservative and Labour front benches have been talking about the importance of growing the economy. In January, prime minister Rishi Sunak announced five key pledges to address people’s ‘priorities’. The following month, Labour leader Keir Starmer countered with his ‘five missions for a better Britain’. A commitment to economic growth was at the centre of both parties’ five-point plans.

Both plans have been criticised for vagueness. But there is a deeper problem with Labour’s and the Tories’ approach to the productivity slump. While both parties have bought into the new economic consensus – that is, the belief that low business investment is at the root of lacklustre growth – they also share the belief that businesses need more state financial support. In today’s circumstances, though, this would mostly act to entrench the low-growth quagmire.

Read the full article here.