Three myths surrounding Boris Johnson’s ‘New Deal’

Prime minister Boris Johnson’s ‘build, build, build’ speech on 30 June failed to throw much light on what, or if, there is a distinctive Johnsonian approach to economic policy. As many commentators noted, the £5 billion he pledged for various infrastructure deployments is a small amount for a government recovery plan, less than one quarter of one per cent of pre-pandemic annual output. This is like turning up to a battle with a water pistol.

As we assess the substance, if any, of Johnsonomics over the coming weeks and months of announcements, we can start by dismissing some of the fanciful narratives that are doing the rounds, both from the government’s supporters and its critics. The first, and most pertinent, myth is that the economic woes we face are primarily the result of the pandemic lockdown. In fact, they long predate it. The second myth is that we are entering a distinctive era of state economic leadership that marks the rejection of ‘neoliberal’ orthodoxies. And the third myth, given Johnson hails his plans as ‘Rooseveltian’, is that President Franklin Delano Roosevelt’s New Deal ended the Great 1930s Depression.

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It’s time to transform the UK economy

It is said that crises provide fertile ground for innovation. This is only partly true. The acute pressures, the falling away of pre-crisis norms and the sidestepping of regulations, liberate individuals and teams of people to come up with great ideas about how to do things differently. This fresh thinking can originate better, more effective and efficient ways of conducting existing productive activity, or it can conceive brand new products or services that improve people’s lives.

Certainly in this pandemic and the lockdown crisis, we have already seen lots of inventive deliberation.  But where the saying falls short is that devising creative ideas is not enough for innovation. Innovation represents the implementation of that creativity for social benefit. While crises can be great times for ingenious thought, novel ideas only become innovations when they are applied and are replicated to bring change, improvement and progress to people’s lives.

This conception of innovation brings out the biggest obstacle to seeing much of it happening in the medium-term future. We are not just in a period of crisis, but a crisis within an existing state of economic depression. Depression is not simply an extension to recession, in the way it is being discussed today. It is a protracted phase of economic sclerosis that has become self-reinforcing.

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After the pandemic: whither capitalism?

To understand what will happen to capitalism after this crisis, one needs to understand capitalism before it.

One of the catchphrases of the pandemic so far is that ‘crises change everything’. Of course, lots will change because of the precipitous economic disruption of the shutdown. Thousands of smaller businesses are already going under and may not return, and this could rise to hundreds of thousands unless the government acts immediately to deliver on its business-support pledges. If the government fails to support businesses and workers, in the same way it has been failing with virus testing and health workers’ protective equipment, millions of individuals and families will endure great hardship. Many may not get their old jobs back. Over the medium term, this can be a bad or a good change, depending on the quantity and especially the quality of new post-recession job opportunities.

However, despite the changes brought about by the economic dislocations, at this stage it is likely that much economic policymaking from the past will endure. This is because crises tend to change things only to the extent to which they draw extant socio-economic features to the surface and speed up pre-existing trends.

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Break free of the fiscal rules

In pre-coronavirus days, immediately following the Tories’ huge election victory in December, this Budget was trailed as the thing that would tell us what the ‘levelling up’ mantra really meant. Things haven’t quite worked out that way. Maybe because of the necessary focus on the coronavirus impact, we learnt little new about what ‘levelling up’ means. Or possibly that was because the government is also still not quite sure what the phrase stands for. Sunak was clearly getting a little carried away by his rhetoric when he claimed that this Budget had already delivered – got done – the election promise to ‘level up’.

The government this week flunked one budgetary issue that could have pointed in the desired political direction. No doubt drawing on his hedge-fund experience, Sunak hedged a decision on what to do about the fiscal rules, after much speculation that he would address them in the Budget.

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Labour won’t transform our economy

‘Ambitious’ and ‘radical’ were two of the friendlier assessments of the Labour Party’s manifesto plans.

Ambitious? Labour is certainly ambitious electorally. Labour’s manifesto is published with the desperate hope that its green spending plans, an end to student tuition fees, providing student maintenance grants and the offer of free broadband for all can be so appealing to voters that it will camouflage the party’s rejection of the Brexit vote – the very issue that precipitated this election.

But ambitious in transforming society for the better? Definitely not. This is because it is not ‘radical’, either – not in the sense of getting to the roots of society’s or the economy’s troubles. Bashing billionaires might make the Labour team feel they are on the side of ‘the many’, but the plans are no substitute for a necessary programme of economic renewal that could genuinely aid the masses.

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