State intervention

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.

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The end of the age of globalisation

philmullan Changing world order, Covid-19, Rivalries, State intervention

The economic consequences of Russia’s bloody and despicable assault on Ukraine are very much a secondary consideration to the immediate human and geopolitical implications. And since the various national responses to the conflict are still so fluid, it is far too early to be able to identify the war’s precise longer-term economic effects. Nevertheless, it is possible to suggest tentatively what could unfold on the international economic front. While today’s military confrontation appears to revive US leadership of the old West, because of its dominant military capabilities, in the longer term it is likely to speed up the shift to a post-American world. The invasion could hasten the demise of the US-led economic order.

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A post-Covid boom? Not so fast

philmullan Covid-19, Economic policy, State intervention, The longest depression

Some pundits are getting a little carried away by the signs of a rapid economic bounce-back. The uniqueness of the past year has distorted the data, creating a misleading impression of our economic prospects. We would be well advised to be more sceptical than usual about the economic stories being told.

The biggest worry is that politicians will overinterpret the contemporary statistical fog in a way that allows them to evade the deeper, more substantial economic issues they should be addressing. We have been complacent for too long about the state of the Western economies. If we get too excited about high growth rates and other anomalous data, we are much more likely to waste the opportunity for real change thrown up by this crisis.

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The economic transformation we need

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

One legacy of the pandemic has been to bring government activism out of the shadows. Whether you criticise or support how governments managed the pandemic, it is indisputable that their actions and inactions were of huge consequence to our lives and to the economy. So far, though, this acknowledgment has yet to unmask the myth that the past 40 years has been a period of state economic inactivity. Until this is understood, the current debate about state economic intervention will be misleading, when what we really need is a state-led shake-up of the failing status quo.

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Please, Rishi, stop evading the problem

philmullan capitalism, Debt, Economic policy, State intervention

There is an animated debate going on about post-pandemic economic policies. Centred in the US, the discussion has implications for the forthcoming Budget in Britain and for decision-making across other advanced economies. As he prepares for the 3 March Budget, chancellor Rishi Sunak needs to get real about Britain’s economic torpor.

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