A poor understanding of economics, close to no experience of financial hardship, blind ambition for power — how the UK conservative leadership’s days are numbered…
It’s astounding how the leaders of the fifth largest economy in the world can come to power based on half truths, false premises, non sequitur opinions and the exploitation of deep-seated (though misplaced) fears of the common people. Boris Johnson, Nigel Farage, Dominic Cummings and Jacob Rees-Mogg are all guilty of the above, and through leading the country to Brexit as well as supporting die-hard, Thatcherite, laissez faire economic principles, now see Britain in a dire economic state, all compounded by the unfortunate timing of Covid-19.
Dubious economic principles and the demonisation of anything “European” started long ago however. In fact, it started with Thatcher’s very public detraction of the EU in 1989 (ref) after having bullishly supported it at the beginning of the same decade, while she diligently fostered free market capitalism as the UK knows it today. Two major misconceptions led to Thatcher’s and the current government’s approach to the EU and economic policy. The first; that somehow the UK is still a relevant economic player on the world stage (though it is large, it doesn’t nearly stack up against the US, China, Japan or even Germany). The second; that capitalism isn’t completely dependent on national infrastructure, regulation and targeted government funding.
Unfortunately, there is no other way it could be. These misconceptions are inherent to the very essence of what it is to be a politician; deeply patriotic complemented by little international experience, and a background in anything other than actual economic theory. The current government cabinet is full of people who studied history, art and low and behold, politics (ref) and who have deep, national family ties. Is it a surprise, then, that they pursue an economic mantra, cult almost, of Thatcherite economic policy, because it’s trendy and sits well with their experience, rather than grasping the fundamental theory behind it or critically evaluating its effectiveness? Or that the UK population, the resilient, tough and creative people of the country (which no doubt we are), in no way depends immensely on the expertise, manufacturing capability and work ethic of people of other nationalities?
Yet ignorance, arrogance and a naïveté of the world seemingly has no limits; most of the conservative party’s leadership hail from elite and relatively privileged backgrounds. Don’t get me wrong, many have had some international experience and not all hail from ‘rich’ families. But almost all have never experienced real economic hardship. Their careers have largely been within safely insulated arenas of banking, international finance, journalism and politics. Most have gone from success to success, unwittingly leveraging their family ties, network and socio-economic backgrounds, all the while perceiving their success to be entirely self-made. As such, there is no cause for them to question their conservative, Thatcherite take on self-reliance, free-market capitalism and individualism — its worked for them, clearly everyone else can and should benefit from it in the same way.
Unfortunately, free markets are imperfect and many people have close to no useful professional network (or even helpful family for that matter). In fact, they suffer discrimination for being poor and growing up anywhere outside of London. The cycle is vicious; those young people lacking the ability to be outstanding in academia, are faced with a paucity of other educational options. For example, specific skills training found in the colleges and polytechnics of old. As a result, they are forced to take low-paying, unskilled work or even remain unemployed. They sensibly avoid the astounding living costs of big cities such as London where more opportunities may await them, but are given no other options apart from moving abroad - itself often too intimidating without the confidence of financial freedom, a higher educational background or an international network.
The principle of laissez faire economics is to allow the free market to dictate almost everything in our society; wages, house prices, the cost of ‘goods and services’ such as health and education, where & how local investment is concentrated, and which industries thrive and which decline, organically. It is based on the assumption that markets are perfect and will self-correct towards the optimum. Anyone with a cursory background in economics will know that, in fact, most economists don’t believe in this assumption. They acknowledge that the model of free markets is flawed, and that markets often need to be corrected and regulated to avoid unintended, and negative effects on society at large (otherwise known as ‘negative externalities’; think pollution, ecological contamination or invasion of privacy). They accept that their economic theories often do not reflect true human behaviour (which is hugely difficult to model), and they themselves admittedly have a poor understanding of how to maintain a thriving, productive, fair and clean economy. It’s certainly not through monetary (money supply & interest rates) or fiscal (taxes) policy adjustments alone, which seems to be a popular approach today.
It’s important that today’s conservative leadership ask themselves this; would building an economy from scratch while adopting laissez faire economic principles have ever led to roads, public transportation, national energy grids, national health care, pensions, primary education or minimum wage — all things we take for granted today? Is it not interesting that the grandest conservative icon, Churchill (formerly a Liberal Democrat), introduced minimum wage in the early 1900s? Did he not believe in a civilised society that looked after its own? That every man and woman should enjoy some leisure time, some time to pursue creative interests or hobbies, access to free education and healthcare?
And let’s not forget laissez fair economic’s biggest failure of all; climate change. Is it not through a lack of regulation, a lack of appreciation for the true cost of every gallon of diesel burned, that has led us to a global crisis of epic proportions? In the same way we’ve taxed cigarettes because of the huge burden they impose on our health care system, should we not tax emitters for every ton of carbon they release into the atmosphere for the huge future cost it will levy on us through increased risk of devastating floods, droughts, storms, heat waves, freezing winters, crop failure and the decimation of coral reefs followed by marine food shortages?
Furthermore, most break-through technologies commercialised by firms hail from government-funded programs. Take Teflon, first deployed to protect tanks in World War II, or the Internet, developed by government researchers at CERN or cellular networks which leverage satellite technology developed by governments during the space race. What about the military? Does laissez faire economics not purport completely free international trade to optimise the cost of local goods and services? (which incidentally has now been torn to shreds by leaving the EU and the thousands of international trade agreements which went with it) Why, then, should we not trade freely with Afghanistan, Iran or Russia? Or why does Taiwan then not trade freely with China? Because in realpolitik, military might counts. Laissez fair economics means nothing if your country is invaded, which is far more likely if you’re an economically weak and isolated country.
And yet laissez faire economic principles are held as the be all, end all for a healthy economy by Boris’s cabinet, because, and here’s the rub, it works for them. So where do we go from here? Embracing an economic principle which is now failing the UK will not be sustainable. Geographic and wealth inequality has increased over the last three decades (ref), the cost of education is at an all time high, social mobility is declining, obesity, drug addiction and alcoholism continue to threaten communities and the influence of the UK on the world stage is at its lowest point in centuries.
The answer is massive, and continued government investment in manufacturing capabilities catalysed by the need for clean technologies and renewable energy. The expansion of local autonomy over regional investment led by decentralised governments and regional development agencies is key to making these investment decisions. Unfortunately, it seems that if you’re based in London, or are from a wealthy family anywhere in the UK, that you are inherently London-centric and support the financial services sector. With many conservative leaders hailing from banking backgrounds, there is a major focus on financial services over actual productive industry. Yet Canary Wharf, the centre of market capitalism as the Tories know it, was initially developed through massive government stimulus siphoned through the London Docklands Development Corporation. We need to do more of the same, elsewhere around the UK, but rather than stimulating the financial services industry, the funds need to be directed towards the creation of manufacturing hubs. Doing so will foster an independent Britain and provide work for those with less opportunities.
Indeed, if borders suddenly became impenetrable, and world-trade ceased, would you prefer to be trapped in a country that had perfected the art of making money out of money or one that could actually produce goods such as materials, computer chips, sophisticated tooling or vehicles? The lack of focus on growing the UK’s manufacturing industry has led to the continued and now complete decline of past industrial manufacturing centres of the world (think Manchester or Liverpool). As a result, unless you get into financial services and live close to London, you are at risk of a massive lack of opportunity and if you do succeed in finding a position at a factory, design or engineering firm, it will be woefully underpaid for its utility to the economy, especially when compared to similar work in other European countries. The conservative leadership must free itself from the delusion that London’s financial services sector represents the essence of market capitalism and is an adequate substitute for the production of real, trade-able goods.
There also needs to be a refocus on regional economies through investment not only in manufacturing but also trade schools, regional development agencies, affordable education and direct, fast intercity train connections. Otherwise the current state of affairs will lead to the continued disillusionment of a massive part of the population outside of London, particularly among the youth and deprived parts of the country. The continuation and in fact, growth of free market capitalism focused on the individual without thought for government intervention and support for under-developed parts of society will lead to massive resentment of the current conservative leadership, and perhaps more importantly, the overall loss of national productivity, wealth and global influence. More funds must be redirected to regional development to allow for a balanced and content society.
Admittedly, Britain’s current situation is not helped by the economic free fall we see today in inflation, labour shortages, trade tariffs, lost productivity and travel restrictions caused by Brexit and the Covid-19 . At the time of this writing, high-street prices are due to increase by 15% over the winter of 2021. It is therefore more urgent than ever to implement these policy adjustments quickly, to prevent even deeper economic hardship caused by these external factors. Otherwise the ousting of conservative party for its lack of concern for society as a whole will be imminent. Such sentiment will even be propelled by an ever growing youth movement criticising government inaction around climate change.
All that being said, the pendulum should not swing more to the left than is sensible. There is a real risk that a reactive political counter-movement will lead to huge hikes in taxes, minimum wage and government support for commercial entities. If we cannot balance our belief in laissez faire economics with an understanding of the real role government needs to play in our economy, we may end up abandoning free market capitalism completely, and revert to a post-war economy strangled by unions and cumbersome government-run entities which waste tax payer money through their massive inefficiencies. The other side of the coin is just as dangerous. Liberal market economics has brought wealth to our economy as well as many other economies in the Western World, and I am a wholesale supporter of it. However, it must be implemented using government checks & balances, and direct support where and when needed for forgotten or deprived parts of society, and change must happen today. The divided, segmented society we live in is not a healthy one. The robustness of an economy, and the strength of a country, is reflected in the quality of life of its people as a whole, not just the wealthy few.
