A crisis in credibility - Labour's economic programme
51:55 Share

Hello and welcome to Politics Theory Other. My name is Alex Doherty and my guest today is the sociologist and political economist Will Davies. We spoke about Will's recent article in the London Review of Books titled A Crisis in Credibility, Labour's Conundrum. We discussed the nature of the economic agenda that Labour has adopted in its attempt to break out of the low growth and low productivity rates that have characterised the UK economy in recent years.

We chatted about the extent to which the Starmer Reeves project emulates and also diverges from the Biden administration's economic policies and the left de-risking critique of so-called modern supply-side economics. We also touched briefly on Elon Musk's recent extraordinary attack on the UK government and his other interventions in European politics.

Today's episode is brought to you by PTO supporters on Patreon and also by The Syllabus, a non-profit knowledge discovery service doing artisanal automation. How does that work?

Well, they use technology to monitor thousands of sources and each week human curators, that is actual people, handpick the best of what's been published on the internet. When you sign up, you get to set up your feed. You'll pick from six languages and 60 topics like far-right populism or energy and extractivism, heterodox economics or AI and automation. Everything's there. Each Monday, you'll get a new batch of personalized recommendations,

And it's not just podcasts. It's essays and books, academic articles and reports, and even videos. Check out their website, thesyllabus.com, and that's with a hyphen between the and syllabus. They offer two-week free trials, and if you enter the code THEORY at checkout, you'll get 30% off your first year.

Finally, if you would like to support Politics Theory Other, you can do so by becoming a £5 per month supporter on Patreon. As well as helping to keep the PTO show on the road, you'll get access to lots of bonus content like listeners questions episodes, including one coming up with Adam Tooze in early February. Go to patreon.com forward slash poll theory other to sign up.

And now to today's interview. Will Davies teaches at Goldsmiths, part of the University of London. His books include The Limits of Neoliberalism, Authority, Sovereignty and the Logic of Competition, The Happiness Industry, How Government and Big Business Sold as Well-Being, and This is Not Normal, The Collapse of Liberal Britain.

So in the LRB article, you write about Labour's economic programme and its emphasis on achieving greater economic growth through increased public and private investment, which it is hoped will improve the UK's very sluggish rate of productivity growth.

These are, of course, hardly new problems. Capital investment has been weak since the 1980s and despite occasional upticks, has never returned to anything like post-war levels. And you note in the article that in 1998, the then Labour Chancellor Gordon Brown commissioned a report from McKinsey on ways to tackle the productivity gap between Britain and its competitors, which resulted, as you say, in many recommendations that the current government is pursuing.

In the article, you touch on that history of these failed attempts to do anything about the investment and productivity gap and how reliance on the city as an engine of growth has substituted for doing anything about these deep structural problems the economy faces. But you suggest that we're no longer in a situation where the can can be kicked down the road and you write, why then might the next five years be any different? One reason is that the problem is now so dire as to be unignorable.

COVID and war in Ukraine have resulted in economic conditions far graver than those on which McKinsey was consulted at the end of the 1990s. This reality can no longer be papered over with a successful financial services sector, discrete acts of redistribution or the distractions of culture wars. Before we get further into the article, can you say something about the scale of the crisis and why, as you say, the situation now dictates more radical measures in your view?

Yeah, I think one of the big differences is in terms of the contrast from the late 90s is that Britain's performance since the global financial crisis of 2008-2009 has relative to certainly the United States, if not the Eurozone, has deteriorated quite significantly. So

We've experienced this stagnant GDP per capita over the last 15 years, which is manifest also in wage stagnation, that has never happened before in industrial times to the extent that it has. GDP has risen over the last 15 years, but largely as a result of immigration. There's been unprecedented levels of immigration, particularly since the end of

lockdowns. I mean, to give some sense of the discrepancy between the United Kingdom and the United States, the UK's real GDP per capita has grown only by 6% since the global financial crisis, whereas in the United States, it's grown by 20%. So this is a measure of

I mean, this is what allows you to spend money on... I mean, obviously, there are all sorts of different political options open up when you have your economy growing per capita at these different rates. But, you know, you could either pursue social democratic goals or you can simply see that money translated into higher wages, leading to a higher standard of living and, you know, better housing conditions and so on. But ultimately, this...

Britain's capacity to generate prosperity has been hugely impeded since the global financial crisis and other obstacles such as Brexit, which had a major impact on trade, particularly in manufacturing. These additional problems coming along mean that this is no longer simply, oh, we're not quite keeping up with the United States. There's actually a prolonged period of

of stagnation that's going on. As I say, high levels of immigration are also one way of papering over that to some extent, because it means that your GDP, that is the overall size of the economy in the aggregate, continues to rise, but also with a rising population.

So there's a sense that I think that Britain can no longer look at these problems as being temporary effects of whatever it might be, the austerity programme, although austerity of George Osborne has left lasting social and economic scars. But it no longer feels like something that is cyclical, but instead seems like something that could just carry on indefinitely unless some kind of

far more far bolder policy program could be introduced to address it because unless that happens and in some ways I'm offering the perspective of you know the kind of mainstream policy establishment which Reeves and Starmer concur with

The only way you can carry on increasing spending on particularly the National Health Service, but also these other areas that we know are hugely overstretched of social care and children's services and not to mention childcare.

questions such as housing and other things that local government is responsible for, you either have to raise taxes, and taxes overall are now at their highest level since the 1940s in terms of the overall share of the economy, or you have to enter into some kind of zero-sum game where you take money away from one thing to put it into another. So that's the nature of the urgency right now.

And do you think that urgency that you described, do you think that casts a slightly different light on the Conservative government of Liz Truss and Kwasi Kwarteng, which is

is obviously viewed with very well-founded derision and obviously not to defend them. But do you think that, you know, for all the dire consequences of the mini-budget of 2022 and while acknowledging the likely horrific effects of their economic and social policies had they remained in office, that in some respects their urgency and radicalism showed a strange sort of realism that they're not typically credited with, at least in contrast to the sort of drift of the Sunak government, that they recognise that the economic situation is indeed dire and necessitated by...

you know, drastic action of one sort or another, obviously not the action we would prefer. Yeah, I think, I mean, they were looking for something a bit like kind of shock therapy and shock therapy doesn't really have a particularly good record. Uh,

in any circumstances. But nevertheless, there is, as we know from the work of Naomi Klein and others, there is a faction of the neoliberal right, the more libertarian neoliberal right, which believes that economies can require dramatic interventions, which can be very painful in the short term in order to overcome their kind of sustained torpor.

I suppose that a libertarian view, and this is a view that I guess corresponds to some of the tenets of so-called Austrian economics of Schumpeter, Mises, Hayek and others, is that from the perspective of trust as economic...

to the extent that she had economic thinkers, there's a sort of a combination of firms that have got locked into a kind of low innovation, kind of torpor, a sort of repetition of the past.

mixed with a government that has effectively repressed some of the kind of underlying problems of capitalism means that, you know, you need in a way to make a radical change of direction so that it's possible for the entrepreneurial, so-called creative destruction of capitalism to be kind of released, sort of unleashed. There was a lot of rhetoric of unleashing things around the trust government. And that idea that, you know,

capitalism has these kind of innate energies and they can go to sleep if things get too easy for people is of a long-standing belief of the neoliberal right. And certainly, so in answer to your question, I suppose, you know, I think they were right to see, they were right to look at British capitalism and to

to view the problem of low productivity growth, low wage growth, low GDP growth as not just temporary afflictions that, you know, would be overcome once, you know, things kind of

sort of naturally kind of restored some sort of equilibrium of 3% growth a year just through sort of waiting. We couldn't just carry on waiting for a return to a sort of pre-2008 world, but instead there needed to be something that demonstrated that Britain was taking an entirely new path

And of course, their way of doing it was to effectively throw all forms of economic rationality out of the window through, you know, sacking the permanent secretary of the Treasury, telling the Office for Budget Responsibility that they were no longer allowed to evaluate their budget and slash taxes on the rich and capital gains taxes, as if, you know, the financial markets, the government's lenders,

would just sort of take all of this as good news, not show any kind of concern as to how this was going to work fiscally. So obviously, we know how that all ended. But I do think that they were looking for what we might call a paradigm shift, and they believe that it could be engineered through an act of shock intervention. Yes, and I suppose that would tally with their perspective on Brexit and the post-Brexit situation, which they would see as some kind of

worst of all worlds, you know, halfway house where you're outside of the EU, but in many ways you're still operating as a, you know, very much akin to other Northern European states and that Brexit presents this opportunity to rip things up, to have a bonfire regulation and so on. And that's the chance that's not being taken.

Yeah, I mean, I guess that Brexiteers, to the extent that they're willing to talk about Brexit any longer, generally would probably say that it was never properly tried in some sense, like lots of utopian projects that, you know, Brexit, oh, that would be a nice idea kind of thing. And yeah, that...

Britain has not fundamentally moved on from the model of capitalism that coalesced over the 1990s and early 2000s. And obviously they blame Blair and Brown for the fact that that model of capitalism involves a larger state than they would wish, making more social commitments than they would wish, and that...

on some point the state needs to start rowing back on some of their social commitments. I mean, it's interesting when you think about, you know, where does the 2010s figure in that imaginary? Because obviously the state got even more dragged into additional social commitments.

relying on higher taxation, particularly over the, well, as a result, particularly of COVID. But what happened under, I guess, Johnson would be seen as a traitor from that perspective in the sense that it was under Johnson that the state and with Sunak in the Treasury got drawn into even wider set of social commitments with things like the furlough scheme and this sort of thing. And obviously, a lot of the aftermath of the COVID pandemic was

was this much higher rate of disability claimants, this much higher rate of non-employment from the labour market due to long-term ill health and so on, and what is perceived to be an even greater problem of high taxation

low economic dynamism. I suppose there is an interesting question here in all of this about the extent to, in a way, the sort of what role does George Osborne play in all of this? Well, Osborne was quite good at, well, he was very, he was horrifically good at

reducing social expenditure. And we know that particularly in local government, the contribution of central government to local government spending was cut drastically with some devastating effects for all of the various stakeholders, parties that are dependent on local government, including some of the most vulnerable and needy in society. But what Osborne never was really that interested in doing, or the Cameron Osborne Project was never that interested in doing, maybe because of their compassionate conservative rhetoric,

explicitly and publicly reducing the range of commitments that the state offered to people. I mean, if you were to say, okay, you know, we're no longer going to support, we're no longer going to provide these various forms of social support, social insurance, we're no longer going to play a role in, you know, the provision of, uh,

emergency housing, for instance, we're just going to accept the various social effects of the state sort of contracting in that area, or we're no longer going to provide disability benefits for people with a particular range of, say, mental health diagnosis or something like that. If you were to go whole hog from a libertarian perspective and actually start to cut various marginalised and vulnerable groups off,

there would be at least a kind of, I guess, from a sort of libertarian right perspective, a kind of a consistency. Instead, what Cameron and Osborne represented was a sustaining of the range of social commitments that the state had, but a contracting of the fiscal largesse to actually honour them. And in that sense, that's partly why we now face

you know, totally dysfunctional social model in the UK of rising social spending often diverted via private equity owned, you know, care homes or special needs providers and this sort of thing because the, you know, people still look to the state to support them in all these ways because nobody is, you know, it's not the,

There's never been a political movement to actually cut off those obligations. There's just been a big fiscal movement to reduce the amount of money that's available to them. And the paradox is in the longer term, you know, we're now sort of, you know, nearly 15 years on from Cameron and Osborne, is in the longer term ends up costing the state more because you end up more reliant on private sector, often vastly profitable providers to come in

and provide emergency provision in certain areas because of people who have simply got nowhere else to turn. Yes, and I suppose we could also bring the PFI contracts negotiated by New Labour into discussion. Yes, sure. But going back to the Starmer government and the current situation, so at the start of the article you describe the way in which the government has articulated its economic programme in terms of fixing the foundations, and you write that, quote,

The challenge Labour has set itself is to modernise the technological and legal foundations on which Britain's economy is built.

The transport hubs, energy supply, planning rules, market regulators, rather like an upgrade to a computer operating system. Could you say a bit about the strategy they've adopted, which shares something with the so-called modern supply side economics championed by Janet Yellen and the Biden administration, a strategy that critics describe as de-risking? Yeah, so this is an active state agenda. So this, at least on the face of it, is not...

quite the same as what might be considered to be an old supply-side agenda. So the old supply-side agenda, which can also manifest itself as a kind of race for the bottom in terms of international competition, is that what capital most wants is less taxation, less red tape, less bureaucracy, less things getting in the way. And once those things are all reduced...

then capital will sort of turn up magically. It will just sort of, you know, investment will occur. And actually, I mean, you know, if you want to sort of a particularly, a more, well, I say extreme, maybe it's not extreme, but a more focused manifestation of that, you look at the work that Quince LeBodian's done on zones as an imaginary of the contemporary neoliberal right. The idea that there, you know, that what,

the way really to attract capital isn't simply to run the nation state in a way that is friendly to capital. What you really need is to kind of have these smaller territories that... Free ports and so on. Exactly. And I mean, even, you know, as it was, people found ironic that at one point, you know, Rishi Sunak said that Northern Ireland now...

could be one of the most successful zones because it still has access to the European Union that the rest of the United Kingdom lacks. And yet it's also got access to friction-free access to the rest of the UK. So anyway. The plan all along, I'm sure. Yeah, absolutely. Exactly. So, you know, zones would be an example of collaboration.

kind of where the supply side imaginary has gone today. But the modern supply side vision, which is the idea of modern supply side agenda, which is a concept that Janet Yellen, US Treasury Secretary, I guess she's still US Treasury Secretary, is the idea that the state can't just look at removing obstacles and tax and regulation and red tape. It also needs to invest in

In, you know, as I say in the quote from my piece that you read out in this sort of operating system, the kind of platform on which the rest of the economy works. So that includes particularly transport infrastructure, telecoms infrastructure, energy infrastructure. I mean, one of the kind of key impediments to catching up with the United States in Europe has long been that it has much higher energy costs.

And so, again, you know, investment in cheaper energy sources, whatever they might be, which could actually alter the wider infrastructural socio-technical environment in which firms are investing or sort of, you know, locating in is seen as being a way in which government can actively use its fiscal capacity to ultimately to benefit capital.

Now, of course, you know, certainly rhetorically, the vision would be, well, you know, we'll have this, you know, we'll have better roads, rail, energy infrastructure, ports, other forms of manufacturing industries that then have various kind of spillover benefits to the local region and so on.

And the government will somehow kind of bring this about and then other firms will want to come and locate there and create good jobs and invest and so on because the wider environment is conducive to high productivity, profitable investment strategies. Now, as your question alludes to, there's also been a critique of this advanced by the likes of Daniela Gabor. Gabor describes this approach as the Wall Street consensus.

And she argues that the Washington Consensus, which is the ideological paradigm that was born in the late 1980s and advanced and expanded around the world by the World Bank and the International Monetary Fund over the late 80s and over the 1990s,

but which was you know famously a kind of deregulatory agenda which opened up borders to capital movements and tried to bust trade unions and so on but the wall street consensus is a vision of economic policy making which puts the interests of financial asset managers to the fore and the biggest of those financial asset managers are well clearly black rock being that

biggest of them. But it's a whole collection of various asset management firms that have boomed, particularly over the last 15 years, which have at their fingertips billions of pounds worth of capital that they are managing on behalf of their clients. Many of their clients are pension funds and other types of investment funds.

And they have the capacity to mobilize very large amounts of private financial capital on behalf of their clients. But if governments can make their own public infrastructure projects sufficiently attractive to those private asset managers, then, of course, there is the opportunity in the eyes of Treasury departments around the world to

to build that infrastructure, those ports, those roads, that energy infrastructure and so on, with the help of these giant asset management firms. And the way you do that, and this is where Gabor uses the term de-risking,

the way you do that is you guarantee a certain level of profitability. You offer particular tax credits, various combination of, well, most part of Gabor's critique is that it's mostly carrots. There's very few sticks involved. It's mostly if you invest here, you will get this kind of return. You will get this kind of, you will get these various tax breaks so that the profitability becomes kind of baked into the project. So that rather than it being, you know,

well, we'll make this much return on investment, but there's a risk that we won't. Instead, there's a kind of guarantee that these firms will be making the kinds of return on investment that they basically expect as the norm rather than as the exception when things go unnoticed.

particularly well. So in that sense, there's a sort of turn towards asset managers as being the answer to these various kind of public problems of decaying infrastructure. And that's definitely part of the Labour agenda. They've been very clear that what they want to do through things like the National Investment Bank, the National Wealth Fund, that they want to use

public sector, public capital in order to crowd in, catalyse, mobilise, all these are the various terms for it, that private sector investment. And the way they'll do that is on a kind of deal by deal basis is the idea, certainly through the National Wealth Fund. So you would say, right, we're going to build this, you know,

rail network or this new kind of port infrastructure or whatever it might be. And there would be a kind of deal would be struck with various private sector financial asset managers in order to determine exactly kind of what they will get out of it as part of the deal for actually kind of going into this long term investment plan.

I suppose one thing that's quite interesting about the de-risking project is the way in which it seems to implicitly endorse certain left-wing arguments. So even if the government isn't saying as much, it's implicit in the strategy that, you know, business will not sufficiently do socially useful things unless effectively they're

bribe to do so, right? And from the business side of it, you know, they're more or less admitting that their self-portrayal as swashbuckling risk-takers is a bit of a farce, right? Yeah, I think that's interesting. I mean, in a way it's, and there are critics of this from the right as well, who look at, and I mean, there's been, you know, the kind of claim that

that BlackRock is a form of woke capitalism. I mean, that's partly because of some of the statements that Larry Fink, the chief executive of BlackRock, has made about kind of the fact that, you know, the idea that BlackRock can oversee the green energy transition. And obviously, we know it's very clear now in the United States that there's large factions of the political classes that...

don't believe in the energy transition, they don't think it's necessary, they don't want it to happen. So in that sense, someone like Fink ends up on the other side of an argument from, you know, the MAGA elites. But no, certainly it's a very coordinated model of capitalism. It involves particular concentration of decision making amongst particular types of financial and political elites. It involves, you know, there is, and there's been

criticisms of the whole model of asset manager capitalism or maybe not criticisms but certainly sort of analyses of it that that it is it does involve this you know one of the ways in which these these asset managers work in relation to the stock market is this kind of passive they diversify their ownership across a huge number of different different firms they don't try to kind of

beat the market or do particularly sort of clever sort of investment plays trying to be ahead of the rest of the game. Instead, they use various algorithms and data analytics to effectively just own very large swathes of equities across a very large

spread of companies and effectively just wait over time as the value of these equities and the dividends they pay grows over the long term. So it's a form of sort of patient capital in contrast to the depiction of shareholder value that was the sort of dominant critique in the 1980s and 1990s of people who sort of owned a share for exactly short-termism. And in that sense, you know, it's a...

It is a novel turn in the development of American corporate governance and capitalism, as Benjamin Braun and others have examined. But yeah, when it comes to the question of risk and return, the de-risking model does assume the state is going to act like a kind of a client or is going to

allow itself to be exploited effectively, that it will allow the taxpayer to carry risk. Meanwhile, the private sector will make off with return. And there's a sort of doffing of the cap to these asset managers that has understandably received quite a lot of criticism from the left. In a way, it

could be from the right as well. And I think, as you say, because it does sort of rather mess with sort of some of the key dynamics of how capitalism is imagined, certainly on the kind of more swashbuckling libertarian end of the neoliberal right.

You argue that even if the project in the UK is a success in its own terms, its benefits might not be felt for a very long time. And you point to statistics from the OBR suggesting we could be looking at 10 years or more before some of the effects of creating new infrastructure and so on starts to be felt. So longer than the length of two parliaments.

That seems a pretty risky strategy given prevailing political volatility and the remarkable unpopularity of the government despite their landslide electoral victory. Do you think that they just assumed that given the malaise of the Tories that they could be fairly confident of at least securing a

a second term in office and therefore all the pain or all the bad news could be front loaded in their first term and then they could then hope to reap some political benefits from their economic achievements much further down the line. And do you think that perhaps given how bumpy the ride has been for the first six months of the government that they may no longer take that view?

I think something like that was clearly the plan. And I mean, if you think back to the last summer, Labour was spent July and August having just won this thumping majority, the second highest majority since 1945, talking about how dreadful everything was. There was one particular speech that Starmer gave in the Downing Street Garden, I think in late August, which I think a lot of, I think backbenchers, Labour backbenchers

began to complain that there was just this constant gloom emanating from 10 Downing Street. Certainly very, very different from the mood in the summer of 1997, for instance, for lots of reasons. So there was clearly some kind of plan that while the Tories were still alive in the memory, fresh in the memory, that it could be possible to say, look, the country is in a really, really bad way and not to be blamed for that. It's interesting to think about how long that can happen. I mean, so with Reeves,

So, you know, they pledged to have the... I mean, they've already begun to backtrack on this pledge, but there was a pledge at one point to have the highest growth rate in the G7 by the end of this parliament, which, I mean, everyone sort of immediately pointed out, well, it's a ridiculous pledge because you don't know how much growth other economies, similar economies might have. And...

Who's to say that France might not suddenly have some unprecedented rate of growth that you can't match? But the news has not got any better. No economist would expect...

indicators to yet be reflecting Labour's economic policies but the it turned out that the you know Britain has gone back into I'm not quite sure not quite recession but pretty much zero economic growth I think of the third quarter of the year so this was you know such a

very early in Labour's term in office. But, you know, lots of these things are still heading in the wrong direction. Inflation is not going down. The cost of borrowing for the government has been creeping up for Christmas. So there's a lot of things which are not heading in the right direction. And you might not expect them to yet, but there is a question of...

To what extent, you know, I don't think already, I don't think Star-Morale Reeves would feel very comfortable blaming all of that on the Tories because it now does feel like, you know, it's certainly within the political cycle and in the popular memory, people already, you know, think, well, no, you've been in power now since July. You've got to start owning some stuff. So there's that. And I do think that it will be quite difficult to...

Certainly in terms of the long term vision of trying to increase the rate of productivity growth, as you say, the Office for Budget Responsibility suggests that, yes, this could happen, but it may not happen for 10 years. Well, that's kind of useless from a kind of electoral political perspective.

Some people would say, well, it's the right thing to do anyway. You could say, you know, if you believe that Starmer and Reeves have some sense of kind of national duty, which they claim to, you could say, well, regardless of winning elections, it's needed and therefore it should be done sort of thing. So there's that argument. And in a way, it's a bit like how the dynamic of how the Republicans and the Democrats have been in terms of economic policy really since 2008.

since the 1980s, where Democrats see it as their job to clear up all of the kind of mess, economic mess left by the Republicans. That was how, you know, like Clinton famously delivered the first fiscal surplus since the 1960s in the late 1990s. And it was seen as suddenly economic policy was heading in the correct neoliberal direction only for George W. Bush to come in and sort of ruin everything with tax cuts and whatnot.

and international wars and so on. And then, you know, the sensibles had to come back in again in 2008 and try and sort out the mess again. So you get this sort of alternation. So you could say that's what's going on a bit. There's this kind of alternation between sort of economically reckless conservatives and the sensible Labour government.

I suppose you could even push that back to Jimmy Carter and Reagan, right? I mean, as some commentators have pointed out, for all his personal virtues and many decent things he did since leaving office, Jimmy Carter, in certain respects, was a more authentic neoliberal. He was more committed to austerity, whereas under Reagan, you have the bonanza of deficit spending.

Yeah, sure. Well, I mean, there's always been that sort of, you know, some people say, well, it's part, I mean, obviously, this applies to Carter, but, you know, in more recent years, it's always been said that, well, maybe a party that is to some extent on the left or the centre left, you know, needs to demonstrate greater fiscal responsibility because there's a kind of an instinctive trust, arguably, that, you know, financial markets might be willing to cut a bit more slack to Conservative parties than to

liberal left parties. I suppose particularly if the party in question has in recent memory from the perspective of capital been out of control as the Labour Party was under the Corbyn leadership I suppose. Yeah no for sure and that's what a lot of the sort of you know public statements and the sort of you know as I point out in the piece in the London Review of Books you know Rachel Reeves kept going back to Washington DC to give speeches you know she gave a she gave this speech about what she called securonomics in the spring of I think 2023 and

in Washington, D.C. And that was very much her trying to sort of kind of, I think, quite ostensibly trying to sort of hitch herself to the Biden-Yellen agenda and to kind of bask in the kind of what in some ways looked like a kind of new consensus, new hegemonic model, which, of course, now no longer really looks like that, given what's happened in U.S. politics and is about to happen in U.S. politics.

But she then also, when she was wanting to kind of gear up towards this budget in 2024 that was clearly going to raise borrowing quite substantially, in addition to raising taxes very substantially, she went and gave a speech at the IMF in Washington, which very quickly won the approval of the IMF. The IMF said that her budget plans looked very sensible and necessary and all this sort of stuff, which, again, is a kind of like a shoring up

credibility through a kind of mobilization of elite allies and and i think that you know that's happened quite explicitly by by reeves and starmer i mean one of the questions is you know to what extent obviously also is uh trying to considering ways in which she could unleash the growth potential of financial services in the uk in ways that has already alarmed a lot of economists of you know what you

obviously there were a lot of regulations that various interests in the cities would like to see rolled back and relaxed and so on. And they will convince her or they will try and convince her that this will allow them to grow more rapidly and create more jobs and bring more investment into the UK and so on. I mean, there's a question about, you know, which when you're trying to mobilize a coalition of elites and ideas and of, you know, trying to generate policy credibility through this

kind of bringing together of various voices and interests, you know, who gets included in that, who doesn't. And I think one of the worries with this modern supply side agenda, which I mentioned in my piece, is that

at what point could it just sort of collapse back into a kind of old supply side agenda? Because of course there will be voices and you could find them within the IMF as well still. It's not like the Washington consensus has just sort of evaporated. There is still, there are still elements of the Washington consensus that are out there. It's not just like Washington consensus is gone, Wall Street consensus has come along. There will still be people who say, well, actually, you know, maybe you do just need to kind of, you know, cut taxes on capital and have a more flexible labor market and so on. And, you know, at some point,

if the economy doesn't start to improve at some point, those voices will get louder. Now, the main area where I think that kind of

supply side agenda is most influential and which does pick up what McKinsey was saying in the late 90s is when it comes to planning and construction because I think clearly Reeves and Starmer are of the view that there is a huge inhibition in the UK to investment particularly in the built environment and also in infrastructure projects created by the amount of

you know, quote unquote, red tape that is necessary to make things happen. So whether that be, you know, building a, you know, a new manufacturing plant or a new wind farm, or just building more housing, it's much easier to stop those things happen than it is to make those things happen. So that's sort of, I think they're going to invest a lot of political capital into

in trying to rebalance that away from, you know, NIMBYism of one kind. And it's not really just NIMBYs in the sense of sort of special interest. It's also, I think, I mean, what Starmer and others have been very vocal about is the extent to which the current range of rules...

creates huge hurdles before something can actually finally get built and huge delays as well. And the example that Starmer wants to be seen as the model to follow is that of the vaccines, the COVID vaccines, that it was possible to

safely rushed through something through a regulatory process that was the like of which had never been seen before. And if the same thing could happen to something like the planning system, you might then begin to release forms of investment that have been thwarted for decades in the UK. That's part of the argument as well.

Just going back to that point you make about there still very much being voices at the IMF and so on arguing for the tearing up or partial tearing up of workers' rights and so on. Do you see that as something that would potentially happen in the UK then only if there was this shift into a more conventional supply side economics? Because although...

Stalman before he was in government very much picked a fight with the Labour left, won that fight. They have sought to keep the unions on side and they've sought to keep the unions on side by having, you know, a not terrible agenda when it comes to rights at work. No, I mean, you know, they're actually quite committed to, you know, they have their New Deal for workers. I mean, Labour governments tend to come in with various obligations that they have imposed.

to, I mean, whatever we might think about the kind of ideology of the Labour Party at any one time, they do nevertheless have certain, you know, they do end up with various commitments towards their trade union backers who are their, you know, the major funders and so on. I think the workers' rights agenda of the Labour, the current Labour government is, you know,

it's not insignificant and it's a major part of their platform. I think the hope is that it is in keeping with a strategy for increasing labour productivity because there is a view that Britain still remains too reliant on a kind of

flexible hire and fire labor market model, which actually impedes productivity growth. I mean, this is an argument that has been circulating for a long time. I mean, it was an argument that people like Wolfgang Streich was, before he became a kind of apocalyptic

kind of, or pessimistic, let's say, but sort of, you know, a critic of capitalism. He, in the late 80s, early 90s, used to celebrate the German model of capitalism. He then became very pessimistic about the German model of capitalism, but celebrated it on the basis of the, you know, when people are locked into certain commitments with labour, you know,

that leads to higher levels of investment in skills and training and that kind of thing because once you're locked in you have to pursue a kind of high road to profitability and growth rather than a kind of low road one and this argument has been made about the UK for some time so I don't think at the moment there's any evidence that the

Starmer and Reeves want to incorporate a kind of classic Thatcherite element of supply side economics when it comes to the labour market. Obviously, they have considered many critics and you hear them, you know, often you kind of hear on the radio, various business leaders are criticising them for burdening them with more regulations when it comes to workers' rights. But also they're particularly unhappy about the

massive increase in employers' national insurance contributions as a result of the budget, which has had all sorts of perverse outcomes, which I think shows quite how sort of... It really is a kind of game of whack-a-mole because you kind of solve... There's no easy way of navigating this fiscal quagmire. They thought, wow, we've managed to raise £25 billion to the... That was what the employers' national insurance contribution was.

going to cost. But it's having, you know, there's now genuine concerns about the extent to which it might be leading to reduced wage growth. But also these other areas like, you know, universities found that the cost of this national insurance rise has more than wiped out the additional fee increase that was agreed for the next academic year. So, you know, that was an area where they were trying to think about where can we shift the

some of the kind of fiscal burden they thought well we can shift it on employers but they're getting quite a lot of pushback now from from from businesses and so on so i don't think they're they're not at the moment in the job of just trying to give businesses everything that they could could ask for but you know i guess the interesting question would be you know what if in in two years time there hasn't really been a major change of direction for the

It'd be difficult to carry on just sticking to the identical rhetoric. I think they're hoping that if they can put as much muscle as possible into planning reforms, then that might, it's not quite the kind of shock therapy that the likes of Truss and Kwarteng were aiming for, but that could genuinely be a kind of trigger point.

for an uptick in investment in various particular areas. They also have a much more sector specific perspective. I mean, the argument is that Reeves apparently wants the Treasury to change its

really within the UK government so that rather than it being principally concerned with the management of public finances, so concerned with macrofinancial policy and management, instead do what in a way used to be the job of the old Department of Trade and Industry or something like that, much more focused on looking at specific sectors and thinking about how can they be enabled to grow. So you look at the sectors where the UK has some kind of

internationally. They tend to be services, financial services, business services, IP-based industries, aeronautic, you know, there's some telecom, that kind of stuff. So there were particular sectors where the Treasury is now being expected to kind of beef up its insight, understanding, with a view to actually supporting these sectors to grow. So that could be the more kind of subtle shift towards a more active industrial policy, but not...

one that is necessarily always very visible because it's more about trying to tweak the priorities of the various economists and civil servants in the Treasury.

Going back to the Democrats and some parallels you draw between the United States and Britain and the way in which the situations of the Democrats and the Biden administration vary. So you write that Jake Sullivan, Biden's national security advisor, was one of many voices declaring the age of neoliberal globalization in which growth is good regardless of geography to be dead. But what followed seemed to involve weaponizing economic policy to ramp up domestic industrial production for a new Cold War.

Janet Yellen morphed into a national security spokesperson, making it clear that America would put security above economic growth, ratcheting up Trump's trade wars and leaning on European allies to join in for their own protection. Now that sort of new Cold War narrative that the Democrats have run with, it doesn't seem to have done them a great deal of good in electoral terms. But whatever else it was, it was at least a narrative, something that Labour seemed to have singularly struggled with.

And presumably for all of Rachel Reeves' talk of securinomics, which you've touched on, that kind of national security angle is perhaps somewhat less available to the UK, given our more precarious position in the global economy. It's not obvious that we can afford to

antagonize China in the way the Americans can. And in that regard, it's perhaps notable that for all our sort of slavish shadowing of US foreign policy, there has been a degree of divergence over China with the UK, for instance, joining the Asian Infrastructure Investment Bank in 2015 over very strong US objections. I just wonder if you could talk a little bit about the different positions of the two administrations in that regard when it comes to the security sphere.

Yeah, I mean, clearly the US has a completely incomparable function in relation to international security from the UK. So in that sense, that kind of role is just not remotely available to any UK administration. I think, I mean, Biden, I mean, there's a terrific piece that you may know by Andrew Elrod called in the Phenomenal World blog called What Was Bidenomics?

which it kind of covers how, particularly how the people like Sullivan and others kind of

into these saber rattlers from kind of after this initial year, 2021, where there was remarkable optimism on the left regarding what Bidenomics might mean in terms of resetting the entire model of American capitalism, responding to the unprecedented Black Lives Matter protests of the previous decade.

taking into account the kind of social infrastructure as well as physical infrastructure when it came to thinking about things like childcare and that sort of thing, you know, pushing up taxes on the rich, importing some of the kind of activist antitrust agenda that would, you know, genuinely start to push back against the power of the giant platforms, all that kind of stuff that generated inflation

excitement on the amongst progressives in the United States but that kind of gave way to this emphasis on using industrial policy to reduce US reliance on China but also to you know

basically, Yellen gave this particular speech where she talked a bit about kind of actually growth was no longer the priority of economic policymaking on the part of the United States. So in that sense, quite different from anything that someone like Starmer or Reeves would say, where they made it clear that growth is their overwhelming priority. I mean, obviously that, you know,

should the UK and the rest of Europe have to cover its own security bills in the future, as the likes of J.D. Vance have said they will, then obviously the question of balancing the

pursuit of economic growth against the pursuit of national security becomes a much thornier kind of problem. But the Yellen-Sullivan-Biden agenda was to use industrial policy to start onshoring, and particularly of chip manufacturing, but also to kind of push to not just sustain, but actually ramp up some of the trade war policies of the Trump administration. And Yellen lent

quite vocally on European governments at the same time saying well you need to join in with this if you carry on trading with China in these particular areas you can't carry on expecting our support and so on you've got to start deciding which side you're on in this kind of new bipolar world

Now, I don't think Starmer or Reeves have yet been confronted with any of those kinds of choices. I don't think that the question of national security is really, I mean, it could do. And of course, Ukraine has changed the terrain of economic policy calculations in various ways, particularly with relation to energy. And the question of defence spending is now something that economic policy...

and people like Mario Draghi and the report he did for the European Commission last year about Europe's productivity growth problem. Part of the problem there is, you know,

Unless you're going to get this additional levels of productivity growth leading to higher levels of GDP per capita, how are you going to potentially find the money to cover the additional defence spending that's needed in a world where Putin is offering a real threat to European security?

Then when you get the arrival of Trump and Vance and so on, that becomes an even more urgent problem. So, I mean, those issues are going to keep haunting this government, but they're not going to haunt them in the way that this is very different from the position of a global hegemon.

where, which has the overwhelmingly largest military capacity in the world to a country like Britain, which is, you know, as we know, a much smaller economic player, but also a much smaller defence player. So it will be interesting to see how that continues to

play out, not partly because of the question of getting the overall levels of defence spending up is itself a major fiscal problem. And you can see quite how tight the room for fiscal manoeuvre is for this government. But also at what point, maybe there would come a point where industrial policy in the UK has to start thinking about, I mean, it turns out that arms is one of the areas of

We do have some competitive advantage in arms manufacturing in the UK. Maybe you're going to see a more militaristic, more mercantilist approach to that as a source of economic growth. I mean, that's not something that I've yet seen, but it's not inconceivable over the next four years of the next Trump administration and the remaining Starmer one. You've been listening to Politics Theory.

If you've been enjoying PTO and finding it useful, please do consider rating or reviewing the show on Apple Podcasts. It really does help to bring in new listeners. The show's music and graphic design is produced by Planet B Productions. Thanks for listening. I'll be back next week.