The Role of the Politician and Economic Productivity
The International Monetary Fund has projected a 0.6 per cent contraction of the United Kingdom’s economy in 2023, while other major economies are expected to grow. This means the British economy will perform even worse than Russia, who has been hit by numerous sanctions following its invasion of Ukraine.
Paul Krugman expresses concerns for the stagnation of the UK’s economic productivity growth, wherein, “Productivity isn’t everything, but in the long run, it’s almost everything.” As the main driver of growth in revenue, including wages and corporate profits, this is dismal – as the UK has been stagnant in this area since the financial crisis of 2008. This means the UK is near the bottom of the rankings of all G7 advanced economies regarding its productivity.
Political scientists express concern, as it appears to many the UK government does not provide any coherence regarding this problem. However, Jeremy Hunt, the UK chancellor, recently outlined a vision for the British economy, wherein he proposed ‘the four ‘Es’ of prosperity,’ wherein he proposed that education, enterprise, employment and everywhere would be the key to economic security and growth. Slogans have long been part of the political world, especially for chancellors. They, in a way, give both civilians and politicians a goal to work towards.
However, it is being criticised for being a cover-up; an empty promise with no real strategy to realistically increase productivity. For example, Kitty Ussher criticised Hunt, adding a fifth E to his list – empty. It has been compared closely to that of former Prime Minister Boris Johnson’s infamous mantra: “build back better.” However, even Johnson himself has mocked this– meaning people are sceptical if they hold anything more than empty promises.
Ultimately, Hunt’s motto loosely points towards three main goals – conventional modern economic points to drive productivity.
Firstly, Hunt should work to increase capital investment, which, compared to other advanced economies, the UK maintains low levels of. There should be a push to increase the scale of the UK’s state-owned Infrastructure Investment Bank to ensure capital investment can be maintained at a level to promote and sustain productivity. Hunt needs to ensure the country can ‘bounce bank’ from sources of turmoil, such as Brexit, COVID-19, and the Russian invasion of Ukraine. This will strengthen industrial policy and long-term investment to steer away from emphasised dividends and buy-back shares. This would all allow Hunt to deliver on his promise of ‘enterprise.’
Moreover, the innovation system begs for improvement, on which Hunt’s promises of ‘education’ and ‘employment’ come into play. New technologies should be greatly infused into society, research and development begs for more expansion. This is costly, and can take time, but these long-term goals instil popular confidence in politician. This will demonstrate concern for the UK’s long-term growth rather than just their re-election at the next General Election.
Finally, Hunt’s goal for ‘education’ would address institutional deficiencies. With large portions of many economic sectors on strike, protecting these workers greatly improves productivity. For example, a rebirth of the Wilson-era Department of Economic Affairs, or simply broadening the goals of the Treasury are key to ensuring the workforce and the work it does are promoted and protected.
The UK cannot fall victim to short-terminism, and productivity growth will not happen overnight. Ultimately, the public waits with bated breath to see if the IMF’s dreary predictions will come true.
Carolina Beirne