The Politics of Growth

Being in favour of economic growth is easy. It is also empty.

Eleven or so weeks ago, back when Liz Truss was Prime Minister rather than a tricky pub quiz question answer in the 2040s, she declared to her conference that her three priorities were “growth, growth and growth”.

Around nine weeks before that Labour’s Keir Starmer had set out his own three aims for economic policy as “growth, growth and growth”.

For a brief period, both of the major parties seemed to be competing on how to deliver higher growth – although with very different policy prescriptions.  

Things have moved on. Jeremy Hunt may have declared the three priorities of his Autumn Statement to be “stability, growth and public services” but it is hard to avoid the conclusion that signalling stability and a concern about the public finances are his real guiding lodestars.

There is no doubt that Britain has a growth problem. And that solving that growth problem would make just about everything else – from resolving the cost of living crisis to improving the increasingly dire state of public services – much easier to tackle.

But an interesting question is, are there any politics in growth?

There’s certainly a lot of political economy.

As readers ‘the book’ will know, I think one of the most interesting – and novel – features of contemporary British political economy is the rise of large block of almost post-economic voters. Essentially comprising homeowning older voters who have been relatively well insulated from the day-to-day gyrations of the business cycle and the labour market over the last decade¹.

This summer, responding to Sam Bowman’s thoughtful take on doomsters and boosters, I tried to work out whether I was a pessimist or optimist when it came to the question of raising Britain’s rate of growth.

My answer was that I was a bit of both. I boosterishly believe that there are plenty of practical things that politicians and policy-makers could do to increased growth but have a doomster-ish doubt that the nature of British politics will allow them to take such steps.

The two contenders to be Britain’s next prime minster [Truss and Sunak, this was written during the Conservative Party leadership race before last] might talk up their Thatcherite credentials but at the same time they are both falling over themselves to pledge to protect the interests of existing homeowners.

The same issues blight the case for investment in new nuclear and renewable capacity, our trading relationship with our largest trading partner, immigration policy and a host of other areas.

The real challenge to reviving growth in Britain is as much political as economic. 

But whilst there is a clear political economy blockage to raising Britain’s growth rate, it remains unclear to me that there is much political potential in talking up a party’s desire to achieve it.

Partially that reflects the “that’s your GDP, not ours” problem. Back during the 2016 referendum Anand Menon received that heckle when asking an audience what they imagined Brexit would mean for GDP. Whether it is true or not in the data, there is a widespread perception that growth doesn’t mean much for typical voters².

In theory, that should not be an obstacle to the politics of growth. The key is to talk in terms of higher wages, more affordable housing, cheaper energy and higher standards of living rather than to stick to abstract notions of GDP and productivity.

The real problem, I suspect, is that the politics of growth – as Britain’s politicians usually talk about it - is an argument without an opponent.

Being in favour of higher growth, in the abstract, is to be in favour of nicer things. Yes, it would indeed be great to have faster real wage growth, better productivity and higher quality public services. But no one is against that.

Politics requires an argument in which two (or more!) people participate.

Strange as it seems to credit Liz Truss with much in the way of political sense after she lasted only 49 days in office, she was on to something with her talk of the ‘anti-growth coalition’. She at least recognised that being in favour of growth was not enough. She needed an enemy to rail against.

Of course, her own definition of that ‘anti-growth coalition’ was drawn very narrowly. To her it was simply trade unions, environmental campaigning groups and a rather abstract class of people living in North London and taking taxis to BBC studios³.

Saying one is in favour of growth is all well and good but unlikely to cut through with many voters. Showing the public that you are in favour of growth puts a politician on stronger ground. The easiest way to show not tell is to pick a fight. A fight not only generates political and media heat but, hopefully, throws some light on policy choices.

Truss picked a set of politically convenient enemies that did not risk fracturing her own coalition. I remain unconvinced that she could have successfully cast herself as the pro-growth politician by sticking more restrictions on trade unions. But I am certain that doing so would have at least had a higher chance of success than simply repeating soundbites about ‘growth, growth and growth’.

Growth is an attractive thing for politicians to talk about as it can be rhetorically presented as a positive sum game. Higher growth means faster wage rises and higher profits, it means better public services and less need for tax rises. But that easy rhetoric also risks making the whole thing just sound unbelievable. Sometimes identifying the losers from a policy – and having the public battle with them – matters.

‘I want your energy bills to be lower’ is a nice sentiment. ‘I want your energy bills to be lower and therefore I am removing the ability of these people to block new renewable and nuclear sources of domestic power’ is a political argument.

Removing the political economy blockage on British growth means making that argument.

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1. Or at least they have until recently. Rising interest rates and 10%+ inflation mean they are no longer post-economic.

2. Voters might believe that increasing the rate of GDP growth would have no material impact on their own standards of living. They are wrong.

3. As a side point, who are these people and how have they persuaded the BBC to pay for their taxis? If you know, please do get in touch.