Boris Johnson’s latest wheeze is classical political economy. Faced with the chaos of petrol shortages, empty supermarket shelves and surging gas prices, Johnson offered an audacious response this week: this was all part of the plan. Britain, he explained, was merely transitioning out of a broken economic “model”, based around low pay and high immigration, and into a new one, based around high productivity and high-wage job creation.

His conference speech was immediately criticised by the right, on the basis that by celebrating tighter labour markets it appeared to be actively inviting inflation. But on the basic gut level, to which Johnson only ever speaks, he appears to have got away with it. Britain’s most exasperating economic policy riddle of recent decades – its sluggish productivity growth – was simply going to be magicked away, he announced.

Regardless of whether we agree with the Adam Smith Institute that his speech was “economically illiterate”, Johnson’s newfound interest in economic “models” tells us something about how this weird new Conservative party is operating. It is equally significant that Keir Starmer – in contrast to his two predecessors – shied well away from discussing the state of British capitalism. The terms of political debate appear to have flipped.

To some extent, Johnson was ploughing a familiar conservative furrow. The insistence that apparent economic failure is, on the contrary, merely a symptom of the medicine beginning to work has strong echoes of Margaret Thatcher’s turbulent first few years in office. In 1981, Thatcher was famously criticised by 364 far more distinguished economists than those of the Adam Smith Institute in a letter to the Times condemning her attempts to tackle inflation through punitively high interest rates.

Thatcher posed as the strict nurse, painfully weaning the patient off its addiction to inflation. Johnson, by contrast, is suggesting Britain now needs to kick its dependence on foreign labour. No matter what apparent damage the Conservative party does to business or GDP, there is something about its status in British public life that grants its leaders the right to speak about the essence and direction of capitalism, in defiance of all economic logic and indicators.

Thatcher, of course, was deadly serious and a living embodiment of the work ethic that she was advocating. Johnson is neither of those things. Thatcher nearly paid a hefty political price for her intransigence, whereas it’s hard to imagine Johnson risking his position for a mere ideology. For Johnson, it’s safe to say, this is more bluster that “works” to the extent that it allows him to spin a good yarn. Theories of capitalism now join ancient Greek myth and rugby metaphors – all simply ways that Johnson chooses to navigate an interview.

Starmer evidently views Johnson’s recklessness as an opportunity to position Labour as the party of business. “Good business and good government are partners,” he told Labour conference a week earlier. While his speech was understandably hostile to Conservative economic policies, which he blamed for low wages, it contained nothing as drastic as changing the entire model of the British economy. In the tradition of New Labour, it largely fixated on extolling the benefits of what (good) business can do.

It is a strange juncture to have reached, when the character of British capitalism is now being questioned for wholly opportunistic purposes by a showman such as Johnson. But this is what happens when more honest politicians duck difficult questions about the workings of capitalism, or get punished for asking them by the media – which is precisely what has transpired over the past 30 years.

Among political economy scholars, interest in “varieties of capitalism” blossomed during the 1990s, at the same time that liberal democracies were abandoning the question of “capitalism or socialism?” in favour of a question about which kind of capitalism. Before winning power, New Labour was tempted by Germanic visions of “stakeholder capitalism” proposed by Will Hutton, but Gordon Brown came to the conclusion that Britain’s flexible labour market was too valuable an asset, especially given stubbornly high unemployment on the continent at the time.

The economist David Soskice, whose 2001 book Varieties of Capitalism (edited with Peter Hall) is still the handbook for this mode of analysis, supposedly convinced Brown that he was far better off streamlining Britain’s existing, flexible “model” than seeking to impose a set of constraints upon the labour market in search of a new one. Before long, the entire question of economic “models” fell by the wayside. Brown, meanwhile, rolled out a system of tax credits, that brushed the social consequences of a low-wage economy under the carpet.

It wasn’t until 2011, with capitalism in crisis and the bookish Ed Miliband leading the Labour party, that such questions were resuscitated. In place of New Labour’s usual bland paeans to “business”, Miliband sought to draw a line between the economy’s “predators” and “producers” – a truthful recognition that British capitalism had become a playground for asset-strippers, speculators and monopolists. It was shot down in the press as evidence of “Red Ed’s” dangerous Marxism.

From 2015-19, Jeremy Corbyn and John McDonnell upped the ante, developing a left populism that accused the super-rich of “rigging” the economy. In their eagerness to side with the majority of workers, they went into the 2019 general election promising to target just 150 “billionaires”: not so much a failed economic “model” as a tiny parasitical clique.

By retreating back to the New Labour tactic of praising “business” and promising “economic prosperity” in general, Starmer has abandoned any such critique. The manifold differences between, say, a private equity fund extracting profits from a care home by squeezing wages and a family-owned exporter of machine tools, become obscured all over again. In his bid to look economically serious, Starmer has had to avoid making serious economic distinctions. In a public culture that rewards mendacity, a liar such as Johnson ends up with more licence to raise such topics, so long as and he doesn’t do so with any serious intent and Labour remains silent about them.

Economic reality cannot, of course, be wished away altogether with bluster and humour. But among the dysfunctions of Westminster is the fact that economic outcomes may eventually be determined by two policy areas that are no longer up for democratic debate: Brexit and monetary policy. Johnson can bluff about productivity and immigration all he likes, but neither he nor Starmer will stand up in public and highlight manifest connections between Britain’s chosen Brexit deal and logistical chaos.

And he can troll the Confederation of British Industry all he likes by celebrating wage increases, but if inflation runs above 2% for long enough, the independent Bank of England is duty bound to respond by raising interest rates. The effect this may have on an already-inflated housing market may pose him far greater political problems than wage inflation, but that’s how Britain’s economic model works. If he really wants to change it by design, and not merely revel in the current chaos, he’s got his work cut out.

Source: The Guardian

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