Britain’s No-Growth Economy Means Politics Is Only Going to Get More Chaotic

Buckle up.

by Aaron Bastani

25 October 2022

Conservative leadership candidate Rishi Sunak's wife Akshata Narayan Murty at a hustings event
Millionaire Rishi Sunak just became Britain’s third prime minister in seven weeks. August 2022. Reuters/Hannah McKay

Between 1964 and 2016, Britain had four Conservative prime ministers in 52 years. Between 2016 and 2022, Britain will also have had four Conservative prime ministers, in just six years. By itself, this tells us something has changed. The question is whether it is temporary or permanent.

For those who see the situation as exceptional, Britain’s descent into ever deeper tumult is generally viewed as the result of Brexit – original sin and starting gun for our collective madness. It’s a comforting idea, principally because it offers an origin for a sequence of events, and therefore, at least in theory, suggests a swift conclusion. But this interpretation is wrong, because while the chaos saturating the country’s public life has undoubtedly intensified in recent years, many of its key political presumptions have been in suspended animation since at least 2010. 

After all, that year’s general election gave rise to a formal coalition government – the first in peacetime since 1918. 2011 not only saw riots across England but also the cancellation of the state opening of parliament – the first time that happened outside of war since 1925. It happened again in 2018.

Between those two dates, Ed Miliband was elected as Labour leader. While his leftwing credentials were noteworthy, he would be outdone by his successor, Jeremy Corbyn. Elected in 2015 he was the party’s most radical figurehead since the 1930s. Earlier, in that May’s general election, the SNP reduced Labour to a single seat in Scotland, while Ukip amassed almost four million votes. Three prime ministers in a single year is merely the latest episode in a longer saga. ‘Unprecedented’ events – from the BNP gaining almost a million votes in 2009, to the Tories falling to 14% in some polls today – are becoming mundane. Despite the Brexit monomania of some, things have been growing increasingly strange for quite some time. 

Alongside Brexit, it’s fashionable to argue that bad, incompetent people are to blame for all this. That is all the more persuasive since an abundance of such people visibly prosper in public life. But while individuals play a role, and the collapse of the Conservatives can be partly attributed to appalling management and personnel, the primary explanation for the extent of their nadir – and the trend of the last decade – is economic growth. Or rather its absence.

Governing in low-growth societies is hard.

While it’s true that Kwasi Kwarteng’s ‘mini budget’ was the greatest unforced error since the Suez Crisis, in ‘normal times’ reducing corporation tax and the top rate would not have led to such a response. Yes, the scale of his proposals were absurd (the proposed cuts would have been the biggest since 1972) but in another era they would have at least been plausible. After all, Nigel Lawson oversaw the equivalent of £34 billion in tax cuts in 1988, and tens of billions in the years before. The difference between chancellors Lawson and Kwarteng, however, is that the former slashed away while the economy grew by a plucky 5.7%. 

This gets to the heart of the problem for today’s Tory party. It wishes to implement Thatcher-era tax cuts without the growth associated with the second half of the 1980s. No growth means tax cuts must therefore be funded by deficits, but such an approach was never central for Thatcher. Indeed, when her administration faced similarly straitened circumstances – in 1979 and the early 1980s – she increased taxes like VAT, as well as imposing a windfall tax on the banks and North Sea Oil. Such calculation is lost on her cosplay devotees. 

No growth also means challenges for any Labour government that takes over. After 14 years of public sector cuts, and falling real wages, the party’s voters will expect better pay settlements and public cash pumped into schools, transport and the NHS. But high inflation and low growth – and as a result low tax receipts – will make this hard. Indeed without a programme of serious redistribution, it is impossible. The most basic improvements for things like ambulance waiting times, let alone a touted national care service, will require tax increases which only John McDonnell has publicly acknowledged.

Does liberal democracy work without growth?

For the whole of Britain’s democratic era economic growth has provided the revenues for one of the major parties to reward their respective constituencies, and thereby generate political consent. For the Tories, this meant appealing to big business, homeowners and, more recently, pensioners. For Labour, it meant the public sector and, historically, organised labour. For the Tories, growth meant tax cuts. For Labour, it was the basis for post-war social democracy and, under Tony Blair, huge infusions of cash into schools and hospitals. That this is no longer possible is at the root of present Conservative despondency. They are yet to grasp Britain is becoming a steady-state economy, meaning a budget like 1988 is as realistic as Phil Collins headlining Wembley Stadium. 

This is also true for Labour. The key difference between social democracy and democratic socialism is that the former presumes market economics will always generate growth – the proceeds of which allow for redistribution, mitigating the unfairness that capitalism generates. But what happens when growth fades and only injustice remains? Like their Tory counterparts that’s a reality many in the Labour party are yet to engage with. Until they do, their own harsh lesson is just as inevitable. 

It is close to an iron law of modernity that societies with low growth and high inflation – as Britain now is – struggle to remain socially and politically stable. This, in combination with an electoral system built on adversarialism, means the country’s dysfunction is liable to only get worse. Though the fortunes of all parties will wax and wane, there won’t be a return to ‘normal’ – that halcyon state of affairs which, for pundits and politicians, generally means the 1990s.

Once this is grasped, it should be clear that demands for ‘competence’ are not at odds with calls for a different economic model. Indeed it is increasingly difficult to deny that one requires the other. It doesn’t matter if a talented bureaucrat oversees a dysfunctional system failing to deliver. Just look at the final years of the Austro-Hungarian Empire, which disintegrated in the face of competing nationalisms. Or the Soviet Union, whose ideological narrative – of progress and modernity – became entirely detached from economic reality. Of course, Britain is nowhere near such terminal torpor, at least not yet, but both feel increasingly familiar. Governing under the economic conditions we’ll face in the 2020s is difficult, even for the most talented of mandarins and statesmen. Not only does Britain possess all too few of those, but its party and electoral systems insulate power from new ideas and talent by design.

Aaron Bastani is a Novara Media contributing editor and co-founder.

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