Boris Johnson invents a new economics: The Bullingdon School
You couldn't make it up because he has
Chris Johns
Boris Johnson has, in the last few weeks, raised taxes, nationalised a big railway company and announced his strategy for winning the next general election: raise the incomes of the lower paid. Oh to be alive in socialist Britain.
Launched this week by Kwasi Kwarteng, Secretary of State for Business, Energy and Industrial Strategy, the new policy blames membership of the EU for Britain’s ‘low wage, low productivity’ economy. Erecting trade barriers with your largest trading partner and ending the key worker right of freedom of movement of labour will, in and of themselves, lead to a ‘high wage, high productivity economy. All we have to do is to sit back, live through a short, tricky, period of ‘transition’ and the sunny uplands await. Cue much language about ‘toughening it out’ with respect to queues for petrol and shortages of everything.
Ahead of the Tory party annual conference, Johnson confirmed this new economic thinking in definitive terms.
When people voted for change in 2016 & when people voted for change in 2019, they voted for the end of a broken model of the UK economy that relied on low wages & low skills and chronic low productivity. We're moving away from that.
So, Prime Minister, what will you actually do such that the high productivity, high wage economy can be delivered? Answer: 'we’ve done it, it’s called Brexit and the ending of free movement. Firms will now have to pay their workers more.
Johnson is mute on what this must mean for everyone else: higher wages have to be paid for. In the absence of productivity growth (and it will be absent) everyone have to pay more via higher prices, higher inflation. How do you get an HGV driver to be more productive? Drive faster? Drive bigger lorries?
This doesn’t have to be a long post. The holes in the economic thinking are too obvious and too many. Here’s a flavour of what can be said: Britain’s low wage problem had nothing to do with being in the EU.
And
@jrhopkin has a long thread that goes on in this vein.
Economists have pondered the issue of productivity growth for decades. It remains something of a mystery. What we do know is that it’s complicated. We also know that the kind of things you need to do to improve productivity have been absent in the UK for years and that governments have actually made the problem worse rather than better. Nowhere in the theoretical or empirical literature will you find anything about restricting labour supply or introducing trade frictions leading to better productivity.
@shjfrench illustrates the complexity of the problem. And the shallowness of Johnson’s thinking.
Unusually, Johnson has offered a hostage to electoral fortune: what’s he going to say ahead of the next general election when real wages for the lower paid haven’t risen relative to other workers? I guess that he will just say that they have. The Bullingdon school of economics. Here’s Johnson already arguing with data:
Denying data, denying facts. It’s what he does. It’s what he will do. Will reality ever catch up with him?