Does Britain need to be pursuing a development strategy?

Professor Tony Payne - Director of SPERI

I don’t particularly like their deployment of populist terms like ‘going South’ and having ‘a Third World economy’ because these terms don’t really stand up very well any longer to critical scrutiny.  But the phrases work effectively to catch the eye and the book remains a great read.

The core Elliott and Atkinson argument is that, as they variously put it, Britain is ‘going backwards’, ‘submerging’ rather than ‘emerging’, in effect ‘de-developing’.  They pile up a heap of evidence in support of this claim and insist, rightly in my view, that the ‘age of quick fixes’ is over.  Instead, they argue, what Britain desperately now needs to think out and adopt, just like all countries that have to pursue development, is its own preferred ‘development model’ - a model, as they describe it, for ‘the redevelopment of the national economy’.   

Elliott and Atkinson go on to make many useful suggestions as to how such a model should be conceived and of what policy dynamics it should be composed, but it’s not my purpose here to consider their proposals in detail.  The point I want to stress is that they make great strides in this debate precisely by couching their analysis in terms of the search for a new model of development for Britain.  That of itself is an intellectual breakthrough and it’s notable, to say the least, that it has come, not from the academy, but rather from a pair of (very good) journalists.

I’ve also picked up a couple of interesting, albeit fleeting, recent usages of development thinking by current British politicians.  Vince Cable wrote an article in the New Statesman in March this year which was exclusively interpreted in the media as a call from a member of the current government for a modest relaxation of the Chancellor’s extremely tight fiscal policy in favour of some increased public investment.  In a deliberate reference to a classic Keynesian formulation Cable entitled his article: ‘When the facts change, should I change my mind?’

In the body of the piece, however, Cable said something quite important and momentarily took his analysis of Britain’s economic problems to a deeper level than Keynesianism.  He described the ‘structural deficit’ as ‘a problem closer to that of a developing country whose leading commodity export has collapsed and which has to persuade creditors to finance growing sovereign debt until structural budget and wider economic reform has been completed in a credible time frame’.  He then noted simply that ‘Keynesian economics does not provide much insight into such problems’, which was presumably the political point he wanted to make, perhaps to offset his perceived flirtation with a Keynesian stimulus, and moved quickly on.

This was nevertheless a little jewel of an observation.  For Cable was in effect saying that financial services are to Britain what copper is to Zambia, oil to Saudi Arabia, bananas to Honduras and so on – something that unbalances the economy as a whole and can accordingly create severe structural problems.  Even if Keynesianism does not have much to say about such issues, developmental political economy unquestionably does.

Finally, just last week, in a thoughtful keynote speech to the Resolution Foundation in London, Labour’s Shadow Chief Secretary to the Treasury, Rachel Reeves, summed up her analysis of the present condition of the British economy by noting that that ‘deep problems in the way our economy has been developing – or, more accurately, not developing – over the past few years are resulting in stagnant real wages and increasing insecurity for the majority and persistent low pay and outright exploitation for far too many’.

The italics are mine, but in deploying this short phrase Reeves was highlighting the classic distinction drawn in the political economy of development literature between growth and development, the latter understood as something you build from growth on the basis of some kind of moral view of the world.  It’s a distinction surely worth emphasising and bringing more fully into the British political debate.