In a recent 3-part series (part 1, part 2, part 3) I set out some remarks about the pursuit of ‘beneficial economic growth’, and why it needs to be systematic, rather than tokenistic or riddled with ‘solutions looking for problems’. Below is a summary.

‘The economy’ is still the No1 policy concern of the general public, and it was the central ‘cure all’ of the current Labour government when it was elected. The government did not, however, set out its approach systematically, or tell us ‘how’, thus leaving everything to hard-pressed civil servants. The coming dire budget is but one consequence.

QUALITY OF GROWTH

Economic policy throughout government should focus on the quality of growth, not just the quantity. Key quality attributes include fiscal, environmental and social sustainability.

DYSFUNCTIONAL INSTITUTIONS

Economic regulation and promotion is spread across government, and can be harmfully contradictory and dysfunctional. The institutional set up for orchestrating beneficial growth aims, is confusing, and ineffective. The interdependence of reforms seems not to be taken into account. There are many lessons from overseas.

CONCENTRATED FINANCE AND FINANCIALISATION

Investment banks, banks and non-bank-financial institutions, should be providing services to businesses, which should be the master not the servant of finance.  Extreme concentration in international finance (eg via index funds) has led to excessive financialisation, opaque cartelisation, and systemic risks. De-monopolisation and reforms to transparency and capital market rules, are the main remedies.

SCLEROTIC STATE

Few in the UK would disagree that the UK state is sclerotic. But why so ? Excessive secrecy and a lack of transparency and accountability is one factor. The major hidden culprits are … excessive contracting out, appalling procurement practices and lawful conflicts of interest. Coupled with the culture of ‘generalism’ in government and obsessive ‘commercial confidentiality’, this is catastrophic. Transparency, and major changes in the parliamentary supervision of governmental employees/departments, with more accountable value-for-money criteria, are the first reform steps.

LAND AVAILABILITY

This article concludes a three-part series on what the UK needs to do to manage ‘beneficial growth’ policy across government. This article briefly considers examples in banking, trade, commercial law and infrastructure.

De Jure Monopoly Banking – ‘Never a lender or borrower be’

A purposefully restrictive banking sector, dogged by regulatory capture, has done much to inhibit the UK economy. The monopolistic sector structure was designed to create high profitability and crisis resilience in the UK banking sector; but the 2008 crash did not change this justification! In effect the sector’s self-governed, cartelised approach, with multiple regulators, failed. Instead of reform, a permissive approach to ‘accounting tricks’ transpired. The remedies proved to be very profitable.

The sector thus remains largely unreformed. The dysfunctional UK banking sector has relatively few banks, absence of specialist banks, and weird over-extended anti-customer rules. The UK suffers unresponsive services, instability, lack of competition, and reliance on the taxpayer as a last resort. Over-dependence on derivatives and property lending means they hardly ever lend for real-world business development. Remedies include more effective prudential regulation, and a raft of measures to increase competition; for example, a regulatory path from small (eg credit unions) to large, among many steps to eliminate the protections afforded the big banks from smaller competitors.

Trade policy, promotion and facilitation – ‘The expert manufacture of bottlenecks’

There are three critical problems in UK trade policy. First, post-Brexit, the UK is notoriously bad at matching UK tariff demands with evolving strengths and weaknesses in the UK economy.

Second, the UK system of business promotion globally is amateurish compared to (for example), Japan, South Korea, Finland or the USA. Japanese sectoral development associations, global technology organisations such as JETRO, and the role of METI in supporting overseas manufacturing, are worth copying.

Third, trade facilitation within the UK is sclerotic. Consider international freight rail transport from London Gateway to the North, or the Liverpool-Manchester-Leeds-Hull route, (and the permanent gridlock in S.E. Kent). The aims of trade reforms can be clearly stated.

Commercial Law – ‘Labyrinthine and outdated’