Despite good economy, UK struggles with told-you-so corporatism

Britain has evolved a successful economy without evolving any affection for it. France, in contrast, cherishes its managed market as an expression of the national idée fixe: that good things must be organised, not left to chance. And Germany's exporting prowess has given it something more innocuous than blood and soil from which to derive an identity.

Alone among Europe's three largest nations, Britain has prospered while faintly cringing – at the financial skew of its economy, at the lack of corporate icons to vie with L'Oréal and BMW, at the laxity on show.

Intellectuals tend to endorse economic systems that put people like them somewhere near the tiller. To them, Britain’s apparently anarchic model – its anti-system – constitutes an affront.

This is why every industrial failure, such as the one bringing down Tata Steel’s Welsh operations, “proves” the wisdom of a strategic state. Each grim batch of current- account data “shows” where laissez-faire takes you.

This self-reproach predates the crash; similar outpourings of told-you-so corporatism attended the 1999 crisis at Rover’s car plant in Longbridge and a dozen other industrial Alamos.

Compares well

At the end of it all, Britain’s per capita income is comparable to Germany’s and it has consistently lower unemployment than France. It contributes more in gross value added to Britain’s economy than financial services did even before the crash.

The labour market blends Thatcherite looseness with a web of in-work benefits that others study for guidance. In London, Britain has the only European city of global import. In finance and other services, it has a specialism that will be harder for emerging economies to emulate than the production of things.

And even those producers, tormented as they are by a strong pound and weak global demand, are nothing like the waifs of caricature. Because the country’s manufactured exports are industrial lenses, aerospace gizmos and other wares too niche to impinge on everyday life, Britons believe they are useless makers. It is anguish born of an optical illusion and stoked by grandiose political missions to “rebalance” the economy toward that which is tangible.

Every economic system is flawed. To the extent that countries really choose theirs, they are making trade-offs. Germany’s stunted service sector may turn out to be a historic miscalculation if the profile of Chinese demand morphs from manufactured goods to the insurance, banking and legal counsel required by an increasingly sophisticated economy.

Britain’s own “choice” has different problems, none more disconcerting than that current account. That does not prove its folly in the aggregate.

"There is no protectionist argument in British politics on the left or the right," George Osborne, the chancellor of the exchequer, assured an American audience three years ago. "It just doesn't feature."

That confidence should be shaken by the spectacle of Sajid Javid, Osborne’s business secretary, scampering back from Australia to save British steel. The era of ministers accounting for private sector events supposedly went out with disco.

But Osborne’s insight will age better than the transient boom in do-somethingism. Britons think they want a more managed economy without meaning it or voting for it.

Labour’s miscalculation

Not a year has passed since

Ed Miliband

led the Labour Party into a general election on a semi-corporatist prospectus, with

Germany

as its explicit destination. There were to be price interventions, industrial strategies and less of the easy foreign money that comes from low tax rates and skimpy regulation. This vision was so compelling that Miliband is now a backbencher trying to make himself useful.

Part of the trick of politics is smelling the difference between what voters say and what they mean. Polls suggest they want various industries nationalised, but also that they favour capital punishment. How many would trust a party that proposed either?

Intervention can work even if it mostly does not. Forswearing it in principle is arid dogma. Its advocates may be right that it can work for steel, even if it takes a very sweet personality to believe they will stop there.

However, given Britain's postwar scars – the humiliating strikes and inflationary wage deals while France was sauntering through les trente glorieuses – interventionists cannot complain when the burden of argument falls on them.

Folk memory is a powerful thing, and interventionists have a lot of it to live down. They can start by acknowledging the gains Britain has made since it stopped listening to their intellectual ancestors almost 40 years ago.

– Copyright 2016 The Financial Times Ltd