Source: Yuyuan Tan Tian
Frequent changes of prime ministers did not improve the chaos in Britain.
The latest data on the 11th showed that the UK's gross domestic product (GDP) fell by 0.2% in the third quarter of 2022 from the previous quarter, while record inflation data triggered the worst strike wave in the UK in decades - railway workers, dock workers, university employees, medical staff, all on strike.
In the face of the British people's demands to reduce inflation and reduce energy prices, the new British Prime Minister Sunak said in his first official interview after taking office:
The British people cannot expect the government to solve all their problems.
In the face of Sunak's statement, Jeff Morgan, an adviser to the former British Prime Minister who has served in five British governments, told Lord Tan that the British leadership has an unshirkable responsibility for the current situation in the United Kingdom, and because of this, Britain has "lost" for several years.
Starting from his personal experience and combining his latest observations, he shared with Tan Lord his reflections on the British development model.
From John Major to Boris Johnson, I have served in five of these administrations, which has allowed me to witness the impact of the financial crisis in 2008 and the coronavirus pandemic in 2020, so I have a lot to share about the crisis and governance.
In 2002, then-Prime Minister Tony Blair established the Prime Minister's Strategy Department in the UK Cabinet Office. I was the first person in charge of this team, which allowed me to deal with national governance strategies for many years. I can clearly perceive that the whole world is in a state of needing to face multiple crises at the same time.
From the perspective of changes in the value of money, it can reflect many different crises.
Unhealthy economic fundamentals are one of them. Many countries, including the UK, have yet to fully recover from the 2008 financial crisis, and many people's incomes have not increased for 15 years. On top of this economic foundation, the worsening climate crisis and rising energy and food prices due to regional conflicts have had a huge impact on the UK, where inflation figures remain high.
Second, many countries are also in a dilemma in monetary policy. Inflation cannot be left unchecked, but raising interest rates would push the UK economy into recession. The Bank of England, the central bank of England, wanted to be able to curb inflation quickly, but it was difficult, so the fall of the pound became a fact.
In the short term, the most immediate impact is that the personal income of Britons and their confidence in the country's long-term financial position are falling sharply. The situation will worsen next year as a period of prolonged low interest rates ends and a possible recession.
At the same time, the UK is also raising taxes in tandem, and the policy of cutting public spending in areas such as infrastructure and national health care may continue for several more years. So there is no doubt that the UK will face a very difficult time.
But the frustration of inflation and rising interest rates isn't just in the UK. We can see that the euro is also falling. The factor behind this cannot be ignored is the strength of the US dollar.
The dollar has been the dominant international reserve currency for the past two or three decades, giving the United States all sorts of so-called "freedoms" and options that countries such as Britain or Europe do not have. So, against the backdrop of relative interest rates, the pound and the euro fell involuntarily.
In the medium and long term, the crisis is much more than that.
I think we will also see the second and third order effects of the above obvious results - the United Kingdom, the United States and many other countries after economic growth has stalled, but also catalyzed political change and instability, such as the Brexit referendum in the United Kingdom, which in turn will affect the British economy, forming a vicious circle of chain reactions.
Brexit has cut off the UK from major European trading partners. The 2008 global financial crisis, which led to deep cuts in public spending in the UK, has had a rather bad impact on overall demand. When demand decreases, productivity will be driven to the bottom, and the average productivity in the UK has not grown for more than a decade, and the loss of the European market means another blow.
I recently observed that most people in much of the West today believe that their children will be worse off in the future than they are now, something that has never happened before.
The poor economic situation has a lot to do with the structure of the British economy.
At present, the composition of the British economy is dominated by the service industry, including retail, hotel services, business administration and finance. In 2021, the services sector contributed £1.7 trillion of gross value added (GVA) to the UK economy, accounting for 80% of the UK GVA.
The UK financial sector has a comparative advantage, but after Brexit, many financial institutions have also withdrawn from the UK market.
The UK also retains strength and potential in some cutting-edge key sectors, such as artificial intelligence, life sciences, genomics, financial services and legal knowledge.
If I had to find a striking point in the UK's public spending cuts over the past 10 to 15 years, I would think it would have been the UK that has kept investment in research as much as possible. But now, in these areas, the UK is also starting to have a problem of underinvestment.
Economic growth is the result of a combination of factors that require the UK to take the right long-term decisions and more strategic measures in areas such as education, investment patterns and infrastructure.
But it is clear that the UK has not really developed a strategy that serves the overall productive forces.
What is more worrying is that a new phenomenon has emerged in the UK - frequent changes of prime ministers, which is bound to be a bad phenomenon.
The UK has lost considerable time due to poor governance and successive governments have been unable to address the core concerns of the population.
Some believe that the stagnation of Britain began with the process of "de-industrialisation" in the 70s and 80s of the last century. I am a post-"deindustrialist" generation, and in my observations, the massive decline in steel, shipbuilding and car manufacturing was indeed a very painful experience for a booming Britain.
But the most painful phase of Britain's "deindustrialisation" is over. Since the late 80s and early 90s of the last century, the world economic turmoil has come to an end, the macroeconomic situation is relatively stable, and education, national medical care, research and development, and infrastructure have become the focus of economic investment.
From my political experience, from 1990 to 2010, the British economy maintained an annual growth rate of about 2.5% during the two economic crises, despite slow growth.
Since 2002, as head of the Prime Minister's Strategy Department in then-Prime Minister Tony Blair's cabinet, I knew that in Blair's eyes, good government must be able to respond quickly to short-term pressures, but also need to have a long-term strategic vision. So it is very clear to me that the role of this team is to work together in every aspect of the country's governance policy, providing in-depth strategic advice and policy analysis to the Prime Minister on key priorities and then developing medium- and long-term strategies.
We also pay extensive attention to and learn from perspectives other than our own government. At that time, I regularly visited China.
I think that before 2008, the UK experienced its best period of growth in 200 years.
But when then-Prime Minister David Cameron took office, he transferred the department's functions to other parts of the Cabinet Office. Cameron and I are friends, but I must also point out that this shift has left an important link in the government missing.
I believe that the key to the good functioning of any government requires vision, in addition to comprehensive capabilities. So I've been studying how we can be able to plan for the next ten, twenty, thirty years in the face of a serious crisis.
Having studied many countries, I have found that the pain of "de-industrialisation" is not at the heart of Britain's current stagnation. The UK has stalled because the right governance and policy framework has not yet been fully established to meet the new development challenges of the 21st century.
At this point, I must point out that China has always been a pioneer.
Economic growth and carbon reduction, for example, have been one of China's key goals, but China has long embedded a focus on carbon reduction and other things in its policies.
I have also communicated about the circular economy in many local governments and national departments in China. China has already invested heavily in solar and wind energy at an early stage, truly demonstrating China's focus on reducing carbon emissions.
China's systematic thinking is lacking in the West – in contrast, many people in the British economy have not yet understood that the economy must be considered from both a social and an ecological perspective.
The thinking of British economic policymakers is still stuck in the 20th century, not the 21st. This has led to many mistakes, as are many countries around the world. Judging from the results of some of my recently completed research projects, the old Western countries, such as the United States and the United Kingdom, do seem to be quite backward and lack of foresight in this regard, and Western governments have stopped moving forward.
In this context, I often wonder whether the major powers, led by the United States, can cooperate if there is a sudden real global shock.
You know, the last global economic crisis began in the United States. It began with the massive overexpansion of the U.S. housing market and the financial sector. At its peak, 40 percent of most corporate profits in the United States were invested in the financial sector.
In a way, the U.S. financial industry has become a predator, sucking value from other parts of its economic structure, spending heavily and overspending in poor regulation, pushing itself into very dangerous risks, and then allowing that risk to spread around the world.
At the time, I was working for the UK government, and I knew that the UK was one of the first countries to be affected and that very aggressive action was needed from the government to deal with this issue.
At present, the coronavirus pandemic has had a huge impact on the British economy, but there has not been any similar economic collapse.
The main problem we need to face is hidden behind the shock – the global system of cooperation is much more fragile than it was 15 years ago.
What worries me is that countries like the United States are trying to solve problems in a competitive way alone. This could create new trade barriers, as well as new restrictions on financial flows, and could also lead to a faster downward spiral in the global economy.
There is no doubt that countries like the UK will be affected. You know, after ten years of quantitative easing in the UK, almost all economic laws have been broken, and no one knows how our system works to cope with new shocks.
If the UK were to descend into a period of prolonged geopolitical tensions, conflict and sanctions, the economic consequences would be even worse.
What the UK really needs is a more open global market and a future.
Lord Tan once wrote that the British chaos reflected not only economic problems, but also problems of governance capacity, as well as deeper problems such as the Western development model.
As one of those who have been involved in UK policymaking, Jeff Morgan reflects on these deep-seated issues from his own perspective – a lack of systemic thinking, a lack of overall strategy, and a stagnant thinking of policymakers. Whether to solve these problems, or to turn a blind eye to them, may become a watershed in the development of Western countries.
As Lord Tan wrote in the article, the British rebellion is probably just a harbinger of chaos in the West.