Table Of ContentNational Policy in a Global Economy
DOI: 10.1057/9781137473059.0001
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DOI: 10.1057/9781137473059.0001
National Policy in
a Global Economy:
How Government
Can Improve Living
Standards and
Balance the Books
Ian Budge
Emeritus Professor of Government, Department
of Government, University of Essex, UK
with
Sarah Birch
Chair of Comparative Politics, School of Social and
Political Sciences, University of Glasgow, UK
DOI: 10.1057/9781137473059.0001
© Ian Budge with Sarah Birch 2014
Softcover reprint of the hardcover 1st edition 2014 978-1-137-47304-2
All rights reserved. No reproduction, copy or transmission of this
publication may be made without written permission.
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Copyright, Designs and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency,
Saf ron House, 6–10 Kirby Street, London EC1N 8TS.
Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
T e authors have asserted their rights to be identif ed as the authors of this work
in accordance with the Copyright, Designs and Patents Act 1988.
First published 2014 by
PALGRAVE MACMILLAN
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registered in England, company number 785998, of Houndmills, Basingstoke,
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ISBN: 978–1–137–47305–9 PDF
ISBN: 978-1-349-50133-5
A catalogue record for this book is available from the British Library.
A catalog record for this book is available from the Library of Congress.
www.palgrave.com/pivot
doi: 10.1057/9781137473059
Contents
Introduction 1
1 A British Economy? Boxing with Shadows 6
2 Globalization and Its Efects 28
3 What National Governments Can and
Can’t Do Well 42
4 Providing Citizen Support 53
5 Paying for Support 63
6 Focusing on Action: A Model Manifesto 80
7 Putting Policies into Practice 92
Bibliography 104
Index 108
DOI: 10.1057/9781137473059.0001 v
DOI: 10.1057/9781137473059.0001
Introduction
Abstract: Tis introduces the themes of the book, previews
the main argument and provides a guide to subsequent
chapters, outlining the case for a radically diferent
approach to economic policy.
Budge, Ian with Sarah Birch. National Policy in a Global
Economy: How Government Can Improve Living Standards
and Balance the Books. Basingstoke: Palgrave Macmillan,
2014. doi: 10.1057/9781137473059.0002.
DOI: 10.1057/9781137473059.0002
National Policy in a Global Economy
Te integration of national economies into a unifed global one has
vastly reduced national governments’ power to shape their own
economy. Te diverse economic activities which take place on their
territory are shaped by independent international institutions and
technical developments beyond their control (the advent of digital
technologies, improved mineral extraction, new antibiotics and materi-
als, three-dimensional ‘printing’ of artefacts). A major problem with
political parties and governments is that they continue to debate policy
as though there is a national economy which they can ‘build’. Tis is
fundamentally a political conception, not an economic one, though it
has profound implications for the way in which economic problems are
understood and addressed.
Tis concentration on what are at best marginal interventions, and at
worst inefectual and resource-wasting policies, obscures what govern-
ments can do with the powers at their disposal. Tat is improving other
areas of life within and for their own territory. Once accepted that
economic growth and development are – like weather – surrounding
conditions that are largely beyond the control of politicians in individual
countries, a major constraint on internal policy-making is removed.
With this realization government should be free to decide on policies
based on their immediate contribution to the common good and not in
terms of their hypothetical (but in reality unknown) consequences for
medium- and long-term economic performance.
A major example is fscal policy. It is ofen argued by economists and
politicians that taxing multinational companies realistically will cause
them to pack up and go elsewhere. Once governments accept that multi-
nationals will make decisions on many other grounds, we can challenge
this alleged constraint on their own actions. Distributor companies will
not wish to lose a major market; factories cannot be abandoned without
cost; good infrastructure is hard to ignore; cash-strapped governments
elsewhere will follow the precedent, levelling the international playing
feld.
Te same goes for other policy areas such as health, welfare, educa-
tion, culture, sport and so on. Policies in the United Kingdom should
be driven by their own merits – not because action will have hypotheti-
cal economic benefts. Making the country a better place will no doubt
make it more attractive, economically, in the long term. But this should
not be the policy’s main justifcation, as business moves are so uncertain.
Other European governments have already adopted such self-justifying
DOI: 10.1057/9781137473059.0002
Introduction
strategies with considerable success, and Britain would be well-advised
to follow their lead.
Breaking the link between national policy-making and economics
should be immensely liberating for governments and benefcial for citi-
zens. Charting fscal policy by what you need to pay for, rather than fear
of imagined consequences, provides more stability internationally and
makes other benefts possible – and balances budgets, as is only prudent
in the face of unpredictable global change.
Tis is the gist of the book’s argument. It aims to develop a radical
alternative to the conventional thinking of all the main parties, also prop-
agated by many political and economic commentators. Tis alternative is
underpinned by our analysis of current trends. But the argument cannot
be altogether constrained by these trends as its purpose is to suggest
other ways of tackling them. Tus when we suggest a social partnership
rather than the non-negotiable stance taken by most governments at the
present time, we are pointing to alternatives freed from Keynesian or
even neo-liberal economics based on the myth of a controllable national
economy. Britain will be used as the prime example in the book, though
the analysis applies in a wide variety of contexts (except possibly the
United States – the one reasonably autonomous national economy in the
world).
Te separate chapters develop these points in more detail, starting in
Chapter 1 with our current situation and the way it has been interpreted
by economists and politicians, media commentators and reporters. Te
chapter expands on our analysis, arguing that the ‘national economy’
has little meaning other than as the government’s (potential) tax base.
Peculiarly, economic analysis and discussion has adopted a political
rather than an economic defnition of an ‘economy’, and we ought to
recognize this and follow through on its implications.
In Chapter 2 we review the scholarly literature on the phenomenon
labelled ‘globalization’, which has ended national economic autonomy.
We assess evidence on its nature and efects, before looking at the impli-
cations of a globalized economy for recent economic developments in
Britain.
Tis brings us on to Chapter 3, ‘What National Governments Can
and Can’t Do Well’, which reinforces the point that government has
little infuence over the level of economic activity on its territory,
given globalization. It is still the major economic actor there but not a
dynamic one. What it can do is see to the well-being of its population
DOI: 10.1057/9781137473059.0002
