July 28th, 2018
(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: firstname.lastname@example.org
I’m with the radicals here. I suspect that government intervention doesn’t seem to help economic growth, because the various Western governments have not attempted political and social revolutions since 1945. If a nation has a particular growth rate, and you’d like to double that growth rate, you need to make very radical changes. Among the more obvious things Western nations could do would look at the various constraints that keep women from fulfilling their potential. We have half the population held back by various customs. It is those customs that would need to change, if the economy was to grow faster.
Endogenous growth theory cuts both ways: if success breeds success, so failure breeds failure. The UK’s longstanding weaknesses in manufacturing – a lack of vocational skills, poor management and the consequent lack of animal spirits – might well condemn us to continued failure. And Corbyn – like most politicians – is I fear insufficiently heedful of a point made (pdf) by Landon-Lane and Robertson, that national policies might (within reason) be unable to do much to raise growth.
You might, however, draw another inference from such scepticism – that it shows that we need radical and broad-spectrum policies to try to raise growth: not just UK-biased government procurement but also better macro policy, a national investment bank, better training and so on.