In difficult times, good politics is even more important

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Much the most important economic problem facing the United Kingdom is the long -term stagnation of productivity. This was the subject of My column two weeks ago. Yes, the crisis of the moment cannot be ignored. But urgency is not necessarily important. Except for a catastrophe (a world war or global depression, for example, on any of which the United Kingdom can do little), the main determinant of our prosperity and stability will be the decisions made by this country and within this country. The economy must divert from its almost two decades of fall.

This does not want to argue that Donald Trump’s war on the open world economy is irrelevant. How can it be? It is proposing huge and unpredictable barriers to global trade and, at the same time, destroying the institutional architecture that its wisest predecessors created for eight decades. However, this is unlikely to be the end of the economic world, at least for the United Kingdom.

According to the Office of National Statistics, the United Kingdom exported goods worth 59 million pounds in the United States in 2024, only 16.2 percent of total exports of goods. Its services worth £ 137 million in the United States, 27 percent of exports of total services, were much more significant. Details of UK exports to the United States underline the contrast. The category of services with largest exports to the United States was “other business services”. These amounted to £ 61 million by 2024, which was 33 percent of exports from other business services. Remarkably, exports from other business services to the United States were worth more than those of all combined goods. The highest category of goods exports to the United States was machinery teams, at a modest £ 29. In addition, only 19 percent of exports in this category went to the United States.

This is a good position for the UK to be inside. Trump, in this sense, very similar to the Brexiters Homegrown, does not seem to be careful about services. This, the fans of the magician feel, is not what the “real men” do: they make steel or my coal. In addition, rates cannot be applied to services.

The indirect effects of Trump’s policies, both economic and broader, are much more difficult to analyze. As Megan Greene It was noted on April 25, the uncertainties are multiplied in all directions. It is undoubtedly difficult to see a reverse for the United Kingdom, apart from the opportunity to attract first -class people to work in a country that still clings to the idea of ​​the rule of law.

However, the main involvement of Trump’s clash is that good politics becomes even more important: it always does it in difficult times. In general, the goal should be that the fiscal position and the financial system be more resistant, to improve the flexibility of the economy and substantially increase the investment in human, physical and intangible capital: public and private.

Unfortunately, there is no way that these things can be done in a country with a slow growth of productivity and a great current account deficit, without suppression of consumption. This is a truth that no government wants to face. But,, According to the IMFThe National National Savings Rate of the United Kingdom between 2021 and 2024 was 15.6 percent of GDP, which placed 35th in every 37 high -income countries, ahead of only Cyprus and Greece. This must increase if the low investment in the United Kingdom does so.

However, the ability to finance a higher investment is only a necessary condition for faster growth. There must also be opportunities to invest. Some of these will be caused by proper deregulation, such as relaxation of planning controls and elimination of more absurd environmental restrictions and excessive sidewalks to employment flexibility. But others will need efforts. In particular, growth means change and therefore requires innovation. It is a risky and expensive process with many positive externalities: a successful new activity will almost always share the advantages of its pioneers with others.

That is why there is a solid case for government support for innovation. The question is like to ask it. David Willetts, a former conservative minister, has just published a brief brochure for the Foundation On “How to make industrial strategy“, Which explores the possibilities. My opinion is that the costs of not taking the risks of failure exceed the costs of taking them. It is quite clear, as Alexander Hamilton believed, that the government can and should act as a catalyst for change. There will be many failures. But there is a good chance that there are also success. More.

The big point that has long been falling home is that the more dangerous the world and the worst thing is the economic performance, the more harmful the reflective conservatism of the United Kingdom. Fortune favors the brave.

martin.wolf@ft.com

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