Politics over Policy: How political gain is imperiling the health of Britain’s economy

J. Otis

With the Labour Party struggling under the hapless leadership of Jeremy Corbyn and UKIP soul-searching its own purpose after achieving its singular goal of leaving the EU, the Conservative Party, which now leads the British Government, is well positioned to gain more supporters.  It seems that the new Prime Minister Theresa May is aware of the opportunity to crowd out her opposition in the wake of the political tailspin brought on by the Brexit vote.  The only problem is how she plans on going about it.

On October 5th Mrs. May took to the podium at the annual Conservative Party conference to outline her political strategy and deliver a speech on her vision for the future of Britain’s economy.  What followed were a troubling series of proposals set to expand state intervention in the economy and crack down on immigration.  By adopting Labour’s anti-business attitude and UKIP’s nativism, May hopes to gain their supporters and render these parties pointless.

However, with Brexit’s impact still uncertain as negotiations with the EU are still under way, what Britain needed most from Mrs. May and her party was a plan for a robust economic agenda and a levelheaded attitude towards leaving the EU.  No such plan was put forth.  Instead, the Prime Minister proposed an agenda likely to harm British growth at a time when the nation needs it most.  While her move may be smart politics, it’s patently bad policy.

Take for instance, Mrs. May’s plans to boost labor rights through a series of new regulations and by mandating trade union representation on corporate supervisory boards.  One of the major selling points of Brexit was that Britain would be free to prosper after being unshackled from the excessive red tape coming out of Brussels.  The irony is that Mrs. May wants to impose burdensome regulations from Westminster at a time when there isn’t any clear labor rights crisis to respond to.  Mandating union representation on supervisory boards isn’t any better as it would shift the focus of company decisions away from stewarding the long run interests of the firm, which typically serves the interest of British consumers, towards the instant gratification of labor demands.

Mrs. May also wants to take the fight to the Labour Party on the issue of income inequality.  The Conservatives proposed an idea for firms to disclose how much they pay their executives relative to what they pay the average worker.  The objective is to highlight pay differences and pressure businesses to pay their CEO’s less.  If the policy meets its intended result it will be harder for British companies to compete and attract the world’s best talent.  In addition to being counterproductive, the measure is influenced by mindless politics.  The underlying premise is that life is a zero-sum game with individuals being paid arbitrary amounts.  This isn’t true since CEO’s are paid based on the value of their work per market factors and are in no way paid at the expense of their workers.

The Prime Minister’s plan to deal a blow to UKIP on immigration is even worse.  The party put forth an idea for businesses to mandatorily disclose the number of foreign workers they employ and prove that they tried their best to hire Britons.  The strategy is to appeal to British workers that feel their jobs are being taken away by foreigners.  Whatever effect this may have on British attitudes towards immigrants, there will certainly be economic penalties.  Put simply, the public disclosure of foreign workers is a way to pressure British companies into hiring Britons by way of affirmative action; placing the hiring of a certain demographic over hiring individuals with the best qualifications.

The Conservatives’ stance on immigration is made worse by their commitment to it and what that means for Brexit.  By coming down hard on immigration and rejecting the EU’s free movement of peoples, Mrs. May is leading the UK towards what is called a “Hard-Brexit”.  Rigid opposition to a free market in labor is imperiling Britain’s chances of negotiating a beneficial trade deal with the EU.  Global investors’ concerns were expressed in the pound sterling’s sharp 6% decline in under 2 minutes on October 7th.  The pound depreciated in response to investors’ expectations of less trade with Britain.

The Prime Minister must resist the temptation to take the opposition parties’ ideas.  Though it would help the Conservatives achieve political victories in the short run, it would saddle them with the responsibility of carrying out a bad mandate.  Instead, Mrs. May should embrace her party’s traditional pro-free market approach and find new ways to message those proven ideas to win converts.  She must also reconsider her party’s immigration stance so that Britain may acquire the freest trade deal possible with Europe and, thus, the most responsible Brexit.  May should expand on the more liberal economic policies of her party that helped lead Britain out of the 08’ recession with one of the West’s highest growth rates and overall maintain her party’s Thatcherite characteristics.

 

 

 

 

 

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