Britain’s Labour Party won 411 seats in the House of Commons in the July 4 national election. It was the country’s biggest landslide victory since Tony Blair first took office as prime minister in 1997. But while Blair had a distinct governing philosophy—New Labour—it’s harder to say what economic ideas Labour leader and new Prime Minister Keir Starmer stands for.
Has the composition of Labour’s vote changed? What is Starmer’s economic philosophy? And could Starmer pursue a realignment of Britain with the European Union?
Those are a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast that we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.
Cameron Abadi: How would you go about defining Starmerism as an economic philosophy?
Adam Tooze: I think it’s really a series of negatives before we come on to the positives. So, first of all, it’s well-ordered, sensible government in the interest of the common good. So not the Tories of recent years. It is, however, also not Blairite. Blair really was a kind of Macronist in the sense that he wanted to make all of Britain Europhile and middle class. And Starmer is not promising that at all. And he’s also not a Thatcherite in any simple sense, right? So he’s not a pro-market privatization figure. So how, then, does one positively identify what he’s about? There’s a deep communitarianism about him that is really quite extraordinary. In his 2021 Labor Conference speech, he literally said, “The two sources of what I believe to be right and good are family and work.” It’s an almost social Catholic kind of conservative vision of the source of values. You know, people cite [Michael J.] Sandel from Harvard, who’s been quoted all over the place right now as a kind of godfather of communitarianism. Starmer is an intellectual. He was a very serious human rights lawyer and actually interviewed Sandel on the BBC show that he hosted. So there may be a kind of connection there.
And then, on the other hand, there’s this thing they call—it’s unbelievable—securonomics. I don’t know which person thought this was a good idea, but securonomics is an economic policy focused notionally on security and resilience. They borrow from Janet Yellen’s liberal supply-side thinking. It’s this new version of the state as an activist player in the economy and in society as a stabilizing force, which isn’t counterposed to entrepreneurialism but is seen as the launching pad for entrepreneurialism, but roots society in order, in organization, that will be provided by different types of intervention. To their credit, one should say that they have been very loud in arguing for a rollback of the labor market’s “liberalizations” that have reduced the standard of living for many working-class people in Britain and have enormously expanded the group of the working poor. So this is where I think the rubber hits the road, and their communitarianism and their securonomics will really be tested as to whether or not they’re actually able to reduce the problem of working poverty in the U.K.
The third element is a foreign economic policy orientation, which is posed against the imperial legacies and then the craziness of the Tory Brexiteers who had this grandiloquent, insane vision of “global Britain” that was somehow going to conquer the world by way of restoring relations with India and the Commonwealth and this sort of flimflam. The progressive realists are trying to say, no, the issues are the ones that we all know—they’re about climate, they’re about AI, and in this sort of broader, more realistic view of the world, the U.K. occupies a very modest position. And so from that very modest position, we should negotiate in a sensible way with our obvious partners, which include the United States but might also, in certain domains, include the Chinese and the EU.
CA: Starmer’s own chancellor of the Exchequer, basically Britain’s treasury secretary, is Rachel Reeves. And she has openly said she’d like to emulate Yellen and her program of supply-side liberalism. But at the same time, both Reeves and Starmer are describing the British government as not able to really spend more money right now, in contrast to how the Biden administration has gone about pursuing this program. What’s left of this kind of supply-side liberalism if you remove the money?
AT: Yeah. It’s a hugely complicated issue, and I think we’ll need to come back to this as we actually see the development of the U.K. economy because the development of the U.K. economy—or rather the lack of its development in recent years, really ever since 2008—is a historic story. I mean, it’s a disaster of Italian proportions. The British economy has basically stopped growing at any kind of pace whatsoever. It has to do, I think, largely with the break of the financial crisis of 2008 and the exhaustion of the growth dynamic in London. And so there is a huge problem for any incoming government in the U.K. Standards of living have stagnated for a large number of people for more than a decade. Productivity growth is at rock bottom. The rates of investment, both in the private and the public sphere, are among the lowest in the rich-country world. So that’s the problem the Starmer government has to address because otherwise all of its choices are going to be hugely constrained. Then there’s the issue of public finances. Britain is by no means at crisis level in debt terms. But there was the nasty Liz Truss moment when they screwed up government policy and the Bank of England didn’t cooperate and the financial markets freaked out.
So there’s that in the background. And there is this desperate need on the part of the Starmer team to present themselves as responsible stewards of government finance. And that’s a problem because the government budget is not in balance right now and there are major tax increases in the pipeline already. And they’ve committed themselves to basically observing the fiscal rules set in place by the Tories. They’re unwilling to discuss in a capacious way, the way that the Corbynites were, a more imaginative rethinking of fiscal and monetary policy and how they might work together in a monetary and fiscal sovereign like the U.K. They’re also unwilling to take any risks on that front because they know they’ve achieved a huge electoral breakthrough, so they’re worried about keeping their coalition together. And they’ve also said that they’re not going to raise taxes on working people. And that really puts them in a box in terms of funding extensive government action of any kind.
One effect of that is that their public spending commitments—which, inherited from the Corbyn era, initially were rather generous and large-scale and focused on green innovation—have progressively shrunk over time. And what has taken on an ever larger role in their thinking is public-private partnership and de-risking. In other words, back to the formula of the Blair era, where Britain was one of the forerunners of the now, I think, notorious public-private partnerships that delivered mediocre public services at inflated cost by way of various types of subcontracting to private suppliers and private providers. This created what’s known as the rentier state, the rentier economy, in the U.K. The new iteration of this involves fantasies about pulling down large-scale institutional investment, the likes of BlackRock. And Larry Fink of BlackRock, you know, this giant global fund manager, has been actually very outspoken in his support of Starmer. I think the challenge there will be actually doing the deals because when it comes to it, private investment often requires a very, very heavy amount of de-risking, at least $1 of public money for every $3 of private money that goes in, which is not necessarily a particularly attractive kind of deal. And furthermore, Britain is stigmatized by having exited the EU and having an outstanding legacy of problems with its most significant trading partner. Nevertheless, the Starmerites are committed to a series of Invest in Britain road shows. They’ve created this thing called GB Energy, which is going to be a de-risking entity for private investment in the green energy transition, in which Britain actually has for a long time had a lead, somewhat tarnished in recent years, but where, I think, this could be a creative dimension.
And in fairness to the Starmer people, I think it’s going to be less at the level of the big spending programs and more at the level of competent government and socially improving legislation and administrative regulation that we’re going to see rapid progress. So they’ve immediately, for instance, unblocked the planning process for onshore wind farms. Britain is an ideal location for onshore wind. It’s very cheap to build green energy out that way. The Tories, in a populist move, had simply banned any onshore wind farms within hours of taking office. The Ed Miliband and the Starmer administration has, you know, unblocked that. I think they’re going to move hard on offering a much better deal for working people in Britain in abolishing zero-hour contracts and trying to restore a degree of fairness to the labor market. They may be able to make some significant changes within the welfare system in moving toward more adequate provision for families. And I think it will be there that the real bona fides of this progressive administration are tested. It isn’t going to be in large spending programs. Given the way they boxed themselves in, there isn’t going to be much room for that, but it’s going to be in the nitty-gritty of the workings of the British state and British government that they may be able to make real strides. And those kinds of things really matter.
CA: Starmer has said he’s ruled out rejoining the EU. But are there other kinds of realignment that are conceivable that he could pursue?
AT: Yeah, I mean, this is my fundamental beef with the Starmerite Labour Party is that it’s a flag-waving party of British patriots. The party membership card has the Union Jack on it, for crying out loud. And when Starmer says he wants people to get their act together and go to work, he says, pull on the England shirt, which is a little odd because it’s the United Kingdom and he should include Welsh and Scottish people. But what he means is, you know, get with the nation. And it’s so not my cup of tea. I mean, they’ve explicitly ruled out renegotiation, either freedom of movement or the customs deal. So the question really is how much wiggle room there is and how much patience there will be in the EU for any kind of U.K. offering. I mean, I’ve spent months now out of the United States, both in Europe and in Asia, and to be honest, despite my very notable accent, I wasn’t asked a question once about British politics by anyone, any time. No one cares. And it will take a while for London, I think, to settle down and realize this.
But you do see intelligence in the first moves of their diplomacy, which include sending [David] Lammy, the new foreign secretary, on a European tour as quickly as possible, to touch base with anyone that you could touch base with. And I think the way they’re going to leverage this is over NATO, because if the U.K. does still continue to play a role at all in international affairs, having exited the big unit within which it actually mattered, which was the EU, the one place in which it still does is NATO. And with the Ukraine war in a critical phase and the U.K. a notable supporter for Ukraine and being one of the states that has actually provided some meaningful military support with some hardware and being a state with a considerable military-industrial complex, with BAE in particular still being a significant player, I think they’re going to try to leverage connections to Europe by way of security policy. And that’s one of the constraints on their fiscal program because they’re committed to raising defense spending to over 2 percent of GDP to make them a NATO member in good standing and secure their position with the United States, even come a Donald Trump presidency. But I think it’s significant that they dispatched a full team of U.K. cabinet ministers to the NATO meeting in Washington to use it as an occasion, I think, largely for diplomacy with the EU within the frame of NATO because direct negotiations with the EU are not going to be comfortable.
Their problem is that the overwhelming majority of Labour Party support is pro-Remain, vocally pro-Remain, and voted for remain. And what Starmer is terrified of is losing his hold with the right-wing press in Britain and losing this label of patriotism, which he’s so devoutly attached to. I think it’s really deep for him and he probably means it. And that is the tension. So their risk is that if they make too proactive moves toward Europe and then fail to deliver anything significant, they disappoint a significant fraction of their electorate, which actually, in its heart of hearts, wants back in, wants to overcome this absurd decision that was taken on a narrow majority of voters who are now increasingly dead because it was elderly Brits who voted for Brexit overall. And there is a real question, I think, about how long it will take before a Labour Party can actually move toward what clearly should be the position, from every respect, both in terms of representing its constituency and for the progress of British society in the British economy, how long it will take before it can openly articulate what’s clearly necessary, which is that the Brexit question has to be put back on the agenda and Britain has to actually negotiate to rejoin in one form or another. And my fear is that the Starmer epoch in Labour, though it brings them back to government, actually defers that moment when they realize that what they actually have to face up to is that highly divisive issue. People talk about a civil war in Britain and so on. But on the other hand, if you don’t address this, I don’t really think that there’s much prospect for a high-growth scenario for Britain going forward, because why would you choose to invest in Britain when there are so many more attractive options within the EU, which is a much bigger market fundamentally?
