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Good morning. Yesterday Rachel Reeves became the first person to deliver a second Mais Lecture, the annual address at the Bayes Business School in London. There were a number of policy announcements in it that I will cover in greater detail in future newsletters, but for today I wanted to tackle the bigger argument that Reeves made in her 2024 speech and again in yesterday’s, because I think it is so important in understanding much of what the government does, and not just in the economic sphere.
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Reeves’ optimism in security
The big idea across Rachel Reeves’ 2024 Mais Lecture and her 2026 one is “securonomics”. Essentially, the broad thrust is that in an age of global instability, the path to growth runs through building resilience and changing our economic model to create a greater sense of security. Here’s the key argument from yesterday:
Two years ago, in my first Mais Lecture, I described the new ‘age of insecurity’, marked by the long fallout from the 2008 financial crisis and the seismic events that followed: the global pandemic, war within Europe’s borders, and now in the Middle East, energy crisis and disruptions to global trade.
These crises affirm the reality that globalisation, as we once knew it, is dead.
When I said so in 2023, I was criticised in some quarters, but I don’t think today many people would deny it.
Each crisis has reminded us that ours continues to be an interconnected world, in which a country’s competitiveness, openness to trade and credibility on international financial markets remain critical;
But that easy optimism about global economic integration has faded, with shocks in one part of the world transmitted swiftly along fragile global supply chains, impacting prices and living standards here at home.
My conclusion was that we must build growth that is both secure and resilient.
I have two big objections here. The first is I think this account is too pessimistic about the resilience of global trade, the profit motive and people’s desire to acquire new stuff, all of which ultimately are the big “true” drivers of globalisation. (Excellent column from Alan Beattie earlier this year on that.) Trade between nations has weathered, among other things, the collapse of the western Roman empire, religious upheaval, plagues and war.
This reflects a broader shortcoming within this government, which is it is too reluctant to harness consumer choice and market mechanisms to achieve its aims and distrusts both of these things in the private sector as well.
The second is that I think it is too optimistic about the very real costs that Reeves is right to identify here. States around the world do need to spend more on defence, and businesses are having to reorient and diversify their supply chains to account for geopolitical upheaval.
Ultimately these are policies that cost money and are at best a sub-optimal route to growth. The British government does need to spend significantly more on defence — and on a quicker timetable than it currently plans to in my view.
But both in terms of government spending and the UK’s real and finite resources, we would be better off using the money to fund broader research and development or a more favourable tax regime for our areas of comparative advantage, or frankly using it for almost anything you care to name.
Reeves is right to say that you can’t have growth without security, but all too often she and the government conflate “you can’t have growth without security” with “spending on security can, in and of itself, lead to growth”. Securonomics becomes the way that Labour reassures itself that the things states are being forced to do by events outside their control are more electorally fruitful and more economically useful than they are in reality. That Pollyanna streak on growth is why the government then becomes recklessly casual about what really does drive growth: a reset with the EU that is still largely rhetorical, a looming crisis in our university sector that is going unmet, and a tax burden that falls too heavily on businesses.
Now try this
I’ve just finished If Cats Disappeared from the World by Genki Kawamura: it is a lovely short novel that will appeal to anyone who enjoys magical realism.