The Starmer model

By Daron ACEMOGLU

The Labour Party’s sweeping victory in the United Kingdom’s general election already holds lessons for center and center-left parties elsewhere. But whether it will matter in the long run depends on Prime Minister Keir Starmer’s ability to address his country’s economic woes – a very tall order.

To their credit, the Tories showed respect for democracy by accepting defeat, with Conservative Party leader Rishi Sunak graciously congratulating Starmer even before the vote count was final. It is impossible to imagine a scenario in which Donald Trump would do the same in this year’s US presidential election.

With many Republicans already preparing to deny any electoral defeat this November (further undercutting Americans’ already low level of trust in institutions), the British example reminds us that we must never normalize such behavior. The US media and civil society have a duty to call out Trump and his allies’ anti-democratic behavior at every turn.

Starmer’s rapid rehabilitation of the Labour Party also holds valuable lessons. Upon taking the reins from Jeremy Corbyn in 2020, just after the party’s worst defeat since 1935, Starmer emphasized moderation and policies to improve the economy and public services. His victory shows that it is possible to win elections without extremism. He promised to make democracy work better for everyone.

This is a powerful message. My own recent research shows that people become much more pro-democratic when they see democracy functioning properly and delivering in terms of economic growth, stability, public services, and low levels of inequality and corruption. The same basic formula has worked well for workers’ parties and social democrats elsewhere. The birth of the storied Nordic model can be traced to election victories by workers’ parties in Denmark, Sweden, and Norway almost a century ago. These parties first moved away from hard left ideas and rhetoric. Then, once in power, they delivered on the concrete improvements they had promised.

In Sweden’s case, social democracy was forged in the crucible of the Great Depression. The Workers’ Party – which had broken from its Marxist roots two decades earlier – campaigned on a platform of macroeconomic stability, more jobs, and wage growth. After it delivered on these promises, it became the country’s main governing party.

The Norwegian Labour Party carved out a path even more like that of its British cousin in 2024. After running on a hard-left platform and losing more than 20% of its seats in the 1930 election, it underwent a rapid rehabilitation. In 1935, a fundamentally different Labour Party came to power by campaigning on school reform, welfare programs, and jobs. Through its historic “Folk School Reform,” it raised the quality of education in less economically developed parts of the country, winning the lasting support of many voters. Social democracy has remained the dominant model in Norway ever since.

Transforming a party is difficult. For Starmer, it  involved sidelining Corbyn and making clear that his brand of far-left extremism would no longer be on the agenda. Starmer endured many months of widespread criticism from the left, but he held firm.

Now comes an even bigger test. The import of Labour’s victory ultimately will depend on whether the party delivers, especially when it comes to reviving economic growth. Britain’s economic performance during the past 14 years of Tory rule has been rather disappointing. Per capita income growth has been slow, and the country’s leaders have failed to address an obvious productivity problem: growth in output per hour worked compares poorly to that of the United States, France, and Germany.

 

Recognizing that a lack of public and private investment underlies the UK’s anemic productivity and employment performance, Labour has sound ideas for kickstarting a robust economic recovery. But to finance the public investments in health care, education, infrastructure, and technology that Starmer has promised, the government will need to increase its tax revenues. Starmer therefore may need to walk back a separate promise not to increase taxes for working people.

 

If so, he should point out that no advanced economy can achieve sustained, dynamic growth without innovating. While countries such as Vietnam and China have been able to leverage mature technologies and low-cost labor, high-income economies lack this option. They must either innovate or fall behind the global technological frontier. Although specializing in financial services can provide a boost, the benefits are temporary. And as the British example shows, becoming a financial hub for money from Russian oligarchs, petrostates, and tax evaders brings a range of societal ills.

But innovation is easier said than done. Despite the previous government’s emphasis on artificial intelligence, Britain is lagging behind in the technology race, and no amount of government emphasis will miraculously turn things around. Instead, the UK needs a coherent long-term strategy geared toward finding a niche in the broader innovation economy. Success will require more than just an old-style industrial policy of supporting specific companies or sectors.

There are also potential fault lines within Labour’s plans for making democracy work better. Responsive democratic governance means that no major public concern is ignored, and the British electorate has again signaled that it is very concerned about immigration.

One reason why the Conservatives fared so poorly is that Nigel Farage’s populist, anti-immigration Reform UK party performed so well. In fact, if the Tories had captured most of Reform UK’s vote, they would have won the election.

As in the rest of Europe, the British right will face growing pressure to tilt further rightward, and Labour and other centrist politicians will need to prepare for this shift. Election after election has shown that ignoring the population’s views on immigration is not a viable strategy.

Labour must make the humanitarian case for allowing in refugees, while also promising greater transparency and control on immigration overall. Finding the right communication strategy and the right principles to guide its immigration policy will be one of the new government’s biggest challenges.

As someone who formerly worked both as a human-rights lawyer and as a chief prosecutor dealing with public-order issues, Starmer may be uniquely qualified to succeed where others have failed.

Daron Acemoglu, Institute Professor of Economics at MIT, is co-author (with Simon Johnson) of Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity (Public Affairs, 2023).

Copyright: Project Syndicate, 2024.
www.project-syndicate.org

The post The Starmer model appeared first on The Business & Financial Times.

Read Full Story