The Way Forward; We've Outpaced the U.S., Europe and Japan, Writes Britain's Chancellor of the Exchequer Gordon Brown. Now We Need a Plan to Stay at the Head of the Pack
Brown, Gordon, Newsweek International
Byline: Gordon Brown (Brown is the Chancellor of the Exchequer.)
Can Britain become an enterprise economy so dynamic that it rivals the United States? For decades such a comparison was unthinkable. Postwar Britain was the stop-go economy of the industrialized world--always the first in, worst hit and last out of every global slowdown. People talked of the British disease: the "union problem," the "investment problem," "the inflation problem." In the 1950s, it was said, Britain managed decline; in the 1960s we mismanaged decline; and in the 1970s we simply declined to manage.
But in the past few years when America, Germany, Japan and much of Europe faced recession, Britain has continued to grow quarter after quarter, delivering the longest period of uninterrupted growth in our history, with more people in work than ever before. And it is generally accepted that Britain's hard-won and newly won stability is not an accident but the result of our new fiscal and monetary framework, backed up by policies for competition, flexibility and enterprise.
In 1997 my first decision as chancellor was to make the Bank of England independent. We radically reduced the national debt from 44 percent of GDP to 34 percent now. Tough decisions to reform labor markets have helped create record employment with 2 million new jobs. Our competition regime is now amongst the most open in the world. And like corporation tax and small-business tax, rates of capital-gains tax have been cut--for long-term business assets--from 40 percent to 10 percent.
But Britain must never be complacent. The challenge for Britain is to build on historic qualities--our stability, our outward-looking internationalism, our scientific and creative strengths--and become more flexible so that we can do better in a harshly competitive global economy. For, like the rest of the industrialized world, Britain faces a future where within 20 years half the world's manufactured exports could come from developing countries and 5 million U.S. and European jobs could be outsourced. And this is not just low-wage competition: all the time China and India are upgrading their science and skills--already producing 125,000 computer-science graduates a year compared with 5,000 in Britain.
No nation can shield itself from these forces. History teaches us that some nations will rise to these challenges, some will not; and that the price of failure is steep: low growth, higher unemployment and poor standards of living. In Britain's case there is an added urgency to our response: having lost out 50 years ago through complacency, Britain cannot afford ever again to resort to the old short-termism which was at the root of last century's national economic decline. So to those in Britain who want to postpone long-term decisions and tell us that there should be no change without security, my answer is there can be no security without change.
As I will set out in the Pre-Budget Report later this week, I believe that because of our inherent strengths, Britain is uniquely well placed to succeed in this new global economy. But it is imperative that we seize this moment of opportunity. And having built a shared national consensus about the importance of stability to our country, the question for Britain is: can British people agree on a shared commitment to making even more difficult and testing long-term choices and decisions for global success--and show the purpose, direction and sense of destiny that every successful advanced industrial economy will need?
Take enterprise. There are 300,000 more businesses since 1997, but let us be honest: today our rate of business creation is still half that of America's, and if we had the U.S. rate, we would have 1.8 million more businesses in Britain. The long-term choice we must make is to learn from America, rigorously introduce the right incentives and rewards for risk, and make the changes in the school curriculum and in our colleges and universities necessary to create a revolution in attitudes toward enterprise and wealth creation. …