The comrade has spoken

7 October 2016 By Edward Hadas

An autocratic ruler of a one-party state unveils a revolutionary economic plan which ignores the advice of experts. The result is a disaster. That, in brief, is the story of China’s Great Leap Forward, introduced by Mao Zedong in 1958. It could also be the story of the UK’s “quiet revolution”, promised by Prime Minister Theresa May in her Oct. 5 speech at the Conservative Party conference.

Of course, the British revolution will not rival the Chinese in the fatality count. The famine caused by Mao’s futile effort to speed up industrialisation at the same time as introducing harmful agricultural techniques probably cost the lives of 5 percent of the nation’s population.

The UK’s departure from the European Union, which is at the heart of May’s revolution, will be a much tamer affair. Even the hardest imaginable Brexit will not bring starvation. If all trade with the EU stopped totally and foreigners suddenly refused to finance the large British trade deficit, British GDP might still only decline by a survivable 10-15 percent. A far less extreme deterioration is more likely. Some sensible economists expect nothing worse than a half a percentage point drop in the British GDP growth rate.

Still, the May approach has some eerie similarities to the Great Helmsman’s. To start, their approaches are almost equally autocratic. Both Chairman Mao and the prime minister were not elected by the people, but both claim a popular mandate. Both rule through their parties, not through parliamentary votes. Both mistrust traditional elites and are willing to ignore economic experts. Both are prone to ridicule any critics as hopeless pessimists. Neither faces any effective opposition.

Mao and May also have a common taste for nationalist hope. They both see countries whose natural position of global greatness has been diminished by foreign domination and previous weak governments. The answer, for each of the leaders, is for active governments to unleash the hidden potential of the masses. Mao thought Chinese peasants could achieve superhuman gains. May is more modest, but she wants to use the freedom provided by Brexit to help simple working people find a better life. It is an opportunity for the nation to “write a new future upon the page”.

Finally, there is the shared taste for economic nonsense. Mao believed that the mass effort of unskilled workers can build modern economies. He also believed that economies, like armies, work better with almost total central control. He was wrong on both counts. His command to construct of millions of backyard steel furnaces led to tonnes of useless steel. Worse, the labour diverted from farming cut down the production of food, contributing to the massive famine.

May also seems to have a fundamental misunderstanding of how modern economies actually work. She seems to believe that both EU membership and economic migration have slowed down the British economy. At the conference, she said that liberation from the EU’s rules would help “build an outward looking, confident, trading nation”.

But if that is really what she wants, she should abandon Brexit right away. For the complex manufactured products and advanced services which the British want to trade, success requires the intimate integration of regulation, finance and worker training. The EU’s single market provides exactly that, as the Japanese government reminded May at the G20 summit in September.

Also, enterprises export more when they are international in their outlook and hiring. British membership of the EU has bred a new generation of people who feel at home in Europe and the world. Migration from and to the EU has reinforced those gains. The newly freed up xenophobic undertones of British anti-immigration sentiment threaten to erase them.

And nations trade best when they have economic clout. The EU will inevitably strike more favourable trade deals than the UK can on its own.

Despite his absolute control of the Communist Party, Mao could not ignore the disaster of the Great Leap Forward for long. The damage from May’s ignorant economic nationalism is likely to be less dramatic, so she may be able to keep up the fiction that Brexit will increase British prosperity for much longer. But business people would do well to remind her frequently of the Great Helmsman’s famous warning: that a revolution is not a dinner party.

 

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