The political economy of British Capitalism

The political economy literature has developed a sophisticated analysis of the so-called ‘Anglo Liberal Growth model’ which characterises British capitalism since the 1990s. Historical and very long-standing commitment to economic openness, enmeshing the UK economy in international trade and investment flows, networks and practices has been a vital hallmark of the Anglo-liberal growth model

A key facet of the UK model since the 1990s has been the increasing reliance on debt-fuelled consumption practices (with citizens borrowing against the value of their homes, or taking out other forms of personal debt). This has been used to compensate for lower wage earnings. Analysis of the Anglo liberal growth model often focuses the housing market and its relationship to consumer credit. Other elements – labour market, industrial relations, education and training, receive a good deal less attention in many studies.

British capitalism has restructure din the context of the Anglo liberal growth model. The services sector has grown to replace manufacturing sector employment in the UK economy. However, only relatively small parts are at the high skills, high wage, high value-added end of the spectrum. Inequality is another salient characteristic of the Anglo liberal growth model, arising from the labour market, but also a public sector hit by austerity and cuts. The lack of strategic investment capacity of the UK state means investment funds have not been channelled to key sectors that could provide the high productivity jobs of the future.

Research has identified a number of frailties and shortcomings of the UK model of capitalism and its growth model. These including the low wage, low skill proclivities of the UK labour market, its governance and regulation. The dovetails with specialisation in the low value added services sector and the expense of higher skills, higher value added sectors. The lack of training and ‘upskilling’ is another key characteristic. The comparatively poor productivity performance of British capitalism in recent decades may well result from characteristics of the Anglo liberal growth model.

" debt-fuelled financialization dynamics at the heart of Britain’s finance-led Anglo-Liberal capitalism contained instabilities and fragilities which provoked economic crisis. The aggravating of inequalities was a source of social polarization, rising political tensions, and anti-system sentiment ... accumulation was predicated upon a financial bubble sustained by rampant UK house price inflation. Indeed, an important shortcoming of British capitalism was that, from the early 2000s onwards, the UK economy suffered an enduring reduction in trend growth rates—the so-called productivity puzzle. The British model was failing to deliver growth, suggesting structural, endemic weaknesses within British capitalism (see Clift and McDaniel 2021). " (Clift 2023: