Politics

Immigration drives growth—so why is Johnson pretending otherwise?

In his conference speech, the prime minister set out restrictions that will push up inflation and deepen the productivity crisis

October 06, 2021
Image: Mark Thomas / Alamy Stock Photo
Image: Mark Thomas / Alamy Stock Photo

Brilliant politics; terrible economics. For a prime minister and his government to ride high in the polls when their party has been in power for 11 years, when petrol is scarce, food rots in the ground, supermarket shelves have large gaps, gas prices are rocketing and Christmas is threatened—that’s some achievement. 

Today, at the Conservative conference, Boris Johnson set out to build on his curious popularity by offering his vision for Britain’s future, which at its core links the restriction of immigration to his levelling up, high-skills agenda.

In truth, Johnson’s policies will not boost growth but impede it; they will not solve the productivity crisis but deepen it; they will not hold inflation down but push it up. It is as if the prime minister wants to refight the Corn Laws, come out on the wrong side and revive economic notions that have, rightly, long been abandoned.

The battle over the Corn Laws in the 1840s saw the defeat of protectionism. It brought cheap bread, baked with imported wheat, and boosted the living standards of manual workers. More to the point, it was a triumph of rational economic ideas and the cause of prosperity over the vested interests of landowners who were happy to keep everyone else poor.

More than two centuries after David Ricardo developed the Theory of Comparative Advantage and set out the fundamental case for free trade, it should not be necessary to repeat the argument; but it is—and one of the oddest things is that Johnson’s voodoo theories are not being killed off by any of the opposition parties. 

Ricardo’s insight was that, in general, free trade increases prosperity all round. If a country is particularly good at making something, they should make more and sell it abroad—and import things that other countries are best at making. Yes, yes, there are qualifications to this argument. There may be social and other non-economic reasons to shun certain cheap imports, or to protect particular domestic industries, temporarily or permanently. But the general principle is important and explains much of why general standards of living are so much higher than they were 50 or 100 years ago.

In his extraordinary fight with British business, Johnson is throwing one of the most basic economic principles out of the window. Immigration has been a great driver of Britain’s growth in recent decades. From hospitality to food production, from nurses to lorry drivers, and in a host of other sectors, workers from other countries have been adding to Britain’s workforce.

The basic laws of economics apply to people as much as goods. The way to maximise national prosperity is to invest in British people so that they acquire the skills to do the best possible, highest-paid jobs, and to hope to attract people with more limited skills in other sectors. That’s emphatically not to say that people and products are the same. They are plainly different. Rules such as workers’ rights, the minimum wage rigorously enforced, and a redistributive system of taxes and welfare support are essential in order to prevent raw economic forces from creating unacceptable social outcomes.

But the fact remains: Johnson’s approach to immigration is, in economic terms, the same as that of anti-Corn Law landowners wanting to prevent the sale of cheap bread made with imported wheat. Curiously, the person in the 1840s who framed the anti-reform argument most like the way Johnson does today was Karl Marx. He predicted that cheap bread would give employers an excuse to force down wages. His argument was demolished by the pro-reform MP Richard Cobden, who showed that free trade did not cut wages, for it was in the interests of business generally, and the wider country, for decent wages to be paid: “To have a useful and a prosperous people, we must care that they are well fed.”

If Johnson is wrong about the basic economics of migration, he is also wrong to say that limiting immigration will drive up productivity. The opposite is true. A more skilled workforce is key to higher productivity. Suppose wages are bid up to attract British workers to take more of the less-skilled jobs traditionally done by immigrants. Two things will happen. First, the prices of many things will rise—food, hotels, restaurant meals, social care, anything with significant distribution costs and so on. (Insofar as higher costs are borne by the public sector, such as the NHS, taxes will also have to rise. So much for the “low-tax” economy that Johnson promised once again in today’s speech.) 

Second, Britain’s economy will be deprived of the full potential of those workers who are diverted from new high-skill, high-value-added jobs to lower-skill jobs with improved wages. This is a recipe to prevent Britain maximising its productivity potential. Levelling up? Far from it: Johnson’s Britain will impede the expansion of high-skilled jobs in the very communities that have been left behind.

There remains a powerful reason for keeping immigration low. Not all of us share it, but it should be acknowledged. It is the argument that Nigel Farage puts more honestly than Boris Johnson: that we want to place strict limits on the number of people with different roots, values and cultures who settle in Britain, even if this means slower economic growth. From time to time Farage has acknowledged that, for him, culture trumps economics.

That is not Johnson’s argument. He says that high immigration is bad for Britain’s economy. An honest policy would acknowledge the culture-economy trade off and admit that rules to restrict immigration will reduce (indeed, are, today lowering) the growth rate.

But that is not what he is saying; and nor are the leaders of our opposition parties. None of them are open about the basic laws of economics that have been known for two centuries. The media are not much better. We seldom hear alternative ideas for building a fairer, more contented and prosperous society that welcomes workers from other countries. So Johnson carries on with his basic, economically illiterate strategy pretty well unchallenged. Which is one big reason why the prime minister continues to ride high politically.