Rachel Reeves: is securonomics really Bidenism but without the money?

March 17 2024 / The Sunday Times

Rachel Reeves went to Washington last May to proselytise about what she believes is her big, transformative idea for the next Labour government: “securonomics”. The neologism was her own coinage and encapsulates her considered response to what she calls “our age of insecurity” in which hostile great powers compete to control the technologies of the future.

“The era of hyper-globalisation as we know it is dead,” she told a breakfast gathering at the Peterson Institute in Dupont Circle. Her message was received, overall, with polite indifference and afterwards her interlocutor, the economist Adam Posen, asked if she was preaching a form of “zero sum economics”. Reeves smiled and pushed on, praising the Biden administration’s Inflation Reduction Act (IRA), which uses subsidies and tax breaks to incentivise investment in green technology, American manufacturing and domestic energy production.

Since the Washington trip, Reeves has been ensnared in the debacle over Labour’s U-turn on its incoherent pledge to spend £28 billion a year on green growth. Most weeks she is caught up in the grind of trying to explain how a Labour government would invest in public services without raising taxes. She repeats her mantra of fiscal restraint with robotic discipline.

But she has bolder ambitions and on Tuesday she is giving the annual Mais lecture, hosted by the City of London University, and will use it to deepen the theme of securonomics.

Securonomics, she will say, will not signal a return to 1970s-style big state Labourism.It advances, by contrast, not the big state, but the strategic state. Not the top-down, Whitehall-knows-best industrial policy approaches of the past, propping up industries that cannot compete and seeking to direct from above.”

“This is a big moment for us,” Reeves, who has been “working flat out” on the Labour manifesto, said when we spoke on Friday afternoon. “The central importance of the speech will be to emphasise resilience, security and active government – and the need for reform.”

Reeves, who refused to serve in Jeremy Corbyn’s shadow cabinet, loathed Corbynism – especially its strident pieties and voodoo economics. But she is equally sceptical of progressive boosterism and believes market-driven globalisation has created too many losers, a decaying public realm in Britain and overstretched public services.

Unlike Tony Blair, who once told me he believes the “arc of history bends towards justice and enlightenment”, Reeves does not think progress is inevitable. She’s not an anti-liberal, but her political instincts are increasingly post-liberal and, therefore, more in tune with these dark times.

The purpose of an active state, she believes, is to provide security from the havoc wrought by global free markets as well as creating the conditions for economic growth. There can be no liberty – what Thomas Hobbes called “commodious living” - without security and order. On this, she is aligned with Keir Starmer.

The Labour leader’s colleagues often say that while he is ruthless in pursuit of victory and therefore as pragmatic and flexible as he needs to be, he has “no politics”. He has instincts rather than a grand strategy or ideological conviction, which may be a good thing: he can travel light, and flex and bend as the logic of the situation dictates. He entered parliament late and is not associated with any of Labour’s core factions: the hard left, the soft left, the old right, or the Blairites.

But Reeves is a creature of the Labour Party. She is deeply interested in its traditions and history. Even as a young economist at the Bank of England, having turned down an offer while at Oxford to join Goldman Sachs, she was identified by Gordon Brown as a possible future Labour chancellor and nurtured accordingly.

Starmer’s unthreatening demeanour and moderation should be enough to make him prime minister as the Tories self-immolate. But many Labour voters demand more than incremental change and technocratic social democracy. They want bold ideas. They want radicalism. This, perhaps surprisingly given her public image and innate caution, is where Reeves believes she can help: she is Labour’s chancellor-in-waiting but also its chief ideologue.

That maybe so but does securonomics really amount to anything more than an exercise in wishful thinking: Bidenism but without the money and the mighty dollar? More than this, as Adam Posen suggested in Washington, is it really another word for protectionism?

“Look, I have no problem with our great financial service companies selling to China,” Reeves told me. “But never again should we be reliant on China, a country that does not share our values, to build our nuclear power stations and never again should we open our 5G infrastructure to Chinese investment. Securonomics is not protectionism. But it is hard-headed realism. As for Bidenomics, I know we can’t put in billions, trillions in investment like the Americans can. So we will have to find different ways of getting investment in the economy by working in partnership with business.”

Rachel Reeves knows a long period of Conservative rule is ending and that the political sea-change is now for Labour. She is troubled by what she calls “British decline” and wants to position herself in the vanguard – alongside US Treasury Secretary Janet Yellen - of a new economic consensus.

At the end of the 1970s, as the post-war order crumbled, the Thatcherites had a radical solution to the political and economic crisis in which Britain was mired. Can Reeves, with her talk of securonomics and new orthodoxies, and Labour effect a similar transformation today during a comparable period of crisis? Or will the cycle of decline continue? We shall find out soon enough.