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Under The Radar – 20 August

This week, we discuss:

  1. The Government’s intervention in the planned £2.6bn takeover of Ultra Electronics

  2. Increased productivity in the US

  3. Boston’s historic Mayoral election

US Private Equity Swoops in on UK Defence Sector 

What happened?

The British Government has intervened in the planned £2.6bn takeover of Ultra Electronics, a UK-based defence company who supply the Royal Navy, by rival Cobham which is owned by US Private Equity firm Advent International.

What does it mean?

By allowing the acquisition of UK defence companies, Britain loses out on a huge amount of intellectual property (IP) that is critical for defence and military purposes. This reduces our ability to advance military technology and industry, whilst the knock-on effects hold Britain back from re-establishing itself as a leading innovator. All in all, it’s not great for ‘Global Britain’ or ‘levelling-up’.

But pressure on the government to become more interventionist is having the desired effect. Ultra Electronics continues a trend of interventionist policies over the past year by the Conservative government, who are now in the habit of defying regulatory boards’ suggestions. The National Security and Investment Act, which comes into force in January 2022, vests power in ministers, not competition authorities, to block takeovers in seventeen areas including energy, transport, and communications, on the grounds of national security.

With US private equity being frustrated and current scrutiny of the situation in Afghanistan, particularly relating to the UK following America’s lead in deciding to pull out, commentators are beginning to question the extent to which Britain should be beholden to US interests.

Is it time for the so-called ‘special relationship’ to be reconsidered?

The Covid School of Economics

What happened?

New data published Tuesday showed a 2.3 percent annual rate of productivity growth in the US in the second quarter of this year, compared with 1.4 percent from 2005 to 2019.

What does it mean?

Over the last decade, productivity growth in the West was extremely poor. Consequently, these societies saw stagnant wages, growing inequality, and a political malaise borne of discontent.

While the U.K.’s furlough scheme means that our productivity statistics don’t give the clear indication that they otherwise would, the ONS produces a measure of output per job that excludes the furlough factor, which has indeed risen. So, why has Covid-19 counterintuitively caused a sudden burst of productivity in the US and seemingly also in the UK?

One likely explanation is that while the pandemic destroyed jobs, it also created labour shortages. And this forced the hand of employers, who have long procrastinated putting in the time and money to find more efficient ways to operate. If this is the dominant factor in the productivity boom, then the political significance of Covid-19 may be felt for a long while to come.

The pandemic could well prove to have been the trigger that clearly demonstrated – contra to free-market orthodoxy – the benefits of labour restrictions not only to select groups of workers, but to the economic health of the nation more generally.

Boston City on the cusp of historic first election

What happened?

Boston is on the brink of a historic Mayoral election, with an all-ethnic minority short-list of candidates remaining in the race.

What does it mean?

Boston is one of the last remaining big US cities to have only elected white men as their mayor, but a nearly two-hundred-year streak is now certain to end with this historic upcoming election. All five candidates in the preliminary race are people of colour, including four women.

Boston is a city that has struggled with racial tensions and has developed a reputation for being “one of the most unequal places in America”. The city was in the spotlight in the 1970s for violent desegregation protests, and inequality has remained persistent ever since. In 2015, it was reported that the median net worth of white Bostonians was $247,000, whilst the net worth of African American Bostonians, who make up 25% of the local population, was just $8.

The short list of candidates, including two black women, has been hailed as a turning point for the city. The race has, however, not been without controversy – candidate Andrea Campbell faced calls to stand down in order to avoid “splitting the black vote”. In response to this, she spoke out, arguing that “black women are not a monolith”.

Unfortunately, identity politics is once again overshadowing more important debates, especially which candidate has the best programme to tackle deep rooted economic inequality.

This Week’s Must Reads

  1. ‘How America Failed In Afghanistan’ by Isaac Chotiner for The New Yorker

  2. ‘Green issues expose Tory division and loner Boris Johnson’s distance from his party’ by Isabel Hardman for The Guardian

  3. ‘How corporations rebrand poverty?’ by Leo McKinstry for The Spectator

  4. ‘Iran’s drones give Houthis an edge in Yemen war’ by Richard Spencer for The Times

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