Almost 50 years ago, Margaret Thatcher, then-U.K. prime minister, transformed her country’s relationship with organized labor. Thatcher argued that powerful unions had gained too much influence over the economy and government, contributing to excessive inflation, strikes, and declining industrial competitiveness. Her government passed legislation limiting secondary strikes, requiring secret ballots before walkouts, and restricting union-member-only businesses. Her reforms modernized the British economy and restored economic stability. Because of Thatcher’s economic reforms, the United Kingdom was rejuvenated. The country was no longer considered the “sick man” of Europe.
Today, the U.K. is experiencing another period of prolonged economic decline. Economic growth, productivity growth, and business investment have been effectively stagnant for almost two decades. The country needs another Thatcherite revolution.
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Unfortunately, Britain’s political leaders are rejecting reform and instead embracing economic statism. They are also empowering the country’s labor movement. Workers at Google’s DeepMind AI project have voted to unionize as part of an effort to prevent the AI lab from providing its technology to the U.S. military. If employees at DeepMind do unionize and then exercise economic power over operations, that will be a major step backward for British efforts to become a world leader in AI and advanced technologies. Unions with excessive economic power reduce private-sector investment and function as a brake on economic growth, job creation, and productivity-enhancing innovation.
The U.K. is a global leader in AI because labs such as DeepMind are able to be first movers and attract elite talent from around the world, including from the U.K.’s best universities. DeepMind can pursue ambitious research without the rigid bureaucracy that has undermined British competitiveness in so many sectors of the economy.
Unionizing DeepMind’s workers would undermine one of the country’s most important comparative advantages, highly skilled human capital, at precisely the wrong time in the global AI race. The success of DeepMind has already brought enormous prestige and investment into the U.K. The AI lab has solidified Britain’s position as a worldwide AI powerhouse. DeepMind is transforming London into a global technology hub, where more than 3,000 highly skilled workers drive scientific research. For example, DeepMind’s work on AlphaFold, a protein structure prediction system, is widely used in Britain’s top-tier pharmaceutical industry to accelerate life-saving drug development. Because of DeepMind, the U.K. is at least somewhat able to compete with Silicon Valley for human talent and venture capital.
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The company is establishing Britain as one of the few countries capable of competing against China and the U.S. at the frontier of AI development. Excessive labor militancy would discourage future AI investment in the U.K.
Investment capital would instead flow to the U.S., with its more flexible labor market and pro-innovation culture.
James Rogan is a former U.S. foreign service officer who later worked for over 30 years in law and finance. Now he writes a daily note on markets, economics, politics, and social issues.
