Politics kills economics stone-dead

Is this the best we can do?

Phillip Hammond’s budget is widely hailed as a life-saver for himself and his boss. Yet a government producing such economic travesty doesn’t deserve to have its life saved.

The only reason to rejoice in its continuing survival is the ABC of today’s politics: Anyone But Corbyn. The British economy may just limp on under the present lot; Corbyn’s arrival would produce a collapse within days, possibly hours.

This is an economic version of apophatic theology: proceeding from the negative. Proceeding from the positive is in this case impossible: the budget offers no positives.

It highlights a deep flaw of our democracy-run-riot: it politicises everything, including the economy. Lacking a parliamentary majority, HMG has to kowtow to the public, which is even more ignorant and corrupt in such matters than the government itself is.

The people are treated like so many customers in a bad restaurant: they’re invited to order whatever pleases them from a menu mostly consisting of unpalatable dishes.

Now economic activity has a long standing in history, second only to religion’s. Experience of running economies big and small for thousands of years surely must have built a solid capital of knowledge.

We know what economic principles have been empirically vindicated or debunked. We know what kind of policies produce prosperity or disaster. We even know how economics affects human behaviour, pushing it from moral and prudent to corrupt and infantile.

Yet in today’s democracies all this knowledge is wiped out by short-sighted political needs – not only of an election a few years away, but even of tomorrow’s polls. Decisions that ought to be based on wisdom, common sense, experience and sound principles are made solely to play lickspittle to a dumbed-down herd.

The aforementioned ABC principle brought to the fore the urge to preempt Labour. To this lot ‘preempt’ is fully synonymous with ‘emulate’. The Tories are trying to stop Labour by becoming Labour.

One flagship policy they’ve put forth is abandoning stamp duties for first-time buyers on properties costing under £300,000. This gimmick can fool only economic ignoramuses.

For one thing, I find it hard to believe that those who can cough up £300,000 for a chicken coop (all that amount buys these days in areas where most jobs are) will be deterred by an extra £5,000 in stamp duty.

Moreover, I think the law of supply-demand is still in force. Hence if the gimmick does miraculously stimulate demand, property prices are bound to go up, making that first rung on the property ladder ever more elusive.

The budget has been hailed as an end to austerity. Now for something to end it has to have begun in the first place. Our much vaunted (or derided) austerity has nothing to do with economics and everything to do with semantic chicanery.

Austerity means spending less, or at least not more, than one earns. If one’s excess spending used to be 50 per cent and now is a mere 15 per cent, it’s not more austerity but less profligacy.

Under our so-called austerity, the national debt steadily rose to almost two trillion. The annual cost of servicing it is greater than our military and law-enforcement budgets combined.

This, may I add, in conditions of historically low interest rates. If they go up, which they’re bound to, the servicing cost may well double or triple. Perhaps we’ll have to eliminate military and law-enforcement expenditure altogether (things are certainly moving in that direction).

The deficit is set to grow by an extra £20.5 billion, and experience suggests that such forecasts may be safely doubled. Touchingly, Hammond has ring-fenced something like £4 billion to pay for hard Brexit, should it catastrophically come to that.

Leaving aside the obvious observation that hard Brexit is the only Brexit, one still wonders where to look in this budget for the somewhat higher cost of ‘soft’ Brexit that currently stands, but won’t remain, at £40 billion.

That rubric simply doesn’t appear. Appearing instead is a huge bung for the NHS, which highlights the problem of an utterly politicised economy.

The NHS is a disaster. This is so not because it’s badly managed, though God knows it is, but because a totally nationalised medicine is based on a corrupt egalitarian philosophy married to rampant statism. That’s why no other European country, and some of them are even more socialist than Britain, has followed the same model, relying instead on a public-private mix.

The NHS is already by far the biggest employer not just in Britain but in Europe. If we continue to finance it lavishly, in due course it’ll become the only employer: we’ll all dedicate our lives, tightly controlled by central government, to keeping one another healthy.

Or not, as the case may be: nationalised medicine isn’t only suicidally expensive but also homicidally inefficient. Our cancer survival rates, for example, are the lowest in Western Europe.

Yet no politician can as much as hint at something like this. If he did, his political longevity would equal the time it takes for the PM to demand his resignation and for him to tender it. The NHS is a sacred cow that can be milked for political gain but can’t be slaughtered (or even slighted).

Then there’s more money for house-building, and we used to think such things are best left to the market. It’s not the government’s job to build houses. Its job is to create an economic climate in which it would be profitable to build houses and affordable to buy them.

The spending spree of Hammond’s inept budget will achieve exactly the opposite. At least he honestly lowered growth forecasts and confidently promised that personal income will in effect freeze for a generation or two.

Not to worry, Phil. Personal indebtedness will take up the slack. We’re fast approaching the glittering standard of the US where over the last 20 years people have spent three times more than they’ve earned.

Cheap mortgages and car loans are on offer, along with credit cards on which British families already owe something like £20,000 on average. A little more push in that direction, and 2008 will look like a minor blip.

This is a budget of crisis: political, economic, moral and intellectual. Yet again a Tory government has chosen to Labour under a misapprehension.

1 thought on “Politics kills economics stone-dead”

  1. As the old saying goes: ‘If you can’t get out of that hole, stop digging!’ Alternatively: ‘Don’t do something, just stand there!’. A succession of governments has achieved bigger debts, bigger lies, more grasping (expenses) and more groping (opportunities). Public-private mixed enterprises are essentially a means of getting capital expenditure off the public ledger but the public still pays for it by way of being directly billed for services and through various ways of pumping subsidies and tax breaks to the private sector. And you can bet that the present government would grope towards it in such an incompetent way that we all pay more (and borrow more) in the end. The debt situation is a global malaise and a cascade of defaults will end up with us all resorting to barter or worse.

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