Statist way isn’t the way out

Few things give me as much pleasure as watching socialists squirm. This morning’s Sky interview with Shadow Chancellor Anneliese Dodds didn’t disappoint.

Our next PM? Many commentators think so, on a mysterious basis

Asked to comment on the measures announced by Chancellor Sunak, the poor woman found herself between a rock and a hard place.

The rock was the keenly felt necessity to criticise the Tories and guarantee that Labour would do much better. The hard place was the certainty that Labour would do pretty much the same things.

The presenter Kay Burley tried to help Dodds out as best she could. Referring to the Chancellor’s raising the ceiling of stamp duty on house sales from £300,000 to £500,000, Burley tried to throw her interviewee a lifeline: “But that will benefit the rich, won’t it?”

But Dodds sighed wistfully and swept the line away. While appreciating that a Sky presenter was even more left-wing than she herself (which is going some), she didn’t want to appear more stupid than strictly necessary.

She knows, as does everybody else this side of Sky TV and BBC studios, that the asset inflation has been so horrendous that the proposed ceiling rise would benefit not just the rich, but most house owners in any other than depressed areas.

For example, the average terraced house in Fulham, where I live, costs £1.3 million, which is 602 per cent higher than in 1995. People who could afford such a house 25 years ago didn’t have to be rich, and those who bought it 40 years ago might have lived on a modest income.

All Miss Dodds could manage was a suggestion that, while borrowing as much as Mr Sunak’s proposed £350 billion a year, Labour would ‘target’ its spending differently. That word represents the Labour consensus established in advance, and the poor woman was endlessly repeating the word ‘target’ in response to every question, in and out of context.

Psychiatrists refer to such compulsive repetitiveness as ‘perseveration’, and I wouldn’t be surprised if she’ll be telling her husband to improve his targeting tonight.

The trouble with Sunak’s stimulus package is that it’ll stimulate nothing but rapacious growth of the state. That being the ultimate goal of all modern governments, either Labour Lite (aka Tory) or Labour Full Strength (aka Labour), the two parties agree on the principle, even as they may quibble about the details.

Doubtless some extra borrowing is required at a time of crisis. Yet borrowing in one year more than the country’s annual GDP, however the money is targeted, will create more problems than it solves.

Mercifully, the prematurely popular Chancellor didn’t mention the giant infrastructure projects so beloved of Boris Johnson. After a brief initial spike, this panic-inspired trick has backfired everywhere it has been tried, most emphatically in Roosevelt’s America and Hitler’s Germany. But for the war, both economies would have lain in ruins (which might have been one of the reasons for the war).

But what Sunak did mention amounts to the state taking over the economy. For, and I know this sounds terribly old-fashioned, the borrowed billions will eventually have to be repaid. When reminded of this unfortunate necessity, the government spouts the mantra about the interest rates being so low that borrowing costs next to nothing.

That, however, doesn’t obviate the need to pay back the principal. Nor does it invalidate the observation that interest rates fluctuate. It doesn’t take a cosmic flight of imagination to realise that this kind of traffic is two-way: if interest rates can plummet, they can also soar.

At the present level of borrowing, even a slight increase in lending rates, say two or three per cent, would bankrupt the country instantly. But even barring such a calamity, how is the Chancellor planning to repay the principal?

The answer is, by using taxation to squeeze every drop out of the economy and bringing it even more under state control. Public spending will have to come down in parallel, but that’s where that ‘targeting’ comes in.

The NHS is sacrosanct. So is social spending, other than the ad hoc coronavirus relief. So are the ruinous and foolhardy green policies.  Where then will the government pinch?

The answer is, mostly in defence and law enforcement. In particular, the already risible defence budget will be cut down to nothing. And even that won’t solve the problem – a predominantly statist economy won’t come out of the crisis for generations, if ever.

The very fact that our socialist parties of both strengths are in agreement shows how intellectually and morally corrupt the proposed measures are. The Chancellor has taken the coward’s way out by refusing to make unpopular decisions that alone can pull us out of the morass.

Such decisions would all be based on freeing up the economy, and they’d lead to initial pain followed by growing prosperity. However, the initial pain would scupper the next election, with the likes of Dodds at last being able to zero in on a clearly visible bull’s eye. And modern governments are ever ready to let the country die so that they themselves can live.

Rather than just selling to the public the snake oil of lower stamp duty (for just a short spell, mind you) and £10 eating-out vouchers, the Chancellor should talk about turning Britain into a tax haven and an ideal country for investment, both foreign and domestic.

Red tape, including the ideological and unscientific drive to eliminate carbon emissions, ought to be rolled up and thrown away; the corporate tax rate, currently at 19 per cent, should be halved or, for start-ups, suspended for several years. Manufacturing companies should be given every conceivable incentive to set up and thrive in Britain.

I shan’t try to work out every specific – we still have enough resident expertise in the country to do that better than I could. Yet history shows that only that kind of approach can stop the doldrums – but not in a country as thoroughly corrupted by socialism as Britain is.

This was the strategy adopted by West Germany in the aftermath of the war, which produced an ‘economic miracle’ by the mid-fifties. Britain took the statist road, and the crisis continued until the 1980s.

Those old enough to remember the 1970s know what to expect. I just hope they’ll share that knowledge with the youngsters.

5 thoughts on “Statist way isn’t the way out”

  1. “Labour Lite (aka Tory) or Labour Full Strength (aka Labour), ”

    Tweedle-dee, tweedle-dum. George Wallace. I think George was RIGHT.

  2. I asked someone a lot more knowledgeable than I am about all this spending and borrowing. He said that there was really “nothing to worry about” because after WW2 we had overall debt of 250% of GDP and we now “only have” 101%. He then went on to explain what I think was Modern Monetary Theory and QE. I got the impression that MMT is based on an assumption that money isn’t what it used to be because it’s all just numbers on a spreadsheet and that you can always magic up some more of it whenever you like. Also known as the Magic Money Tree that Labour has found in someone’s back garden.
    More seriously, I think this government thinks it can pay down the debt (at low interest rates) if the spending it is planning on infrastructure leads to growth and so more taxes being paid. But as with the FDR New Deal this won’t work if government sets about being overly prescriptive in a socialist statist sort of way. It will only work if it gets out of the way as much as possible and allows the market to do its thing. If it doesn’t there’ll be no growth, just inflation which will mean higher interest rates and the whole thing will just come tumbling down.
    I’m not hugely hopeful.

    1. No sensible person is hopeful. Does your knowledgeable person realise that we only finished paying off the wartime debt in 2006? That it already cost us more than our defence budget to service even the pre-corona debt? The problem with huge public investment in infrastructure is that it’s circuitous. If the government pays for them out of tax revenues in the hope of generating tax revenues, then no real growth occurs. If the government pay for them out of borrowed money, then it’ll have to service the debt out of the taxes the projects generate. And the very fact that the government engages in the economy on such a scale means it’s getting in the way, not out of it. As to the low interest rates, what if they go up? By, say, 10 per cent, which they are eminently capable of doing? Before long half of our GDP will go to the debt collectors. Would your friend bet his house that nothing like this can ever happen?

      1. I’m very much with you on this. The government will find it impossible to get out of the way. And interest rates will only have to get a bit higher before we have carnage.
        I think I should have called him an acquaintance rather than a friend. Most of my friends may be a lot less “knowledgeable” but far more clued up.
        I remain not hugely hopeful.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.