Friday, 9 July 2010

The Selfishness of Socialism

Last week, the opposition seized on selective Treasury figures suggesting the government's emergency budget would lead to 1.3 million job losses - ignoring the 2.5 million expected to be created. It is a sign of the shrill, partisan and selective politics we can expect in the months ahead. What surprises me most is the sheer denial - on opposition benches - not just of the debt legacy Gordon Brown left behind, but also the basic economics of how jobs are created in a market economy.

Of course, the state can spend taxpayer's money employing more and more people. Of course, public sector cuts will not automatically create new jobs in the private sector. But, strengthening economic competitiveness, increasing productivity and creating new jobs can only come from private sector growth. And that is suffering because of the high taxes and high debt that inevitably follows the reckless spending spree of the last decade. Consider the big picture.

According to OECD figures, the amount of national income consumed by the British state increased by 13% between 1999 and 2009 - as state spending rose from 38% to 51% of GDP. During that period, UK economic competitiveness dropped on the international rankings, our tax competitiveness plummeted, whilst productivity lags behind our major competitors. We have slowly but surely shifted from being a liberal economy - more akin to the US, Australia or Canada - to a continental-style welfare state. It has done real damage to our economy.

Research for the Institute for Economic Affairs this month shows the scale of that damage. Between 2000 and 2008, European governments that spent less than 42% of GDP created jobs growth of 27%. Governments spending 42% or more saw jobs growth of a paltry 6%.

So, cutting the deficit is not just about avoiding default on sovereign debt, or wider market confidence in Britain. It is also about re-calibrating an economy overloaded by a bloated state apparatus, which the private sector cannot continue to carry. Or, to put it another way - it is like putting an 8 stone ruck sack on Kelly Holmes, and expecting her to go out and win the 800 meters.

The reality is that the British economy is now in a poor position to compete with its traditional competitors, let alone the rising economic powers in an increasingly competitive global economy. If we do not reduce the size of the state, we will not fulfil our economic potential. If we fail to clean up the economic mess, made over the last 13 years, the future consequences will be grave. It would mean less jobs and less opportunity - not to mention less tax revenue - for the next generation. That is why the socialist attacks on the emergency budget are so selfish. Why should our children suffer for the economic mess made over the last 13 years?


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