It's the supply side, Stupid!


There's much muttering, even mithering, about what can be done to aid the UK economy at present. Suggested answers range from giving even more of our money to the votestealers to spend as they wish (entirely bizarre, given that even Keynes would have said that raising taxes reduces aggregate demand) through to well, if we all become more mutual like, less selfish, abolish greed, then everything will be right, you'll see.

Err, yes, but in an echo of Bill Clinton's first Presidential election campaign I'd like to remind you all that it's all about the supply side, stupid.

No, supply side economics is not just about reducing marginal tax rates: that helps for sure, but privatising BT was supply side economics, so was flogging off the generating companies but keeping a very tight regulatory rein on the National Grid. Supply side means reforming, liberalising, the supply side of the economy.

As part of a long story (with which I won't bore you) about the extended family I've just come across the Criminal Records Bureau:

95% of Standard Disclosure completed within 2 weeks

For the job this family member desires she needs a CRB check. She has an employer lined up, willing to take her tomorrow except for that CRB check. It isn't a highly paid job, but making her wait while the bureaucracy does its thing is a pure waste. A destruction of economic value. She could be working, earning, producing a service, but must wait for the imprimatur that allows her to do so.

I'm told that there are some 11 million people who require such CRB checks: allow me to be extreme and argue that they each need them each year and must each wait for two weeks without working for them. That's actually £5 billion of economic activity we lose each year (min wage x £5.91x 37.5 hours x 2 weeks x 11 million people).

No, of course it's not that much. But it is illustrative of the waste which is there in the economy though regulation: I would argue over-regulation.

Anyone who is actually serious about trying to grow the economy would be concentrating on this supply side: it might be that we insist CRB checks are done in one day, so as to lose less economic activity. It might be that we decide that CRB checks aren't needed at all. But any rational analysis of our economy will throw up innumerable examples of precisely this sort of loss, of total waste, which is why we really ought to be concentrating upon supply side reforms.