Why Britain's stuffed


Scott Sumner sums it up:

British voters have no stomach for the savage inequalities of Swedish-style laissez-faire.

And he's right, the body politic simply will not put up with some of the major features of the Swedish State. No inheritance tax, low capital and corporate taxation, for profit voucher financed schools, well, read more of his list of what Sweden does and we do not, cannot.

And it's this paper that shows us why this means we're stuffed:

An increase in government size by 10 percentage points is associated with a 0.5 to 1 percent lower annual growth rate.

Yes, it is possible to have all those lovely accoutrements of an icy social democracy. But there is a price to be paid for it, reduced economic growth. The other name for which is making our children poorer than they could be.

However, there is a way out of this, a get out of jail free card:

countries with large governments compensate for high taxes and spending by implementing market-friendly policies in other areas.

Which brings us back to the way in which Britain simply will not put up with the sorts of market friendly policies that Sweden does routinely.

This is backing up a long held (and often said) contention of mine. Yes, it is possible to have a high tax, high government and high redistribution society. But in order to avoid stagnation while doing so you've got to have a classically liberal, almost laissez faire, economy humming along underneath.

You cannot have what the British left seem to call for, both a highly regulated economy and a highly redistributive one. You can, of course, have the low redistribution, lightly regulated one and that's of course what I would prefer (and I assume no one at all would like the heavily regulated and low redistribution version). Which means that yes, we need to deregulate the economy, whichever of the two, high or low redistribution, versions of classical liberalism you would prefer.

For the children, of course.