The way out is significant economic growth
We’re told that the national debt is about to murder the economy in its bed:
Labour risks being forced to seek emergency help from the International Monetary Fund (IMF) as Britain lurches toward a debt crisis, leading economists have warned.
In a warning shot to Labour leadership hopeful Andy Burnham, the former IMF chief economist Ken Rogoff said a major UK debt crisis before the end of the decade was now more likely than not.
“Britain is bust.” Those were not the words of a politician or a scaremongering economist.
They were uttered in 2012 by Sir Robert Chote, then head of the Office for Budget Responsibility (OBR).
He warned that unless the government acted by either spending less or taxing more, the national debt risked spiralling out of control.
We agree, because of course we do, with Adam Smith that there’s a lot of ruin in a nation. Given that taxation is already at historical highs as a level of everything more of that’s not going to work. The idea that there will ever be any significant cuts in spending is, aha, aha, one of those solutions not to be found in the possible space of political solutions. Sure, we’d be delighted to point to all the things government shouldn’t be doing to bring the bill down but we do agree that a Parliament that would do this is unlikely.
Which leaves only the one other possible solution - change the denominator. Debt at 100/100 is a different thing from debt at 100/200. So, grow the economy.
Near all of the other claimed problems in the British economy would also be solved by substantial economic growth. 4 or 5% real GDP growth for a decade would solve pretty much everything in fact. Given that this is the only politically viable - we think - solution that’s the one that will have to be applied.
Fortunately, we also know how to engender growth. It’s a natural byproduct of not stopping people from trying things out. Humans are inquisitive little shaved apes, we do try things out. Trying out lots of things then doing more of those that work, fewer of those that do not, is the very definition of economic growth. So that’s what should be done. Stop stopping people doing new things.
This is, again, stopping government from doing much of what it does. But we do tend to think it’s going to be easier to stop the bureaucracy doing anything than it is to stop the shrieks of those who would not be spent upon if the money tap were turned off. So, kill the regulatory state rather than the redistributive one. Not, particularly, because that’s the right answer but because it’s the possible one.
Just get all Cowperthwaite, Hong Kong Stylee, on the regulatory state and solve Britain’s economic problems. Works for us even if the Lanyard Classes might not like it very much.
Tim Worstall