The economic consequences of Mr Brown
For all his claims to have singlehandedly engineered British growth, Gordon Brown is the architect of policies that undermine his desire for a better society, writes Irwin Stelzer
So it is fair to say that the economic consequences of Gordon Brown include an enlarged state, both in absolute size and relative to the size of the UK economy, higher taxes and a deterioration in Britain’s financial condition. While increasing the size of the state, Brown has simultaneously overseen a redistribution of income from the high-productivity, wealth-creating middle classes to lower-productivity workers directly employed in the public sector, of whom there are now 600,000 more than when Brown moved into No. 11 (not counting consultants, contractors and others feeding on the taxpayer), and to the work-shy. We can’t be certain, but that just might explain the relative rise in UK unit labour costs, and Britain’s decline in the international competitiveness league tables.
What we do know with greater certainty is that as a consequence of a massive increase in spending, and more red ink than should have been spilled during a period of growth, Britain is less well positioned than it would otherwise be to cope with the impending slowdown. Instead of being in a position to finance Keynes-style stimulative spending increases, the government finds itself pledged to rein in the growth of spending. Nor are tax cuts available as an anti-slowdown tool: tax receipts will anyhow decline as the City bonuses that have been pouring so much into Treasury coffers shrivel, and the long-run consequences of Brown’s new attack on entrepreneurs and non-doms (foreigners resident in Britain but planning an eventual return to their home countries) unfolds. But on the plus side of Brown’s ledger is the fact that his policies have contributed to the strength of corporate and private balance sheets, perhaps sufficiently to enable them to weather the approaching storms.
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Philip Lundquist
January 18th, 2008 2:26pmthe author states that President Bush sought to reward greater risk-taking by business leaders. Another perspective is that he simply robbed the nation on behalf of already-wealthy friends, who have - in large part - thanked the American people by shipping their jobs overseas permanently. And the most coherent reasoning behind this madness does seem to be found within the conspiracy theorists' unveilings. Bush didn't spend all that time laying around in a casket at Yale Skull & Bones doing unprintable things without reason.
Mark
January 18th, 2008 5:56pmYou are absolutely right. My wife is a dentist, and she refuses to pay 40% income tax. Solution: she has reduced her workload and is aiming at staying just below the threshold. She is now working only 3 days a week. And very happy. If she works one more day per week, almost half of it would go to Brown!!! No way!!! I support her completely, 100%!!!
Don Whiteley
January 18th, 2008 10:52pm(This is a question for Mr. Stelzer to address. Can he explain in one of his columns why the pound sterling is so strong against the dollar, when the rate of government spending, the tax hikes and other disincentives to work are rising, and manufacturing in the UK has nearly vanished. I would be very interested if you could point me, and maybe some other readers in the right direction on this issue. )
Jon Livesey
January 19th, 2008 2:26amMr Stelzer's comments are well made. The frightening thing is that we have seen this movie before. Under Old Labour the votes that public sector jobs bought - and that is the real motive, create jobs for those who will then vote for whoever created the job - were in the nationalised industries like steel and coal. After Old Labour's economic policies collapsed, the steel industry was able to reduce its manpower by a half, so rampant was the over-manning. Today the useless mouths are carrying clipboards and telling us to eat our veggies, but the principle is the same. Back then, it took national bankruptcy to persuade the majority of voters to turn to other policies; we can only hope that it doesn't take such a disaster to persuade them this time. Lenin used to say "The worse the better" and though that may be the way to get the next Maggie elected, it seems a pity that we have to keep repeating the same failed experiment in social engineering over and over. After all, we already know how the movie ends.
Novus
January 21st, 2008 8:55pmMr Stelzer writes, "[...] Britain is less well positioned than it would otherwise be to cope with the impending slowdown. Instead of being in a position to finance Keynes-style stimulative spending increases, the government finds itself pledged to rein in the growth of spending." (p2) Since the accession of Mr Brown, a curious change has come over Mr Stelzer. It's hard to imagine the man who so encomiastically introduced the Routledge Classics edition of Hayek's Constitution of Liberty and who was credited with "Hayekian rigour" by the Shadow Chancellor falling for the chimera of "stimulus". This absurd notion is entertainingly demolished here: http://blog.mises.org/archives/007676.asp
Englander
January 25th, 2008 12:40pmThe one thing that most economic commentators seems to say about Brown is that he is economically competent, but I fail to see any justification for this claim. If by this they mean that Britain has grown economically over his period in power then you have to say is this due to Brown and if it is how much. During his period in office we have seen interest rates globally come down, but Britain still has higher interest rates than other countries which suggests all that has happened in Britain is that the rates have come down in line with other countries. If Brown had made a difference then interest rates would be lower than in other countries. Also how much of the growth has been funded through extra governnment spending? Anyone can grow an economy by borrowing and then spending. If Brown had made a difference economically then we would have grown and produced a surplus in the boom years - what do we have not one year (other than when following the Tories spending plans) of surplus under Brown. Competence to my mind has not been demonstrated. Turning now to the spending - has it increased productivity - no. Again is this competence, I think not.
Mark
January 26th, 2008 1:46pmReply to Don Whiteley. The City of London: Export of financial services; and attraction of international capital (with few questions asked, like a mega Switzerland...).