An outsider viewing the Olympic opening ceremony could easily have gained the impression that Britain was in the midst of an unprecedented boom. A week on Sunday we are promised an equally spectacular closing ceremony. For the moment, the cost of staging the Olympics — £9.3 billion for the games, including £80 million for the opening and closing ceremonies alone — has been laid aside in a rush of public enthusiasm. The biggest source of discontent this week has been the rows of empty seats reserved for the IOC’s politburo and their associates.
After any big party, of course, there is the risk of a big hangover. The Olympics will be no exception. Come September, the news agenda will return to the underlying story of 2012: the painfully weak performance of the British economy. The US economy has now surpassed the size it was in 2007 and is growing. The UK economy is 4 per cent smaller than it was in that year, and notwithstanding the optimism of Philip Delves Broughton on page 22, it looks certain to keep shrinking. Many will seek to blame the poor performance of the British economy on the government’s austerity programme and demand the economic equivalent of performance-enhancing drugs: more government spending. But it would be a dangerous folly.
A Keynesian pump-priming operation is one thing if — as Keynes himself advocated — a government runs a surplus during the good times to provide the cash for spending during the bad. It is quite another thing when a government has run up a huge deficit during the good times. To carry on spending in such circumstances promises a Greek-style ending, with investors losing all faith in the government’s ability to repay its debts. In its dying months in office, the last Labour government came close to adopting a doctrine that all state spending is good — waste, big salaries and pensions included — because it was all pumping money into the economy. But economies do not grow just because governments pump money around them; they grow when productivity is increasing.
The public sector depresses the economy because its record in productivity is so poor. The NHS, which was lionised during the Olympic opening ceremony, is a case in point, with productivity sliding by 0.4 per cent per year over the past decade, and by 1.4 per cent in hospitals. If the whole economy behaved in this way we would be stuck in perpetual recession. Governments have a terrible record, too, in targeting investment, having a tendency to throw money at vanity projects designed to boost morale rather than duller investments that actually promote growth.
Anyone who thinks public investment always increases growth should pay a visit to the recently built airport at Ciudad Real in Spain, which lies abandoned after its closure in April. The Olympics have been a bigger success than that, but no one should hold up much hope of a boost to the economy. One of the stories of this week has been the quietness of streets in central London; the tourists who would normally throng them at this time of year have stayed away. This, and a likely short-term fall in output as workers in the city stay away from their desks, must be set against the boost to fireworks factories.
The secret to the UK’s recovery does not lie with the Olympics or with other prestige projects but with boring things such as regulatory reform, tax cuts for business and the confidence which is provided by fiscal and monetary stability. Once the Olympic flame has been carried away, these are the issues which will need to be addressed.
Gore Vidal, who died on Tuesday aged 86, really was a great American. He is being remembered this week for his gay fiction and his tremendous waspishness, and perhaps rightly so. He was a master of ‘turning the other fist’, as he put it. Newspapers have been reprinting many of his whipsmart aphorisms. ‘It is not enough to succeed,’ he said. ‘Others must fail.’
But Vidal was much more than a high-camp controversialist. He was a brave defender of freedom; and an independent thinker in the American tradition of Mark Twain and H.L. Mencken. He despised the corruption of Republican ideals — the drift towards imperialism in US foreign policy, the cartelisation of Washington DC, the rise of political correctness — and never shrank from taking on the powerful and the famous. He was a conservative, too, in the sense that he cherished the past, believed in honour, and challenged what he called ‘the ancient American sense that whatever is wrong with human society can be put right by human action’.
In his last years, Vidal’s brilliance often deserted him. He was still cruelly wheeled in front of cameras because — though the wit had largely gone — he could be relied upon to foam madly at his interviewer, and that made good television.
Now that the media are showering him in tributes, Vidal would surely have found their hypocrisy repulsive. ‘I’m not sentimental about anything,’ he said. ‘Life flows by, and you flow with it or you don’t. Move on and move out.’