The new leviathan: the big state is back

‘In this present crisis, government is not the solution to our problem; government is the problem,’ proclaimed Ronald Reagan in his inaugural speech as American president. Forty years on, the leaders of the G7 have reversed this mantra. In Cornwall last week they declared that the government, and more specifically its $12 trillion of economic support, had not only been the answer during the pandemic but would continue to be the answer during the recovery. They committed ‘to support our economies for as long as is necessary, shifting the focus of our support from crisis response to promoting growth into the future’.

It would have been quite possible for leaders to have drawn a very different conclusion: bloated government bureaucracies have failed. Lavishly-funded public health bodies patted themselves on the back about their pandemic readiness; the US and the UK were ranked the two best prepared countries in the world, but in the event, they had planned for the wrong pandemic. The UK state then borrowed billions to finance a test-and-trace system that failed to stop a second wave. Salvation came from vaccines produced by private pharmaceutical companies. So the G7 might well have decided that it was time for more society, and less state.

This was never going to be Joe Biden’s agenda. He’s a newly-elected Democrat with a Democratic-controlled Congress. No surprise he is proposing a $6 trillion budget that would take federal spending to its highest prolonged level in postwar American history. The surprise is that, in Boris Johnson, Britain has a Conservative who is almost as keen to spend as Biden. Just as Reagan and Thatcher before them, they share an economic view. But their view is that government spending is a crucial part of the revival of America and Britain’s economies.

The Prime Minister has gone out of his way not just to align himself with the Biden administration’s foreign policy agenda, but its domestic one too.