The politics of growth

One strange side-effect of the car crash that was the Liberal Democrat conference is that no one dares say the word “cuts” anymore. Since Nick Clegg promised “savage cuts” – alarming his base in the process – we’re back to the normal euphemism of “efficiencies”. This, like so much in life, will have Gordon Brown hopping mad. He didn’t want to say “cuts” in the first place, and the whole farrago will prove (in his head) that he should stop taking advice from people outside his coterie.  

The next stage in the debate is to focus on growth. As James revealed in his political column for the current edition of the magazine, the Tory plan to do this is an aggressive cut in corporation tax. The politics of growth should divide parties like the politics of cuts. Osborne’s corporation tax cut is a welcome dash of supply-side sanity in this debate – Cameron for a while looked like he wanted to pick national champions, Chirac style, and personally incubate a green industry. This resulted in crazy ideas like an “environmental stock market,” as if this were some great money-making idea that the City was too stupid to work out for itself.

See, politicians cannot incubate industries. And they are also clueless when it comes to forecasting economic trajectories. Even captains of industry struggle to do this. I cite here Carrick’s First Law of Economics, which is “you can’t predict the future – there are too many variables” (named after a friend of mine, who said this after he dropped out of uni in dismay at the futility of his economics course). Thatcher and Lawson knew this, which is why they cut tax and let the economy do what it will.

This sense of humility – that governments cannot know what economies will do next – is (or should be) at the centre of a conservative economic policy. That is why Osborne’s plan for coproration tax cuts is precisely the right course. We do not know what companies will emerge out of the recession, or even in which industries. But we do know this: the most constructive thing that government can do is get out of the way.