“The problem with socialism is that you eventually run out of other people’s money.”
Margaret Thatcher
“We don't have a trillion-dollar debt because we haven't taxed enough; we have a trillion-dollar debt because we spend too much.”
Ronald Reagan
As someone who believes passionately in individual freedom and a more egalitarian form of capitalism, I am significantly challenged by last week’s Autumn Statement. Of course, fiscal responsibility must be the top priority: but how can a Conservative government justify consolidating state intervention by failing to set out a proper strategy for getting public spending under control, and by concentrating only on taxing everything that moves (including electric cars)?
Five weeks ago we set out — and I submitted to HM Treasury at the time — some proposals (Health and the Economy – 17/10) not only for a significant reduction in the crippling cost of the health service, but also for introducing a degree of inter-generational fairness, so that NHS use by wealthy old people is not paid for by taxes on the working young. The Chancellor has clearly passed on this opportunity by asking former Labour health secretary Patricia Hewitt to ‘advise the NHS on efficiency’: hardly the basis for starting to unwind seventy years of socialist welfare dysfunctionality. It’s interesting to note, however, that in Scotland the NHS has picked up the proposal, as the BBC reported this morning (21/10).
So, in the absence of such strategic rebalancing, decisions have been taken to focus on swingeing increases in personal taxation and personal investment on ordinary working people.
The heart of the UK’s problem is excess intermediation, which has gradually infected all economic and political activity in the United Kingdom. With national debt now so huge, it's very difficult to extract ourselves: it seems that Margaret Thatcher’s prophetic words are becoming a reality.
However, this Conservative government could at least make an attempt.
Economics is unfortunately doing very little to set out alternative approaches for Government to consider. The profession has also become addicted to heavyweight intermediation by the public sector, and is steered predominantly by aggregates rather than looking at relative standard of living across both socio-economic groups and age cohorts.
There is also a singular lack of interest in exploring long-term changes such as the impact of technology on the way we live: there is an assumption that everything can be based on meaningful comparisons with the past. As a result, our chronic levels of excess debt were overlooked throughout the long period of rock-bottom interest rates, and no attempt has been made to develop a meaningful replacement for Gross Domestic Product (GDP) in order to measure the standard of living (see our commentary on 20 April ’20).
There is also the same rigid differential between the owners of capital and labour that has existed since the Industrial Revolution. As a result, HM Treasury despairs over the statistics of ‘our missing workforce’ and plans to require work coaching for over 600,000 people. Perhaps they will discover that a large proportion have discovered other styles of life in which Universal Credit is sufficient for covering their basic needs. Perhaps they should have considered further our Thought for the Week on (26th September: ‘Workforce Capacity is the Missing Link’).
However, you can only integrate capital and labour if you move away from the assumption that capital should belong exclusively to the rich and powerful. The Autumn Statement may have appeared to be a burden on the latter with the lowering of the 45% tax threshold, but no serious moves towards rebalancing were evident, as the continued tax privileges of non-dom status made clear.
What this tells us is that capital rebalancing is an international, not a domestic, issue. HM Treasury has real (and genuine) concerns that tough action in this area will trigger an exodus of high net-worth business leaders and wealth generators. This is why we included economic justice in our Thought for last week, ‘Empowering the United Nations’.
No wonder we appear to be stuck in a political and economic rut.
In order to get out of it, we need economists who can see the wood for the trees: and, in particular, we need to understand how technology is changing everything. Tech is not just another business sector — it is driving everything we do: how we communicate, how and what we buy and sell, how much travelling we do, whether labour is needed in addition to artificial intelligence, the role of competition and how technical obsolescence affects the balance between productivity and innovation.
But, above all, we need to get capital ownership of technology moving out into the possession of its massive customer base: and the currency of data storage and harvesting presents us with a real opportunity (10th August ’20) in this regard. The challenge is that this transition has to be international.
Egalitarian capitalism would enable people from all walks of life to make the journey from working for money towards the point where money works for them, so that we no longer see capital and labour as protagonists across society; but where both are available to all. It is a vision that these opportunities should be for individuals, not for the public sector.
This is a long way from the road that Hunt and Sunak are currently walking, stuck in their rut of Conservative socialism. If they continue down this road to the next election, it is difficult to see how they will regain popular support — those people who are satisfied with socialism will seek to be governed by the party which understands it best.
Over the next two years, there will be intensive focus on developing Party manifestos. The challenge for the Conservatives (9th May ’22) is whether they can mature from a simplistic balancing of right and left factions within their party to this understanding: that at the heart of their message needs to be individual freedom within an egalitarian society.
They are a long way from this at present.
Gavin Oldham OBE
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