Heil Blair?

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Regular readers will know how vehemently we have attacked the UK Neuearbeitspartei’s expansion of the public realm, deriding the idea that modern information technology and the application of half-digested business school mantras could ever make a Command Economy work to deliver the right goods and services at the right price to the right people.

Partly, our skepticism arose because this would have been against all historical precedent — for, if the most brutal totalitarianism, as practiced by the likes of Stalin and Hitler, could not function in suppressing the laws of economics indefinitely, there would be no hope for the petty tyranny of RobespiBlaire and his apparatchiks.

More fundamentally, the master of our school, Ludwig von Mises, demonstrated all of two generations ago that what he called u2018economic calculation in the socialist commonwealth’ — i.e., the job of matching ends with means and earned demand with offered supply — could never — in principle — be discharged where there was no free market and its unhampered price system to co-ordinate things organically from within.

No matter how many Five Year Plans were promulgated, or how numerous the targets for 50%, 60%, or 70%, of something or other to be achieved by the end of this or that parliament, we have argued — and illustrated with a whole host of facts and figures along the way — Brown and Blair were always guaranteed to end up wasting resources and distorting economic activity to the point where less and less would be delivered by more and more at greater cost to us all.

So, we were not surprised to read that the employers’ federation, the CBI, has warned that, as the Guardian puts it, u2018the government is losing its grip over costs in the public sector, leaving business facing the threat of higher taxes to pay for promised improvements in education and health.’

Calculating that 7.5bn of taxpayers’ money has been wasted on u2018unexpectedly high inflation’ in the public sector (not unexpected by us, you will agree, Dear Reader).

u2018The Treasury cannot ignore an efficiency problem that threatens to undermine the government’s investment programme,’ said Digby Jones, the CBI’s director-general. u2018The private sector is busting a gut to be both productive and competitive. Surely taxpayers — businesses and individuals — are entitled to see the public sector do the same.’

Public sector jobs rose by 181,000 over the last year, but output per job fell by 0.5%, the CBI reckoned, whereas, in the private sector, output per job rose by 1.8% in services and 4% in manufacturing.

While not endorsing the exact details of any one statistical abstraction over another (especially not one involving the problematical macro-economics of productivity), we’d agree this one is credible insofar as it goes, though that in itself is not likely to go half far enough for a true understanding of the scale of the problem.

This is because if you measure the numerator in the division of output/input which gives us u2018productivity’ as the most cost-effective and sustainable delivery of what individuals members of the public actually want of their own accord, any and every centrally-mandated, public sector provision of u2018services’ by diktat is outside the scope of economics entirely and so its worth — and certainly the costs of the opportunities forgone to make room for it — cannot even begin to be calculated.

With that in mind, Digby Jones was only half right in declaring: u2018The government must urgently improve the efficiency of public spending or face the painful choice between scaling back investment or increasing taxes further.’

From all we have written, you will see that we cannot emphasize too strongly that this u2018efficiency’ concept is a complete blind alley — though, sadly, one into which the floundering Tories have allowed themselves to be lured, to the point that their sadly unimaginative Opposition manifesto only offers an alternative of management style, rather than a more fundamental one of conception.

In the words of that marvelous 19th century French champion of laissez-faire — Frdric Bastiat — u2018government is that process by which everyone tries to live at the expense of everyone else.

So, no, Digby! — the only real choice is between ever-increasing national penury or moving instead to scale back public spending (NOT u2018investment’, you dolt!) far enough so that the Tax-Eating classes — as that ardent Victorian Free Trader Richard Cobden memorably termed them — then impose sufficiently light a burden on the wealth-generating, Tax-Paying classes that we can all achieve a little genuine progress once again!

Unfortunately, such is the intellectual shallowness of this debate that a mentally-impaired lungfish would feel out of place and, come the day when the Outs get their chance once again to be the Ins, we can be assured that Messrs Howard and Letwin (or whoever it is who has survived the Conservatives’ inveterate internecine proclivities up to that point) may drive us at a different speed, along a different road, but will surely be heading for Perdition, just the same.

Sean Corrigan [send him mail] writes from London on the financial markets, and edits the daily Capital Letter and the Website Capital Insight. He is co-manager of the Bermuda-based Edelweiss Fund.

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