NO: the end does NOT justify the means
ECONOMIC PERSPECTIVES 152 - July 2024
Why have right-wing political movements in many European countries steadily gained electoral popularity, while the UK has just witnessed the virtual annihilation of the Conservative Party? And the election of a Labour government by a massive margin?
On the Continent the younger generation has been the focus of a radical right-wing upsurge, chiefly because growing numbers, under the banner of ‘take back control’, now recognise that membership of the EU has brought economic stagnation, political impotence and social turbulence. The present demand to ‘take back control’ is the polar antithesis of Mario Draghi’s ’ever closer union’ obsession - while the eurozone’s failed policies and deepening swathes of regulation have transformed it into a low-growth zone - while its failed border-control policies are now a rabble-rousing topic. Mass protests have had no positive outcomes, and it’s no surprise that voters in European local and national elections are demonstrating their frustration in the ballot-boxes.
UK’s economic failure
In the UK a seething undercurrent of frustration and resentment with a supposedly caring administration has now boiled over into complete rejection of shallow promises: NHS reform, levelling-up, migration and border control, functionality of public services, deregulating planning laws, housing adequacy and infrastructure improvement. All the lies we have been fed for more than a dozen years of Conservatives with a Socialist script, have been relegated to the Ministry of Sick Jokes.
At root this failure is economic. The state coffers have been exhausted and there is no credible shred of taxable capacity left in an economy hamstrung by eye-watering levels of public debt and labyrinthine regulatory paralysis.
Money-supply tampering in USA
Nor is there anything to be learned from the USA, where some statistical sources report an economic revival. The reality is that its ‘Monetary Base’ now exceeds $5.7 trillion and, as my esteemed colleague Prof. Pat Barron puts it, the Monetary Base is the core of the money supply, upon which banks ‘pyramid’ their current accounts, short-term deposit and savings accounts, and other accessible funds held in the banking system - the total of which has mushroomed from $15.4 trillion in January 2020 to $28.3 trillion in the first quarter of this year. Thus America’s current boom is a baseless mirage of money-printing by the Fed and credit expansion via the fractional reserve antics of the banking sector. The interest alone on the resulting federal budget deficit (now more than $3 trillion) will be funded by money printed out of thin air – where else?
It's happening again. Some UK lenders, such as the digital Starling Bank. are being forced to create massive provisions for ‘non-performing’ loans and to repay Taxpayer-funded covid-era ‘bounce-back’ loans. Right now the only things bouncing are the cheques.
Redistribution and equality
The new Labour administration is floating on a wish-list of collectivist notions such as ‘equality’ - but its method is that magical process called ‘redistribution’. They will tax ‘wealth’ by raising the rate of theft taxes like capital gains, while increasing benefits and give-aways - guaranteeing that millions of idlers will not turn up for work. As ever, the lure of ‘something-for-nothing’ is assuredly society’s most reliable demolition wrecking-ball.
Any ‘business-friendly’, ‘pro-growth’ government would, by definition, favour free markets and would not need to ‘redistribute’. A free market guarantees an equitable outcome – but not an equal one. Natural economic law does not meet Socialist objectives because, to the Socialist, ‘equality’ means ‘equality of outcome’ – a concept completely alien to the real world of individuals with distinct characteristics and unique features that create the inequalities the collectivist is hell-bent on eliminating.
Pace Thomas Jefferson - but all men are not created equal. Thank heavens (or, if you prefer, Mother Nature) for our differences, for our uniqueness as individuals able to excel in different ways and to different degrees. In this regard we reflect the economic principle of natural advantage that favours some countries over others. Rich rain forests, arid deserts, lakes, rivers, seasons, minerals – these myriad features constitute the very foundation of national identities in terms of what we do, how we create wealth and how we feed our populations. Perish the obsession with equality!
What they say and what they do
Despite the warm words and wishful assurances emanating from the Starmer, Rayner, Reeves triumvirate, I personally don’t believe that leopards change their spots. Am I a cynic? Or a realist? I base my own views on the evidence of my own experiences. I vividly recall the way in which my Communist parents and their circle of smug bien pensants fondly referred to that tyrant whose rule oversaw the destruction of millions of his own people, as ‘Uncle Joe’! and how, when Nikita Khrushchev disclosed the extent of Stalin’s crimes to an incredulous 20th Congress of the Soviet Communist Party in February 1956, the Hampstead Communist Clique simply shook their heads in disbelief. Their propensity for blinding themselves to evil was suitably matched by their capacity for self-delusion.
Role-models and their playbooks
Has very much changed? Have we already forgotten Mr Corbyn? Mr Benn? ‘Red Ken’ Livingstone? And all the others who would again try to revive the failed ideas that never die? The leadership of the reconstituted Labour Party swears that ‘this time it’s different’. They’ve learned the script, but I don’t believe it. They say they will not raise new taxes, but they hardly need to: millions of workers will be pulled into the 40pc rate of income tax, and another half-million will be paying 45pc – all because of the regime of ‘fiscal drag’ institutionalised by successive Tory chancellors, to their eternal shame and well-deserved annihilation. In this stricken country 54pc of households already receive more in benefits (including the imputed value of health and education) than they pay in taxes.
After 14 years of Conservatives with a Socialist script, here’s the sad truth: neither party recognises, though it confronts them like a colossus every day, is that when people are allowed to keep more of what they earn, they work more. When businesses and individuals are confronted by higher taxes the first casualty is risk-taking and less wealth is generated.
We should heed the words of Sir Martin Jacomb, the wise City trader who died earlier this month. He decried the ease with which market participants are now able to ‘’make money out of money and cash out while the going is good, thereby eroding the capitalist model of long-term productive investment that originates with savings’.
An “economy”, after all, is a mental construct that doesn’t exist apart from its millions of individual components. Yes, People.
ECONOMIC PERSPECTIVES 152 – JULY 2024