Observer Leader

Umm, gents?

Among Britain\’s three main political parties, there is near unanimity about how the economy should be run: markets should generally be free so that individuals have the right incentives to generate wealth. If the state intervenes, its touch should be light.

There is plenty of argument in Parliament, but little debate of ideas. That is because, in macroeconomic terms, the prevailing ideology has served Britain well.

Those are, of course, microeconomic matters, not macro. And the basic points are all Thatcher\’s. As Owen Barder put it, in one of his more perspicacious moments:

Thatcher and Lawson should be commended for persuading the chattering classes that increasing trend economic growth is primarily challenge for microeconomic policy (ie improving the supply side), whereas controlling inflation is primarily a challenge for macroeconomic policy. This seems obvious today but it was a total reversal of the then prevailing wisdom which saw macroeconomic policy targeting growth (demand management) and microeconomic policy controlling inflation (price controls, wage freezes, hire purchase controls etc).

1 thought on “Observer Leader”

  1. Just for starters, the Observer editorial is seriously complacent.

    It reassuringly assumes, for instance, that the central banks of America, Britain and the Eurozone will successfully avert further major failures of financial institutions with the associated threat of contagion as well as a prolonged recession with rising prices (stagflation). But what will follow as and when the house-price bubbles in America and Britain deflate? If our housing markets are functioning well, why all the pressures for more “affordable” housing in Britain? If we have virtually full employment then how come we have 2.6 millions receiving incapacity benefits and why is the government intent on cutting that number back?

    The editorial also lightly skips over unresolved issues in Britain over the balance between public and private ownership in the supply-side of schooling and healthcare despite continuing (and sensible) public concerns about the quality of both.

    Consider this:

    “In the Netherlands a scheme ensuring freedom of parental choice in education was enshrined in the Constitution of 1917. Altogether about 70 per cent of children attend independent schools, of which the majority are church schools. It is relatively easy to set up new schools – only 50 parents are needed in towns of fewer than 25,000 people but 125 in towns of over 100,000. Hence 65 per cent of schools in the Netherlands are private.”

    In Britain, some 20 to 30 thousand school pupils a year are leaving education with no qualifications and we have one of the highest drop-out rates at 16 from education and training among OECD countries.

    As for healthcare:

    “Britain’s health system is among the worst in Europe, according to a survey. The poll of all EU member states plus Switzerland and Norway ranks Britain 17th out of 29 countries for patient satisfaction. Its rating was dragged down by waiting lists, MRSA infection rates, access to cancer drugs and dentists as well as cancer survival rates.”

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