But there will come a point when the labour and capital have been fully mobilised and the technological frontier more or less reached. And the question is: then what?
Historically speaking, the answer is clear—growth slows to 2-3% per year. Because faster growth can\’t be achieved from more intensive use of inputs (thanks to diminishing returns) it has to come from innovation, that is, new and better uses of existing resources.
And there, the top down, planning-heavy method of growth is nearly hopeless. The American government has at times generated some nice bits of innovation—the internet is the classic example—but it has taken the distributed ecosystem of the market to figure out what to do with it. Top down leadership will stomp promising developments out of existence before they have time to flourish.
Once you\’re at the technological frontier (which western Europe, the US etc is) then you want less, not more planning from the centre.
As, once again, we find the Nordics doing. Yes, they\’ve high tax rates and high rates of redistribution. But government tells business what it may or may not do a great deal less than happens here.
Which, of course, is why they can still have that economic growth with the high tax rates and the high rates of redistribution.
All of which leads us to an amusing point for British lefties. You have to make a choice here.
1) High tax, high redistribution, yes, you can have this, but only if you\’re willing to give up the micromanagement of the economy. Fuck off and leave us all to a classically liberal society and yes, you can skim to moolah off the top for your pet projects.
2) Keep your fingers in the economic pies, continue to insist that the Man in Whitehall really does know best how to create income and wealth. In which case you need to have a low tax, low redistribution society. For there just won\’t be the moolah for you to cream off for your pet projects.
Over to you folks, which do you want?
And no, there isn\’t a third way to get what you claim to want.