Despite Truss and Kwarteng’s overconfident claims, there is not a scintilla of evidence that tax cuts “trickle down” to impart economic dynamism, extra effort or enterprise. Growth instead comes from the application of inventiveness, via the efforts of thousands of firms and millions of people using the gifts the gods gave them, to make the world better – and from which profits flow. Economic growth, as I argue in one of a collection of 18 essays, The Change We Need, on Monday, is the product of complex economic and social organisations marshalling these impulses around a shared purpose. It is purposeful firms that bind their stakeholders into a common cause and drive growth.
Britain has too few. “Supply-side reforms” that focus on further deregulating an already very deregulated economy are beside the point – the focus should be on reforming how firms are owned, managed and governed. Only thus can other crucial ingredients of growth – increased public investment, boosted R&D and full access to our biggest market, the EU, via rejoining the customs union and single market – catch fire.
Willy’s wrong, of course. He’s arguing against the first and most important insistence of economics – incentives matter.