So, as we know, the great shout from the left is that if we just spend more money through hte government then everything will be peachy once again. And then along comes a lefty econopmist to prove that this won’t actually work. Not that he says so out loud you understand, but it is the essence of what he’s saying:
All of this means that, without addressing the underlying decay in productive capabilities, Britain cannot fix its ailing economy.
And I’m sorry, but that does, really, screw the idea of fiscal stimulus. For that only works if there is unused capacity. By getting the government spending more money we then get that unused capacity back into use and everything is indeed peachy. But if there isn’t any unused capacity then things don’t become lovely: the extra spending feeds straight through into inflation instead.
This is just the old point that you can’t have it both ways. Either we’ve capacity which stimulus would inspiure the use of or we don’t. If we don’t, as is being asserted here, then you can’t go around arguing for stimulus. Because your very point being made means that stimulus won’t work.
And as to this:
To deal with this problem, it urgently needs to develop a long-term productive strategy through a broad-based public consultation involving not just the government and private sector firms, but trade unions, educational institutions and research institutes.
The strategy should first carefully identify the industries, and the underlying technologies, that will be the future motor of the economy and then provide them with the necessary support. This could be in the form of subsidies for R&D, loan guarantees for small firms, or preferences in government procurement, and should be targeted at “strategic” industries, although they could also be in the form of policies that are apparently not industry-specific.
We come up against two problems here. The first is the theory one. Government just cannot collect the information about what those wondrous new sectors are going to be, cannot identify who will be good at them and will not be able to direct the cash to those that are. There’s just no way it can: this is the socialist calculation problem writ small. BTW, preferences in government procurement is illegal under EU law.
The second problem is, well, look at the people we’ve actually got who will be making those decisions. Yeo, Deben and Caroline Lucas (Jonny Porritt n’all) will make up a vile cabal that will identify windmills as just such a strategic industry. Melchett will insist upon organic farming (along with many of the former). Polly will be screaming that actually, insisting that all the people changing nappies at day care must have PhDs will do the trick. And so on and on.
Absolutely none of the people who will be making such decisions have any idea about business at all. They’ve no more clue about it than a pig does about why farts smell. They’re not just ignorant on the subject, they’re congenitally incapable of understanding it.
Even if planning the economy could concievably work it wouldn’t simply because of the fuckwits who would be doing the planning.
And that’s without even thinking about the orgy of rent seeking that would take place. Look at the one part of our current economy that the government really does currently plan. Energy. And you want the idiots responsible for that to be in charge of the whole shebang?