The West's relentless fall in the proportion of the national income devoted to investment rather than consumption increasingly calls into question whether Western economies are striking a reasonable balance between the present and the future. Political deadlock in the US and policy paralysis in the EU make liberal democracy appear incapable of getting difficult decisions taken and implemented. For a long while, it looked as though countries poorer than those in the West were just catching up. Such a view is no longer tenable: countries such as Singapore are forging ahead, with living standards already significantly higher than those in much of the West.
The reason why all this matters so much is that the West is now in danger of losing out not only on economic growth, and all that goes with it in terms of living standards and political significance, but also because freedom may well be the next major casualty. Liberal democracy used to be able to claim not only that it was a better way of ordering human affairs than autocracy in personal terms but also that liberal institutions provided a more effective framework for economic advance than state-driven growth. Freedom generates economic success in conditions where the state exists to serve the individual and not the other way round. Contract law is better than the exercise of too much discretion. There should be a free press, the presumption of innocence until proved guilty, fair elections and changes of government. Most people in the West, especially in the Anglosphere, still cling to the view that freedom generates economic growth — but what happens if this is demonstrably no longer the case?
This is why taking a radical look at where our current economic policy framework is leading us is so vitally important. I believe that, with some major but entirely feasible changes of perception, it would be possible to get the West's economies to perform hugely better. I set out how to do this in a recent pamphlet, There Is An Alternative (Civitas). We need to recapture the components of GDP where productivity growth is highest, which is in light industry. We can do this by making investment, manufacturing and exporting hugely more profitable than they are at the moment, by having a far more competitive exchange rate. We need to lift our investment as a proportion of GDP from about 14 per cent, where it is now, to over 20 per cent. We must start making what the world wants to buy or we will be caught for ever in balance of payments crises.
We need to focus on having an exchange rate policy to make the UK competitive again. Without this, not only will we lose out economically but our cherished notions of freedom and liberal representative democracy will be under threat as well. There is a huge amount at stake.
The reason why all this matters so much is that the West is now in danger of losing out not only on economic growth, and all that goes with it in terms of living standards and political significance, but also because freedom may well be the next major casualty. Liberal democracy used to be able to claim not only that it was a better way of ordering human affairs than autocracy in personal terms but also that liberal institutions provided a more effective framework for economic advance than state-driven growth. Freedom generates economic success in conditions where the state exists to serve the individual and not the other way round. Contract law is better than the exercise of too much discretion. There should be a free press, the presumption of innocence until proved guilty, fair elections and changes of government. Most people in the West, especially in the Anglosphere, still cling to the view that freedom generates economic growth — but what happens if this is demonstrably no longer the case?
This is why taking a radical look at where our current economic policy framework is leading us is so vitally important. I believe that, with some major but entirely feasible changes of perception, it would be possible to get the West's economies to perform hugely better. I set out how to do this in a recent pamphlet, There Is An Alternative (Civitas). We need to recapture the components of GDP where productivity growth is highest, which is in light industry. We can do this by making investment, manufacturing and exporting hugely more profitable than they are at the moment, by having a far more competitive exchange rate. We need to lift our investment as a proportion of GDP from about 14 per cent, where it is now, to over 20 per cent. We must start making what the world wants to buy or we will be caught for ever in balance of payments crises.
We need to focus on having an exchange rate policy to make the UK competitive again. Without this, not only will we lose out economically but our cherished notions of freedom and liberal representative democracy will be under threat as well. There is a huge amount at stake.
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