Death or Glory?

I am no politician, so forgive my innocence. Since when were growth and austerity mutually exclusive?

Austerity is not merely reduced consumption – austerity is reduced waste. Growth is not merely increased production – growth is increased productivity.

Just as terminal starvation is not a rational response to obesity, terminal recession is not a rational response to economic recklessness. Growth and austerity go hand-in-hand in any common-sense strategy for returning from the brink of economic catastrophe.

The rational response to obesity comprises (a) altered food intake and (b) altered effort. Both are best altered in volume and nature, to reduce waste (unwanted calories) and increase productivity (beneficial effects of exercise).

By the same token, the rational response to economic recklessness ought to comprise (a) altered consumption and (b) altered production. This would reduce waste (unwanted inflation) and increase productivity (rate and quality of output), as long as both are altered sensibly in volume and nature.

Neither Government nor Opposition are right on this. Austerity doesn’t need to mean everyone reduced to penury, and growth doesn’t need to mean Government spending as if it would never have to pay for it.

Real growth comes from smart behaviour.

Spending needs to be reduced and redirected. Spend less on universal benefits, and direct what is spent toward only the needy. Spend less on big-ticket national transport projects, and direct what is spent toward high-return local transport improvements.

At the same time, output needs to be increased and more cleverly generated. Everything that a doctor or a teacher or a politician does that can be done by a computer, should be done by a computer. Everything the private sector runs that produces a negative impact on the public good (such as railways), should be returned to the public sector.

After all, the role of public money is to subsidise the private sector only where there is a market failure. 

The pattern of our spending goes up and down over time. It changes with age, with lifestyle, with opportunity. This variation is normal, and applies just as much to countries as to individuals. The key to recovery – and to avoiding boom-and-bust cycles in the first place – lies in spotting those variations which are structurally unusual, and moving swiftly to get us back on track. We rely upon our politicians for that - and they let us down.

Sir Peter Kemp once said “Policy is judged by the process, not the outcome”. It's time that sentiment was put aside, and the outcome took centre stage.

That which does not kill me makes me stronger

If one bans something, then it must stop. If it does not, for example because some people want it to keep happening, then costs for the provider of the banned substance or activity will rise to include the cost of avoiding the ban. The provider wants to maintain margins, so the price to the consumer will rise as the cost rises.

That isn’t all. Being a provider of something which is banned carries risk. To reflect the additional risk of possible consequences to the provider of a banned substance or activity, the price will rise more than the cost rises – and the greater the risk, the higher the margin to reflect it.

This “bad will” premium – the opposite of the good will that makes legal businesses attractive – makes the banned practice more lucrative for providers, not less. Unless the ban reduces the number of users or the amount of the banned substance or activity, then providers will become richer and more able to afford ways to avoid the ban and to promote their (banned) product.

Thus, unless that which is banned can be stopped altogether, bans act as promotion not prevention. Nietzsche was right – “What does not kill me makes me stronger”. Drug “tzars” should take note.