J P Floru is a Westminster councillor and Head of Programmes at the Adam Smith Institute. Follow J P on Twitter.
“They call it austerity. I call it balancing the budget”, German Chancellor Angela Merkel said at a book launch a few days ago. The principle of living within one’s means is familiar to many of us. If we don’t live within our means, bank or bailiff will make us. Sadly, there is nobody to stop the state. Apart from a few courageous politicians, such as Angela Merkel?
Spendthrift governments caused it all. The almost pathological inability of politicians to match spending to income made them turn to the Holy Trinity of Spendthrift Government: taxing, borrowing, and printing money. The flood of cash caused the bubbles – not just in property prices, but also in the expectation that the state will care for us from cradle to grave.
The failure to grasp that government profligacy caused our present and future woes – or the sluggish reversal of it – is now turning an economic crisis into a depression. Keynesians urge for more infection to cure the gangrene. “Overspend more!” the IMF shouts. “Austerity has reached its limits”, EU Commission Chief Manuel Barroso warns. Paul Krugman wittily labels living within one’s means “austerity mania” ”or deficit fetishism”. The other Great Keynesian Sage, Joseph Stiglitz, calls austerity plans a “suicide pact”.
How can austerity be a suicide pact when the patient is dead already? Here in Britain, at least we’re trying to revive the economy. George Osborne and David Cameron are courageously sticking to Plan A. Sadly the electorate did not give the Conservatives an electoral majority, and so the Coalition’s efforts are too modest for our sounder friends. Notwithstanding the endless wailing about “savage cuts” by the beep and others, the deficit in cash terms is barely reducing: the government only borrowed £300 million less than last year out of a total of £120.6 billion. Again, the Germans are right. When the European Commission suggested that austerity “had reached its limits”, Michael Fuchs, the German Christian Democrats’ deputy leader, stated that "Declaring an end to consolidation is absolute nonsense. In truth no one is really saving anyway, they're just issuing less debt than before."
Of all the rights acquired by special interest groups (some say: by voter banks) during Labour’s Era of Irresponsibility, benefits prove the most difficult to tackle. Even though the welfare bill is still rising according to the Office of Budget Responsibility, our Coalition partners say the cuts have gone far enough; government-subsidised socialist “charities” warn that society is about to collapse; and bishops announce the imminent return of child chimney-sweeps.
In fact, the opposite is true. If we don’t mend our erroneous ways, our children will certainly be worse off. Right now, we are eating our capital. The unproductive state sector is consuming capital produced by the productive private sector to such an extent that the habitual recovery of the economy will not occur. Obese government has pushed us beyond the cliff edge – we are in a depression, not a recession. In the light of the death of Lady Thatcher, it is fitting to explain it in the phraseology of the corner shop: Excessive debt and expenses, and resistance to change by the existing management mean that only a very drastic restructuring will save the business.
Corner shop wisdom is almost interchangeable with “common sense”. As the great philosopher Friedrich Hayek pointed out again and again, it is the try and error of our forebears and friends which teaches us what is responsible behaviour and what isn’t. Most of us were raised on these simple truisms, so derided by Mayfair Marxists. This common sense is what Conservatives wish to conserve – and we expect the state to do the same. Keep costs to a minimum. Invest prudently for the highest return. Save for a rainy day. When you are above your limit, don’t borrow more. Don’t subsidise able-bodied people to do nothing. And above all: He who does not balance his budget for too long will lose it all.
That is what our Manifesto should say. And that is what will give the heirs to the corner shop’s daughter an electoral majority to do what needs doing.