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Monday, 9 March 2009

We are all socialists now

Why is the economy in such a mess when Gordon Brown says that GDP has been growing?  The answer as I have said many times is that GDP is just a measure, it is not an end in itself.  It is a measure of monetary value and there is an assumption that that the value paid for goods and services reflects their true value.  In the private sector it is reasonable to assume that a fair value is being paid, otherwise a business fails very rapidly, in the public sector there is no easy monetary value and inflation creeps in very quickly unless controlled.  Who can say what the true value of a Community Cohesion Co-ordinator might be? £15,000 or £150,000.  The Brown game has been to pump money into the public sector at rate increasing at 7% per annum, giving the impression of GDP growth and hence prosperity, whilst in fact the private sector has declined under the burden of increased taxation and regulation. 

Doubling GP’s take home pay didn’t actually make anybody better off, apart from GPs.  Good for them. Perhaps they deserved it.  The rest of the economy was burdened with the cost of the NHS and other government costs.  Perhaps we could afford it, but then again, maybe not. Parts of the United Kingdom have become so heavily dependent on government spending that the private sector is generating less than a third of the regional economy.  The government’s share of output and expenditure has now surged to more than 60% in some areas of England and over 70% elsewhere.

In the northeast of England the state is expected to be responsible for 66.4% of the economy this year, up from 58.7% four years ago. When Labour came to power, the figure was 53.8%.  Across the whole of the UK, 49% of the economy will consist of state spending, while in Wales, the figure will be 71.6% – up from 59% in 2004-5. Nowhere in mainland Britain, however, comes close to Northern Ireland, where the state is responsible for 77.6% of spending, despite the supposed resurgence of the economy after the end of the Troubles. Even in southern England, the government’s share of spending is growing relentlessly. In the southeast, it has gone up from 33% to 36% of the economy in four years.

The state now looms far larger in many parts of Britain than it did in former Soviet satellite states such as Hungary and Slovakia as they emerged from communism in the 1990s, when state spending accounted for about 60% of their economies.

We have already seen that such levels of state control didn’t work in the 1970s, they failed in post-war Eastern Europe and they will be a disster here too.  You have been warned.  Many times.

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