Monday, August 16, 2010
Coalition Gets Good Economist Review
It's obvious the journal does not regard as the enforced imminent assault upon the city walls of Labour's public expenditure an altogerther unalloyed disaster. Under Gordon Brown the UK became the Napoleonic home of dirigisme. A chart shows its spending by central government at 70% of all government spending as second only to New Zealand and above Germany (20%) and France(35%).
Labour ran a deficit even during the boom years, and stuck to its expansive three-year spending plans after recession hit. Fiscal stimulus on top of this took the deficit to a record high of 11% of GDP in 2009-10; the IMF forecast in May that it would be the biggest this year among G20 economies. Whoever won the election would sooner or later have to slash the deficit.
Osborne aims to pay off the deficit by 2014-5, less intense than some EU countries, like Ireland or Greece, but a big ask by any standards. But the journal praises the radical energy of both parties in their desire to shrink the state: 'Decentralisation has now found a home'. Education, the police and healthcare face major restructurings to make them more accountable to their local communities. Whilst aware of the dangers of precipitating the collapse of a fragile recovery, The Economist, offers a warm round of applause:
Yet with all these caveats, the new government’s vision of a looser state, and its determination to reform virtually all the public services at once, is boldly outlined. Add in the even more daring plan to cut the fiscal deficit, and Britain is in for a breathless and convulsive few years. Now and then, British elections are epochal, setting the tone for other countries, too. One such took place in 1945, when the modern welfare state got going. Another, in 1979, loosed Margaret Thatcher on a waiting world. By producing a ruling coalition that is as radical in redefining government as it is in cutting it, the election of 2010 may prove another turning point.