The economy made Britain great once – with the right government action, it can again
The Prime Minister and Chancellor are scheduled to make a statement ostensibly about economic policy.
It has already been trailed that there will be no tax cuts until inflation comes down, which won’t be before next year, which seems to be code for we will have a give-away close enough to the election that it is fresh in people’s minds. Any political party can do this. It is meaningless and the electorate are not stupid. What people really want to know is that the government are competent for the long term in their economic policies and the management of tax and spend. Johnson and Sunak ought to study our free market history to take a tip on how to create economic success, conquer the cost of living crisis, level up and balance the books.
In 1922 we had an empire spanning a third of the population of the globe. There is a huge misconception that this was purely exploitation which made Britain “Great”. On the contrary, the empire was burden created out of an accidental acquisition of lands, in turn driven by colonialists - adventurers, landed types and religious reformers - and by Whitehall, when in fact the core purpose was trade and investment.
Britain created incrementally in the eighteenth, nineteenth and early twentieth centuries, a world system based on globalisation and a stable currency, which facilitated the most rapid phase of human development then experienced - Pax Britannica.
There are many in our elites that now would have us believe we are destined only for decline. Britain has not declined, it has adjusted, and back to our roots, free of the encumbrances of empire and of the EU, we have every opportunity to see the best days yet to come.
It was not an empire that made Britain unique amongst nations. It was the political, primordial soup that nurtured economic development and led to the unprecedented industrial revolution. The Glorious Revolution of 1688 saw a new settlement which gave a democratic Parliament primacy and although the mandate was exclusive and largely based on a land-owning class, Parliament had the foresight to reduce taxes on productive industry while increasing taxes on idle land. The equivalent now would be slashing corporation tax and fuel duty to boost business and the cutting of income tax to encourage work. It promoted innovation and production. It was the beginning of a change that set England and Wales apart. There was a rapid scientific and technological evolution. The Scots came on board and added the enlightenment and Adam Smith.
Free trade and markets were hard fought up against the forces of vested interests. The creation of joint stock companies, abolition of monopolies and the protectionist corn laws in the 1830s. The expansion of democracy and free markets from the 1840’s led to an amazing period of growth and wealth creation, which benefitted the whole of society and was followed by some other countries, in particular in the Anglosphere. This progress was only reversed when the U.K. joined the protectionist EU and free markets and free trade became subordinated to the “German project”, which of course the French thought was theirs.
We now have a choice. We can accept the declinist dogma of the “let them eat cake” left liberal establishment, or we can emulate our forebears and embrace the creative destruction of a free market future with all of the excitement, innovation, wealth and growth that it will create.
The government need to grasp our freedom, cut business taxes and the tax on fuel. This will not only encourage investment and trade but, more importantly, it will boost the 70% of the economy that is domestic – including family businesses, many of which are SMEs.
Unilaterally cutting external tariffs will reduce the cost of living in an instant, as did the abolition of the corn laws. It will reap much of the benefit yet to be achieved from enhanced trade deals, but immediately. Why not cut this tax on food and goods that we do not produce ourselves?
Meanwhile Deregulation would free our business community and is of even greater importance than trade as it impacts a much larger tranche of the economy.
Yet, there is no sign that the government intend to do any of this.
Of course, free markets serve a purpose and are not an end in themselves. The purpose of maximising cost efficiency and the efficient and effective allocation of capital. Hence promoting growth, wealth creation and wellbeing.
This works best in a single market like the U.K. where there is a common understanding of the capitalist system and norms. It works less well in international contexts.
The best of these is where there are common norms of competition and the rule of law for example with the USA it works reasonably well and with others like CANZUK and some Asian countries.
Where it does not work well is where there are large distortions and market failure characteristic of state capitalism, and where states consider the economy and trade to be an extension of power e.g. China and Russia. It would be very foolish to treat these in the same way and normal economic considerations are outweighed by strategic interests. Here there are intrinsic distortions of “free markets” and trade.
Last year, at The Independent Business Network we produced a report on China dependency which was to say at least alarming and the west has only just woken up to its implications.
The creators of “Great” Britain knew all of this in the context of the age in which they operated, they were not fools, but they recognised the huge benefits of the internal free market and of expanding trade within a British world system, within the norms of free trade and the rule of law.
It is the ability of our current political class to recognise the wonderful opportunity they have to re-establish Britain’s free market future that will determine if they are worthy of being the inheritors of our unique island story, or whether they are fools.
John Longworth is an entrepreneur and businessman, Chairman of the Independent Business Network of family businesses, former head of the British Chambers of Commerce and Conservative MEP.
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