LibLink: Simon Hughes – Polly’s advice to the Lib Dems is double-edged

Simon Hughes has a letter in the Guardian today responding to Polly Toynbee’s article “Now is the perfect time for Liberal Democrats to wield the knife“.

Simon writes:

Polly Toynbee’s argument, like some arguments she has made before, is based on a false and misleading premise – that this government is embarking on some ideological dismantling of the state. This does everyone a disservice.

Here are three reasons why: first, by the end of this parliament the government will be spending about £730bn a year, a full 42% of GDP and roughly the same as we did in 2008. Hardly back to the stone age. Second, our deficit reduction plan is broadly in line with those being pursued by presidents Obama and Hollande – not exactly small-government rightwingers. Third, last autumn when it became clear we would not meet our target of clearing the structural deficit by 2015 we didn’t decide to cut harder and faster, we gave ourselves an extra two years. This makes our plan very similar to that proposed by Labour chancellor Alistair Darling at the last election.

What Lib Dems are doing is out of necessity, not ideology or desire. We didn’t come into politics to cut public services. However, like presidents Obama in America and Hollande in France, we know we must deal with the debts we inherited. We must not leave our families and our country paying for the mistakes of the past decade for years and years ahead.

* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames and is a member of Federal Conference Committee.

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52 Comments

  • All wise and truthful words from Simon, but no-one is listening.

    Nationally, we are simply not able to get our message across about what is being done and why. As a result, we are not able to shake some of the misconceptions that seem to have become so firmly rooted, particularly among ex-Lib Dem defectors to Labour about what the Lib Dems are doing in government.

    We need to find ways of communicating our national strategy, which is simply not being put across in our Focus leaflets and through the national news media.

  • “Polly Toynbee’s argument, like some arguments she has made before, is based on a false and misleading premise – that this government is embarking on some ideological dismantling of the state.”

    I can’t see where in Polly Toynbee’s article she says that. Can anyone else?

  • jenny barnes 8th Jun '12 - 2:36pm

    Any ideas where growth is going to come from? Cutting the size of the state won’t do it. The “public sector is crowding out the private sector” argument might work if we had very low unemployment, but that’s not the case. It might have been better to run a surplus running up to 2008 – but we didn’t and we have to manage from where we are. The crisis, slump, etc was caused by the financial sector and growth disappeared shortly after Osborne’s first budget. We need to borrow (or print) serious sums of money and build infrastructure. Social housing, tidal barrages, etc. Once the economy is growing then you can let your tory chums pursue their ideological shrink the state ideas.

  • Polly Toynbee doesn’t say anything about an ideological dismantling of the stae, however, Jedibeeftrix does:

    “But if we aren’t firmly into the thirties by the end of the parliament I will be deeply disappointed.”

    which confirms that some members of the Lib Dems ARE wanting an ideological dismantling of the state (assuming Jedibeeftrix is a Lib Dem).

    It is a dismantling as well. The reason the state is now bigger than 4 years ago is because of the contraction of the private sector and not because of an expansion of the public sector. That’s what happens in recessions. The state was even bigger (as a percentage of GDP) under Thatcher in 1983 than it its greatest extent during this down-turn.

  • @Jenny – ‘Once the economy is growing then you can let your tory chums pursue their ideological shrink the state ideas.’

    From the comfort of the opposition benches, hopefully.

  • LondonLiberal 8th Jun '12 - 2:58pm

    @ Chris, 2.27pm. You wrote:

    ““Polly Toynbee’s argument, like some arguments she has made before, is based on a false and misleading premise – that this government is embarking on some ideological dismantling of the state.”

    I can’t see where in Polly Toynbee’s article she says that. Can anyone else?”

    Yes. It’s in paragrpah 5 of her article: “Stand back and look at Cameron and George Osborne’s great game – to shrink the size, scope and spending of the state. Clegg has applied no brake to the breakneck privatising and commercialisation. Above all, he has not diverted them from an armageddon austerity plan.”

  • LondonLiberal 8th Jun '12 - 3:02pm

    @ Steve “The reason the state is now bigger than 4 years ago is because of the contraction of the private sector and not because of an expansion of the public sector. ”

    That’s not actually the case. State spending will be bigger is cash terms in 2015 than 2010 because of the costs of providing welfare to an aging population(including the cost of providing healthcare) and because of the costs of unemployment will still be far too high. Keynesian growth, along the lines suggested by Toynbee in her article, would go a great deal of the way to alleviating the latter and helping pay for the former.

  • Helen Tedcastle 8th Jun '12 - 3:24pm

    Quoting Polly Toynbee: ‘Instead, Clegg led his party into the Tory lobby on everything important, including £18bn in welfare cuts. He badly mishandled the NHS bill: victory was theirs for the taking, since Cameron would never dare call an election over a Lib Dem stand to save the NHS.’

    Simon, Polly is right. Yes, the Lib Dems are doing things – the Pupil Premium will target resources at the most needy children, your social mobility report was excellent. But on the really big things: Health, Schools, Welfare, Tuition Fees, Nick has accepted too much from the Tory ideologues, hell-bent on using the ‘Age of Austerity’ as the excuse they need to dismantle public services – it’s a disgrace.

    Clegg has been naive and out-manouevred in the big policy areas. The party needs to return to a social Liberal agenda – and fast.

  • A thoughtul response by Simon Hughes.

    Polly Toynbee is an effective writer when she ISN’T dropping her sycophantic, partisan lines in favour of Labour. I think a lot of Guardian readers who leave comments about her articles have noticed this. Unfortunately the times when she isn’t pandering to the party in her articles is rare. Here is a journalist who defends, omits, or rationalises the actions of one of the most inefficient, corrupt, and borderline authoritarian governments in my lifetime. It’s to the point where even pre-Blairite Labour supporters were forced to abandon the party. Polly wilfully forgets that the gap between the rich and the poor grew after Tony Blair left office (given that she speaks about social justice a lot), or the control freakery of Home Secretaries like Jacqui Smith.

    Why should the Liberal Democrats wish to take advice from this New Labour apologist?

  • “Yes. It’s in paragrpah 5 of her article …”

    Well, if you allow that shrinking something is the same as dismantling it, maybe. Even so, Hughes’s main objection seems to be that the Lib Dems are supporting the austerity plan only out of necessity, so that “the government” as a whole isn’t trying to shrink the state as an end in itself. But in the bit you quote, Toynbee says only that Cameron and Osborne are deliberately trying to shrink the state – and that the Lib Dems have failed to stop them.

  • Helen Tedcastle – the public spending bill is £750bn. £18bn is less than one quarter of 1% of this enormous amount. The deficit is a quarter of it.

  • Good letter Simon. I love the fact that Polly Toynbee refers to the diplomacy of “the adept Lord Adonis” – this would be the Lord who, at a Lib Dem conference, singularly dismissed any liberal tradition, patronisingly gave us a lesson in why John Stuart Mill was a Tory, and insulted our political memory.

    Helen: I think the tuition fees broken pledge was wrong, but the change is not ‘one of the major things’ when compared to having an economy that functions, a state pension, or the pupil premium (or social mobility for that matter). And neither does all the achievement look too bad compared to, say, fewer than 10% of the seats in parliament.

  • “the public spending bill is £750bn. £18bn is less than one quarter of 1% of this enormous amount.”

    Hmm. You might want to check that using a calculator.

  • “I think the tuition fees broken pledge was wrong, but the change is not ‘one of the major things’ when compared to having an economy that functions, a state pension, or the pupil premium …”

    Well, the pupil premium will be a redistribution of (eventually) £1.25bn within the education budget.

    The increase in tuition fees is intended to yield something like £4bn extra. Much bigger in cash terms, even if the pupil premium wasn’t just moving the same money around in a different way.

  • David Allen 8th Jun '12 - 3:57pm

    “Why should the Liberal Democrats wish to take advice from this New Labour apologist?”

    Polly Toynbee is a Jekyll-and-Hyde writer. She intermixes original research and insight, penetrating analysis, self-serving claptrap, wishful thinking, and inspiring idealism in a way that is unique.

    The sensible way to read her stuff is to extract the good bits and laugh off the rubbishy bits.

    Sadly, Lib Dem loyalist propagandists use Toynbee’s stuff differently. The sequence is: (1) Identify unpleasant truth about Lib Dem policy which one would prefer to deny; (2) Find a piece written by Toynbee which contains that truth; (3) Publish the reference, and shout it from the rooftops that if Toynbee believes something, it must be codswallop!

  • David Allen – “The sensible way to read her stuff is to extract the good bits and laugh off the rubbishy bits.”

    That statement does not apply uniquely to the Pollster 🙂 The problem, however, is in defining “good” and “rubbishy”.

  • Chris – I am, naturally, aware of the amounts involved, but in this case I view the value, and cost as significantly distinct.

  • david thorpe 8th Jun '12 - 6:18pm

    the growth will come from the billions in public spending alloted over the next twpo years
    toynbee thinks in cliches, and like many multimillioanires, cant see beyond her own circumstances.
    simon hughes is very corercet ion this letter

  • Richard Dean 8th Jun '12 - 6:42pm

    Tonybee is working for the Labour Party, who see LibDems as their future problem. She and they want us to disappear, and what better way than to promote internal feuding, destroying from within and showing the electorate a messed up party? She writes of Vince Cable “His business department has overseen a collapse in manufacturing”,and “Few politicians could manage contrition with Cable’s conviction – he speaks human so well”. With that kind of support, who needs enemies!?

  • “I am, naturally, aware of the amounts involved, but in this case I view the value, and cost as significantly distinct.”

    If you were already aware of the fact that the sums involved in raising tuition fees are much larger than that being redistributed as the pupil premium, I’m more baffled than ever as to why you think tuition fees are less ‘major’ than the pupil premium.

    Obviously the political impact of raising tuition fees on the Lib Dems has been huge, The latest figures suggest the impact on university applications is also going to be serious. I can see why you’d prefer it not to be a major issue, but that’s not the same thing.

  • “Tonybee is working for the Labour Party, who see LibDems as their future problem. She and they want us to disappear, …”

    She and they – and your coalition partners in the Tory party, of course! Not a happy position to be in.

  • Paul Walter Paul Walter 8th Jun '12 - 8:16pm

    @Chris
    “She and they – and your coalition partners in the Tory party, of course! Not a happy position to be in.”

    But, hey! That’s politics!

  • David Allen 9th Jun '12 - 12:37am

    “Tonybee is working for the Labour Party..”

    Aha, now I see it all! Toynbee = Tony B(ee)

  • Stuart Mitchell 9th Jun '12 - 10:01am

    Tabman: Your maths is out by a factor of 100.

    Jedibeeftrix: Small-statists have been making that kind of argument for decades, Yet inconveniently for them, the fact remains that those advanced countries with a “bigger state” than us (the Scandinavian countries being the obvious examples) have higher standards of living than us, while those countries with significantly smaller states than us are not the sort of countries in which anybody but a rich man would have a good standard of living. There are exceptions but by and large this rule has been proven for many years.

    Everybody envies the growth rates of the BRIC countries, but how many would wish to have the standard of living of an average person in those countries – and there’s no prospect of them catching us up in the foreseeable future.

    Quoting economic meta-studies is near to meaningless. As anybody who has studied economics knows, there’s a study to support whatever preconceived notion anybody may happen to have.

  • Liberal Neil 9th Jun '12 - 11:14am

    The point of Simon’s article was to point out that Toynbee’s accusation that the Government is planning to shrink the state is wrong in fact. It may well be that Cameron and Osborne want to shrink the state for ideological reasons. If so, then the Lib Dems clearly are succeeding in stopping them, because the state isn’t shrinking.

    Anyone who believes that the share of GDP spent by the state should increase by the end of this Parliament must believe either a) GDP should reduce and state spending should remain the same, or, b) GDP should remain the same and state spending should increase, or, c) GDP should grow and state spending should grow even more.

    Personally I’m not attracted to any of these options.

  • “The point of Simon’s article was to point out that Toynbee’s accusation that the Government is planning to shrink the state is wrong in fact. It may well be that Cameron and Osborne want to shrink the state for ideological reasons. If so, then the Lib Dems clearly are succeeding in stopping them, because the state isn’t shrinking.”

    You say that what Toynbee said about Cameron and Osborne’s motivations “may well be [true]”, but that the rest of it’s wrong because the state isn’t shrinking. That’s a very strange contention given the scale of public spending cuts that are currently under way. Even Simon Hughes doesn’t dispute that public services are being cut. He just says that the Lib Dems are supporting the cuts out of necessity, not ideology or desire.

    What this amounts to is that the government is shrinking the state, but that different parts of the government have different motivations in doing so. And in fact that is entirely consistent with what Polly Toynbee wrote.

  • Sorry, but I’m not sure why we’re giving so much time to opportunistic grandstanding by a hostile commentator who is determined to twist reality to fit her party political agenda.

  • Jenny Barnes correctly cuts to the root of this austerity/growth dilemma of the Simon/Tonybee debate, and asks the question that is eluding the best brains around the world. “Any ideas where growth is going to come from?”
    The answer may not be what we want to hear.

    If we overlay the timeline of two events it becomes clear that, :
    – In July 2008 the oil price rocketed to $147 per barrel, for a brief period.
    – In Sept/Oct 2008 the present (world), financial crisis started in earnest.
    It seems clear to me that the latest world financial spasm, was caused by the fact that a (growing), global economy could not cope with such high priced oil, (and still can’t.)
    Surely, this then tells us that, :
    – the level of growth we have enjoyed over the last 50 years when oil averaged $15/$20 per barrel, is not now possible, with oil now hovering at around $100 per barrel.
    – printing money and/or borrowing from the future worked very well, when we could assure ourselves that future growth would take care of that debt. With no perceivable growth prospect, that future debt will now, either, fall on the shoulders of our children, or be defaulted upon.
    – this is why an extraordinary amount of our politics and military is spent in and around the middle east.

    I hope I am wrong.
    Apologies. Please don’t shoot the piano player, I’m just playing the tune I see before me.

  • Stuart Mitchell 10th Jun '12 - 2:38pm

    @Jedibeeftrix “when the facts change, I change my mind, what do you do, sir?”

    The same. Should the facts ever change – i.e. the countries with “large states” such as Scandinavia suddenly start tumbling down the standard of living charts, or it ever appears likely that the average person in Shanghai will overtake the average person in Stockholm for standard of living – then be sure to let me know.

    The facts at the moment are exactly the same as they have been throughout my lifetime. Countries like Norway, Sweden and Denmark continue to be at or near the top of whatever economic well-being chart you might happen to look at, despite having the largest states of any developed countries.

    The challenge for the small-statists – and it’s a challenge they are always very reticent at taking up – is to explain why their theories fail utterly in explaining these facts. If small states are better, explain Sweden. One of the very largest states in the world, with government expenditure over 50%, and over a quarter of the workforce employed in the public sector. This does not stop them being one of the richest countries in the world per capita. They have one of the lowest national debts in Europe, and actually ran a budget surplus last year. Growth was among the highest in Europe last year. Their state was probably too big 20 years ago, and it is smaller now than what it was, but it’s still among the biggest in the world and this is doing them no harm whatsoever.

  • @ Stuart Mitchell

    It is not the size of the state that matters. It is what you do with the money. At the moment, you could argue we have too large a state when it comes to some things and too small when we are talking about others.

  • Stuart Mitchell 10th Jun '12 - 7:43pm

    @Jedibeeftrix
    An economic projection through to 2050? You might as well quote science fiction at me, since economists struggle to predict what’s happening next week. 20 years ago everybody was saying the future belonged to Japan. Look what happened to them.

    Even if we give credence to your graph, all it shows is China nearly catching up with the basket case that is Italy. It barely dents the huge lead enjoyed by the likes of France, Germany and the UK. Shame the Scandinavian countries are now shown, but given that they’re all doing better than Western Europe right now, it’s easy to imagine what the graph would look like with them on it.

    We shouldn’t even be debating this at all. What’s the richest country in the world (tax havens excluded)? Norway.

    http://unstats.un.org/unsd/snaama/dnllist.asp

    Does Norway have a large state? Yes. Not as big as Sweden’s, but since 2000 its spending has been roughly equivalent to the UK’s, at least until the UK had to bail out the banking sector. In terms of employment, Norway’s public sector is huge, employing just under 30% of the labour force, nearly twice as high as the UK.

    http://www.oecd.org/dataoecd/59/6/48215466.pdf
    http://www.oecd.org/dataoecd/61/9/47876677.pdf
    http://www.nytimes.com/2009/05/14/business/global/14frugal.html

    What this should tell you, at the very least, and beyond any doubt at all, is that having a “big state” is no impediment to being the richest country in the world. Norway proves it.

    The Lib Dems are a strange choice of party for a small-statist, given that they have generally (outside of coalitions at least) argued for a bigger state than either of the other two parties.

  • Stuart Mitchell 11th Jun '12 - 8:14pm

    @Jedibeeftrix

    OK, so you don’t think Norway is a good role model for the UK economy. Afterall, who in their right mind would want to have the highest per capita GDP in the entire world? Perhaps you could tell us the names of a few countries who are doing it better, i.e. following your small-state formula while providing their populations with Scandinavian-type levels of wealth, happiness and equality. I can’t wait to find out. Up to now the only country you have said anything positive about is a communist dictatorship whose citizens live in grinding poverty.

    That you dismiss Norway as a “petro-nation” just typifies your head-in-the-sand response to anything that doesn’t chime with your world view. The fact is, if you remove Norway’s entire oil revenues from their GDP figures, then they are still the richest country in the world per capita by some considerable margin (excluding tax havens). Moreover, you are wrong to assume that Norway’s huge public sector is funded by oil. It has been Norway’s policy for decades to save their oil revenues for the future rather than spend them; so far they have put aside a staggering $400bn. Despite this, they have still managed to fund a large-state economy with a public sector employing nearly a third of the entire workforce. Oil has had very little to do with it, in fact the UK has probably spent much more from oil revenues than Norway has.

    (Contrasting Norway’s $400bn sovereign fund with the way Thatcher squandered our own oil revenues in the ’80s is enough to make a grown man weep. But then, Thatcher had the same kind of anti-state prejudices as you, so that kind of far-sighted state planning would have been completely anathema to her. Hence we’re broke, while Norway is the richest country in the world. Which reminds me: the one time we had a PM who genuinely *wanted* to shrink the state, the whole thing blew up in her face and we actually ended up with the largest state in UK economic history, before or since. Go figure.)

    Economic history teaches us several things that are relevant here. First, rich countries tend to have large states. There are few exceptions, and what exceptions there are tend to have high levels of inequality. Second, countries which attempt to shrink their states tend to meet with the same kind of failure that Thatcher did; there’s a ratchet effect at work. Third, people who fret that society is facing impending doom due to demographic factors (and there have been plenty of those, going back to Malthus and beyond) usually end up – let’s be polite here – not being looked on too kindly by posterity.

    Your argument seems to rest entirely on a graph somebody has concocted showing GDP projections for 2050. Fact: No economist on earth has the faintest idea what is going to happen in 2050. The OBR can’t even get anywhere near predicting GDP for 2012! 20+ years ago, I used to sit in economics lectures where we were told that the future would be dominated by Japan and a rampant Eurozone. Many economists believed that then. Forget your graph, it’s a work of pure fantasy. Besides, you seem not to have noticed that your graph actually shows most large-state countries doing rather well.

    So relax. Go look at http://unstats.un.org/unsd/snaama/dnllist.asp and notice how the upper reaches of the UN HDI charts are dominated by countries with large states. Then ask yourself how this can be if large states impoverish their citizens.

  • @jedi
    I think there’s some confusion over the merits of ‘wealth’ versus ‘standard of living’, in which the latter can be seen as reliant on the former, or, equally, vice versa.

    The problem with making ideological arguments rather than principled cases is that facts get used in different and often contradictory ways – by their nature ‘real’ facts cannot be ‘ideal’.

    And that’s advice someone really ought to give to Polly Toynbee too.

  • Matthew Huntbach 12th Jun '12 - 1:13pm

    I was sorry to see Simon pushing the line so beloved of the political right that if spending levels remain the same no real cuts in services have been made.

    The reality is that many factors, the growth in the number of very elderly people being a big one but by no means the only one, mean that a standstill in service levels requires an increase in spending levels. I wish we could have some honesty in politics which could talk openly about this, as it is just about the biggest issue facing us. Instead we have the political right playing the game “look spending is the same, so no real cuts have been made”, and the political left playing the game “the cuts you are seeing are all the fault of the evil government, we can reverse them at no expense to you”. Or, when the left is the government, paying to keep service levels up by borrowing in the hope something will turn up in the future, or when the s*** hits the fan the right will be back in control so the “evil government” line can be played again.

    If we are spending the same % of GDP on government services now as in 2008, sorry Simon, but given the way the world is going that IS big cuts. We need to be honest and say to the people that’s how it is – if you don’t want the cuts, you have to be prepared to pay more.

  • Stuart Mitchell 12th Jun '12 - 7:12pm

    @Jedibeeftrix

    If the world economy ever flips on its head as you suggest, i.e. the correlation between high levels of wealth and large states starts breaking down, then you might be on to something. But it won’t. So worrying about the size of the state (within the kind of limits we get in the UK) is actually irrational, from a purely economic perspective.

    You acknowledge that “a standstill in service levels requires an increase in spending levels”, then follow that up with a reommendation to slash spending levels. I don’t think you’ve thought this through.

  • Matthew Huntbach 13th Jun '12 - 12:07pm

    jedibeeftrix

    your alternative would be to keep spending ever higher amounts of GDP to maintain services come hell or high weather?

    The flaw in your argument is that if the extra health and care needs for the elderly are paid for privately rather than through taxes and government services, they must still be paid for. I don’t buy your argument that it makes some massive difference how it is done. In the end it still means one person works while another benefits. Whether the transfer of work to benefits is done through taxation or through the benefit receiver having investment which the worker must pay towards is a lesser issue.

  • Libertarian 13th Jun '12 - 2:13pm

    Straight from Wikipedia:
    -According to Swedish Statistics, unemployment in May 2011 was 7.9% in the general population and 25.9% amongst 15-25 year olds.
    -According to Jan Edling, a former trade-unionist, the actual number of unemployed is far higher, and those figures are being suppressed by both the government and the Swedish Trade Union Confederation. In Edling’s report he added that a further 3% of Swedes were occupied in state-organised job schemes, not in the private sector. He also claimed a further 700,000 Swedes are either on long-term sick leave or in early retirement. Edling asks how many of these people are in fact unemployed. According to his report, the “actual unemployment” rate hovers near 20%. Some critics disagree with this concept of “actual” unemployment, also termed “broad unemployment”, since they do not see e.g. students who rather want a job, people on sick leave and military conscripts as “unemployed”.

    Think about it.

    Even without a minimum wage (flexible wages normally allow the labour supply to meet demand at all times, in a functioning economy)

    Even with the state employing 31% of the labour force (in what I would call mostly-unproductive dead-weight activities)

    Even after massaging its statistics in typical socialist fashion (ignoring thousands who want to work but can’t find any work)

    Sweden still records an unemployment rate above 7% of the active population and 25% of the youth population.
    Do you think that’s the sign of a prosperous, functioning economy?

    A tax burden of 46.4% of total income, that’s the sign of a functioning economy?
    It’s not going to affect work and investment patterns at all? Not going to shatter normal incentives, really?

    A GDP PPP per capita 32.4% lower than that of a country like Singapore and 16.6% lower than that of the US, that’s the sign of a prosperous economy?
    Sure, Sweden’s result is 10% higher than that of the UK, but the UK is effectively a bankrupt country with fast-track access to third-world status.

    If state expenditure makes a country prosperous, how come Singapore does better on just about every measure of efficiency and quality with a public-sector expenditure of 17%, less than a third of the public-sector expenditure of Sweden (55.2% of GDP)?

    Even if we assumed that Sweden was doing as well as Singapore, which obviously it isn’t, what country would you prefer to live in, one where the state effectively takes away half of your labour for its own nefarious purposes, or one where you can keep 85% of the fruits of your labour? Do you think people with cash and talent do not make this kind of calculation?

    As time goes by, Sweden is bound to fare worse and worse, simply because of this reality. The reality that people do not want to be taxed and people do not want the state to have an overbearing influence.

    The Soviet Union lasted for 74 years and in that period many did think that it was the equal of the US. How wrong they were, and how wrong are Europeans to think that Sweden is a model for any country to follow. It ought to be obvious to Europeans that it is not a model, just by looking at how miserable countries like the UK, France, Italy and Spain have become, simply by following the credo of statism. I rest my case.

  • Stuart Mitchell 13th Jun '12 - 7:26pm

    @Jedibeeftrix
    “at what point do you believe we will finally start to seriously retard economic growth; when the economy breaches 60% of GDP, or perhaps 90%?”

    That’s a good question. Based on the experiences of our nearest equivalents, I’d expect our optimal position to be somewhere in the 40s, with the sort of growth retardation you talk about really kicking in somewhere in the low 50s. But I can’t say for sure as I would expect the optimal level to differ markedly from country to country.

    There is at least one recent example of a major country which has massively reduced the size of its state AND enjoyed excellent growth: Canada. But alas, as I mentioned earlier, the inevitable consequence of doing that seems to be burgeoning levels of inequality :-

    http://www.conferenceboard.ca/hcp/details/society/income-inequality.aspx

    Quote: “Canada is the only peer country whose relative [equality] grade dropped between the mid-1990s and the mid-2000s, owing to its significant increase in income inequality (the second-largest of all the peer countries).”

    Looking at the data above side by side with the UN HDI data over the same period, it looks like any country which wants high growth without high inequality needs to have a relatively large state.

  • Stuart Mitchell 13th Jun '12 - 8:59pm

    Libertarian:
    Singapore, a small-state nation? Are you aware that the Singapore government owns companies which comprise around 60% of Singapore’s GDP? Or that 85% of housing in Singapore is owned by the state? Little wonder that tax rates are low when the government is the employer and landlord for the majority of the population! Singapore is basically a socialist corporate state. It’s also a city-state (the third most densely populated in the world) with borderline tax haven status. You can’t really compare it with countries like Sweden and the UK.

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