Douglas Carswell's Blog

A macro economic mess unfolds

Five years into this economic mess, and the IMF has just lowered its UK growth forecast.  

How much more evidence do we need before we accept that the government's macro economic response has got it wrong?  

Neither Brown nor Continuity Brown have worked.   

Faced with the end of a decades long credit bubble, policy-makers have responded as though they were dealing with another cyclical downturn.  First under Gordon Brown, and now under George Osborne, the emphasis has been almost entirely on stimulus.

With the government spending £100 Billion more than it takes in tax, we have seen a massive fiscal stimulus in all but name. With low interest rates and print-money-and-pray from the Bank of England, there has been a massive monetary stimulus.

The result of this stimulus approach?  No growth.  More debt. And mounting evidence that the macro economic orthodoxy - just like in the 1970s - is wrong.

Years of easy money caused chronic malinvestment, which we mistook for growth.  Instead of allowing that to unwind, the government's macro economic policy has done the opposite. 

Stimulus short cuts are no substitute for dealing with the underlying problem of competitiveness.   

While the UK economy flat lines, many countries outside Europe are booming. Growth is possible, but it will only happen once we have removed the constraints on wealth creation that are holding us back. 

We will only return to prosperity when we have a government that pursues a policy of sound money, less state spending, radical deregulation and an end to crony corporatism.

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