Douglas Carswell's Blog

What should the Chancellor say at Mansion House?

"We used to think that you could spend your way out of a recession ..." Jim Callaghan told the Labour party conference in 1976. "I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion by injecting a bigger dose of inflation into the economy".

The speech marked the moment when the Westminster Establishment finally grasped that fiscal stimulus wasn't working. The old medicine was making the patient ill. It was time for a new approach.

Tomorrow at Mansion House, I hope the Chancellor, George Osborne says something like this:

"We used to think that you could use cheap credit to get out of a recession. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion by masking our underlying decline in competitiveness and causing chronic malinvestment, which we mistook for growth."

"Fiscal stimulus and monetary stimulus are different sides of the same bankrupt orthodoxy, one which holds that governments can engineer growth. Which presumes that an economy grows when demand increases. I believe instead that demand rises when you have growth"

"Instead of stimulus economics, we need to deal with the underlying problem of competitiveness. We will deal with the zombie banks. We will ditch the crony capitalist model we now have, and introduce the free market model we urgently need".

Like in the 1970s, the economic outlook is dire. Just like then, the old remedies no longer seem to work. It is time to abandon the money manipulation orthodoxy and try a new free market economic approach instead.

I shall listen to the Mansion House speech with interest.....

Back to all posts