Knifonomics (part 19): listen to your elders

The Knife is a fan of George Osborne, in the sense that:

a.) He’s not Gordon Brown (although they have a similar obsession with small fiddly changes)

b.) He’s coolish under pressure, and has already achieved a big hit in maintaining international confidence

Hence, although PWUGO (see elsewhere) is thriving, I doubt there’s much alternative to him as Chancellor, but his policies are a bit insipid at the moment. The budget was never going to be very dramatic at this stage in the electoral cycle (the government is less than two years old), and droning on about not very hard done by pensioners and the absurd pastie tax is completely overdone. Who cares really?

However, he should pay attention when one of his notable predecessors speaks, and does so with his usual clarity and thoughtfulness, even if it was written back in 1992:

So by the time I entered the House of Commons in 1974, the views I had arrived at, and which I continue to hold today, could be summarised in terms of two interconnected reversals of the post-war conventional wisdom. The first is the conviction that the recipe for economic success is the greatest practicable market freedom within an overall framework of  firm financial discipline – precisely how that discipline is best applied being essentially a second-order question, though important, and one which was to prove surprisingly explosive. This is in stark contrast to the approach that culminated in the debacle of the 1970’s, in which an ever-increasing erosion of market freedom was accompanied by the progressive abandonment of financial discipline.

The second reversal is …that instead of seeking to use macroeconomic (ie. fiscal and monetary**) policy to promote growth and microeconomic policy (of which incomes policy was a key component) to suppress inflation, the Government should direct macroeconomic policy to the suppression of inflation and rely on microeconomic (or supply-side) policy, such as tax and labour market reform, to provide the conditions favourable to improved performance in terms of growth and employment….that was, and is, the essence of it.

Of course part of this is in place: an incomplete commitment to free markets, the Bank of England ostensibly targetting inflation (but in reality not doing so), a slightly firmer – but still inadequate  – grip on public spending, and the unions aren’t going to regain any sort of stranglehold. Sloshing borrowed money into stupid projects, like foreign aid to India and various expensive green policies, and printing money in massive amounts rather undermines these partial gains.

Buy my diet book!

Mind you, Nigel Lawson (for it was he) had a slightly different route to the job: comfortable but not extremely wealthy upbringing, mathematics and PPE, FT, Sunday Telegraph,  civil servant for the PM,  then editor of The Spectator, being first elected MP at the age of 42, which these days is old.

George on the other hand is not yet 41, and he’s been Chancellor for nearly two years. Right enough, he has his obligatory Oxford degree (History), but his family are loaded and his career trajectory was putting data in an NHS computer, folding towels in Selfridges, then Conservative Party gopher and “adviser” until he got his hands on a safe seat in 2001. Bright lad, but not what you’d call a balanced upbringing.

Lawson had his failures, like the difficulties he had in restraining inflation, but he was and is a great intellect and loaded with common sense. Hence his ability to write best sellers on both dieting and the climate change scam.

George still has a great opportunity, even shackled by the moronic Lib Dems and the Eurozone. He needs to take it.

**I think Lord Lawson’s inclusion of supply side tax cuts etc as “microeconomic” policy is slightly at variance with most definitions, which put it into fiscal (ie. government controlled, rather than Bank of England) macroeconomic policy. See here and here for handy definitions.

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