The first cut is…deep enough!

I’ve just watched venture capitalist John Moulton on The Daily Politics putting his case for deeper and swifter cuts. He argues that more pain now will deliver greater gain later on. He complains that the state is far too big: he wants  to see the economy made up of 40% public sector and 60% private sector instead of the other way round.

I’m not a great fan of ‘vulture capitalists’ as they are of banksters born, but John’s point about the balance between public and private sector is well made. The public sector is far too big in this country. In communist China the public sector is less than 30% of the economy. Where I disagree with John is his way of achieving a smaller public sector. His solution of making deeper and more swifter cuts is too simplistic. Why? Because any idiot can cut (as we are witnessing now), but there are very few who have the imagination to create. Yes, we need a much bigger and more productive private sector, but we have to make this happen, it won’t happen by itself.

Successive governments have proved to be particularly useless at creating the right circumstances for businesses to grow and prosper. Tories are ‘master cutters’ and Labour swell the ranks of the public sector to cover their lack of ideas. Private sector growth in Britain rises and falls with the economic cycle, not much else.

John Moulton’s plan of deeper and swifter cuts would certainly increase the pain and there would be some gain, but not enough to justify the human cost of his proposal. I believe his motivation  is one of self-interest. He and his vulture capitalist friends would have plenty to feast on in the short term – and they wouldn’t have to wait so long either.

Last week Germany announced that it had just posted its best ever export figures. Its economy is doing really well. The difference between the British economy and the German economy? They make things and they save. In Britain we don’t make (enough) things and we don’t save. The Germans innovate and positively advantage their manufacturing sector, we positively disadvantage our manufacturing sector – and maintain a quaint distain towards those who make things.

In my opinion the cuts that have been announced are deep and swift enough. But we are making a massive, massive error by not making a huge investment in the means to grow our real economy – and by real economy I mean that part of the economy that makes and creates things, things we can sell abroad.

All the coalition has come up with so far is to designate a few enterprise zones, and as past experience demonstrates, all they do is to recycle existing jobs into smarter premises. What we need is some really imaginative thinking if we are to make Britain prosperous again. We Brits are stubborn souls. Sometimes we have to read the writing on the wall before we get off our backsides. There’s no evidence yet that things are about to change, but I live in hope.

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