Politics

Unshackling Europe’s Economy: what holds us back?

philmullan Creative destruction, European Union, Politics, Productivity, State intervention

Here is a video of the talk I gave at the conference ‘Unshackling Europe’s Economy: what holds us back?’, organised by MCC Brussels on 24 September 2024.

My talk critiqued Mario Draghi’s recent report, The future of European competitiveness – A competitiveness strategy for Europe. I explained that this is not a neutral report on economic policy with new ideas to boost productivity within European countries. Rather it is a political manifesto motivating an ever-closer European Union controlled from Brussels. Europe’s real productivity slump is used as another instance of a ‘crisis’ – in Draghi’s words, an ‘existential challenge’ – in order to justify extending the powers of the EU to the detriment of national sovereignty and decision-making.

An ageing population is nothing to fear

philmullan Demographic change, Economic growth, Politics, Productivity

People are living longer lives than ever before. This ought to be regarded as something to celebrate. Yet for far too many politicians, commentators and academics, the fact we’re living longer than ever is seen as a serious problem – even as a source of despair. Last week, two reports, one on the malfunctioning National Health Service (NHS) and another on the steadily rising public debt, attributed much of the blame for Britain’s woes to our population’s longevity.

But people living longer is neither an obstacle to growth nor an unbearable strain on the public purse. This fatalism is wrong on every level.

Read the full article here.

Does the OBR run this country?

philmullan Democracy, Economic policy, Politics, State intervention , ,

The UK desperately needed something bold and innovative from this week’s spring budget. The nation’s infrastructure is literally crumbling, the energy grid is overloaded and local authorities are going bankrupt. The economy and public services are simply not working.

Of course, it would have been naive in the extreme to expect any answers to these problems from the current moribund Tory government – even as a General Election looms. And, given the UK’s stagnant economy, any chancellor would have struggled to conjure up the resources to fix all of this now in a single budget. Still, chancellor Jeremy Hunt’s budget was a paltry affair, even by his past standards.

Some have blamed the paucity of the chancellor’s budget statement on the Office for Budget Responsibility (OBR), the ‘independent’ watchdog that determines whether the chancellor is sticking to his so-called fiscal rules.

But we should be wary of demonising the messenger. And any suggestion of ‘external’ constraints on the government should be rebuffed, as it lets our elected leaders shirk responsibility for their own decisions.

Read the full article here.

The tax-cut delusion

philmullan Creative destruction, Economic growth, Economic policy, Politics

A second article suggesting a different approach to the UK’s 6 March spring Budget.

Many in and beyond the Tory Party seem to believe that lowering taxes is a cure to our economic ills. It’s time these tax-cut proponents stopped kidding themselves about the economic effects. A cut in personal or business taxes will not re-energise Britain’s entrepreneurial spirit or resolve its high-debt, low-growth malaise. The barriers holding back investment and innovation won’t be overcome with a reduction in income or corporation or inheritance tax. Britain’s economic slump is deep and protracted.

Yes, we can legitimately argue for lower taxes from the perspective of personal freedom. But lower taxes won’t raise productivity levels. That can only happen through the restructuring of our economy, by shifting resources away from low-productivity businesses into higher-productivity businesses that can provide better-paying jobs. That will require a wave of creative destruction, not fiddling with tax rates.

Read the full article here.

Why industrial policy isn’t working

philmullan Creative destruction, Economic growth, Economic policy, Politics, State intervention

There can be good reasons for governments to pursue a so-called industrial policy – that is, a policy that sustains or develops certain industries in order to achieve national goals. In less developed countries, an industrial policy can help develop foundational industries, such as energy or food production. In developed countries, a government might pursue an industrial policy during wartime, providing financial assistance to armaments producers.

But in Britain today, there are several compelling reasons for not pursuing an industrial policy. Excessive corporate welfare is sucking the dynamism out of the UK economy. As things stand, government efforts to shape and direct industry are slowing growth, encouraging corporations to depend on state handouts and distracting from the core role of the state in providing decent public services and infrastructure.

Read the full article here.