Magazine article The Spectator

Who Needs Governments?

Magazine article The Spectator

Who Needs Governments?

Article excerpt

The Spanish seem to be doing better without one

On 26 October last year, the Spanish government shut up shop in preparation for a general election. This duly took place in December but then a strange thing happened: after all the build-up, the arguments, the posters and the television coverage, the result was... nothing. The various parties were so balanced, so mutually distrustful and ill-assorted that no government could be formed. Since last October, therefore, there has been no government in Spain.

One can imagine that the average political correspondent would think this a terrible problem, maybe even a crisis. The Financial Times has referred to Spain 'enduring' months of 'political uncertainty'. This is assumed to be a matter requiring furrowed brows and grave tones. But the economy seems to be taking a different view of the matter. It is bowling along more breezily than in a long time. The growth rate during the final quarter of last year was an annualised 2.9 per cent, which, in these days of dismal Euro-growth, is a star performance -- easily beating the pants off Italy, France and even Germany.

The improvement has continued this year. Unemployment has fallen month after month and is now down to 20.4 per cent which, though awful, is an improvement on a year ago when it was 23.2 per cent. That is a much better showing than in most EU countries. In France, for example, which has the supposed advantage of an active government dedicated to fighting austerity, the unemployment rate has fallen by a mere 0.1 of a percentage point. One could begin to wonder whether having a government is such a good thing after all. In fact, if one looks around, a lot of the evidence seems to point in the opposite direction.

Switzerland probably has the weakest central government in all Europe. It is so puny that it does not even have a minister of education. Yet Switzerland is the most successful of all the European economies if one leaves out small tax havens and oil-rich Norway. Its GDP per capita is £52,000 compared with Britain's modest £28,000.

Then let's think what has been the most celebrated period of economic growth in Europe since the second world war? Was it the triumphant product of some bold Keynesian borrowing and spending enacted by a dynamic government? Not at all. It took place in Germany when it was a bombed-out wreck. On 7 July 1948, Ludwig Erhard, the Director of Economics, going well beyond his official authority, grabbed the power to abolish hundreds of price and production controls. He removed with a sudden yank a great blanket of government that covered the economy. He just let the market get on with it. The bureaucrats in the occupying forces were appalled. What would happen to poor Germany in the absence of their guiding hands?

What happened was spectacular economic growth. There had been terrible shortages of everything from bricks to stockings. These were replaced with jumps in production. Production of stockings, as it happens, soared from 23 million pairs in 1949 to 152 million in 1956. Industrial output overall rose 140 per cent over the same period. Some may say, 'Oh yes. But Britain had a recovery too.' Yes, it did. But Britain's industrial production grew by less than a quarter of the amount in Germany. This was because Britain had a government that planned, rationed and managed whole industries. …

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