Omnipotent government

I wrote this last week for The Critic...

 

Not since the early 1980s has the government had such a stranglehold over economic life in Britain. It is well known that taxes are at a record high and that the state is spending a larger share of GDP than at any time since the Second World War, but these statistics do not do justice to the full extent of the government’s interference in the economy. The price of gas, electricity, water, bus tickets, train tickets and, in Scotland and Wales, alcohol is controlled by the state. So too is the price of labour — since 2010, the minimum wage has risen from half of the average wage to two-thirds. Listed companies are ordered to “comply or explain” why 40 per cent of their board members are not women. Captains of industry are summoned to Downing Street to receive bollockings over non-existent “price gouging”. Businesses are given targets to sell more of one product and less of another. 

We lack the words to describe our current economic model. The left call it neoliberal but neoliberals have had no meaningful influence on British governments for thirty years. The right call it socialist but neither the Tories nor Labour have shown much interest in seizing the means of production. Keir Starmer’s government is more left-wing than he wants you to believe, but even if he renationalises the rail and water companies, it will be a nostalgic gesture rather than a heartfelt effort to control the heights of industry. Only on the fringes of the left is there any desire to return to the days when British Airways, Jaguar and Thomas Cook were under “democratic control”.

On the face of it, the post-Thatcher settlement has held, but there is nothing Thatcherite about this government, nor the ones that preceded it. “State capitalism with British characteristics” would be one way of describing it, but that doesn’t really fit. Under state capitalism, as practised in China, the government owns the major industries but allows them to use the price mechanism and other levers of the free market to compete. What we have in Britain is almost the opposite of that. Businesses are allowed to stay in private hands but with so many instructions, targets and, increasingly, price controls that it could perhaps best be described as a capitalist command economy. 

 

I go on to discuss the government fining companies for selling too much of a product which is, I think, completely new for this country. Everything else I mention has probably been tried before because every terrible economic policy has appealed to governments at one time or other. But it is the mix of these policies that is unique for the UK. It is no longer a question of being more socialist or more capitalist.

 

Upon publication, some people said what I was describing was corporatism or crony capitalism but I don't think that is right. Someone pointed me to Mises' Omnipotent Government, which I had not read, and said that a capitalist command economy is similar to what Mises called "the German pattern of socialism", i.e. the economic policies of the Third Reich. Certainly, there are similarities: private companies were kept private but threatened and bossed about to achieve the regime's goals. But Mises distinguished the German pattern of socialism with what he calls "interventionism". It is "interventionism" that is closest to what I am describing.

 

He wrote:

 

Nor should interventionism be confused with the German pattern of socialism. It is the essential feature of interventionism that it does not aim at a total abolition of the market; it does not want to reduce private ownership to a sham and the entrepreneurs to the status of shop managers. The interventionist government does not want to do away with private enterprise; it wants only to regulate its working through isolated measures of interference. Such measures are not designed as cogs in an all-round system of orders and prohibitions destined to control the whole apparatus of production and distribution; they do not aim at replacing private ownership and a market economy by socialist planning.

In order to grasp the meaning and the effects of interventionism it is sufficient to study the working of the two most important types of intervention: interference by restriction and interference by price control.

And there's a video...