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Thursday, 9 October 2008

A breathing space not a reprieve

If the concerted actions of world central banks have stabilised financial meltdown, they have won us a breathing space, not a reprieve. Similarly the fall in oil prices takes a little pressure off an open wound, and will by reducing transport and processing costs also take a little pressure off immediate food prices, although any fall in fertilizer costs will take much longer to come through the system. Despite the palpable sense of relief, it would be folly not to use now this hiatus to prepare for what is to come.

We face a slow and painful period of economic reconstruction. Debt still needs to be deflated, and if not in a sudden financial crash then slowly and with a hand on the tiller. And as Germany has demonstrated this week, both in Merkel's reassurance to German savers and in her refusal to commit German government money to an ECB-area bail-out fund, now is the time that governments look first to the people that elect them. Irish voters amongst others will rightly be asking how much their EU membership is worth when Germany's brave eurowords turn to such dust overnight.

The real pain - the chronic deep hurtful ache - is yet to come. We may get through Christmas, but 2009 and all it brings will not be so easy; painful economic change must necessarily have social consequences. The mild recessions of the 80s and 90s caused significant social change, destroying local institutions and cementing the central State. It would be naive to imagine we will not come out of this one a different nation and society. But a time of change is also a time of opportunity, a chance to establish a restructuring that will leave us better placed as a nation when we come through to the other side. And those changes will not be towards a greater centralism.

Simon Heffer comments in today's Telegraph that
The maxim of the American writer and philosopher Ayn Rand came close to fulfilment before the denouement of Old Labour on May 3 1979: that the difference between a welfare state and a totalitarian state is a matter of time.
Our economy simply cannot sustain Labour's welfare state through the coming times. By the new year it will become apparent to the electorate that Brown has no solutions to offer; any attempts to increase taxation purely to bolster the welfare state, rather than for deeper economic and social restructuring, will be rejected. The pressure for an election will still be there. And like Germany, people will look inwards. Parochialism isn't necessarily a bad thing; rising crime and disorder will impact on our homes and our streets, poverty will be met daily in the local supermarket, and boarded-up shop fronts and deserted delivery depots will line our routes to work if we're amongst those that still have jobs - and a very large number of us still will. The pressure will come to see the direct local effects of our taxes. Local building societies and credit unions may blossom once again. Local watches may demand greater powers to police their own areas. Local welfare schemes may evolve to meet the worst effects. Parents may run local voluntary educational facilities. As the central State starts to fall, local institutions can grow like saplings in the sunlit space left by a fallen forest giant.

Cameron has already dumped his commitment to continue Labour's profligacy. If he to capture the coming zeitgeist he must also be prepared to dump his commitment to continue Labour's Leviathan central State.


Nick von Mises said...

I'm certainly hoping for this. The parallels with Atlas Shrugged are there. As capitalists pull their money out of risk instruments, it's got a similar effect to just plain going on strike. Any ideas on where to find Atlantis?

Guthrum said...

I fear it will be more authoritarianism with the elite defending their own against the abandoned state dependents.