Many of the centre right who value a small State, low tax economy have questioned whether Boy Osborne is doing the right thing right now; one doesn't have to be a leftist Keynesian to see that government investment can stimulate economic growth. Investment is not of course the same as spending, something with which those on the left still haven't come to terms. Investment means exchanging land, labour, materials, plant or specie for an asset equivalent in value, such as building a house. Employing home-helps, librarians and nursery nurses just consumes wealth with no valuable asset to show at the end of it. The other major advantage of capital rather than consumptive spending is that it can be turned on and off like a tap, unlike the government employing people to provide services, which is rather a ratchet and once advanced is horribly hard to reverse.
The latest growth figures support the views of Simon Jenkins in the Guardian this morning; "Flexible exchange rates are a more painless way of forcing down labour costs and promoting trade than government austerity. Inflation is a better way of easing debt. The remedy for depressed demand is increased demand, simple as that. The risk of inflation in Britain at present is trivial compared with that of deflation and recession."
If Osborne is getting it wrong, at least he has the opportunity to get it right, unlike the Eurozone. Jenkins writes;
The euro was a Locarno dream. It was the last cry of the 20th century, envisaging a brave new order in which bankers and businessmen, workers and peasants, would stand arm in arm, singing Ode to Joy. All labour costs would become equal. There would be fiscal and regulatory integration across the entire continent. The euro would unlock the door of a united states of Europe. Ireland and Greece would be to Germany what Nevada is to New York. The euro would squeeze and stretch the peoples of Europe until they were one.
This concept of union must rank among the great mistakes of history. Like other pan-continental visions, it has proved no match for the crooked timber of European mankind. Its acolytes cannot bear revisionism or tolerate dissent. They have driven Greece into chaos and Spain into severe depression, with half its youth now unemployed. The Eurocrats do not care. Their incomes are secure. They dance only round the euro and claim its blood sacrifice. They will do anything but admit they were wrong.
A measured and affordable investment in smaller scale construction schemes, deliverable in the short term, may help the UK avoid the worst of the Eurozone. If the Chancellor announced £10m for each Council in the country today, schemes could start spending on site in three months, the total cost a fraction of that lost to the balance sheets of the multinational banks through QE with no economic benefits. While the Eurozone gets ready for a catastrophic collapse, it's time for Britain to invest.