Private benefit is a public good

I’m often asked how bad the impending recession is going to be. The answer is that nobody has the faintest idea. If they say they do, then they’re either lying or mistaken. 

We’ve had a whole range of figures from the forecaster. From a 5% decline to a 35% decline this year. With things changing so fast, it’s impossible even to guess. 

We might be able to get a clue from the Spanish flu of 1918-9 which was actually far more lethal than Covid-19. US industrial production then  fell by 25% but it had mostly recovered within a year. I don’t expect a quick bounce back this time. 

In previous recessions, business has at least kept going. This time we have closed it down. And our economy is much more integrated than it used to be. Rupture any bit of it and you dislocate the whole. 

Government can help the recovery of course, mostly by getting out of the way: cutting regulations like the land planning rules and taxes like VAT and the taxes on capital and investment: the factory tax. 

Some people might worry about the loss in government revenue doing that but unless we encourage new businesses to spring up and replace the old ones that have been killed by the recession then there won’t be any government revenues anyway. And what does that mean for the funding of welfare benefits and indeed the healthcare system. 

Fortunately most people agree. In polling commissioned by the Adam Smith Institute and conducted by Survation under BPC rules, 72% of people say that they’re supportive of tax cuts designed to boost the economy and jobs after lockdown ends. The largest cohort of support came from the youngest in society. We’re going to need the private sector to survive and thrive if we’re to have a prosperous future, that means reducing the cost of government.