The 'end of austerity' narrative is interesting. On the one hand, austerity is ultimately bad for growth as it hinders investment and aggregate demand. That's a given. But, on the other, there are countless examples of state spending going wrong: whether it's historical examples like Britain in the 70s, where the state was simply too large to promote any sort of incentive to work hard and be productive, or Brazil today, entrenched in a ancient historical unproductive culture based off entitlement causing huge spending on generous pensions or employment in safe public jobs or even France, Greece or Italy. All of these countries now or were in a debt time-bomb. But their government spent loads, isn't that a good thing for growth?
No. This complete oversimplification and generalisation by those on the left is a complete myth. It's the right kind of government spending that drives growth. What doesn't drive growth is increased bureaucracy, increased taxes and most importantly for those on the left, increase disincentives to work.
It's all well and good to say that we should help the poorest in society. But unlike what everyone on the far left seems to believe, needlessly increasing spending on welfare does not help ANYONE. And it is certainly not the way to get out of a recession. I'm not denying the effectiveness of fiscal stimulus though: in the short term, a quick burst of government spending such as Bush's $800 gift to every American taxpayer back in 2008 can be effective. But longer term, increasing spending on benefits does not help growth, or at least the sustainable manageable steady and productive growth we want to see.
I'm going to go further than that however. Government spending in order to get out of a recession and drive growth should be spent on things that increase the productive capacity of an economy to the greatest effect. Why? Because spending isn't unlimited, more spending means more debt and more debt leads to the chaos and potential disaster of a default, as well as spending a whole lot more on interest (like Brazil, Japan or Greece do). Extra spending on pensions, healthcare or even education often just drive consumer spending upwards but not in an effective or efficient way that a tax cut instead would do.
Government spending should be limited to an efficient and effective minimum. This means that the only government role in terms of getting out of a recession in the long-term should be extra capital spending on infrastructure projects.
I'm not denying that government spending on education or healthcare isn't vitally important it's just that its effect, especially short term for getting out of recessions, is limited. Every successful economy needs, in my view, an effective government healthcare and education system but using extra spending on that is not stimulus, it's potentially growing the future prospects of an economy.
To conclude, this is why I agree with the Conservative party's economic policy. State spending for the sake of it is simply not a good thing. Spending should be targeted in the most vital areas, and curbed away in others. George Osborne is doing this: he's increasing spending on infrastructure projects, cutting welfare and other wasteful areas of state spending whilst making some significant tax cuts that are mainly benefitting the poorest. Osborne has also slowed his cuts so that hit magical surplus (that is something I disagree with entirely, but I highly doubt will happen in 2020) 5 years later than expected. I'm optimistic about the next 5 years economically in this country. I dream of Britain being an open, sustainable, productive, uncorrupt country with a small, efficient state with some of the best healthcare and education systems in the world. I genuinely think that Osborne is the best chance we've got of achieving that dream.
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