Want Your Economy To Grow? Shrink The State.

In 1981 Mrs Thatcher decided to cut spending.  364 economists wrote to The Times telling her she would exacerbate the recession.  They were wrong.  Interest rates fell, and economic activity took off.

A similar story is told of Germany’s miracle recovery in 1948.  Wartime regulations and price controls were removed, and the country’s economy took off and grew at 8% a year for a decade, doubling in size and leaving all other European economies for dust.  This story is well told in the WSJ
Germany’s economy is growing again.  The country’s industries and technologies are part of the story.  But so too has been the willingness of German workers to accept pay restraint until they are priced back into markets.  Germans have an ability to think long term, which seems to elude others.
That said, the Euro is now seen as a failure by most Germans.  When Merkel falls, which could take place at any time, whenever her coalition decides to split, it seems almost inevitable that the next government will want to break free from the restrictions the currency is creating, and the threat it poses to future inflation.  If Germans are motivated by anything at all, it is the memory of how their society was destroyed by inflation and war.  They will do whatever is required to avoid a repeat of the same.
British eurosceptics who want to tear their hair out at the failure of the Conservatives to stand against EU power, should take heart from developments in Germany.  The end of the Euro as a single currency cannot be far away.  Its replacement into two or more sub-currencies is inevitable.
The big question will be what will happen to France.  Will France be allowed into the Northern Euro?  Or will she be relegated to the indebted Southern sector?  I would imagine the split, when it comes, will send her South.  The German economic powerhouse will drive forwards unimpeded.

Cameron could take heart that many of his policies involving a shrinking state sector will enable Britain to grow faster also.  The end of the Euro will shatter the arrogance of the EU, and many repatriations of powers could become politically possible at the same time.  Recessions often blow in the right changes, and this one will be no exception.

The Tap Blog is a collective of like-minded researchers and writers who’ve joined forces to distribute information and voice opinions avoided by the world’s media.

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