Wednesday, 3 July 2013

Cameron and Osborne race to the bottom in economic literacy

By Philip Booth

Google Cameron global race and you get a depressing 33,000,000 responses. Google Osborne global race and you get a depressing 2,650,000 responses. Apparently, the ‘global race’ is going to be a major theme of the Conservative Party conference. The concept of the global race is terrible economics and a reflection of utterly incoherent thinking. This is a pity because one of David Cameron’s major speeches on the concept contained a very fine set of aspirations (even if those aspirations are a long way from being implemented in policy). However, the policy analysis in the speech was completely overwhelmed by the reporting of the global race rhetoric which does so much to undermine understanding of economics in the public sphere.

So what is the problem?

Cameron does not say with whom we are in a race. But, given that it is a global race, I guess we can assume it is everybody: India and China at one end of the scale (rapidly growing but still relatively poor countries) and France and Germany at the other end. Presumably, in Cameron’s view, there is some kind of fixed prize. If France or China adopt bad policies, we are more likely to win the prize and come first in the global race. But there is no evidence for this competitive theory of development. A poor France or a failing India does not help Britain. It will mean more expensive imports for Britain if other countries are less efficient and smaller export markets for our own companies if other countries are less prosperous. Furthermore, good policy can be copied – if there are models of good policy abroad, that provides evidence for Britain and we can copy those ideas: low corporate tax rates in Ireland and competition in education in Sweden are both examples of global copying rather than global races in a zero sum game.

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