By Swapan Dasgupta
Nostalgia can be terribly uplifting. Yet those who experienced life in London in the 1970s have reasons to look back with mixed feelings. There was, of course, an exhilarating personal freedom. But this was coupled with fears: fear of high inflation, fear of a shrinking currency, fear of yet more taxes and, for my British friends, the fear of unemployment.
The 1970s was the first decade Britain tasted the everyday consequences of decline. The experience left it scarred. In one generation a nation which built the world’s largest empire and resolutely defied Hitler was transformed into an assembly of moaning minnies, a transformation that withstood Margaret Thatcher’s brave attempt to put the “Great” back into Britain. In hindsight, both Thatcher and her New Labour inheritor did their country a disservice: they created a delusion of recovery and delayed the realisation of the relegation to the second division.
The ongoing global recession has traumatised Britain more profoundly than at point in living memory. It is not merely that people have realised that the value of their homes and pensions are nowhere near what they imagined it to be and that more jobs are disappearing than are being created. Particularly galling for a country that has deftly managed to punch above its weight is the realisation that it may have to go begging to the International Monetary Fund—a prerogative of disaster zones such as Zimbabwe.
The harsh reality today’s born-again Keynesians stubbornly refuse to recognise is that countries like Britain are living well beyond their means, on borrowed money. British government borrowing this year is likely to be £175 billion or nearly 80 per cent of the GDP. By the time Gordon Brown—another economist Prime Minister—is voted out, he would have left behind a collective debt of £1.3 trillion. It is estimated that interest payments by the government will soon exceed spending on education and defence. As a feeble bid to narrow the deficit, the government has unleashed a pathetic class war—50 per cent tax on high incomes.
There is no inclination on the part of a socialist government to tighten its belt. It is politically imprudent to tell voters that the country can’t afford exorbitant funding of welfare, not unless the cake gets bigger. This was the harsh message Thatcher delivered in the 1980s and for which she earned the visceral hatred of the liberal intelligentsia. Brown can’t now tell voters that she was right after all.
The unpalatable fact is that Britons, like other Europeans, have developed lifestyles and consumption patterns that are excessive, wasteful, and unsustainable. If binge drinking in pubs and expensive holidays were curtailed, a mid-income family would probably have the cushioning to spend on private education and health insurance. State welfare has lowered the incentives for responsible consumption. British Indians have outperformed their native counterparts because they have practice moderation and uphold the family—Victorian values that today’s Britain despises.
Since they discovered the welfare state as an alternative to Soviet-style Communism, socialists have successfully spread the message that a “caring state” is more important than either families or social communities. In Britain, the state intrudes into every sphere of life from healthcare and education to providing unemployment benefits and pensions. It even tries to prescribe social attitudes. The result is a gargantuan bureaucracy and government spending that equals half the GDP of an economy that shrunk 3.5 per cent last year.
Britain is approaching an economic nightmare. But it is curious that its tax-and-spend profligacy is the ideal of those who tom-tom “inclusive growth” in India. Last week, Rahul Gandhi admitted that 90 per cent of welfare spending is frittered away in waste and corruption. However, rather than balk at this outrage both he and his economist Prime Minister have preferred a bigger role for government over more incentives to individuals and families. The PM doesn’t believe that a low tax regime is a moral imperative of good governance; to him good economics is mega spending.
In comparative terms, India is still a notch below Britain in both prosperity and economic promiscuity. But if a fragile and self-serving coalition assumes power after May 16, increases budgetary expenditure dramatically—which it surely will do—and adds to the already unsustainable fiscal deficit, Indians may once again experience that sinking feeling of the 1970s. The entrepreneur-driven national exuberance of a year ago may well be subsumed by a sense of helpless decline.
Actually, it will be worse than Blighty. The British state is well-meaning but bloated, plodding and intrusive; India’s will be uncaring, inefficient, corrupt and increasingly criminal.