Why Britain needs to return back to Keynesian economics - Andy Brown

The French describe the times that followed the Second World War as 30 glorious years because they seemed a time of peace, full employment, low inflation and economic success.

In Britain these were the years of council house building, free dental treatment for all, the creation of the NHS, grants rather than fees to study at rapidly expanding Universities, factory jobs, and homes available to buy at three times the average salary.

The theory that drove those improvements can be boiled down to this. It is a good idea if local, national, and international governments make plans to guide the economy and society but it is also sensible to leave space for individual initiative and private enterprise.

In the mid 1970s a new economic theory became fashionable. An obsession with the idea that the market must be free from any guidance and control began to dominate thinking. The impact of that obsession has been considerably less successful.

The naïve and extreme application of this theory has resulted in the destruction of much of British industry and the decline of many of the towns and cities that depended heavily on it.

The free market took one look at wage rates and working conditions in South East Asia and decided that it was better to close the textile factories in Bradford and open them in China. It did the same to the steel mills in Sheffield and before long even successful British inventors like Dyson were moving their factories to Malaysia.

Britain became heavily dependent on finance industries which lobbied hard for light touch regulations. Without government controls bankers were able to pay themselves huge bonuses for gambling with other people’s money. When those bets turned sour in 2008 the British government stepped in to bail out the same financial speculators who had told us lame duck industries should never be bailed out. Our national debt doubled to help bankers who had told us we couldn’t help steel workers.

The same extreme free market theories resulted in the sale on the cheap of many important public services like council houses, water companies, power suppliers and railways. The result was decades of under investment, a decline in the quality of much of the service and cost increases as the public was asked to pay for excessive dividends.

Now, suddenly many of the economic and political geniuses who told us that greed was good and globalisation a great step forward are changing their tune. They claim to understand the suffering of inner city communities and are making a lot of noise about making countries great again and the need to bring working class jobs back to working class communities.

This has resulted in some ludicrous attempts at shape shifting and rebranding. Nigel Farage has only ever worked as a financial trader in metals and then as a politician. Yet he had the brass-faced cheek to try and tell Scunthorpe steel workers that he understood their problems because he had worked in the metals industry. He has long advocated the benefits of expanding the role of market forces and letting private health providers take control of the NHS. Now he is suddenly an advocate for nationalising steel.

He also campaigned for Donald Trump and stood beside him and smiled as Trump told the world it was going to be tariffs all the way. The imposition of those tariffs has become a major threat to the British steel industry.

Way back in the 1960s Chairman Mao made a wild and reckless promise that China would overtake Britain in the production of steel within a decade. He tried to do it by issuing orders from the top of a fiercely controlled state system and failed. Then the farsighted leader, Deng Xia Ping, replaced him and started copying Keynes’ ideas.

Deng combined government planning and financial support with private enterprise to consciously direct investment into new technology. The consequence was that China was transformed from being one of the poorest countries on the planet to one of the richest and most powerful.

If we really want to make Britain great again we need to copy this and use the ability of local, central and international governments to plan and invest whilst not abandoning the freedom for people to innovate. It is a good time to start listening to some of the wiser of our dead economists and to stop listening to some of the wilder assertions of our living demagogues.

Andy Brown is the Green Party councillor for Aire Valley in North Yorkshire.