With Party Conference well under way I have no doubt we will be hearing from numerous politicians and experts from all party political colours on what needs to be done to fix both the UK and the global economy. (This argument has become a political broken record of late) The cause of the current simple comes down to the fact that all parties are pursuing their own agenda and not one party has put forth a solution everyone can agree on, including those in government and in the Bank of England. Indecisiveness in economics is nothing new.
This brings me on to a rather interesting programme I watched last night. The BBC is running a three part series of documentaries focusing on three of the twentieth century’s most prominent economists: Keynes, Hayek and Marx. The second in the services focused on Austrian economist Friedrich Hayek.
Born in Austria in 1899 Hayek wrote a best-selling polemic railing against economic planning, The Road to Serfdom, shortly after World War II. In the 1970’s and 1980’s he became one of the economist of choice for those on the right including previous Prime Minister Margaret Thatcher. Most recently The Road to Serfdom has become a best seller in the USA thanks to the Tea Party movement.
Rather than thinking the financial crisis was caused by letting markets get too free – the financial markets in particular, followers of the Hayek argue the opposite, that the financial crises happened because markets weren’t free enough.
Hayek focused on the immense complexity of markets and their inherent unpredictability. Arguing that policymakers simply didn’t have the depth of understanding to master economic complexities well enough to guide the economy in the right direction. The Hayekian explanation for the crisis states that it’s all down to government meddling, and what is actually needed is a period of ‘cooling off’ for the economy to regulate itself. In the Austrian view, the US Federal Reserve and other central banks worsened the financial crisis by always cutting interest rates when the economy showed signs of faltering; for example, after the bursting of the dotcom bubble.
Therefore the economic crisis can be placed firmly at the feet of policymakers, even those who ideologically shared his views but still intervened, seemingly unable or unwilling to let go of the urge to attempt to direct the economy.
More often than not, Hayek said, politicians would only make things worse.
This made me think – What do we need to do to boost the economy and help businesses to do business, would a government free economy actually work? Somehow I don’t see any party leaders suggesting we follow this path at their respective party conferences. What I would love to know is how business owners view this idea of an unregulated economy by government, and not just big business but SME’s, just how sustainable would running a business by without government intervention in the economy?
With governments trying and failing to turn the economy around what do you think would provide the much needed book for business, should the government go economics cold turkey?
Money Makers can be viewed on BBC iPlayer.