Sounds fine to me, does it do what it says on the tin?
I think this is a question that isn’t asked often enough, maybe there is an alternative to Social Democracy, after all that’s the strapline to my blog. I don’t see there is any problem in exploring the question to see where it goes. This is a global phenomenon and absolute poverty rates, defined as $1.25 a day, especially in India and China. The benefits of this poverty reduction have yet to reach Africa, for the most part as the chart below shows.
No-one is claiming that everything is fixed but the improvements have seen “the share of people in extreme poverty has decreased continuously over the course of the last two centuries. This is surely one of the most remarkable achievements of humankind“. So how does this work in practice, how can we improve? The two most commonly mentioned examples are Singapore and Hong Kong.
There’s certainly a lot to like about the economics of Singapore, it is ranked 36th in GDP which is some achievement with a population of five and a half million, a very low tax rate of under 15%, the second busiest port in the world by tonnage, 3rd highest GDP per capita and ranked the most open for business country in the world. The inflation rate is around 1% and it’s economy grew 2.5% in the first quarter of 2017. It also boasts a world-class financial services sector and is a major exporter of electricals, chemicals and services. It has very scarce water and arable land so it needs to import raw materials and export the finished goods to obtain food. A great example for the UK to follow and we have the added advantage of ample agriculture and water in addition to the City.
“Made in Hong Kong!” used to be a popular cry in my household when I was a child, Hong Kong was a byword for anything shoddily made and of poor quality, times have changed since then. The story of the rise and rise is extraordinary, Hong Kong’s gross domestic product has grown 180 times between 1961 and 1997. Also, the GDP per capita rose by 87 times within the same time frame. They have a lot in common with Singapore, low taxes, a thriving (virtually) free port, the sixth largest stock market in the world and a magnet for foreign investment. It has coped with the 1997 handover to China admirably and maintained worldwide confidence. Government spending is entirely financed by taxation and all this with a similarly low population of just over seven million. Surely these are real world neo-liberal policies in action, a template for success, why shouldn’t we copy them? Let’s look at what happened when someone did.
Allow me to introduce Governor Sam Brownback from Kansas, he was elected on low tax platform to put the economy into overdrive. this is a field test for exactly the sort of policies used in Hong Kong and Singapore, the Chicago Tribune takes up the story. “The Congressional Joint Economic Committee reported earlier this year that Kansas had just 9,400 new private-sector jobs in 2015 (out of 2.6 million nationwide). U.S. Department of Commerce data show that, prior to Brownback’s tax cuts, Kansas ranked 12th in the nation in personal income growth; after the tax cuts it fell to 41st”. There’s more.
“Kansas isn’t headed in the right direction,” said a recent editorial in the Topeka Capital-Journal, a newspaper that endorsed Brownback for re-election in 2014. “A massive decline in revenue makes it impossible to compose a stable budget. … The state highway system has been robbed of funds to fix shortfalls. … Those who believe people with mental illnesses or physical disabilities deserve compassionate help are appalled by limitations imposed on services.”
Oh dear. At least the Tea Party Neo-Liberal candidate will be gone in 2018 due to term limitations and the Republicans are desperately seeking to row back on his disastrous polices. As American Prospect puts it “The Kansas governor’s attempt to create supply side nirvana in Middle America not only failed to grow the economy—it created a crippling crisis of government that led to a statewide rejection of his politics”. The near decade long experiment was halted in June this year.
Near midnight on Tuesday, June 6, a number of Republicans in the Kansas legislature did something that few other elected Republicans had done in years: They acted responsibly. Joining with Democrats, they voted to roll back the huge tax cuts that Republican Governor Sam Brownback had inflicted on the state, which had devastated schools and other essential services while also depressing the state’s economy. But after five years of this exercise in trickle-down, the damage had been done.
So why exactly did it all go so wrong? I am sure Mr Brownback had a genuine belief in what he was doing and how he would achieve it, he had a plan and a statewide wave of good faith to help him do it. Neo-Liberalism is a half told fairy tale leaving out the scary bits to avoid frightening the children. Singapore has all the trappings of a democracy but it’s a nasty authoritarian regime and it’s debt level is over 100% of GDP. Sorry did I skip that bit in my Eulogy above? That is straight from the Neo-liberal playbook, they want low taxes, that place has low taxes, therefore taxes should be low. This mind numbing circular logic is equally on display in failing to realise that local governments and national ones have different economics, a local authority cannot produce its own currency making the comparisons facile.
Hong Kong is an accident of history and geography sitting pretty in Asia and right next door the worlds fastest growing economy. It has been the global hub since colonial times and other countries cannot replicate its circumstances. There is also a strong savings culture within those countries and that replaces a lot of taxation. The governments are very strong in these countries another fact the Neo-Liberals inexplicably miss out. Move along now nothing to see here. I shall leave the last words to TLC.
Don’t go chasing waterfalls.
Please stick to the rivers and the lakes that you’re used to.
I know that you’re gonna have it your way or nothing at all,
But I think you’re moving too fast.