/ FAITH, HOPE…
Everyone’s thinking (and some are hoping) that US President Joe Biden is ending the “era of small government” and brute free-marketeering, dating back to Ronald Reagan.
But according to Ruchir Sharma, Morgan Stanley Investment Management’s chief global strategist, that era never really existed.
Mr Sharma recently wrote a thought-provoking piece in the Financial Times (subscription) arguing that the state never really shrank in the past 40 years. Instead, he argues, “since 1980, government spending has held steady, and even risen slightly as a share of gross domestic product in the US, the UK and other developed economies. Deficits have gone from rare to routine, in good years and bad. Public debt in developed countries has soared — in the US to more than 120 per cent of GDP last year. Government is just as big and more interventionist than ever.”
Okay. But something did change in the years since Reagan and Thatcher. What was it?
In the US and UK, neoliberal thinking constantly pushed for tax-cutting initiatives, thereby starving that supposed behemoth of a state of the resources to sustainably grow.
State-owned companies were privatised, sold off to the highest bidder.
The big society was considered a collective myth, best disposed off for pennies in the free-market auction room.
Unions were marginalised and the paucity of collective bargaining made workers’ situation more perilous and troubling than before.
Stock market bubbles became common.
For what it’s worth, President Biden’s plans are about restoring some of the balance to the behemoth, giving it the soil and nutrients to grow straight and strong, rather than weedy and twisted.