This article was originally published on the blog of the Centre For Welsh Studies.
Even the most ardent free-marketeer would concede that the actions of the government in the current COVID-19 crisis are on the right track. We who most lament the excessive involvement of government in the economy in ‘normal’ times still recognise that at times of crisis – war, pestilence or famine – there are things that only governments can do.
And when, eventually, we emerge the other side of this, many people will have cause to thank Rishi Sunak, the Chancellor of the Exchequer, for his bold actions in protecting jobs and small businesses.
But here in Wales we’ve experienced, more than most countries, the effect of excessive government interference over the long term: slowing growth, killing jobs and making everyone poorer. So once this is over, what sort of normal should we want to get back to?
It’s instructive to look back in history to see what has happened after previous occasions when a government has been forced to commandeer large parts of the economy in order to respond to a crisis. Two obvious examples are the First and Second World Wars. If anything, the government made the opposite mistakes in the aftermath of those.
During the First World War, the government of the day took Britain off the Gold Standard by printing so-called ‘Bradbury Pounds’, increasing the money supply in the short term and so keeping the country solvent. Once the war was over, returning to “sound money” was seen as the highest priority, and the Bradbury pounds were withdrawn from circulation over a ten-year period.
In isolation that might have been the right policy, but it came at the same time as the glut of cheap German coal and steel that flooded the British market as part of Germany’s reparations negotiated by Lloyd George at Versailles. This contributed to the deflationary spiral of the 1920s, which in turn led to the Great Depression and such profound hardship for the South Wales Valleys and similar industrial regions elsewhere. We wouldn’t want to see a return to those days.
After the Second World War, the Attlee government continued a very high level of government involvement in the economy – if anything, increasing rather than reducing it through its programme of widespread nationalisation.
The Conservatives largely acquiesced to this – the brief re-privatisation of the Steel Company of Wales in 1951 being an honourable, and surprising, exception – and the post-war consensus continued for a further three decades.
It was during this time that the British economy in general, and the Welsh economy in particular, lagged further and further behind the rest of Europe. It was of course the great hope that joining the EEC in 1974 would enable Britain to catch up with Europe again – but many of us remember what the rest of the 1970s were actually like. It was only after Mrs. Thatcher’s decisive break with the past after 1979 that economic renewal could begin and the economy was set back on a path towards long-term growth.
The tragedy for Wales was that the stranglehold of the Labour Party and the Trade Unions at so many levels of national life prevented the same level of economic renewal from taking hold here.
A new chapter
The immediate effects of COVID-19 on the economy are likely to persist throughout the rest of this year and well into 2021. Yet in May 2021 we shall have what promises to be the most interesting and unpredictable Senedd election since the Welsh Assembly was first established in 1999.
Hardly anyone seems to think that the current Welsh Labour government, which has been as unimpressive in its handling of the COVID-19 crisis as it has in everything else, can continue its 20-year dominance of the Senedd. There is the significant likelihood that the Welsh Conservatives will see their highest level of support yet, possibly becoming the largest party.
Not only that, but there is now a brand new pro-market party in Wales, Gwlad, who having made their first electoral outing in three seats in the 2019 General Election are planning to stand across the country in 2021 on a free-market, small-government policy platform focused on delivering economic growth and closing the gap between Wales and the rest of the UK.
So what sort of policies should pro-market parties be advocating as Wales recovers from the aftermath of COVID-19 and seeks to rebuild?
Here are some suggestions:
- Clip the wings of the Third Sector. We do not need 48 separate publicly-funded organisations to tackle homelessness in Wales, especially when many of them seem to have to import clients from over the border to justify their existence.
- Stop building prestigious business parks using public funds, that as often as not end up being occupied by government departments and third-sector organisations.
- Shift the focus for investment support from overseas firms who’ll be here today and gone tomorrow, and instead concentrate resources into home-grown Welsh businesses who’ll stay and grow for the long term.
- In particular, stop throwing money at every charlatan who rocks up to Cardiff Bay with a half-baked scheme for zipwires, hotels, windfarms or leisure parks, and instead place the emphasis on encouraging long-term, well paid jobs in skilled manufacturing or white-collar industries.
- Most importantly of all, remember that often the best thing a government can do to promote growth is to get out of the way and leave it to people who know what they’re doing.
According to legend, Lucius Quinctius Cincinnatus was the 5th-century BC Roman statesman who, on two separate occasions, was appointed as Dictator (a legal title) at times of national crisis but each time resigned voluntarily to work on his farm as soon as the crisis was over. He became a byword for the vital combination of firmness in times of crisis and humility in times of peace – an example which the UK government would be well-advised to follow in the current circumstances.
But whatever happens in Westminster, here in Wales we have the opportunity to lead the way by electing a pro-market Welsh Government in 2021; one which can begin to free up the Welsh economy and start to create the prosperity that Wales has lacked for so long.