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Dr Matt Ridley

Global outlook rosy; Europe’s outlook grim

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A “rational optimist” like me thinks the world will go on getting better for most people at a record rate, not because I have a temperamental or ideological bent to good cheer but because of the data. Poverty, hunger, population growth rates, inequality, and mortality from violence, disease and weather – all continue to plummet on a global scale.

But a global optimist can still be a regional pessimist. When asked what I am pessimistic about, I usually reply: bureaucracy and superstition. Using those two tools, we Europeans seem intent on making our future as bad as we can. Like mandarins at the court of the Ming emperors or viziers at the court of Abbasid caliphs, our masters seem determined to turn relative into absolute decline. It is entirely possible that ten years from now the world as a whole will be 50 per cent richer, but Europeans will be 50 per cent poorer.

Not that the world economy is a zero-sum game. It is a good thing if Africans and Latin Americans join Asians in getting richer at breakneck pace, as many now seem to be doing, even if we don’t join in: not only because want and misery are bad whoever they happen to, but also because if others grow productive and inventive they can supply us with valuable goods and services. Why should the development of new antibiotics or thorium nuclear power remain a burden exclusively on the shoulders of Western taxpayers?

Even so, relative decline can be painful. Spanish people are richer and live longer than when their silver-sated conquistador ancestors strutted the European stage, but I am sure it does not feel like it to an unemployed youth in Bilbao. Whatever happens, we Europeans will probably have to get used to watching Asians book the best restaurants and launch the biggest aircraft carriers in the years ahead.

Absolute decline is far more scary. If Europe cannot rediscover how to grow its economy, then it will have to default on its vast debts, either directly or by inflation. Either way savers will be poorer, tax receipts will be lower and spending on schools and hospitals and roads will be lower: genuine austerity.

As the MP Douglas Carswell reminds us in his book The End of Politics, here in Britain we have public and private debts that are five times our annual economic output; we are spending £46 out of every £100 we earn to buy government – a product that, unlike most, delivers less output for more cost each year. As the Ming empire found out, the more government you buy, the less economic activity you get. A Fujian travelling salesman in 1400 was enmeshed in such a tangled bureaucracy that he could neither travel nor sell without bribes and permits, and he had to submit a monthly inventory of his stocks to the emperor.

Sound familiar? Every small businessman I talk to these days has a horror story to tell about the delays and costs that have been visited upon him by planners, inspectors, officials and consultees. Using the excuse of “cuts”, the bureaucracy is taking even longer to make decisions than five years ago. In the time it has taken Britain’s Government to decide whether to allow a fifth exploratory shale gas well to be drilled in Lancashire, and from the same standing start, the same investors have drilled 72 producing wells in Argentina. That the country of Watt and Stephenson should look a potential cheap-energy gift horse in the mouth in this way is staggering to this jaded optimist.

From ancient Egypt to modern North Korea, always and everywhere, economic planning and control have caused stagnation; from ancient Phoenicia to modern Vietnam, economic liberation has caused prosperity. In the 1960s, Sir John Cowperthwaite, the financial secretary of Hong Kong, refused all instruction from his LSE-schooled masters in London to plan, regulate and manage the economy of his poor and refugee-overwhelmed island. Set merchants free to do what merchants can, was his philosophy. Today Hong Kong has higher per capita income than Britain.

In July 1948 Ludwig Erhard, director of West Germany’s economic council, abolished food rationing and ended all price controls on his own initiative. General Lucius Clay, military governor of the US zone, called him and said: “My advisers tell me what you have done is a terrible mistake. What do you say to that?” Erhard replied: “Herr General, pay no attention to them! My advisers tell me the same thing.” The German economic miracle was born that day; Britain kept rationing for six more years. Where are Europe’s Cowperthwaites and Erhards today?

A growth-preventing bureaucracy is not the only thing suppressing enterprise in Europe.

Superstition is also playing a part, as it has done in past episodes of economic decline. The great flowering of Arab prosperity and culture under the Abbasids was brought to an end with the burning of books, the shutting down of inquiry and a mistrust of novelty.

Again there are echoes. Many of the ideas that led to the genetic modification of plants – which has boosted yields, cut insecticide use, saved fuel and soil, and helped the poorest farmers – were pioneered in this country. Yet today there is almost none of this work done in Britain and none of its boons are permitted to farmers and their customers. The labs are ghostly quiet. Why? Entirely because of neophobic superstition that has animated reactionary elites into opposing change on the basis of myths peddled by green mystics. (The biggest superstition of all is surely the worship of the euro: the sacrifice of growth, youth and truth at the altar of a mere currency.) By contrast, America, for all its fiscal incontinence, is still friendly to enterprise and open to novelty, as any time spent in Silicon Valley will prove. To avoid the fate of Ming China Europe needs to rediscover economic rationality.