Monday, September 20, 2010

Unemployment: a Liberal solution is in our own hands

In the last big recession, at the beginning of the 1980s, Unemployment became a national spectre. News at Ten would intone in doomed tones the details of the latest job losses around the country, and often the numbers of jobs going were truly appalling. Thousands were laid off, and entire towns lost their very reason to exist. This recession, so far, has been different because unemployment has not in fact risen in quite the same way. Given the various changes (read: fiddles) that governments have adopted along the way in order to reduce the official unemployment rate, the numbers might be expected to be lower anyway, but in fact the population of the UK has risen quite sharply over the course of the last thirty years, so even a three million unemployed level would be quite a lot lower as a percentage than three million unemployed was in 1981. In fact we have got nowhere near that level... yet.

The crude statistics hide more than they reveal: public sector employment was about 19.3% of total employment in 1997, and after rising to about 23%, is now between 20% and 21%- again given the large increase in population this masks a significant increase in the actual numbers joining the public sector. It also hides the significant increase in average wages in the public sector, which are now substantially higher than the private sector. It also masks a dramatic fall in the marginal productivity of the public sector. In short the public sector is larger, more expensive and less efficient than it was in 1997. This comes even before we think about the reclassifications that the nationalisation of the banks might make us consider, after all in other countries, the BBC would be considered a state organisation: for the purposes of British statistics, in the UK it is not- and indeed neither are the banks, such as RBS, HBOS, Lloyds, etc. which the state now controls.

In fact the explosion of state indebtedness was already under way well before the banking crisis. But in the face of the pressure of the twin problems of unsustainable deficit and ballooning national debt, it is clear that significant retrenchment is going to have to happen as a matter of urgency.

The irritation that the Liberal Democrat conference has demonstrated to the party leadership over the issue of "cuts", does not obscure the fact that the party understands why such unpleasant decisions are indeed necessary. However, what neither leadership nor activist base is demonstrating is some thought about how to address the issue of unemployment which is going to result.

Partly, at least this is because the Liberal Democrats, like the Conservatives, are still trying to debate the issue of unemployment in the language of Labour clientism. If the problem is "Unemployment" then the solution is "Creating Jobs" as if this was an end in itself. In fact this is Labour state power writ large.

In a free economy in a free country it is important to remember that people are allowed, and indeed should be encouraged to create jobs for themselves. The point of free enterprise is that people seek to do what they always dreamed of doing and to make an honest buck out of it, and not be Proles directed by the state as to what they should do. Entrepreneurs are not just Dyson or Branson, they include anybody who tries to work for themselves in any capacity. Labour imposed so many restrictions (often -quite falsely- blaming the EU for their own absurdities) that it is hard not to conclude that they conducted a pogrom against free enterprise and entrepreneurship. It is a pogrom that is condoned if we accept the New Labour vocabulary on unemployment and job creation.

Liberals have a deeper affinity with small business and entrepreneurship than any other party. Our traditional bedrock was the nonconformist self-made businesspeople of the north and west- where the Liberal tradition survived the bitter drought of the 1940s-60s. It seems to me that we have a chance to reclaim free enterprise as a cardinal Liberal virtue- and Liverpool of all places is where we should be starting this process. Liverpool was founded and built on a spirit of public spirited Non-conformism. The City was laid low by the Socialist response to the decline of the port, which the "creation" of endless jobs- all in the wrong place and in the wrong sector at the behest of the state. If the wealth of Liverpool was founded on civic Liberalism, its ruin was brought about about by civic Socialism.

We are going to face higher unemployment across the Western world. We could make this a burden by taking on yet further millions of jobless and increasingly skill-less workers into the Socialist client state of the "long term unemployed".

Or we could make it a Liberation.

We could foster greater labour flexibility and greater opportunity by encouraging new business and new entrepreneurship. We need to change people's mind sets by promoting the greater opportunity and greater freedom that entrepreneurship can give - at any age. The increasingly obvious crisis in the public sector can now give our country an opportunity for fresh thinking, and top of the list should be eliminating Labour Newspeak when it comes to jobs.

Government jobs are not the panacea for unemployment- creating a more dynamic and freer economy is.

Liberal Democrats should be making the case for greater freedom for entrepreneurs with gusto- before anyone else does.

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