When I was a graduate student in London right after the earth cooled, 1968-1970, Harold Wilson was the Prime Minister, and Keynesian Economics ruled his Labor Party from Cambridge. At London School of Economics the teaching was more ChicagoSchool, so our professors watched and reported regularly on economic policies.
In a smaller nation, about one third the size of Texas with 50 million people, policies took effect quickly and had measurable consequences.
I remember that the government would decide that the country needed more widgets, and so they subsidized widget creation. Six months later there were too many widgets, according to the same policymakers, and so they started taxing widgets. But soon there were not enough widgets again, and so they removed the tax and came back with the subsidy.
After a couple of these cycles, business people just gave up and invested in something other than widgets. There were therefore less widget makers and less jobs, because, despite the next round of subsidies, businesses did not believe in the long term viability of widgets, and so they gave up on them.
Those who supplied the materials for widgets, and those who used widgets, also had to cut back, with a reverse multiplier effect.
The result? With only a short term perspective and no long term certainty, manufacturing and jobs suffered because business people could not accept all the willy-nilly government risk on top of the other risks inherent in business. They retired with their cash to the sidelines, or invested elsewhere.
The government tinkered with business so much that business threw in the towel and gave up. Sound familiar?
Comments