A history lesson for Johann Hari

“It is better to remain silent and be thought a fool than to open one’s mouth and remove all doubt” – Abraham Lincoln’s advice to Johann Hari

“The trouble with our liberal friends is not that they’re ignorant”, Ronald Reagan once said, “it’s just that they know so much that isn’t so”. If we forgive the Gipper for his misuse of the ‘L’ word, we can see the truth in his remark. Nowhere do we see it more clearly than in the writings of Johann Hari, a man who doesn’t let his complete ignorance of economics prevent him from spouting off about it.

He was at it again last week when he called the idea that government borrowing of £450 million per day was anything to get worried about ‘The biggest lie in British politics’. He revealed an ignorance of history to match that of economics.

Take Hari’s claim that “As a proportion of GDP, Britain’s national debt has been higher than it is now for 200 of the past 250 years”. He challenges us to “Check it on any graph by any historian”. OK then.

Indeed, you see an awful lot of debt. But if you put in a few historical events you start to get a different picture. Context is everything, as they say.

Starting just before 1700 the British national debt does indeed rise at a fair rate. But consider that, in 1694, the Bank of England had been set up for the sole purpose of funding Britain’s frequent wars against France. So you see a steep rise in the debt to pay for the War of the Spanish Succession (1701 – 1714), the War of the Austrian Succession (1740 – 1748), the Seven Years War (1754 – 1763), the war in America (1775 – 1783) and then the various wars following the French revolution (1793 – 1815). And that’s just the major ones.

Indeed, 1815 and the battle of Waterloo stand out clear as day on the graph with national debt peaking at over 250% of GDP. After that, with the exception of the Crimean war (1853 – 1856) and possibly the Boer war (1899 – 1902), Britain didn’t fight a major war again until 1914. Resting on the twin Cobdenite pillars of peace and economic liberalism the British economy grew and the national debt collapsed.

The story in the twentieth century is similar. Debt rocketed when we went to war in 1914 and again in 1939.

So yes, in the narrow sense Hari is correct, our debt is low compared to 1815 or 1945 and many of the years after those dates. The difference, as some basic history shows, is that back then we had the defeat of tyrants like Louis XIV, Napoleon and Hitler to show for it, now we just have a bloated public sector and engorged welfare state.

This is where the claim made by Hari and others that our debt is not so bad historically is thoroughly disingenuous. There is a world of difference between running up debt to stop the country being conquered by Nazis and running up debt to insulate an already well funded public sector from the effects of a recession which has ravaged the private sector.

It’s not a difference supporters of vast government spending are able to see. Taking their cue from the Spender in Chief, Gordon Brown, they think that any money spent by the government is investment, which is a good thing. But ‘investment’ and ‘government spending’ are not interchangeable terms. Investment has a quite specific meaning; it is capital, usually money, put into an enterprise with the expectation of a return in the future. Thus, government building a road or improving education is investment. Government paying out for public sector workers to retire earlier than their private sector counterparts, for people to live in expensive houses in Kensington, for top rate tax payers to receive Child Benefit or teenagers to download music for their iPods is not investment. It produces no return. It is just spending.

Fortunately this crucial difference is understood better by the man and woman in the street than by many self proclaimed experts. This explains the recent finding of 57% support for at least the coalition’s measures.

We are not fighting a world war so there is no justification for wartime levels of debt and not all government spending is a good thing. This shifty argument is yet another desperate cry from people who still don’t want to give up their belief in visits from the Money Fairy.

This article originally appeared at The Cobden Centre

6 thoughts on “A history lesson for Johann Hari

  1. Well we have some pretty expensive wars – however ill-judged – to show for it. Plus we have the expensive trinkets known as RBS and Lloyds-TSB.However, it is also questionable what your point is? Whatever the historical context, it is plain that you agree with the basic proposition that current debt is not exceptional. Is the fact that these historical precedents were caused by a war relevant other than for the purposes of tub-thumping? Did this fact substantially alter the nature of the economy? If so why don't you explain how? Oh wait…If we need to look at the history lessons maybe it is also relevant that public spending went up post-1945.

  2. Our defence spending is a very small percentage of public spending unlike when we fought Hitler, Napoleon etc. People were happy to lend to us and rack up extreme debt because they knew that after wars the debt is paid off by the severe cutting of spending on Spitfires, artillery shells etc. Think how difficult it is to pay off debt now. Every proposed cut is met by a proposed strike. Markets are not so keen on lending money when they can't see how it is to be repayed.

  3. But spending didn't go down. We stopped building spitfires but we bought atomic weapons, fought the Cold War and built the NHS along with the welfare state. So, once again, what difference does it make economically?

  4. Spending did go down but we still had to have rationing, a loan from the Americans and a currency devaluation.Also you appear to be regarding government spending as something homogeneous; it itsnt. Some is good in the sense that it provides a return, such as building a railway or a Spitfire if it stop you being conquered.Some of it isnt good because it provides no return. This can include Housing Benefit for those who dont need it, Disability Allowance for those who can work, subsisdies for arts that can support themselves, paying people in the public sector to sit around twiddling their thumbs…Youve fallen for the Gordon Brown lie that all public spending is, somehow, investment. It isnt.

  5. Errr… Governement spending as a proportion of GDP 1945, 9.9%; 1947, 10.7%; 1949, 12.7%; 1951, 14.7% …Sorry Enfield, but don't confuse me with Gordon Brown. I agree not all public spending is good. I don't think we should be subsidising banks to the tune of £100bn; I think we should abolish our nuclear deterrent rather than replacing Trident; I don't think we should be syphoning public money into private companies so that they can create bogus tests that suggest people with genuine disabilities are fit to work…Do you know public sector workers who are paid to twiddle their thumbs or have you been reading the Daily Mail?Of course waste is endemic in large organisations. I know this because I have seen plenty of it in the private sector companies that I have worked for. I was once employed by a major high street retailer to refit their store. This included being asked to take some shelving to the tip one day only be to told to put it back on the wall the next. So let's pop this fantasy that only public sector workers and institutions are inefficient.I happen to think it is a scandalous inefficiency that Barclays bank has a huge metal sculpture in the foyer of its headquarters. Whereas teachers in state schools are teaching in buildings with plants growing on the inside of the walls. So that looks like an efficient public sector with an inefficient private sector business. You'd agree of course?

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