Adam Smith Inst - May must accept that markets are the solution to our problems
6 Oct 2016 09:36 AM
Following PM Theresa May's closing Conservative Party Conference address, Sam Bowman takes a critical look at her claims of pragmatism.
Sam Bowman, Executive Director of the Adam Smith Institute, commented:
"If only Theresa May was serious about ditching ideology in favour of pragmatism and evidence – she’d have to abandon most of her main policy planks.
"Take energy price caps. We have evidence that these will lead to lower investment, lower production and more brownouts or even blackouts. Eventually, these policies may lead to electricity rationing and nationalisation. High energy prices are mostly caused by high wholesale prices, and energy firms are not generally more profitable than other large firms.
"Or look at the employee representation on company boards – which is better described as union representation. Here, the evidence is that giving unions this sort of power can turn boards toxic, as happened to Volkswagen, and these rules have reduced the value of German firms by 26%. Other academic evidence suggests that board representation is just about the only bad way of giving workers more say in how their firms are run. So why on earth is this the policy that supposedly-pragmatic May is proposing?
"Nor is there any evidence that clamping down on EU immigration will help British workers, but we will have to borrow more if immigration falls because they pay in more than they cost. Or that quantitative easing has made us worse off – the evidence suggests that without it the post-crisis recession would have been deeper and longer.
"Mrs May’s speech was the opposite of pragmatic. We call on the Prime Minister to abandon her ideological attachment to interventionist economic policies, look at the evidence, and accept that it tells us that markets, not the state, are the solution to our problems."
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