To a lunch organised by the Centre for Policy Studies. The idea was to look at the apparent crisis in capitalism.

Tim Congdon argued that it was not a crisis in capitalism and that it was the Government had made a banking problem a great deal worse last autumn. It had failed to do what the Bank of England did in the 1970s, namely support the banks behind the scenes. The good news however was that the Government has finally gone in for "quantitative easing" and this will work, causing the economy to begin to turn in six to nine months' time.

Lord Baker pointed out the huge contrast between individuals cutting back on their expenditure and the Government increasing its expenditure. He suggested the budget deficit would become huge. Sooner or later there would have to be cutbacks.

Brian Reading suggested, among other things, that inflation was a danger.

Together, these three (among a variety of other speakers) painted a mixed picture: some recovery, a huge government deficit and a danger of inflation.

My own contribution was to suggest that democracies have an inbuilt tendency to gravitate towards state ownership and regulation. People are unhappy about one thing or another and demand that "something must be done". That gradually leads to more government control and spending. In the 1970's, the economic crisis came out of a period when excessive socialism and union power were seen to be a cause of the problem. It was thus possible for Margaret Thatcher to use this crisis to create a counter-revolution against the Left-ward drift. But the current crisis, rightly or wrongly, is seen by most of the media at least, as a failure of capitalism and so it will be very difficult for those of us who want to reduce the role of the state to use it to our purpose.

Posted by James Bartholomew • Indexed in Off the subject

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