Is western decline inevitable?

The Decline of the West

Big government was harming Europe's prospects anyway, but the euro is making things much worse

by John Redwood

The rising strength of China and Brazil, of India and the Civets, is based on hard work and free enterprise. Economies which have been kept poor by too much state control and by bad government in past decades, are being progressively liberated.

As this occurs, so more businesses are set up, more jobs created, more people are better educated. A virtuous circle has been created.

The declining relative strength of the west, especially of Europe, is based on the opposite process. There is growing government interference in every aspect of economic life. The top down Euro scheme, little wanted by the German and French people, let alone the British, is doing untold damage to economic prospects.

It is proving to be the ultimate ill judged intervention by the political classes, the final expression of governing power that is damaging families, businesses and job prospects.

It is of course true that the emerging nations have two natural advantages which should make it inevitable that they overtake the west in terms of total income and output. They are much more populous. They can catch up with western living standards by applying western technology and ideas to less productive economies.

In a way the surprise is just how big the gap was in favour of the west for many years given how few people live in the richer countries. Chinese communism prior to the enterprise reforms held the Chinese people back. Brazilian incompetence at macro economic policy led to many years of disappointment in Brazil. Russian communism combined with reliance on the Soviet empire restrained Russia for several decades and diverted a very high proportion of its low income into military spending.

The west, led by US capitalism, powered on , from innovation to innovation. Waves of new technology, electrical, electronic, and then digital fuelled growth and rising living standards.

Listening to the BBC's Today programme under guest editors this week, we still hear the same complacent western mantra. Yesterday we were told that Africa needed an EU style market to make it rich. A BBC correspondent blamed global warming for the failure of the continent to feed themselves.

Evan Davies was a breath of fresh air when he pointed out that crops were going to waste in fields because the trucks could not get to them to take them to market owing to poor roads.

I had hoped we might get a guest editor who would ask the big question – Is western decline inevitable? Was the Credit explosion of 2005-8 the last fling? Does the west have to accept a 10% cut in living standards to get off its diet of debts?

Or can it bounce back with new energy, new ideas, a new wave of technology the world just has to have? How can it grow itself out of too much borrowing?

How will we earn our combined livings in the new world which is emerging, where energetic Asian and Latin American countries make so much of what the world needs?

It would be good to go on from the big picture question to the role of the Euro and European government in hastening the western decline. Why not interview the enthusiasts for the Euro scheme and ask them how much more damage they want to do?

Are they pleased to have brought the European banking system to its knees, to dependence on artificial injections of cash from the ECB? Did they learn nothing from the diaster of the ERM? Why is the Euro scheme different?

Do they regret cobbling economies together that were performing so differently? Have they any idea on how to channel the German surpluses to cover the southern deficits? Was it part of the plan to create a world where the EU sends in technical administrators to distressed EU countries to put through large cuts in public spending?

Did they realise they were creating a mutual austerity machine?

Do they think the industrial companies will hang around in western Europe to pay the high energy prices they impose in the name of anti global warming?

Does making them conform with the growing libraries of rules help, when they can go to cheaper and easier jurisdictions to make their goods?

Are they yet alarmed by the amount of industry that has decamped to Asia and Latin America?

There is dramatic change sweeping through the economies of the world. The west is not owed a living by the rest.

The inequalities which affront many can be reduced by the west experiencing falling living standards, as well as by the rest enjoying rising ones. This may not be what the architects of Euroland had in mind, but it is the necessary consequence of their folly.

It is high time the west asked itself more fundamental questions about how it will earn its future living and whether that needs a new approach from governments to do so.