LEADING ARTICLE : Give Patten a hearing: he may be half right

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The Independent Online
Chris Patten is one of Britain's more thoughtful politicians. His defeat at the last election was a blow to the quality of political debate, above all in the Conservative Party. But one of the disappointments of his period as Governor of Hong Kong is that hitherto he has seen his role as conveying the virtues of Europe to Asia. He has had little to say about what Europe might learn from Asia. His lecture in London earlier this week sought to repair that deficit. Its single most arresting proposition was the statement that a drastic reduction in public spending as a proportion of GDP is an essential condition for rapid economic growth.

Not many economists will accept the validity of this claim, but there is little doubt that Western political debate over the next few years will increasingly be consumed by the challenge of the east Asian economies and what might be learnt from them. The argument has already surfaced in the proposition that Britain should aim to become "the Hong Kong of Europe". This crude oversimplification ignores the fact that the Asian economies with rather less acceptable political characters, such as those of Singapore and China, have achieved even more rapid growth rates than the last great British colony. Asia-philes, particularly those on the right, tend to be selective about the qualities towards which they see us aspiring. Learning from Asia is unlikely to yield ready-made domestic political positions.

There are other reasons to be cautious. It is certainly true that Asian government spending as a proportion of GDP is much lower than the European average. But is this the main reason for the high growth rates? The principal source of growth - provided that government doesn't interfere - is, ironically, backwardness. This has been the case ever since Britain pioneered the first take-off into sustained economic growth two centuries ago. Those who are behind in the economic race can borrow technology and exploit lower wages to catch up.

The potential for economic growth that comes from shifting low-productivity agricultural workers into high-productivity industrial production is one that has been demonstrated by one country after another. The 100 million or so Chinese who are estimated to be moving off the fields into factories are doing no more than follow in the tracks of European peasants whose shift off the land helped to propel the post-war economic miracles.

The revolution - and for once the word is warranted - in the international economy has speeded up this process. In today's ever more integrated capital markets and business environment, technology and financial resources can be shifted around the world ever more quickly. Double-digit rates of growth that once seemed abnormal have become common. In the past three years, China has grown at the extraordinary annual rate of 13 per cent.

There is nothing, then, intrinsically surprising in the fact that many east Asian economies have been sprinting along while those in Europe have been apparently limping. Just as population growth rates tend to level out through the development process, so too do economic growth rates. Japan in the 1990s is a country mired in debt, deflation and depression - hardly the lodestar for a continuing economic miracle.

It would also not be unreasonable to suggest that as these countries acquire more prosperous and sophisticated economies, their propensity for public spending will rise. After all, this is exactly what happened in Europe over the past century.

All of this is true. But we should also beware of simplistic economic and cultural determinism, believing that the Western model is the most advanced available and therefore that all other economies will converge with it as they reach similar levels of development. That is a strong tendency, but we should not be so culturally arrogant as to suggest that there will be no reverse traffic. In some respects Japan has converged with the West, in other senses it has remained distinct. Japan has borrowed much from the West, but we have also started to imitate Japan.

In a world of growing globalisation and ever-fiercer competition, in which all governments answer to the same financial markets, there will surely be increasing pressure on Western economies to reduce the burdens of state expenditure. But even if this were desirable, how is it to be achieved? The Conservatives have been in office for 16 years and have, despite much huffing and puffing, miserably failed to shift the proportion of GDP spent by government. It has remained stubbornly above 40 per cent. The truth is that to effect any major change will require fundamental shifts in the relationship between the individual and the state, and, in particular, a drastic change in how we finance benefits, education and health. There are no simple solutions. Even a government as radical and ruthless as Mrs Thatcher's did not feel confident or strong enough to achieve that. It is difficult to imagine any government in Britain doing so in the course of the next decade.

There is certainly an argument to be had about whether the citizens of rich countries need a cradle-to-grave welfare state. Liberal instincts point in one direction, favouring individual responsibility. Socialist instincts point in another: if the better off opt out of health and education, what will be left will be a rump lacking the political lobbying pressure of the middle classes. As George Walden has observed, who can doubt that educational standards in the majority of schools would be much improved if there were not apartheid between the private and public sectors?

None of this appears likely to stop Mr Major brandishing his "below 40 per cent" target as if it were a potent, newly discovered political weapon. He believes that it will help to distinguish him further from Mr Blair, who may have set his face against blank public spending cheques but who has not yet embarked upon a campaign actually to shrink the state. In reality, Mr Major probably thinks that we will do well to contain public spending at a time when a low-inflation economy delivers steady growth and rising tax receipts. It is not impossible that if this virtuous economic pattern were maintained throughout the next five years, the 40 per cent threshold would be crossed. To go further would require a government which takes a more radical view of the welfare state from the one held by the present Prime Minister and his Chancellor.

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