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Saturday 26 May 2012

TPA – The Estonian Comparison

As all the hard work by the luminaries of the 2020 Tax Commission fades out of view – despite all the column inches and variously lame punditry dedicated to it – the so-called Taxpayers’ Alliance (TPA) continues to push the idea that a smaller state – and by the happiest of coincidences the size that the Commission recommended – is the ideal size, and moreover the size that means more growth.

More guff recommended by the Comfortable of Tufton Street

To this end, non-job holder Rory Meakin has commended a “Research Paper” from the Centre for Policy Studies (CPS), yet another in the seemingly never ending array of Astroturf lobby groups out there on the right. The CPS’ paper is titled “Small Is Best”, and by an equally happy coincidence, this matches more or less what they have been arguing for a number of years.

So what is the basis for this statement? Well, there are lots of regression analyses, which as Zelo Street regulars will know, were used by the TPA to promote the truly fraudulent assertion that speed cameras cause more accidents. So we should immediately be on guard. But, the CPS blurb tells, “advanced small Government economies” have been studied. What would these be?

The TPA lets that one slip: the CPS study includes “new countries such as Estonia”. Estonia? Yes, Estonia. And the figures then spat out by the regression analysis are then applied to produce a “potential GDP” starting back in 1965. Is there anyone out there who is not experiencing a loud noise emanating from their bullshit detector on hearing this? Mine was working overtime.

Let me put Rory Meakin, the TPA, the CPS, the IoD, and their cheerleaders straight. In 1965, the UK and the rest of Western Europe had seen two decades’ more or less uninterrupted growth following the end of the war. All had market economies with – Greece, Spain and Portugal excepted – democratically elected Governments (and despite the dictatorships, the latter two also posted good growth over this period).

Estonia had been assimilated into the USSR – a small measure of autonomy excepted – and was otherwise a closed society. After the fall of the Soviet Union in the 1990s it, and the other Baltic republics, had to start more or less from scratch. The idea of comparing Estonia after the end of the USSR to anywhere in Western Europe in 1965 is breathtakingly false.

But that is the depths to which the CPS is prepared to sink in order to prop up their assertion that it would be otherwise beneficial to cut the size of the public sector to the kind of level it was before the NHS came into being. That the TPA unquestioningly endorse work based on a false premise is typical of these lobby groups: it’s in their end of the field, therefore it must be right.

And it gives the TPA and their followers a nice warm feeling, so that’s all right, then.

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