Although many in the United Kingdom thought that the Conservative Party would ultimately lose control of the government to a coalition of the Labour Party and the Scottish National Party in the recent election, Prime Minister David Cameron and his Conservatives won an outright majority of seats in parliament and will be stronger than in their former coalition government with the Liberal Democratic Party. Most Americans probably dont pay much attention to British elections, but perhaps this time they should.
Instead of using Keynesian economics, massive new government spending leading to or aggravating budget deficits, and money printing to artificially jumpstart the economy after the Great Recessionas George W. Bush and Barack Obama did in the United States and many European governments and the European Central Bank have done on the continentCameron, like his astute German counterpart, has run a policy of moderate austerity by cutting government spending to reduce budget deficits to ensure long-term economic growth. Instead of following the profligate policies of Bush and initially Obama (Obama eventually has brought the U.S. deficit down somewhat), Cameron has followed the example of U.S. presidents Warren Harding, Calvin Coolidge, Dwight Eisenhower, and Bill Clinton, undertaking austerity in the wake of a recession to help ensure a period of long-term prosperity. In general, cutting government spending, balancing the budget, and reducing the national public debt as a portion of the total economic output (Gross Domestic Product) reduces government drag on long-term economic growth.
During his re-election campaign, Cameron courageously vowed to double down on this austerity program if re-elected. Many politicians usually turn on the government spending and money printing spigots to essentially buy their re-electionfor example, as Richard Nixon did in 1972. When these irresponsible practices were combined with the economic ill-effects of the Vietnam War, they helped lead to a long period of U.S. stagflation (an economic slowdown coupled with high inflation) of the 1970s.
So it is no surprise that the two countriesthe United Kingdom and Germanythat took a different path than the usual Keynesianism practiced by most governments are doing fairly well in comparison to the others. Instead, the United States has had a long period of anemic recovery, because its massive national public debt, which now exceeds $18 trillion, is dragging the economy, much like a ball and chain.
And in this regard, one of the big differences between the British Conservative Party and the American Republican Party is that the British Conservatives are willing to cut defense spending and Republicans are not. The British Conservatives have endured criticism for lessening Britains role in the world by such defense cuts and by Camerons promised referendum on whether the United Kingdom should remain in the European Union. In fact, both policies may lead to Britains long-term rejuvenation. The public in the United Kingdom, and its national treasury, became exhausted by the previous Labour governments slavish following of the Bush administration into two pointless and costly nation-building wars in Afghanistan and Iraq. Thus, Cameron has refused to help the United States lead the charge in dealing with problems in non-strategic areas: for example, dealing with the Syrian civil war, ISIS, or Russias meddling in the Ukraine. In addition, Britains ultimate exiting from the European Union might remove the albatross of European regulation from the British economy.
The United States should realize what Harding and Coolidge realized after World War I, what Eisenhower realized after the Korean War, and what Clinton realized after the Cold War the United States needs to reduce public spending, including on defense, so as to allow the rejuvenation of the American economy. America should probably even go further and reduce its overseas commitments, so that it is no longer pledged to defend the world.
Instead, the Republicans in the nascent presidential campaign are calling for a New American Century or to Make America Great Again by adopting a hawkish foreign policy and hiking the already massive U.S. defense budget (the United States already spends what the next 13 countries spend on defense combined). The Republicans of today exaggerate the Chinese threat and at the same time refuse to learn from Chinas rise. Since the 1970s, when China went capitalist, the Chinese generally placed defense spending at the bottom of their priorities, instead choosing to channel their resources into developing their economy. Only fairly recently, after years of rapid economic growth, have they begun to significantly increase their defense budget. Of course, their overall level of defense spending still pales in comparison to U.S. defense spending.
Todays Republicans, beginning with Ronald Reagan, began focusing on fraudulent tax cuts while failing to cut government spendingin fact, increasing itas a portion of GDP, including massive hikes in defense spending, thus leading to the accumulation of huge deficits and national debt. Thus, they didnt cut either social entitlements or defense. As Eisenhower, a former general, had realized long ago, such policies weaken the country and its security in the long term. And the history of prior empires has proven the recent Chinese economy first principle to be the right one: many empires have failed from financial exhaustionin the twentieth century, the British, French, and Soviet Empires, to name just a few.
The American Empire, with its overextended military commitments around the world and its already bloated defense budget, is need of a period of retraction and reinvigoration if it wants to compete with China in the long-term. Whoever wins the 2016 election should take a lesson from the Cameron Conservatives in the United Kingdom about rejuvenationmore austerity at home and abroad can revitalize the economy, which is the basis of all other indices of power. However, Hillary Clinton and almost all of the Republicans running are probably incapable of such an enlightened policy.