Gordon Brown's bankrupt ideology

published 2 October 2009

The financial crisis was all the Tories' fault. So Gordon Brown reckons anyway. Apparently, "what let the world down last autumn was not just bankrupt institutions but a bankrupt ideology". What was this ideology? Ah yes, "the Conservative idea that markets always self-correct but never self-destruct".

Let's ignore the fact that even if this was correct, Mr Brown has been running the economy in one way or another since 1997, and so perhaps should already have spoken out about this 'bankrupt ideology' at some point over the past decade.

Instead, let's take a look at what brilliant new ideas Mr Brown has brought us to replace this erroneous faith we all once had in free markets. Such as the car scrappage scheme. Probably the biggest economic news from the Labour party conference was that the government is to extend this scheme, which involves giving drivers a £2,000 subsidy (£1,000 of which comes from the taxpayer) to swap their old car for a new one.

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There are lots of reasons to dislike these schemes, but for me the most offensive aspect is the sheer waste. Don't take my word for it here's the view of one reader who emailed me to say he'd bought a new car under the scheme. "It sickens me that a perfectly good, unmarked, P-reg car with just 40,000 miles on the clock should be crushed in the interests of resuscitating the economy. It would have served us well for quite a while longer, not to mention a family in the developing world." But, he says, the chance to buy a £7,000 new car for £5,000 was "too good to refuse".

We keep being told usually by the same politicians behind all these 'stimulus' schemes that the earth's natural resources are scarce and that we should stop wasting them. Yet the most feted scheme to come out of the financial crisis so far involves bribing people like the reader above into scrapping their perfectly serviceable old cars, and then needlessly using even more of those scarce resources we're all so worried about to create a new vehicle to replace the one you just scrapped. That's insane.

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.