Time for a new revolution?

Lightening the burden on the state is a great idea, says Merryn Somerset Webb. Putting it into practice is another matter.

There are only 97 days until the Scottish independence referendum. You might not care much, but I think you will still find my interview with Angus Tulloch on the matter worth reading. The points he touches on to make his case go far beyond Scotland's borders.

He mentions rising demands from voters for local accountability and responsibility that's something people are calling for all over Europe. But he also mentions that it is time to step away from our current political systems before we are crushed beneath the weight of our bloated welfare states. That's something he reckons will be a lot easier to do in a small state than in a larger one.

It is a theme picked up in The Fourth Revolution: The Global Race to Reinvent the State, a new book from John Micklethwait and Adrian Wooldridge. The authors argue that the Western state has been through "three and a half great revolutions" in modern times.

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The first came in the 17th century as Europe's princes created centralised states that turned into trading empires. The second began with the French and American revolutions, and replaced "regal patronage systems with more meritocratic and accountable government".

Next came "the invention of the modern welfare state", which, in the West at least, has ruled unchallenged since World War II, bar the half-revolution of the Thatcher and Reagan attempts to limit its growth.

The result of all this revolution? State spending has risen from an average of 10% in the West to more like 47% as politicians have given us more of what they think we keep demanding "more education, more healthcare, more prisons, more pensions, more security, more benefits".

But there's a problem. Not only is it unaffordable, but it cultivates dependence on the state, lack of self-reliance and over-use of services: when people believe things are free, they "gorge" on them. The answer is "a new revolution" in government in the West, one that removes the drag of entitlement and "revives the spirit of democracy by lightening the burden on the state".

We agree entirely with these sentiments in the same way that we love Tulloch's vision of Scotland as a small, wealthy nation who wouldn't? We just can't see how we get from here to there.

On a happier note you might want to read our cover story on European money printing and David Stevenson's column on the best funds to play Japan. These are exciting times in our favourite markets: Japanese quantitative easing (QE) is well underway, with inflation being the clear result (Uniqlo has just announced a 5% price rise across the board) and the European Central Bank has now embraced unconventional monetary policy.

You may not approve of the economics of all this (or the politics no stepping back from bloated welfare states here). But if the last few years have taught us anything, it is that when any central bank starts printing, we should usually judge less and buy more.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.