Tuesday, 13 June 2017

Austerity, go,go,gone...

Ah, election over, austerity over. Problem is, what exactly IS austerity? We hear a lot about balancing the books and yes, that seems to make sense. Sense at least for ordinary people like myself. I certainly try not to spend more than I bring into the home budget! Is that making sense?
Austerity meant mostly cutting public spending by the government in the name of ‘balancing the books’. Admirable in one way but very problematic in other ways.
But governments are on a different level. For a start they control the issue of money. That is to say the amount of money that is in circulation. They can and do print more. Called quantitative easing. We noted this action when billions were spent to bail-out the failing banks. So national economics is not quite the same as home economics. So, was the Labour party wrong in calling for billions to be spent on so-called public projects such as nationalising the railways, and possible other industries, water, power etc. Dropping university fees and reorganising the benefits culture (expanding it probably). Surely very popular as the general public voted in more Labour MPs. Well, Labour has always been the champions of short-term thinking. The problem is that the underlying economic problems do not just go away with throwing more money at them. What options do governments really have? Taxation is one of them. Increasing taxes will bring in more money obviously but it will also decrease the amount people can spend. This might also lower prices in the shops as competition for orders increases. There again more business taxation will increase prices.
Governments can increase the amount of money in circulation by increasing the number of public projects. Not just nationalisation of public services but spending on infrastructure, roads, transport links, public services (NHS). But it will increase inflation as well. There are no easy solutions, it is a tightrope. All these things are linked, you tinker with one and another either dives or rises.
Presently most governments ‘borrow’ money through issuing bonds (so-called gilts) which is not in itself a bad thing but it can get out of hand as well. There is the fact of having to pay interest. Presently in the UK that stands at some £50billion annually.
It is funny but our quest for better wages means that more spending follows, increasing tax income for the government but also increases prices as there will be more public competition for the available goods.
What a mess we are in, all at the behest of consumption, production and spending. Kids should be taught economics at an early age as the so-called ‘Youth revolution’ in the latest general election showed without doubt a total misunderstanding of the reality behind the political slogans. It was a self-centred result of the type of quantitative easing mentioned above. No university fees, millions more homes, and grants for almost everything. Utopia with a price tag around its neck. Cheers, I’ll have my beer now before Heineken goes bust.

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