The economy is NOT a corner shop with a necessity for a balanced budget. The fiscal system is a deficit based debt money system where 98% of all new money into the economy is created as debt. It is utterly impossible to pay the debt back under such a system - a point which seems to be not understood by many Tory voters.
Yes that is it exactly. The current government's model is based on corner shop economics. A corner shop does benefit by buying the cheapest product wherever it comes from. A corner shop must cut its costs to match its income or grow its income to match its costs.
Macro-economics is slightly different.
When I go to my local corner shop and spend £10 then and £5 is spent on wages and profit, then most of that £5 is spent in the local economy and much of that oes to pay more local wages of which most is spent in the local economy .... and so on.
So £10 spent actually grows the economy as a whole, but that does not feature in the corner shop's books.
When a government decides to buy the cheapest from abroad at the expense of its own industry then all that money goes somewhere else and it does not benefit the national economy. What is more if that results in unemployment then government will end up paying the workers to do nothing as well. So it is out of pocket!
Did I make all this up? No, I learnt it at university from a Professor of Economics. This is classic macro-economics.
Of course this is no reason to prop up dead industries, but it is a factor that should be taken into account in procurement. Indeed - before anyone tells me it is not permitted by
EU» public sector procurement laws - it is permitted provided that criteria are clearly set out in the call for tenders! It is just that the
UK▸ Treasury who controls government procurement does not let departments do this! It just goes for cheapest.
Now in Preston Lancs the local council has got together with other local public sector purchasers to promote buying local where possible (e.g. school and hospital catering etc) working within the rules. And they have been able to demonstrate a benefit to the local economy, just as classical macro-economic theory suggests.
Government stimulating the economy with public works is nothing new. One of the reasons that new road and rail construction was so popular in the 1930's and now was that it is highly labour intensive, so almost all the money is paid out in wages and so gets recycled.
The reason that tax cuts for the rich are less effective is that they tend to keep the more of the money or spend it on imported luxury goods.
It has suited Conservative politicians from Thatcher onwards to try and present government like a Corner Shop. It does however help sell the idea of small government and that austerity is a necessary evil. But as you will see this is not good macro economics. Of course you can go too far and wreck the economy, but most countries where this has happened it was due to corruption and/or a national culture tax avoidance and evasion.
Puts hard hat on
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