Tuesday, 28 August 2012

Kick Starting And Kicking Back

With the economic going being sticky and global trade not being much of a help there are now the cries for “doing something” which can be loosely translated into “doing anything”. 

There are many people, notably in around Westminster, who believe that any spending is good by definition, especially if other people can be forced to pay for it.

The sound bite spin term is “kick starting” the economy.  This is a nonsense on stilts in that the economy has not stopped it is still going.  If it had stopped we would all be starving, without energy or water and without hope.  There are some parts of the world where this has happened but not the UK and Europe, at least not yet.

One good way of making it happen would be to throw vast sums of money at grossly uneconomic and unnecessary projects on the basis of debt in a way that commits all present and future citizens to penury and penal taxation.

There are problems in the economy and they are serious if not addressed soon.  This because we could soon be in a situation where the growth of the population together with all the commitments we have created will persistently outrun any real economic “growth”.  That is economic decline in real terms.

Pumping money into a failing system that is leaking both money and resources on a large scale basis will impact only on the monetary figures at the centre.  Out there in reality it will mean a decline, perhaps slow and steady, perhaps too fast for political and social stability to remain.

The current row over airports, their capacity, their location and the idea that the UK must have a major “hub” serving not just the UK but a wide area of Europe is a case in point.  Tim Yeo, who has demanded the third runway for Heathrow now if not sooner to help our contacts with China has been fingered as someone with major personal financial interests in China.

Sinbad Boris Johnson had proposed a raft of major projects that would involve huge spending on “infrastructure” including a new airport.  These are all in and around London, his political base and would benefit his “forty thieves” in the City of London with whom he is friends.

It is one of the characteristics of the Big Spenders that the bulk of the spending proposed on these projects is in London and the South East.  At present this is the part of the UK where the money classes are better off but on the back of a great deal of low wage labour.

Also, they involve an array of the major companies who are the big lobbyists and who stand to gain very large sums from government spending racked up in this way.  It sounds so easy really, pick out a project that goes well with the media and the BBC, hand over the planning and cash and let it rip.

There are one or two small snags, however.  One is that the economy is flat lining now, all these projects will come on stream only over some years of planning and work.  If the economy does improve then the bills will come in just at the wrong time and they will be very big bills indeed.

The other is who will be working on, managing and providing the equipment and hard ware and all the rest?  At present this in unlikely to be UK firms.  The attrition of so many capital industries has left us dependent on foreigners.  This will mean that the spending, while having some impact in the UK will entail large outflows abroad.

Also large outflows abroad in terms of any profits or interest payments will occur for both structural and taxation reasons.  The companies involved are likely to be financially based abroad, for example a Gulf State, or funnelling their money out one way or another and legally.

One answer, favoured by some is to give more money out in benefits to help boost consumer spending now.  This horse will not run for the reasons that again many of the profits and interest arising from this are already going out of the UK and increasing.  Where were your socks made?  They are not being circulated within the UK.

The difficult part is how to distribute any spending across the UK in such a way that not only does it support employment but it adds to the circulation and is retained in the UK.  Moreover, profits and interest are also retained as much as possible.

Since the mid 1990’s and arguably before our governments has been doing the opposite; along with the banking, finance and many other industries.  So it is not simply a question of “kick starting” which means “kicking back” to the lobbyists, it is a question of a radical change in the culture of government and financial management.

The picture above is a push start, a process that is different.

1 comment:

  1. I remember many a push start too - preferably downhill which seems to be the preferred route these days.

    A kick back could be painful.