This blog is a change from normal, commenting on the doom and gloom of current predictions of our future; the need to tighten our belts, selectively of course, and the pettiness of many of these measures.
Reverting to the old fogey, that I am, and reminiscing using the Hovis “when I was a lad” theme, one cannot help thinking how things go in a full circle. I was taught to read and write phonetically, learnt my times table in regular classroom chants, resulting in ready mental arithmetic. Now both being rediscovered and becoming all the rage.
As part of my mathematics degree study, economics was taught on the money circulation principle, which I find simpler to understand and making more sense than the intangible GDP.
Money circulated in an internal circle in which taxes paid wages and spending bought food and goods, going back into the circle distribution creating more services and spending. The size of the circle, that is the amount of money circulating the system could sustain was determined by the losses from the circle.
These losses at that time resulted from imports with gains occurring from exports; at that time every £ of exports created £5 in internal circulation, whereas every £ spent on imported goods or food cost £5 in living terms. In bad times of recession one stimulated the economy by creating internal money and as long as the import content was controlled and exports unaffected, this was possible.
One could therefore expand spending on anything involving internal labour or materials; cost cutting by job losses was counter-productive unless from redistribution to more essential work. House and road building all used sand, gravel and cement, readily dug from the ground; manufacturing imported metallic ores processed internally using energy from home dug coal, as did railway construction and food was mainly home grown
Of course in present times this is all simplistic, outdated and insular and no one thinks that way; we live in a global economy and should buy at the cheapest price, let the third world manufacture and mine; enter into trade agreements and European Union rules which will promote trade and growth and eliminate world poverty.
Unfortunately this idealistic approach is not universally adopted, we are the only ones who obey the rules, whilst everyone else sticks to the old ones. The strongest economies are those who put self interest first; the Far East stringently apply import controls, relaxing only as they build up large foreign currency reserves; Germany, France and USA all follow similar trends, although the latter has large balance of payment problems mainly due to oil imports. Many spend their surplus £’s buying up our Companies, Utilities, Heredity artefacts and properties and investing in our infrastructure.
Yet the Nation’s budgets are much larger but not much different to our domestic ones, we need to balance what we spend with what we earn, both overseas and internally, but have a lot of flexibility within home spending with DIY, home cooking, food production and making things. Living within our means and paying our way. The latest PFI fiasco illustrates this, which was the miracle way to afford modern hospitals but now threatens some NHs trusts due to high costs; some seven times build costs, who would take out a 20% mortgage on their home and expect to afford it!
We, of course, rely on the Commercial Sector to export services and speculate abroad, resulting in the large losses which led to the present recession, resulting in exporting money from currency and gold reserves. Our balance of payment control has gone all to pot, our European and other migrant workers export increasing amounts of money home, we give generously in foreign aid to keep African dictators in power and what is worse buy expensive armaments from America, railways from Germany whilst making servicemen and other workers redundant.
We live in a mad mad world and as a country have delusions of grandeur as a world power; spending our hard earned currency in oversea’s conflicts: our politicians have lost sight of the real world and need to get their feet back firmly on the ground to put UK interest first, in line with the rest of the world. The EU is a good concept but not ready for full integration as present problems show, a global economy is even further away.
Previous recessions have shown that the only way out is to spend, spend, spend but in a controlled manner, create employment from work that requires little imported materials like housing, roads and even the Severn barrage. Reduce our dependence on imports to achieve a trade balance without being overly insular and examine and control the influence of the speculative commercial markets.
It will not be easy but could be directed, the present spending review is rigid, inflexible and haphazard taking the easy way out on labour and services instead of basic reforms. Pension reforms could make greater savings over the next 20 to 40 years than present review targets. Wastage is abundant, a current example is the Basildon traveller fiasco, because planning did not do their job, with costs reported as equal to the projected savings from pensioner travel concession withdrawal.
There is an artificial aspect about living today, one is not sure what is real and what arises from speculation; does it cost more to pump oil from the same well today than yesterday?; possibly but twice as much?; the same applies to large salaries and bonuses, are they justified?; are the farmers being paid more? is there a Euro crisis with each Country’s assets worth nothing?. Or are we all being held to ransom by some faceless tycoon or Institution.
There is confusion about money is it real, or paper or just imaginary; we can spend on our credit cards, with HP, loans and mortgage extensions without really considering whether we can afford it, need it or can finally pay for it and building up large expensive debt. We are not alone our Government, Banks and Commercial Institutions appear to have done the same.
Countries are being run by global Commercial conglomerates, Banks and tycoons, not by the democratically elected Governments; a hidden dictatorship controlling what we do and buy and punishing on a whim. Orwells predictions are coming true but not by a police states but by faceless financiers and media moguls. The hacking scandal shows what can happen when these get out of control and we have all seen good politicians forced out of office unless they toe the media line.
The crisis could offer a good opportunity to return to sensible systems where things have real worth based on what they cost and where people matter, a return to old values and stability. We should also question whether high growth can continue, where can it come from? can living standards become more luxurious? Or are we due for a period of stabilisation and redistribution. These are basic questions on living standards and expectations, we have come far since the end of the last war, but how much further do we need to go, or should we make the most of what we have, living standards are not based on money and possessions alone, should we work less and enjoy life more.
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