Gossip Tory

It is true, as we are all so devastatingly aware, that the economy is among the hottest and most potent current affairs debates currently in motion – and most of us frankly just don’t get it. In this blog, I will attempt to explain my personal take on how the Government’s measures are intended to create a long-term sustainable economic environment and, essentially, why socialism doesn’t work. I’ll briefly reference my last post in which I talked about a lack of communicative strategy in government, which is a reason as to why I believe that this Government’s economic policy has been so easily criticised.

It makes sense if I start by expressing the way in which I respond if I’m asked why I’m a Conservative: ”I’m a realist, I believe in offering individuals a feasible and achievable solution to problematic situations; this is as opposed to socialism, which offers an idealistic, but unsustainable solution”. It may be true that in the short term that the latter, socialism, may be an easier pill to swallow, but, to be colloquial, truly buggers stuff up in the long-run – often causing the demise of excessive welfare and eventual economic bust. Being a believer in individual responsibility, I am by no means a supporter of the ”nanny state” and believe that it breeds complacency among the population; when this welfare collapses, the people relying on it are left with no means to get by or instinct to survive. Now, why can socialism not work? Why can excessive welfare not exist? Why can the state not support jobs for the population? These are all sensible questions. One big, and slightly boring, reason why is the case of ”price signalling”: in a nutshell, the consumer’s response to prices which signals to the market how to set them, in an effort to keep equilibrium (mutual) supply and demand – i.e. not losing profit unnecessarily. Due to the state’s lack of desire to keep economic efficiency, and its effectively blank cheque, there is little incentive to produce in quantities relative to demand – a good example is the New Labour government and the seemingly luxurious lifestyles led by those in government departments and those on out of work benefits, as well as the various loopholes in the benefits system itself which failed to be closed up. As a result, there will be an often huge surplus in supply and unnecessarily profligate government expenditure.

Furthermore, the Coalition’s plans for austerity and the ”rolling back” of the state have suffered overwhelming criticism from economic ”lefties” and even, rather cheekily, from the Labour Party who, be led under no false pretense, had planned to cut just the same! There are two simple ways in which a government can support a large public sector and provide a vast amount of the jobs occupied by the population: borrowing or increasing taxes to a ridiculous level. The former is what the New Labour government endeavoured to participate in and piled huge debts onto the shoulders of working people in the UK; most notably, the younger generation who will carry the burden. Now, as in most cases, there is not an endless allowance that anybody has access to, including the Government, and so there is only a varying level of debt that can be accumulated before economic bust occurs – as we saw in 2008. At this juncture, many people attempt to accuse me of suggesting that the ”Labour Party caused Lehman Brothers to collapse, causing the economic crisis” (Harriet Harman annoys my when she bangs on about this), I’m not – I’m simply stating that we could have been in a far more stable domestic economic position to cope with the pressure – and that, frankly, is putting it lightly! Moreover, as much as the phrase ”increasing taxes to a ridiculous level” sounds relatively self-explanatory, I will be as clear as possible here. It is absolutely true that the consumer, i.e. demand, is a vital element for an economy to succeed – without the consumer, markets will inevitably collapse as there is a lack of money flow. Simultaneously, supply is a necessary factor (it takes two to tango) and without enterprise, and without industry, you will not have that supply (unless the state provides it, read up) and jobs will be non existent to use the worst case scenario. And what is the assumed objective of a private firm? To maximise profit and they, like any sensible person choosing the right insurance provider (i.e. comparing rates), will go where taxes are lowest and demand is sufficient, and it will not be the fault of other nations when they’re intelligent enough to lower taxes to lure in the business. In summary, governments need money from somewhere: borrowing, causes long-term bust; high taxes, drives away business (hence George Osborne’s lowering of the corporation and income tax, although the timing was arguable misjudged from a political perspective).

The great problem with a shift from a somewhat large public sector to a larger private sector is the redundancies made in the process; causing horrific distress for many families and highly miserable times. I’ll only briefly give my take on this, as I don’t believe that it’s my place to justify unemployment where so many families are suffering enormously. When shrinking the public sector, it is a given that there will be huge loss of employment, the government just tends not to make a song and dance about that aspect, and as this occurs the private sector slowly begins to take advantage of the gap in the market left by the private sector and the available labour force to staff their firms; a softer way of putting this is to say that the private sector will ”pick up the slack” left by the public sector and you will eventually reach high, or even full, employment once again. As a further result of this, production will begin to climb, and with private firms being generally more economically efficient there will be a likely more stable increase in production, leading to economic growth, and an increase in productivity (less wastefulness).

My intention was to depict the government’s plans for the economy, and why things might seem a little gloomy at present but how they’ll improve. The Treasury, in my opinion, has not done the best job at getting it’s message out and ”painting a picture” for the future, so I thought I’d give it a shot! Thanks for reading.

LGM