The Political Economy Review 2017

spend more, it can do so only by borrowing your savings or by taxing you more, and it’s no good thinking that someone else will pay- that someone else is you. There is no such thing as public money - there is only tax- payers money”. This is the argument the Conservatives failed to hammer home this election. There is no magic money tree. Public money doesn’t exist. When the government commits public money, they are committing your hard- earned money. Where will this great burden of £60bn reside? In your hands. And can you - can we - afford it? No! A budget deficit reduction programme such as Austerity should stop being branded as “evil” and a way for the rich to gain more money and power over the poor, and start being viewed as a fiscally mature method of maintaining a healthy economy. Austerity is a necessity. What is not understood is that high budget deficits can cause higher bond yields, and higher interest rates on other bonds. In layman’s terms, this increases the cost of paying back the debt, whilst reducing private investment. Moreover, cutting budget deficits through austerity will give investors greater confidence about the long term performance of the economy. Lower debt levels will encourage the private sector to invest. What does this mean? Jobs, Jobs, Jobs! Corbyn remembers back to the days when taxation was at 83%. As a result, morale was low, civil discord was rife. Out of control unions placed great pressure on wages, causing rampant inflation. Prices spiralled, whilst high taxation caused low productivity, our weak and flagging economy requiring an IMF bailout. We should learn from past mistakes, and not be tempted to revisit them in the form of some supercharged Keynesian or pseudo-communist economic system. It didn’t work then, it doesn’t work now. At the beginning of this article, I wrote about taking inspiration to guide us forward through Brexit from the right decade. In order to ensure prosperity and a healthy economy post-Brexit, it is my firm belief we have to look back to Thatcherism and the 1980’s. Privatisation and market-orientated supply-side policies hold the key to our future economic success. The Iron Lady’s economic policies weren’t perfect. We’re beginning to see considered, academic, evaluations of the economic legacy of Thatcher-rather than just the angry shouting of leftists who despised her anyway. It is clear, for example, that her policy of monetarism wasn’t entirely successful. Though Thatcher’s aim to control inflation was admirable, as it would have provided a sound economic framework for the private sector to create employment, hiking interest rates fast and hard, coupled with high taxes led to a sharp rise in the value of the pound, and a steep fall in output. The result of this was a drastic decline in manufacturing, and soaring inflation and unemployment. What really worked back in the 1980’s: the best option for our economy now, lies with supply-side economics. Trade Unions were brought under control, and deregulation made our economy more competitive. Further deregulation today would do just the same - make our economy more competitive, make our country more lucrative for investment, and create jobs and employment and opportunities. This, in turn, through a variety of mechanisms, whether that be the multiplier effect or so-called ‘trickle-down economics’, generates wealth and prosperity. Cutting interest rates and taxes led to a higher disposable income, thus people spent more in shops, consumption and Capital Investment (C and I) increased, causing a shift right in AD - and, you guessed it - economic growth! Selling off of council housing stock and a rise in house prices led to the wealth effect. Consumer Confidence


Made with FlippingBook Annual report