GDP up — thanks to public spending and car scrappage | Business | The Guardian .
The Guardian reports:
Alistair Darling's insistence that the economy would still be stuck in recession without a leg-up from the Treasury was boosted today by news that public spending and the car scrappage scheme had been essential to generating a recovery in the final quarter of 2009.
While GDP growth at the end of last year was a better than expected 0.4%, according to the Office for National Statistics — up from its previous estimate of 0.3% — analysts said the detailed new figures revealed that taxpayers' support had been critical in generating the first quarter of expansion since spring 2008.
Of course that's the case.
The private sector cannot make up the slack in the economy at present. Only the state can. Which is why cuts make no sense at all and a Green New Deal does.
The reality is simple: we need more state spending now, not less. There is no other way out of this situation.
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Dear Richard. The State cannot produce wealth, it can only (a) spend it and (b)create a favourable environment for wealth creators to flourish. The State is bankrupt, and the Treasury is being run by a Chancellor who continually confuses debt and deficit. The Government has followed a policy of devaluation accompanied by the 21st century version of coin clipping, QE. Government support for wealth creation is best illustrated by their latest wheeze, increasing NI by 1%. Are you really serious when you suggest more of a policy which has failed so dismally, both now and historically?
“we need more state spending now, not less.”
Agreed.
@Grumpy Old Man
How absurd!
health practitioners generate no value
Schools create no value
Protecting the environment does not preserve value
Health and safety does not preserve value
law and order is worthless
Is that what you’re saying?
That unless the ownership of a means of production is privately held it is worthless?
Complete tosh
People create value
People work for the state
Ergo the state creates value
So let’s cut the crap
Richard
Richard
Reading GOM’s remarks, he is talking about “wealth” not “value”. I think he considers that all of the things you refer to do not constitute “wealth” so cannot have value. Obviously, this is nonsense.
GOM – maybe if you placed more value on things like health and education and a bit less on “wealth”, you might feel less grumpy!
Richard. I was specifically writing about wealth creation, not value. Schools’n ‘ospitals have to be paid for. In simple terms, wealth is used as part of the value creation process. The production of wealth is harvested by a tax system according to the requirements of a specific society at a specific time.
So answer the points made, I thought this was a blog, not poor man’s PMQ’s….
GOM
This blog is whatever I want it to be
And all those things pay for themselves – because as you’ll discover when cuts come – people will want to pay tax to have them
Your logic is completely and utterly false in other words
The absurd idea that people can only generate wealth, value, or whatever else you wish to call it if there is a private sector employer of their activity is utterly bizarre, and simply wrong
If your questions are predicated on that falsehood they’re not worth answering
Richard
So, the US health industry is a massive wealth creator but the UK NHS only consumes wealth. Eton College creates wealth, but the local comp does not. This economics thing’s a bit complicated, isn’t it?
Grumpy Old Man:
At present your question is confusingly stated and as such not easy to answer. It might help if you define wealth. As I define it (i.e., in the dictionary), it is obviously possible for the government to create wealth.
However, it looks like you could mean that when the government spends it necessarily takes that money from somewhere else in the economy for no net change. This isn’t true. If the government taxes offset the spending, there may be no change. However, when the govt *deficit* spends it necessarily creates new savings in the private sector, by accounting identity definition. It all makes sense if you follow the money:
Govt sells bonds, say £100mn.
Private sector is now down £100mn base money and up £100mn govt bonds. Base money and govt bonds are both govt liabilities so essentially the govt has just swapped one type of liability for another.
The govt then spends this £100mn on something–maybe something clever, maybe dumb, but in any case in doing so it has created savings. When the govt deficit spends it creates (net) financial assets (savings) for the non-govt sector.
Can’t answer or won’t answer? Go though life and duck the difficult questions. Once again, you refuse a straight answer. Your blog is a sham and not worth reading. Goodbye.
@Richard Murphy
Richard, in trying to answer GOM’s questions, you opened another question. Your reply had two aspects.
I think we can all agree that health, education, law and order and conservation are valuable activities. Nothing controversial there.
But then:
You have some explaining to do. Some activities can only or in any more efficiently be undertaken by the government, but one could argue they are the exception rather than the rule. For instance:
– Why would first-aid point, dispensaries or hospitals not all be privately operated, with patients receiving subsidized health insurance?
– Why would schools not be private with students receiving subsidized tuition vouchers, grants or loans?
– Why would defense not be left to private contractors which in turn would hire and train troops and purchase equipment?
How would you answer this?
@Grumpy Old Man
No one asked you here in the first place
You’re very free to go!
@Ted G
An absurd argument
If these activities create value in the private sector they do in the public sector – but since profit is eliminated at lower cost – to the benefit of us all
So what was your point?
And why should the private sector do things at higher cost?
Richard
Richard,
According to your logic, every product or service that creates value for its user, and which the private sector supplies after taking a profit, should instead be provided by the public sector to eliminate that mark-up.
So for instance cars should be designed and manufactured by the state, instead of Ford or Volkswagen. Or telecom infrastructure services should be provided by the state instead of Colt or Vodafone.
I thought Britain had this in the 1970’s. I did not live on this island the time but I do not hear many people saying that cars were better then, or phone services more reliable
Why would education be different? Or healthcare? After all the best universities (Harvard) and hospitals (John Hopkins) in the world are private.
Ted G
Operational efficiency is a function of operational management.
That is a completely different argument from the direction of your questions.
If a society wants to maximise wealth generation, then it needs to recognise the value of providing the foundations for the realisation of successful private enterprise, so predicating invention and progress, to capture the widest possible public engagement, and so perpetuate an environment for mutually beneficial personal ambition.
The idea of individuals making profit from the education, health and security of a community is totally adverse to promoting the kind of ‘meritocratic’, ‘choice-driven’ and ‘consumer-led’ society that I interpret from your questions.
It can ONLY be people that make wealth. There is no doubt that if the conditions are right, they will. It is proven that private enterprise cannot create these conditions.
@Ted G
Actually, you’re wrong
I firmly believe that when there can be excess capacity without significant cost – an this is a pre-condition of effective markets – then markets can be of great benefit
But in education, defence, health, law and order, transport, power supply and much more there is no room for excess capacity
So the state is the obvious supplier
Richard
@Richard Murphy
What am I wrong about? I only asked a question, it is difficulat to be wrong about that…..
That I do not get: surely not EVERYONE in the world can be a fireperson, nurse, physician, cop or GI. If everyone was involved in these activities only, there would be nobody left available to produce the other goods and services required. After all, people also need to eat, for instance, and someone needs to attend to that.
So by definition there can be excess capacity in the provision of these (very valuable) services. That also means that there is a level at which it is better to allocate resources to other activities (farming and food processing, among almost an infinity of others).
So where is that level? How is it determined?
@Ted G
Wrong deciswion model
Society decides it needs a health service
A fire service
And it decides it wants it staffed
But of course it decides it does not want everyone engaged in them
The ballot box is the process that ensures that
Those resources not allocated are open for alternative use
And of course labour shifts between the two – sometimes
But this is not a market process
It’s called democracy
Most on the right spend a lot of time trying to udnermine it
@Richard Murphy
Let’s leave the right-left thing out for a second, shall we? the substance is more interesting.
Let’s assume society votes to have a big FD, big PD, big healthcare. How do we get the right number and quality of people to actually take employment in those areas?
After all if people see that they can make a better living, or find more satisfaction, in making cars or designing board games( 😉 ), or doing anything they else please (including nothing at all), how do we get them to change their minds?
We all want to have our borders defended, but I am not seeing many people volunteering to do so.
It is not lot like you can force people to do it, that would not be very democratic.
What else?
@Arnald
So, how do you get bright minds to come and teach our kids, and equally bright minds to staff our ERs and oncology departments? In order to attract these people one has to offer them the same reward as those they would achieve in the non-state sector? This implies a level of compensation that includes the equavalent of a profit margin.
Am I missing something?
@Ted G
You show your view of reality is so closed that you do not understand the concepts of empathy, compassion, concern, vovcation and so muhc more besides
Profit and cash is really rather low down in a lot of people’s consideration
And because your understanding of the real world is so limited debate with you is not worthwhile
Further discussion with you is closed
Richard
I would rather say, Richard, that TedG doesn’t understand basic economics. The return to labour is wages, the return to capital is profit. He doesn’t seem to know the difference. One is earning from work the other is ‘money making money’.
@Richard Murphy
All of these state activities repressent value & aid wealth generation in the longterm, enabling the private sector’s function through the infrastructure to move around goods & a healthy, educated population to man wealth generating activities. Centralised regulation may also be an aid to creating a competative and hence efficient marketplace.
However the suggestion that maintenance of state activity (or its expansion), generates wealth in an immediate or direct sense, that is to say provides perceptible economic growth, is only correct in limited circumstances. A limited amount of state activity does produce wealth directly but this is generally only project based infrastructure spending; the wages of permanent employees result in the enabling of private wealth generation only & frequently not even that.
Of course the classic arguement is whether state spending generates wealth better than private activity; however the late 20thC has given such a wealth of examples pointing to private enterprise that this is no longer seriously in the table.
@Call me Al
Have you noticed the crisis the collapse of many major drives of the private sector has just caused?
Or do you live in some little evidence free cocoon somewhere?