Fixing the economy

It is no secret that the government depends largely on taxes in order to finance its management of the country.  Even if things were massively stripped back as is proposed by William Hague and his colleagues there would still be a need for large amounts of money just for simple administration and political process, let alone welfare, health, ordefence.  At present there are a number of problems with trying to raise funds through taxation.  Firstly there are a huge number of people who pay hardly any taxes at all.  I do not mean the wealthy and large businesses who can afford to employ clever accountants and tax lawyers.  I am referring to those who earn so little that their wages are not high enough for them to pay tax, or only a little tax if any.  For those at this poorer end of society the idea of paying taxes is simply not feasible because if they did have taxes imposed on them they simply wouldn’t be able to afford to pay them.  For those who are a little better off and earn enough to become a target for the tax collectors the payment of taxes is a great weight to bear; the demands of their lifestyles, living in areas where they can get higher paid work or the expense of commuting mean that they are barely better off than those who do not earn enough to pay taxes.

The idea of fraudulent benefit claimants has been used as an explanation for the lack of money in public coffers, as has the idea of families that have lived from generation to generation wholly dependent on benefits.  It has been stated over and over again that these actually represent a tiny minority of those who are supported by the welfare system.  In reality it is largely ordinary working people who are being helped out by the welfare system.  One figure I recently read showed that the majority of housing benefit claims brought out during a one year period had been claimed by families which would have been considered to be middle class by most people.  During the time when I was lecturing in London a large part of my income was from tax credits rather than my wages.  My employer tried to claim that I was self employed in order that I should also have to pay taxes out of my wage.  Luckily one of the subjects on which I lectured was employment law otherwise I would be bankrupt at the moment.  Despite this a very English tendency towards fair play might have prevented me taking advantage of this if my employer had not also fully agreed with the principles on which I relied to argue my position.

Unfortunately it seems the vast majority of us are in a similar position, child benefits, disability payments, income support between jobs and housing benefit when rents are simply too high.  On the one hand we fear our country’s economy collapsing but on the other hand almost all of us are reliant on our country’s generosity to maintain our meager standard of living.  We want spending on education, welfare, health, etc cut, but at the same time we need spending on these things to be increased in order to maintain the living standards that we consider to be adequate, or in some cases, humane.

While we pay taxes from our earnings we receive them back in various payouts.  Our real tax payments are probably far less in many cases once our income is adjusted in this way.  So we have a government reliant on taxes, yet the vast majority of people pay little or no tax, even receiving benefits as tax in reverse.  This does not work for anyone.  It does not work for those wealthy enough as to be paying large taxes and receiving no benefits.  It does not work for those receiving a demeaning pittance that barely allows them to eat and live.  It does  not work for those who are working furiously hard to keep themselves above water.  It does not work for companies who are relying on the public to have money to buy their goods.

It might seem somewhat contrary to say it works for no one.  After all there is plainly a lot of wealth around.  It must work for someone.  There are of course individuals who will be doing well out of any situation but well is always relative according to the context within which these individuals find themselves.  The feudal system of medieval England appeared to benefit those who lived in large castles with tapestries on the wall and roaring fires over which they roasted whole cows.  However, that is only in the context of the era.  It might be argued that they could not have had the same level of luxury in medieval England as we have in the modern day but progress is not just the invention of technological devices, progress is also political and social reform.  If those feudal lords had cared less for their own personal comfort and had instead tried to increase the educational standards of their serfs then things would have been different.  If they had focussed on trying to make the lives of their serfs better then they would have had a healthierwork forcewho would have been better able to produce more wealth from the land around them.  Admittedly we didn’trealisein those days that education and health could reap benefits broad enough to change the world but today we have the advantage of knowing that these things can change societies.  We have the benefit of having seen it happen.  Yet we still fail to put great enough investment in because we have given over our whole societies to a fatally flawed faith in the wisdom of money makers acting in their own interest.

The free market is one simple idea.  One idea that could have come from the head on one man, yet an idea on which most of humankind is relying to achieve a better future for us all.  It is an idea that works, at least it works in certain contexts and certain environments with certain variables.  Similarlymarxismworks in certain contexts and environments with certain variables.  Religion works in certain contexts and environments with certain variables.  Rather unfairly they are popularly derided now while the free market ideal is theflavourof the day.  In their time they were ideas that were very useful for those in power to build and maintain their power.  This is yet another parallel they share with the free market.  The lesson to be learned is that circumstances change.  The great thing about government is that regulation deals with changing circumstance.  The ludicrous thing about government is that overwhelming faith in the idea of the free market leads to the idea that regulation should be reduced as much as possible.

If the free market was a cathedral then regulation would be the buttresses.  Any builder can tell you that the ideaof building a cathedral of greater purity and majesty to tower above all other cathedrals is not going to be helped by removing the buttresses that marr its purity.  You may end up with smoother greater expanses on the walls but only for so long as the walls remain standing before they fall.  Nowadays we are so used to the idea of buttresses on a cathedral that we consider them to be part of the beauty and part of the design but when they were first conceived they were a compromise to hold the buildings up against gravity, arguably the will of God trying to pull them down.  Regulation might be seen as petty bureaucracy getting in the way of business but over time regulation becomes part of the beauty of the entire system.  Nostalgic old lawyers would tell you this straight away.  They still have so much nostalgia for the past that they continue to use Latin terms and dress in 17th century wigs.

So despite a lifelong disdain for those who are usually in political power I find myself infavourof regulations.  The tendency when wealth is not guided by regulation is that it ends up being hoarded.  Thomas Piketty has told us how the wealthy families of several hundred years ago barely needed to get up in the morning to see their wealth grow at a faster rate than inflation.  Those who were wise enough to buy extrahouses thirty years ago are now living comfortable lives on the rents of whomever lives within those houses now, while people now can’t afford to buy one house.  Them that’s got shall get, them that’s not shall lose, so the bible says and it still is news.

This brings me back to my starting position.  Governments need money.  Money comes from taxes.  It is therefore vital that as many peopleas possible can afford to pay as much tax as possible.  Ideally as many people as possible should be earning so much money that they can afford to throw it at civic projects with joyful abandon.  Instead we have a situation where those who have proven themselves to be most adept through nature and nurture at clinging to and amassing wealth, are the ones who are expected to pay the most tax.  In the case of companies we also have rules written into the Company Act 2006 which state they should do whatever they can to keep as much of their wealth as possible by whatever means possible within the law.  Although I am certain that last condition is more implied than stated.  Unfortunately for everyone loopholes are legal.  If they weren’t legal then they wouldn’t be loopholes, they would be crimes.

Naturally the closing of tax loopholes is important but more important is the encouragement of greater levels of employment and security for the greater number of people.  I hardly think that the most utilitarian view would be that the greatest good of societylayin ensuring that the largest companies could gather as much power and wealth as possible while thousands ate fromfoodbanksand fell into worse health while all the hospitals were being closed down.  The more people who are working, the more people can afford to home themselves, feed themselves, educate themselves, etc,etc.  Irritatingly I find myself sounding very much like any politician at this point.  The main difference being that the current crop of politicians have a solution to getting people into work that they don’t seem torealiseis not going to work.  The solution being offered at present is to take away as many advantages as possible because if people have no food to eat and no clothes to wear then they will be forced to find a job, thereby increasing employment.  Unfortunately they will be so desperate for a job that they will undercut other folk who are already in employment who will then lose their jobs to make way, so will have to also be encouraged back into work.  Mind you the solution for people taking jobs that pay too little is to take away more advantages so that they are forced to find better jobs.  If this wasn’t stupid enough already then the fact that there are not enough jobs for all those looking for jobs in the first place probably won’t have the impactto make it seem even more stupid.

Naturally it is not possible to simply tell employers to give jobs to those who need them.  Things need to be done gently for a start.  Employers cannot necessarily afford to employ huge numbers of people.  There must be reform to the way the stock market works to prevent large companies being punished for employing people and rewarded for dismissing them.  There should be encouragement, politically, economically and publicly to companies who take on extra workers.  There should of course also be greater encouragement for those who are seeking the jobs.  Not the stick that is currently being used but rather a carrot.  Give greater benefits to those who are working in educational possibilities.  Good managers are well aware that people appreciate recognition in thework place.  This is not because they like praise or pats on the back, this is because they assume it will lead to greater opportunity.  Not greater opportunity to take on more responsibilities and stress, greater opportunities to get into positions where they can make positive changes, earn more money and lead a more fulfilling life.  It is true that far fewer managers seem to understand the whole complexity within the equation but this is something that should be regulated for.

CPD should be offered to all workers; there will be many workers who will not want CPD, it is probable that these workers might prefer to be in different jobs.  The free market solution to this is to show them the door and let them work it out for themselves.  That should not be the solution in a society that is aiming for the greatest overall profit and utility for all.  it is because people fear losing their jobs that they never speak out truthfully about how they feel and it is for that reason that so many workers are disgruntled and doing less than stellar work.  It is in the interests of companies to have the best and most suitable workers, and it is in the interests of government to aid the companies in achieving that end.

Ideas such as making difficult to claim benefits also do not work.  The harder it is to claim benefits the more likely it is that claimants will not give up their benefits, especially for jobs that offer little security.  When there is a spate of zero hour contracts across the country then there will be a great many people who will actively avoid gaining such work for fear it will make it more difficult for them to keep their benefits without having to wait for a protracted period to open a new claim.  Even if it works out in theirfavourfinancially they are unlikely to see this because, lets face it, if the intricacies of economics were so open to them then they would not be on the dole, they would be holding down positions atcanarywharf.

Ultimately there are many ways in which employment can be encouraged when a government accepts that not all citizens act according to the idealbehaviourhoped for by free market theorists.  When the citizenry of a nation is looked at from ademographicallevel then it is probable that starving people will encourage some to find work and to progress into better work.  But we are not numbers, we are people, and people are not that easy to predict.  What is easy to predict is ideal economicsituations.  Economics in general is very difficult to predict because situations are complicated and there are many variables.  However once almost all variables are reduced until all you have is more people in more employment, earning more money and paying more tax, then you don’t need to be Keynes to see that this means more money for government.  That is easy to predict, but it is the individuals within thework forcethat are beyond the ability of so many politicians to understand.

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About harrymonmouth

Full of grace and fair regard, a true lover of the holy church. The courses of his youth promised it not but his body has become a paradise enveloping and containing celestial spirits. He has a sudden scholar become after reformation, in a flood, with heady currance scoured his faults and unseated his Hydra-headed wilfulness. Hear him but reason in divinity, and all-admiring with an inward wish you would desire he were made a prelate: Hear him debate of commonwealth affairs, You would say it hath been all in all his study: List his discourse of war, and you shall hear a fearful battle render'd you in music: Turn him to any cause of policy, the Gordian knot of it he will unloose, familiar as his garter: that, when he speaks, the air, a charter'd libertine, is still, and the mute wonder lurketh in men's ears, to steal his sweet and honey'd sentences; so that the art and practic part of life must be the mistress to this theoric: Which is a wonder how he should glean it, since his addiction was to courses vain, his companies unletter'd, rude and shallow, his hours fill'd up with riots, banquets, sports, and never noted in him any study, any retirement, any sequestration from open haunts and popularity.

Posted on April 30, 2015, in Economics, Politics and tagged , , , . Bookmark the permalink. Leave a comment.

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