Sometimes things are so obvious
that one can't see them; or, if one does see them, one tends not to believe them. "It
can't be that simple, can it?" is the response of the mind.
Take, for example, the 375bn pounds of money electronically created by the British government and stuffed into the banks under Quantitative Easing (QE), in the hope that the banks would lend it to businesses and entrepreneurs to stimulate the economy. The banks did not play ball, and numerous attempts at cajoling them fell on deaf ears. Let us think of what the government could have done with that money. To get our heads around such a huge figure, it should be pointed out that the QE money is equivalent to 5,933 pounds for every man, woman and child in the UK.
I fully understand that simply giving the money to people to spend as they wish would create inflation, with money losing its value. But there are other ways to use that money. The overwhelming majority of people would accept that government, using our taxes, should come to the aid of people if they fall on hard times due to illness, disability or unemployment, or if their wages are too low to purchase the basics of life--a home, food, and heating. We also expect our taxes to be used efficiently.Let's looking at housing as an example. The government spends 20.8bn pounds on housing benefits. A substantial part of that goes to private landlords, in effect subsidizing the low wages of people who are unable to pay the exorbitant rents demanded. Is this an efficient way of using our taxes? Wouldn't it be far better to have enough stock of social housing, for which the affordable rents charged are returned to the government? Councils should be given the resources to build the houses needed. They know the problem, so trust them.
There are 1.8 million households on waiting lists for social housing. If we were to use half of the 375bn pounds to satisfy all or part of that need, would it be inflationary? I don't know how much inflation it would cause, but I know that such an investment would bring happiness to a lot of people. It would improve their health and remove a great deal of stress and worry from their lives. It is very likely that it would save the National Health Service (NHS) a lot of money as well.
Such an investment would increase employment, and, since people would be paying taxes instead of receiving unemployment benefits, it would also boost our GDP. The investment would also have the effect of reducing the price of housing, so that more people, particularly the young, could afford to buy. That would help with labor mobility, which in turn would reduce the demand for social housing. Given all that, it is probable that the investment would produce only modest inflation, if any at all.
We Also Need Investment in Renewable Energy Sources
The government is also anxious, or so they tell us, to rebalance the economy. The idea is to make the economy less dependent on the financial sector and move it toward engineering and manufacturing.
Apropos of this, the overwhelming majority of scientists tell us that global climate change is happening and is due to our profligate use of fossil fuel. It is estimated that $5tn needs to be invested globally in the next decade to meet a CO2 emission target of 450ppm. A substantial part of that investment must come through developing renewable energy sources. The IPCC report quoted in the Guardian estimates that "Renewable energy could account for almost 80% of the world's energy supply within four decades."
What better way for Britain to grow the economy sustainably than to invest the remaining 187.5bn pounds ($283bn) into renewable energy sources? This is a substantial sum, which can be used to create and develop industries that can provide the products the world will need to move it away from its addiction to fossil fuel. It would also put to work the talents of British scientists, engineers and industrialists, and create a great export potential by which Britain could earn its keep in the future.
So, let us escape from the straightjacket imposed by the "moneymen" and conventional economics. We need to take the money back, gradually, from the banks, and invest in the people and the future of Britain. Sometimes, the obvious and simple thing to do is also the right thing to do.
