Monday, December 15, 2008


Two Alternatives to Revive the Economy

It's hard to criticize Gordon Brown when one has no alternative to offer, so I was gratified to find two distinguiished columnists coming up with one apiece.

Simon Jenkins recently suggested that better than merely loosing those 12 odd billions into the economy and hope that it will ast as a stimulus to end the recession as Keynes says it should:

Get people to spend by giving them money, and just stop them saving it. Give them non-cashable vouchers for domestic goods and services that expire in three months. Drive them to the high streets, supermarkets, restaurants, entertainments, garages, anything that is not saving and has an employment multiplier effect. Only firms should be able to bank the vouchers. Demand must feed straight into business revenue, because revenue is collateral for credit. Without revenue, boosting credit is pointless.

Maybe this idea is deceptively simple but I'd like to know why; it has already been suggested by German Social Democrats.Wemust reflect that it took the Second World War and FDR's New Deal for Keynesian ideas to win favour. The second idea comes from Andrew Rawnsley yesterday when he suggested Brown shouldn't throw money at the banks but do an FDR and invest in our decaying infra-structure.

If the government is going to spend like there is no tomorrow, better to use the money building things that might be useful when tomorrow comes. Better to invest in Britain. That way, when we do eventually emerge the other side of recession, we will be in a fitter place to exploit a resumption of growth. The case is even more compelling because this is a country crying out for serious investment to improve its creaking infrastructure.

It's a strange thing about innovative ideas; some people are opposed to them by instinct as if they have some toxic quality or because they didn't think of them personally. Of the two I think the latter is the most persuasive and also much needed as anyone trapped in a motorway jam or waiting for a train knows. Chances of being implemented? At the moment, more's the pity, I'd say nil.

Bill, I suspect the problem with the latter is the amount of time it takes in our risk averse country to spend public money. Because every whining tabloid journalist, media pundit and 24-hour news broadcaster are hanging off every lamppost trying to identify someone who has spent £2.50p of public money 'unwisely' we have created a culture where everyone is terrified of risk. So ion order to invest in a motorway it would take 10 years to spend the money when you have waited around for endless public appeals, planning applications (and appeals) health and safety reports, financial due diligence etc, etc.
I agree the second is a better wheeze and one that helped get us out of previous problems eg quite a bit of the Tube network was built in the thirties as part of the New Works programme. I've heard that many of the dry-stone walls in the Lake District exist only because their construction was ordered by (mildly benevolent) land-owners to keep men employed in times of economic downturn.

Three problems with Simon Jenkins's idea are (a) that he claims it's his and he's not as clever as he thinks people think he is, (b) it would take a huge effort to set up, avoid forgery and have retailers (who like cash or credit cards) be able to accept and (c) a lot of people would use the vouchers to buy stuff they were going to buy anyway and hang onto their cash.
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