(16 April 2020) There has been much talk about economics this week along with the unknown rising death rate.
With no supermarket delivery slots available I am trudging to the shops and standing in Soviet style queues, reflecting on economics. These are some things that puzzle me.
Tesco are doing a good job, I am sure, of “feeding the nation” and are enjoying good sales.
The government have said that they won’t have to pay £538 million for business rates. Fair enough. However, they are distributing £630 million to shareholders. I guess some clever people understand how this makes sense though I wonder what happened to “The value of your investment can go down”.
“Growth / Gross Domestic Product (GDP) is predicted to severely diminish. This makes sense if you think of a company that make tangible things from lumps of metal.
However, consider someone who, when at work, every lunchtime, goes to a sandwich chain for a flesh/dairy/plant based alternative sandwich, As a creature of habit they do this every day- so £25 a week for 40 weeks a year -spending £1,000. In a UK workforce of well over 30 million people it is not unreasonable to imagine one million people doing this- spending in total one thousand million pounds (or a billion as it is now known).
Nevertheless, at a guess, all these people probably are still eating lunch in these locked down times. Maybe they are making their own sandwiches say at an average cost of £2, thus spending 60% less or £600,000,000 off GDP. So, GDP falls, but everyone is still eating a sandwich. We are no worse off as unpaid work does not count in the statistics. I will return to this later.
Finally, the government are giving people forced out of work by the crisis some money to help them. This is admirable although a better organised society would have a Universal Basic Income system in place anyway. I have worked out my scheme for this but it is a bit complicated so I need to refine it until it becomes comprehensible.
The government are also helping companies. However, these are private companies so I would hope that if the government (who work for us) provide cash to help them out they should do so in exchange for shares in the company. Should better times return the dividends could be used, for example, to invest in worthwhile efforts such as those that help mitigate environmental ill effects, clean energy etc. (I am not sure if they will though).
Where does all this money come from? An interesting sleight of hand. The government say
“Can anyone lend us £50 billion? – here are some bonds stating we will pay it back some time”.
The Bank of England then says
“We will” and the Governor sends someone down to the basement to print £50 billion. These are delivered to the government who give them to people who go out and buy necessities including sandwich ingredients. Magic really.
When things get better the Governor of the Bank of England could meet the Chancellor of the Exchequer- probably in some traditional club with gigantic armchairs and leather butlers. The Chancellor tells the Governor that it is a bit tricky to give the money back as they want to use the cash they have got for the NHS, Local Councils etc.
“That’s all right mate” says the Governor, “I’ll just chuck the bonds in this nice fire and we’ll say no more about it”.
And the world continues.
As do the kittens
Economics, GDP, Universal Basic Income, all mysterious to me
But I believe you have the concept lost to Mrs May T
The Governor of the Bank of England sends someone down
To the orchard to pick fruit from the magic money tree
With an interesting sleight of hand that we don’t understand
‘Cause the private companies down there are driven by a brute
Suddenly it’s a bit tricky to give the money back
the dividends gone, the share’s worth nowt and its wormy fallen fruit
06/05/20
First there were Keith’s thoughts about UBI on 16 April
Then there was John Harris, Guardian 03 May
(Why universal basic income could help us fight the next wave of economic shocks)
Followed by Guardian readers on 05 May:
Has the time come for a universal basic income?
Readers respond to John Harris’s article on how UBI could offer security to millions of people
https://www.theguardian.com/society/2020/may/05/has-the-time-come-for-a-universal-basic-income
and today (06/05/20) Sadiq Khan weighs in
“Alarmingly, the Resolution Foundation estimate unemployment rising to levels last seen in the 1980s. With a benefits system already buckling, we will need a new settlement that offers proper security for all. This should include ideas like a universal basic income, which is gaining support around the world and would ensure everybody can at least survive. “
Thus, with the Tories currently giving the people something akin to the UBI you and others propose, I look forward to your more comprehensible plan.
So, a poem to finish
Keith, I applaud you. You’re ahead of the game.
Send your thoughts to Sunak before the Gov goes lame
Dom Raab and Rishi Sunak have given it a go
But BJ’s back, he’ll muck it up and lead to year zero