Thursday, 3 April 2014

How it all works - Quick Start Guide

Time and again you hear the same refrain: "it has to be paid for and those that want it never give a realistic view on how that is to be done".

Well we do. Constantly. But it is probably time to put it down in one place for easy reference.

So the 'quick start' version goes something like this:

The government invests in their programme. That money is spent by the recipients on goods and services, which are then made by the businesses for which they hire staff and pay wages.

All that activity causes an amount of taxation and an amount of saving to happen, which when you sum it up exactly equals the government investment. Each time, every time.

Therefore government investment is limited only by the dynamic capacity of the economy, both domestic and international, to produce stuff that people need - largely at the low income end of society. Importantly this is stuff that wouldn't otherwise get made or done.

So its all 'paid for' by making stuff we wouldn't otherwise make, using machines and people that would otherwise be under-utilised, and creating profits, savings and increased economies of scale we wouldn't otherwise get.

It's a win-win all round.