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How would you fix the economy?

Imagine for a moment, that you lived in a small village and was fairly self-sufficient, producing your own food. You even produce enough to sell to the Lord of the Manor and the rest of the village.

Then suddenly with little warning, the Lord of the Manor puts everyone’s rent up and starts an austerity drive.  He want to pay down his mortgage. Who can blame him? No one likes debts. Everyone in the village cuts their spending and they buy less from you.

Everyone in the village is in the same boat, they have falling sales and less money because of the rent increase. No one appears to be benefiting, but the Lord of the Manor is paying down his mortgage. So all the benefits will go to him in the future. Meanwhile, the standard of living of every villager has gone down and there is little money left over for investment in new machinery and tools. The village that once grew and thrived, now struggles and stagnates.

The answer could be for villagers to borrow and invest. But with sales dropping for everyone; who would take the risk? The Lord of the Manor could re-mortgage or go back to paying the mortgage off slowly.  He could then invest in the village and everyone would be better off in the future, including him.

This is what is happening in Britain now, we are all worse off because the government is trying to pay off it’s debts and claims to be mortgaged up to the hilt. Many of the assets that the government used to own have been sold off over the years. Hospitals were once owned by the government. Now they are built with a private finance initiatives and the government pays for them over several decades. The government still owns the Bank of England with it’s very useful ability to print money.

Perhaps the government could borrow and invest the money in the economy. What could it invest in? More airports, so we can all take more foreign holidays? A high speed rail link from Birmingham to London? So unemployed Brummies could go work in the City of London then and get 6 figure salaries. Maybe they could invest in new roads, so the next generation will have something to drive on?

Perhaps we could build more schools and expand the population. Encourage people to have more children. We could even encourage more people to come here from other lands. It could get a bit crowded, but building schools would create jobs… Right?

Back to our little village. Should we expand the village or encourage people to have less children, so that the village school wouldn’t need extending? Should we encourage people to learn new skills so the village had enough tradesmen without bringing in people from outside? Could we use some technology in the village to make everyone better off? Should we build one or two new cottages in the village so everyone had a place to live?

Please use the comment box to share your thoughts…

One response

  1. Pingback: This weeks blogging review « Mike10613's Blog

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