A breakdown of different macroeconomic approaches

At first glance, the strong belief in cutting the so-called deficit (saving more than a country spends to you and I) sounds like common sense, at least that is what the Conservatives have strongly argued in recent history. But let’s shake the assumption that saving rather than spending is best for a country. Then we will ask, “If the state doesn’t spend, then who does?”

Politicians, academics and importantly the everyday people who make up this country have argued that countries are unlike households. Modern and inclusive societies should not simply balance the books. Instead states should invest for the long run. Strong investments should be made in industry, infrastructure, and essential services such as the NHS. In the short, medium and long term this type of investment provides quality jobs, and economic returns from increased capacity. Public works provide people from all walks of life and all social and economic groups with affordable access to essential, life improving services.

The Conservatives take a ‘neoliberal’ approach towards economics. This means the state reduces its involvement in industry, and private companies begin to take on roles the state did previously. Take the privatisation of the railways for example. A little known fact is, when a country sells its possessions or assets, the value of the goods and services (known as GDP) of the country falls, and debt often increases relatively in comparison to GDP. This is why many countries and policy makers around the world are anti-cuts/austerity. To follow a more socialist, traditionally Labour party approach (broadly known as Keynesian theory) that sees state investment in the essential things we all and should have equal access to, would result in an increased GDP. This is due to an increase in the value of assets, which can reduce the size of national debt relative to GDP. National debt relative to GDP is an important economic measurement commonly known as debt to GDP. What fails to be said by party politics and the media is that there is more than ‘logical’ or ‘common sense’ way to reduce national debt.

So, if a country does follow a ‘neoliberal’ approach to the economy, who provides the essential, everyday things we need, such as healthcare, affordable transportation, housing, education and so on. Well, imagine a market in which all the people at the stalls are shouting at you and telling you their apples are the best and cheapest. That is one-way neoliberal market economies work. Lots of suppliers try to sell you what you need for the best price. In the long run, the sellers with the most expensive products go out of business, leaving only the most affordable sellers. At first this does not sound awful. However, corners can be and usually are cut in order to keep costs down, resulting in a poor quality product for you and I.  Individuals retain any profits, which inhibits the spread of wealth, especially when these companies avoid and evade taxes. Ironically, many companies avoid tax while receiving Conservative subsidies. Alternatively, and commonly the so called market, may only have one seller, who can charge however much they want, leaving you and I with no choice. A further scenario is that a system appears in which the affordable options are the poorest quality and the most expensive are the highest quality.

This is no surprise when it comes to luxury goods, however healthcare, affordable housing and a decent education should never be considered luxuries. The Labour party believes access to high quality essential services should be equal, in order to create a level playing field from which all members of society have the potential to move upwards if they so wish, rather than a society in which the disadvantaged are prevented from upward mobility as a result of differential or stratified access to the essential services from which lives can be improved.

Noel Moka – Young Labour Party member in Whalebone Ward


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