UK must invest its way out of recession
After the biggest recession since the Second World War, the debate arose about how to deal with the deficit of the public sector, one of the consequences of the recession.
During the recession, people had a complete other spending pattern: they didn’t consume a lot less, but there was a huge investment fall of 19.3%. Critics say that there must be a restoration of the lost investment, if we don’t want the economy and the competitiveness between people to be permanently low.
Many people thought that the recession was a consequence of the irresponsible spending of Gordon Brown, or a consequence of our profligacy. But that’s not true, and due to the falling taxes the deficit will only grow.
There have been attempts for fiscal stimulation and to make the policy of ‘reassuring the financial markets’ work, but these have all failed: tax receipts have fallen and there was an increase of government spending. Not everyone has faith in the theory of ‘investing the way out of the recession’, although Treasury’s research and the positive outcomes of government investment seem to prove the contrary. Other researches show us that investment is far more important for our current economy than government spending. The only way to reduce the deficit is to get these trends work for us and to make sure everyone gets back to work and pays their taxes. Then it will be possible for the government to invest its way out of the recession.
I think it makes perfect sense that people invest less during a crisis. Off course, they will also consume less, but it stays important to buy food, clothes, gas … whether it’s crisis or not. Less necessary things, like investing, will be of secondary importance. But investments are crucial for our economy, which has been proven by numerous researches. So I think it’s important to make government and other people invest again, while making sure that the government doesn’t spend unnecessarily. It’s better to strive for slow, effective improvement instead of having a huge boom of the economy followed by another bust.
http://www.guardian.co.uk/commentisfree/2010/mar/19/recession-public-deficit-investment
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Dear Nicolas,
BeantwoordenVerwijderenI don't fully agree with you. I share your point of view that the governments shouldn't invest unnecessary but many great economic writers have all written that the government should increase their public spending in times of crisis.
I think that the UK government has taken the wrong measures to stimulate the economy. They may not only concentrate them on the financial market but also on the other markets. For example the Belgian Government has reduced the tax in the construction business. People keep investing in their own houses and the impact of the crisis was almost reduced to the minimum. This is an example of a good measure taken by the government.
Slowly investing in the economy is according to me also a bad way to reduce the impact. During the past years companies have saved some money. This money will be used to reduce the impact of the crisis on the company but when is takes too long they may spend all of their savings. After that the probably will have to close. On the other hand when the Government increases his public spending they may safe these companies.