The upcoming Pittsburgh
Summit of the G-20, the political leaders of the global economy, is already
looking like a rerun of the last G-20 Summit,
which was held in London earlier this year.
Basically, the object of the Summit is to hide the chasm
between the “Anglo-Saxons”, the USA and the UK, who want to borrow yet more
money, and everyone else in the world – who have had the nerve to suggest that,
since too much easy credit got us into this mess, it might not be a good idea
to keep borrowing.
The one thing that will not happen is that the USA and the
UK will be persuaded to give up their addiction to deficits.
So, even if “stimulus packages” are counter-productive, there
is no point complaining: the money is going to be spent, so the challenge is to
ensure that it is spent efficiently.
As with most government “development” or “aid” projects,
“stimulus” money is spent on projects with powerful political
backing or by organisations that are good at filling in application forms.
So most government money to help the economy ends up being
spent on government projects, or projects already sponsored by government.
In other words, the money for “economic development” goes to
the unproductive part of the economy, not the productive, wealth-generating
part, private business – which actually pays the bill.
It is should be obvious that if the object is to increase
production, it is stupid to transfer money from the productive to the
Yet we are far from suggesting that the money would be better
spent on loans or grants to business. Such schemes also have a poor track
Instead, here are some ideas of how stimulus money could be
targeted to increase economic efficiency.
1 Cut property taxes. Taxes must be paid,
but they should be levied fairly on profits or sales. Property taxes – called
rates in the UK – simply increase business costs.
2 Cut payroll taxes. It is ludicrous to increase the cost of
employing people when governments claim their priority is “job creation”!
3 Make bank bail-outs conditional on fair
treatment of business. The point of the bank bail outs was to save the
whole economy, not the bankers. Those who received government money must share