This week it was announced that many people in the UK are living with illegal levels of air pollution.
This is pretty damning and as good a recommendation that we should be encouraging people to get on their bikes. Not only that but by doing this we could help to alleviate some of the huge hole that Brexit is about to carve into the UK economy.
We could this through a little bit of Keynesian thought.
6 years at university, summed up in 7 minutes. Possibly one of many mistakes I have made in my life. At least I helped to boost Cash In the Attic’s viewing figures. Now before we go deeper, I do not hate Hayek I just think his ideas have been woefully misinterpreted, so I blame Friedman.
Anyway, back to topic. Everyone knows the idea that Keynes said pay someone to dig a hole and then pay someone to fill it in. That is the really simple idea and we can use it to boost our aggregate demand.
I had a real plan any fool can understand
The advice, real simple—boost aggregate demand!
C, I, G, all together gets to Y
Make sure the total’s growing, watch the economy fly
These are the lyrics from the song and rather surprisingly do not appear in this order in The General Theory of Employment, Interest and Money: The Keynesian Revolution. Funny that.
So the important figure here is Y. Although we could argue all day that this simple equation should also include X and M, I just do not care enough. Y means GDP, the supposed measure of economic success. So we should all by now realize that Y is going to nosedive during Brexit, we may or may not feel that that is a price worth paying for some intangible feeling like sovereignty.
We, therefore, want to boost Y. Looking at our equation we would need a bigger C, I or G. C is consumption, I is private investment and G is governmental spending. Keynes felt we should increase G, that would then increase C and in turn I. I am going to show in a fairly simple way that we can do this with bikes. By the way, economics is not difficult, the obfuscating of it behind political ideologies on the other hand is.
One thing I will say is to not think of macroeconomics like your household budget. As soon as you do that you end up in austerity and the Paradox of Thrift. We do not want that, so stop doing it. You end up with disabled people having nothing to live on and as a supposedly civilized country can we please quit that. That by the way eventually makes the rich people poorer as no one can afford anything. So big hand claps for the guys and gals in the Tory party.
So we are going to boost G. That is government spending. If you think this is terrible, please click the link on “Paradox of Thrift” and then read about monetary policy and realize that your tax is actually a justification of a currency and not paying for that poor old lady to get the new hip that she really needs.
In this day and age being ignorant is a choice, you have the whole of human thought at your fingertips so use it. You may also want to realize that austerity has made the economic situation of the UK way worse, in fact, whilst Osbourne was Chancellor he borrowed more money than ALL the Labour governments put together. Think of the staggering incompetence involved in that.
So our government is going to boost G. We agree they need to spend some money in order to do this. So they decide we need a great infrastructure for cycling. That will encourage people to ride bikes, cut congestion and ease the burdens upon our NHS. We can all then all agree that this idea is a load better than nuclear bombs to protect us from the Russians, who anyway have bought all the good bits of land in the UK.
So we now have job vacancies, we fill these vacancies. These people now need to be paid. Can you guess what they do with their wages? Do they spend them on items that they need so as to be able to survive or do they squirrel it away in the Cayman Islands? If you picked the second option, you are most likely a Tory MP and I claim my £10. This is called your marginal propensity to consume, this means if you are poor and given £100 you are more likely to spend the money than if you are rich and just put it in the bank.
So forget about saving, get it straight out of your head
Like I said, in the long run—we’re all dead
Savings is destruction, that’s the paradox of thrift
Don’t keep money in your pocket, or that growth will never lift…
Now say we employ an extra hundred people to build our cycle path. They all go to this one roll shop for lunch. That shop will now have to take on more staff. So they are now employing more people. These people now have more money to spend. You should by now have realized that this will have boosted C. People are consuming.
Now we have our infrastructure growing, there may now be new bike shops setting up, new cafes along routes, people might set up their own bike companies. We are now increasing I. People are investing.
If this all sounds too simple it is because it is. That does not mean it is wrong.
Now with infrastructure people will feel safer going cycling and will actually engage with it. With the infrastructure you will no longer need to dress head to toe in hi-vis, you can forget your helmet, and you can get to the shops without being flattened by a taxi. Did you see how simple this all is, Amsterdam made this choice and everyone seems really happy there? We can then start to cut down on breathing exhaust fumes.
The problem is that in order to do this may take longer than a parliament, especially one that Theresa May is in charge of, this means politicians do not want to do this as someone else might get credit for their work. That, in a nutshell, is the big problem with our democracy, politicians do not want to effect real change as they do not want anyone but themselves to benefit from their work. They all appear to have forgotten they work for their constituents.
End of rant.