Cameron: The Economics of Ruin

Peter Hoskin at the Spectator Blog has post up on Cameron’s speech to the LGA conference.

 He quotes:

 Imagine if some of our biggest business brands followed the logic of our government.  These businesses spend their entire time trying to reduce costs in order to provide better value and a better service.

 He then advocates that the public sector should do the same.

 Now, let’s imagine that happens.

 Business and the Public Sector both concentrate on ‘cutting costs’.  What does this mean? More unemployment and lower wages.

Individuals are both workers and consumers. Whilst it may be logical for one business to focus on ‘cutting costs’ to safe guard profit margins, it is illogical for all businesses to do the same.  It would be even more illogical if the State joined them. It leads to demand falling. The only way companies can then grow their profits is either through exporting (and not every country can be a net exporter) or through consumers taking on more debt to buy their products. Which increases the economy’s vulnerability to financial shocks.

This the situation that that the current economic system creates.

To embrace the logic of Cameron is to embrace the economic road to ruin.

This is previously the opposite of the agenda I and others are pushing.

 You can’t cost cut your way to national prosperity. That’s not a sensible strategy, it’s a race to the bottom.