Wednesday, 25 April 2012

Why I Now Know History Is Important

Many years ago when I was at school (I left in 1972) I used to think history was a waste of time; what mattered was the future and not the past.  Over the years I have changed my mind and realised that it is important to study history for two reasons; to know how we got where we are and to avoid making the same mistakes again.  This second lesson and my days at school came back to me when I read this story:

You see I was among one of the first students to take Business Studies 'A' Level and as part of this we did some economics.  Among the things we were taught was that one of the fundamental mistakes made in the Great Depression was for firms, who facing tough trading conditions, to cut wages in order to cut costs.  While they did get a short-term cost cut they also reduced the market for their goods which meant they had to cut production which, due to the fixed cost element, meant their costs per unit increased.  It doesn't take much to realise that this is a vicious circle of wage cuts, sales losses, production cuts wages cuts etc.

In the linked article are a couple of paragraphs that I had feared would happen when all the government cuts were announced:

The ONS said output of the production industries decreased by 0.4%, construction decreased by 3%. Output of the services sector, which includes retail, increased by 0.1%, after falling a month earlier.

It added that a fall in government spending had contributed to the particularly large fall in the construction sector.

Notice that the government cuts have led to a 3% decrease in construction which will in turn mean less government revenue and higher welfare payments which will lead to further cuts/higher taxes, which will in turn push national output down further.  Does anyone spot the similarity?

I know that, as a country, we have been living above our means and the deficit has got to be cut but this  needed to by tackled by greater efficiency and not just cuts.  My time in the Civil Service tells me that successive governments have introduced endless changes to bureaucracy, usually before the last changes have been implemented, as they asked for more and more information to make the 'front line services' prove they are value for money; politicians not trusting anyone to do an honest job unless they 'prove it.'  Given the way politicians behave (MP's expenses etc) it would be better to get the politicians off the front line services back and let them get on with the job.  That way we could have efficient public services, cut costs and be more productive as a country.

The only snag I see with this plan is convincing the politicians that, for reasons of self interest, they don't know how to run a country.

1 comment:

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