Most politicians and economists have no idea how to run a country. There are so many different thoughts and ideas and political theories that there is much confusion. However, when all the rubbish is cleared away it becomes possible to see that there is only one way that makes sense.
Politicians and Economists have been educated into believing that the economy is about money and business, stock markets and GDP. In the same way we have outdated and inefficient tax systems and we have all been led to believe that we pay income tax and other taxes as a duty, when in reality it is included in earnings and it is in fact the employer who pays. There has been a failure to realise that the economy grows stronger with people working and growth in the average standard of living and spending power available. Poor people and poverty result in a poor country. The economy is in fact about a community of people.
There has been a failure to realise that economies only work one way.
Countries comprise three segments, the community of people, the business sector and the government. The government takes its income (taxes) from the people and the business sector. Because the people are employed by the business sector or the government it results in the business sector absorbing all of the costs of employment and all of the taxes paid by employees one way or another. The business sector absorbs all of the taxes and then passes on these taxes to the people(consumers) in the prices. How is this? Because effectively the end product of all business is the production of goods and services for the people who are the consumers and therefore the end taxpayers.
Business will supply other businesses and governments but at the end of the chains are businesses supplying goods and services to consumers (community) who form the only part of the economy that is going to buy the goods and services. The business sector will absorb all of the taxes whether directly or indirectly and pass them on in the price until finally the consumers will pay.
NOTHING CAN CHANGE THIS.
Global Trade is encouraged by many but the down side is lower tax payments to the fiscus and an inability to develop the economy. Many manufacturing companies are very mechanised and do not employ many people so the tax contribution from their employments is relatively low. Robots do not pay tax. Companies will also not pay a lot of income tax because of the tax benefits for capital investment and so many of these companies pay very little tax. Why would a government give tax benefits to companies that replace workers with robots and the like and then lose the tax payments from the people, the tax from the companies and incur more government expense through unemployment. Global Trade brought about a failure to recognise that the end product of all business is the provision of goods and services to consumers and the value of workers as consumers.
Free market trading can really only be somewhat successful by exporters removing direct taxes on the people of the community and reducing the cost of employment to their net pay or less. It has to be appreciated that all taxes with the exception of VAT will add to the cost of business.
It becomes necessary to understand that the economy will only grow and strengthen through employment and improvements in minimum wages to improve the standard of living and spending power. To achieve this end it is necessary for countries to be as self sufficient as possible. There is little point in increasing the standard of living to benefit other countries from whom one imports.
By concentrating on exports business will not want to improve wages and will not look at the effects of low wages on the local market, and so it will be found that improvements that should strengthen the economy will not happen because imports and the trade deficit would rise. It then becomes necessary to appreciate that countries should concentrate business efforts on self sufficiency and employment.
In concentrating on exports one is reliant upon other countries being able to sustain and improve their economies. This will in all probability lead to a collapse in World markets. Business is reliant on consumers earning a living. China is a country that needs global trade because of its cheap labour policies and the number of Western factories that operate there because of those policies. Many of these factories and businesses moved to China with a view to exporting from there to their home countries not appreciating that they have diminished their own market place.
The theory that wealth trickles down (Margaret Thatcher) does not hold water, wealth is generated from the bottom up which is why poor people will make for a poor country.
Britain has problems with immigration and part of that problem is that some British business will employ immigrants because it is cheap labour. They do not recognise that those immigrants will live cheaply and remit part of their income back to their homeland and this does nothing for the local market. Wealth comes from providing goods and services to and building the home market.
I will provide Zimbabwe as an example. During the height of international sanctions when Smith was president the country was forced to develop its internal economy to provide for its own requirements as far as possible. It had its strongest economy at that time with the Rhodesian dollar worth more than the British pound at one time. Since then the country came under new rule and there was what was termed a Land Grab and millions of farm workers were put off the land and much of the agricultural industry collapsed and since then many more companies collapsed with the consequent loss of jobs. Today instead of there being some 6 million people employed in Zimbabwe there are maybe 500 000 and some 4 million employed outside the country sending money back to poor relatives. The country went through a period of hyper inflation and the currency collapsed. It has used the US dollar and is replacing that with bond notes as corruption has spread. Apart from government policies being at fault it just goes to show that a poor population results is a poor country.
So Donald Trump may well be right in putting America first and developing companies and work inside America. He realised that there was a huge problem with factories moving to Mexico (cheap labour) with a view to exporting to America (more wealthy people). He needs to go the rest of the way and reduce the cost of labour by removing the taxes on individuals as well as companies. Replace the whole lot with VAT and make the imports pay the same tax.
China will advocate World Trade because it exploits its own cheap labour market and needs to export. However it needs countries that have good wage structures and good unemployment benefits. It is necessary to remember China was a true communist state and then it opened the door to Capitalists who flocked there because of its cheap labour. The economic strength of China grew and a very strong American economy grew weaker.
Now appreciate that Donald Trump is going to try to rebuild the American economy by concentrating on the internal economy. He will need to change the personal tax laws to reduce the cost of employment and improve internal jobs and spending power as well.
Indeed Theresa May and Brexit should consider taking the same path.
So on a more sensible analysis the government should concentrate on providing work for the community. The business sector, will look after itself if conditions are right, and should provide goods and services for the community as far as possible. It is necessary to get rid of the present taxes and convert to a mainly VAT system of taxes to reduce the cost of employment and make the business sector competitive and the cost of government and its services cheaper. It must be possible to improve the wages and standard of living of the general population without increasing imports. Each country should aim to balance their imports and exports. The strongest economy will prove to be that with the highest standard of living of its people and not the most exports.
Nothing can change this. The belief in World Trade can only result in countries becoming poorer and as markets diminish so business will deteriorate. Business will advance with technology but without a market place there will be nothing. Consumers in the form of people provide the market place and without work and income there will be no market place.
Much of this information can be found at www.baileysneweconomics.com and in ITS ALL IN THE PRICE by Peter William Bailey and available at Bookshops or on Amazon.
SO WHAT CAN WE DO
THE CENTRELINE SYSTEM will appeal to both the capitalist and the socialist and while this may sound impossible it is actually true. The appeal for the Capitalist is that it supports free enterprise and provides good savings in production costs which enable businesses to compete. The appeal for the Socialist is that business and government will recognise the need to establish a community with full employment and people with a good standard of living.
It has a mainly VAT system of taxation with free health, education and pension, all in the interests of keeping down the cost of employment while maintaining spending power. The main control then becomes the minimum wage providing an increase in production and taxes as wages rise. Robots will still not consume goods and services but will contribute tax.
As the change in taxation takes place so business and government will experience a 20-30% saving in costs making business far more competitive. VAT may go up to 20-25% but the end prices of locally produced products would be the same or even less. The consumer is already paying more than this in the present prices. The price of imported goods may rise but that is because with existing tax systems they do not pay the same taxation as local products.
This change would also mean that far more funds would be available for investment. Consumers will realise that buying local products helps in the provision of jobs and incomes, business will appreciate the need to keep people employed and wages reasonable while government costs will go down and government would also appreciate the need for full employment and avoid the costs of unemployment.