The Redcar steel  factory has closed and others considering closing, it has gone into liquidation and more than a thousand workers have been put out of work and who is to blame – DAVID CAMERON – BUT WHY - because he is the leader of the country.

DO WE BELIEVE THIS? If you think this is not true then read on.

Some long time ago a Prime Minister of England said something like We should go back to basics to find the answers.  But where do basics start. In the beginning the communities were tribes with chiefs. The people were expected to work to contribute to the whole. (Smacks of communism). Businesses and Governments developed from these small beginnings and so did political and economic theories and poorly considered tax systems.

First we need to straighten things out. The country comprises three sectors, a government sector, a business sector and the community. The economy actually only works one way. The government makes the rules and regulations and the head of the British government is David Cameron. The government raises its income from taxes levied upon the business sector and the community.  

The business sector produces goods and services assisted by a financial sector which is part of the business sector. The business sector will produce goods and services which it sells to other businesses, the government and the community in this and other countries but the end result of the business sector is the supply of goods and services to a community somewhere in the world.

The costs of government (taxes) are all included in the price of the goods and services supplied. This may be difficult to accept but is absolutely true. There are only consumers with money to buy the end products with the result that the consumers are the tax payers. Apart from VAT all the other taxes including their own income tax are included in the prices that they pay.  

In effect the business sector is dependent on the community to buy their goods and services, as hard as this may be to understand, even though they may be making machinery to governments to  build roads around the world. Things have changed but the basics remain. In any country there is a community of people who need to work to earn money to spend. As technology advances and businesses produce more and communities grow so the problems of the leadership become more difficult.

It becomes necessary for governments to realise that advances in technology are not purely for the benefit of business but must also be for the benefit of the country and the community who will work less. It has to be realised that robots may do the work but will not have money to spend.

By definition It is still a community of people working to supply their own needs and wants, organised by leaders and entrepreneurs into organisations and companies with tools and equipment to boost their productive capacity. Monetary systems provide for payment to the community that allows them to convert the result of their efforts into their personal requirements.

To put it bluntly, without people working and earning a living there will be no business. So it matters not whether you are a capitalist or a socialist the economy is about the earning capacity of the community. GDP can grow through technology but without a market place it has no value.

So Mr. Cameron as the leader of the nation you have to make British business competitive in the world today and to do that you have to change the whole system of taxation to bring down the cost structures. You cannot have free market conditions without making these changes. It should not be possible for other countries to produce goods and services cheaper and if they can it is because they do not provide an equal  market place. For years business men have used China as a manufacturing base because of its cheap labour but they have been very reliant on the West for their markets.  Time to realise what is happening and what needs to happen. For years China has had a higher growth rate than Western countries but as businesses close and unemployment grows and spending power shrinks so China will shrink also.

Countries should produce GDP in correlation with spending power and relative to population growth.  Countries cannot compete in international free trade environments unless equal terms apply.   

It is time for change. Government’s duty is to ensure that the community works for a living, share the burden as it were, It is vital to establish a balance between production, the market place and imports and exports as they are all related. There will come a time when working hours will need to be reduced to cater for an ever growing population and technological advances in business requiring less people. Migration from other countries creates a far bigger problem than is currently realised and populations may need to be controlled.

Creating jobs is going to be a huge problem but the leaders have to do it.
Mr. Cameron I hope that I have proved my point – you are responsible and you should do something about it. Try reading my book Its All In The Price or go to my web page www.baileysneweconomics.com.