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. There are Capitalism, Socialism and Communism and these are theories because no one actually knows. There are different beliefs in who and how control of the economy should happen. 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 In the same way we have outdated and inefficient tax systems.  We have all been led to believe that we pay income tax and other taxes as a duty and because we earn an income, when in reality all those taxes come from earnings and it is in fact the employer who pays the taxes. 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.

 

It all started with a community of people, then came the leadership (government) and then came the business sector(Industrialisation). There are only three sectors and the government and the business sector are there to provide for the needs and wants of the community. Neither the government nor the business sector will exist without the community but the community can exist, maybe with some difficulty, without the other two components.

 

The community has to work to provide for its own needs and wants and may start simply with hunter gatherers but as they progress so their needs grow and their methods of work improve with leaders/governments and entrepreneurs organising them into more and better productive methods. Nothing changes. Money came into the system to get around the barter system and to allow for choice and provided the ability to save. Money is worth only what it will buy whether its is goods or gold.

 

TAXATION

 

The government leadership grew and had to live and do things for the community, and the community had to provide for this government service which then comes in the form of taxes. This is where things went wrong. Without money the people had to grow crops or provide animals for the government. With money Governments have invented all sorts of ways and reasons to raise taxes but despite all the reasons and excuses it is still the community who pay all of the taxes. How does this happen?

 

The people will pay income tax, social services tax, rates or taxes on properties but forgotten is the fact that they get their money from the employer. There are two employers, the business sector and the government, and it is the employer who pays the taxes despite everything that convinces people otherwise. The employer pays the employee more so that he can pay all of his taxes and it would make no difference if the employer paid all of the taxes and the employee drew his net wage or less. The government collects the taxes from the people including its own employees and charges the business sector for taxes as well. In doing so it will be found that the business sector is in fact picking up all of the taxes no matter where or how paid. 

 

Now the end product of the business sector is the provision of goods and services to consumers. Many businesses will supply other businesses and governments in different countries but there is only the people at the end of the chain consuming the goods and services.

 

 Now it becomes necessary to understand that the business sector will have absorbed all of the taxes into its costs and the prices to the consumers will include all of the taxes and that is the point at which all taxes are paid.  Although people believe that they pay all sorts of taxes they actually only pay the taxes when they buy their goods and services. So the economy is still about a community of people who should work to earn a living, and the business sector must recognise that in the end they form the market place. 

 

Business may well sell its products to consumers, other businesses and governments in different parts of the world but the various taxes are in the costs and at the end it is passed onto consumers somewhere. The people are the final consumers and the market place.

 

Of all the taxes only VAT tax does not add to the costs of business and it is paid by the consumer and if it replaces the other taxes it saves all the costs and expenses and the confusion caused by other forms of taxation. With technological advances such as robots it has to be realised that the taxes that would have been included in the cost of employment are not there and there is much merit in replacing those taxes with VAT.

 

It now should be appreciated that the strength of the economy comes from the people who have to work and contribute to the market place. The substitution of people with robots and other technology may well increase business profits but will reduce the tax base and the market place. Can one imagine a Conservative/Capitalist Government with policies of full employment and a good standard of living for the people of the country with free health and education.

 

Global Trade has been encouraged by many but the down side is lower tax receipts to the fiscus and an inability to develop the economy. Many manufacturing companies are very mechanised and many will exploit cheap labour markets 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.

 

Income tax is a problem if governments are not aware of consequences of changing rates. It would be a cause of the large differences in salaries and wages. A prime example in the 1950s British Rail complained that it would cost 90 000 pounds a year to give the CEO a 5000 per annum because of the high tax rates of the Labour government and the extra cost was born by the travelling public.  Some while later the government changed and the tax rate reduced to say 50%. This gave the CEO a huge increase in his pay and the public continued paying. There have been many ups and downs in the income tax rates since then and the gap between the rich and the poor grows. 

 

FREE MARKET TRADING

 

Free market trading to be anywhere near successful requires  Governments to change their tax systems so that it becomes possible to reduce the cost of employment in order to compete. Business costs can be reduced by 10-30% as can the cost of government and things like the NHS, police, defence and education.  

 

By concentrating on exports business will not want to improve home 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. Imports could rise with any increase in spending power in the economy and the trade deficit would rise. It then becomes necessary to appreciate that countries should concentrate business efforts on self sufficiency and employment.

 

Improving economic performance is dependent on growing the internal economy and not led by exports. The government can then control the economy so that there are no booms and recessions. It would also be very attractive to investors being better able to compete with the tax havens.

 

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.

 

 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 will 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.

 

Every country needs to balance its books. No country can afford to import more than it exports otherwise it can be taken over economically. By the same token no country should export more than it imports because it may find itself with debts it cannot collect or having too much external investment.

 

In this regard and for many other reasons it would pay the World to have a single international World currency on paper and not in cash as such. The would be only one exchange rate for each country and they in conjunction with the World Bank could adjust the rate dependent on the need for imports or exports. 

 

There is a huge market potential in Africa but the populations are poor because they have no work because the countries are under developed. It requires huge investment together with education and training together with a political will which may be lacking. Africa has huge natural resources which are being exploited but the populations remain poor and the economies do not develop and many will emigrate officially or otherwise.

 

THE POWER OF THE PEOPLE

 

When it is appreciated that the taxes are paid from the purchases of goods and services by the people then it will be realised that the people have power. They can demand that they be supplied with locally produced products in order to create jobs and improve taxable income to their own government. Working people will realise that their taxes are going to keep the unemployed and that they will pay less tax when these people are employed. Not only that they will have a choice to buy from companies and markets that employ people and not machines that do not pay tax. Here it must be noted that any number of companies outsource some of their administration to places like India and their customers can influence them to change. Even British Airways and some financial institutions use India to administer their computer systems and other services. 

 

The community need to look after their future and the future of their children and much may depend on how they spend their income.

 

In changing to the VAT system of taxation it must be appreciated that it recognises that the people are the taxpayers and if the government needs to raise extra taxes it should increase minimum wages and improve the standard of living. It recognises that the economy is about the people.

 

The people also have the power of the vote. 

 

MIGRATION

 

Britain has problems with immigration and part of that problem is that some British business will employ immigrants because it is a source of cheap labour. They do not recognise that those immigrants will live cheaply and often 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 rate of 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. 

 

BRITAIN

 

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.  Recessions will be a problem on a global economic basis because no one country can resolve the situation. It has not been realised but recessions are often caused by wrong decisions and can be resolved by increasing the minimum wage. A typical example was the Poll Tax in Britain which took away spending power at the lower levels in particular teenagers who spend all of their money. 

 

Free market trading can really only be somewhat successful by the removal of 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.

 

Recessions are usually caused by a drop in spending power such as tax changes (the Poll tax a prime example which depleted the spending power of the young in addition to the lower paid), increased prices and unemployment.  In a self sufficient country this can be avoided by increasing the minimum wage. Many employers will create redundancies and hold back on wage increases while in reality it is necessary to do the opposite to increase the spending power. In looking at global trade and economies this becomes impossible.

 

It may well be found that during the downturns in the economy civil servants may have enjoyed pay increases while workers have not and so government expenses and taxation requirements increase or budget deficits occur.

 

One of the big advantages with changing the tax system to VAT is that many of the problems and inconsistencies brought about by income tax will fall away. It takes care of advancing technology and robots.

 

POLITICS

 

Having sorted out that a country’s economics only really works one way we come to the major difference between Capitalism and Socialism which is the ownership and control of the business sector. Socialism is concerned with government control of major industries and Capitalism is concerned with Free Enterprise and entrepreneurs being allowed to develop industries for profit. On the one hand government risks taxpayers money in business enterprises and the business enterprises are controlled by government officials whose knowledge is in politics and not in business and there is no competition.  On the other hand we have free enterprise where entrepreneurs risk their own money in developing business enterprises. They will develop technology and investigate the needs of the markets. They bear the risk with no cost to the taxpayer. However they are in it for profit but this is the reward for ideas and risks and usually a lot of hard work. The writer advocates this method of operation because the entrepreneur knows that he has to be competitive to stay in business.  

 

INTRODUCING THE CENTRELINE SYSTEM OF GOVERNMENT

 

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 to 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.

 

For those who wish to challenge this I am at This email address is being protected from spambots. You need JavaScript enabled to view it. and for those who like this please be advised that the Centre Party is on its way.

 

Much of this information can be found in ITS ALL IN THE PRICE by Peter William Bailey and available at Bookshops though Xilbris Publishers or on Amazon

Peter W. Bailey FCIS ACMA CGMA

4 Wellburn Drive, Ballantyne Park, Harare, Zimbabwe