BNP’s Economic Policy from a 16 year old

I thought I would look into the BNP’s policies to see if they have any depth. On the BNP Chronicle (a blog that slavishly follows the party line, but is not the official mouthpiece of the BNP) is and article on “Why the BNP can get us out of the Recession” by Jason Newton Aged 16. In the light of his being a minor, I will try to inform than put down.

 

The errors are as follows

 

  1. The solution is less exports and imports.

 

“The solution it seems would be to reduce foreign imports and reliance on them. This would not only reduce who would be involved in this mess but also make it more manageable since by the use of Occam’s razor we can deduce that if less countries are reliant on each other the less that can go wrong.”

 

This is incorrect. The Great Depression of the 1930’s was made much worse by the Smoot-Hawley Tariff Act of 1932, where the US Government sought to protect it’s own industries. Other countries retaliated. Industries that faced foreign competition were helped. They could raise prices and increase output. But, when other countries retaliated, the exporting industries suffered. So jobs are gained in some areas, but lost in others. But with less competition, profits are higher. This is fine for the minority, but not for the majority who pay for the profits with higher prices and less choice.

 

  1. Recessions are caused by an excess of Aggregate Demand

 

“A recession is a temporary retraction in the economy. This means that a recession happens when the current aggregate demand of the economy is greater than the total output.”

 

An excess of aggregate demand is a boom that is out of control. In Keynesian theory (to which I do not subscribe) this leads to inflation. John Maynard Keynes wrote that you could get stuck into a depression by a deficiency of aggregate demand – a circular situation where people without jobs have no money to spend, but without people spending no jobs would be created. The current crisis is due to the financial system seizing up. It was caused by two factors. First, a policy in the United States of helping the poor those in high risk jobs to get mortgages (the sub-prime). Second is keeping interest rates too low for too long (they were lowered after the dot.com bubble burst, and again after 9/11, then raised too high in 2005 and 2006). It was like encouraging some teetotalers to drink a beer. Then when they start feeling a little dizzy to have another and turn the music up. The world economy has collectively passed out. They are each waiting their turn for the stomach pump.

 

2. The way out of recession is through investment.

 

Spending more money would increase aggregate demand which is too high in the first place, if it weren’t we wouldn’t be in a recession. We need to cut back on spending and increase investment that, way more goods and services will be produced, and the long-run equilibrium will be at a higher point.”

 

Investment will help recovery out of the recession, but it must be of the right type. The sort of investment that produces real returns, not job creation schemes that will lead to higher taxes forever. The problem is, government expenditure is already out of control. The cut-backs in spending required will depress aggregate demand far more than some investment will increase it.

 

3. There is only a finite level of output.

 

“With this in mind it shows how the bnp will help to create a stable economy and won’t be driven by the ideology that an economy will continue to grow. The world isn’t big enough for us all!”

 

British economic output in total (after adjusting for inflation) is over 2,000 times higher than in 1700. Per person it is 250 times higher. In purchasing power it is 40 times higher than in the poorest countries. Globally in the last millennium, output per person grew by 20 to 30 times (2000% to 3000%). Most of this was in the twentieth century. But in 1900 or 1950, most people would have said the economy can’t grow any more. Further, an economy that does not grow will be an incredibly miserable place to be, Spain from 1940 to 1975, or Portugal 1945 to 1970. The biggest example is India from 1947 to 1990. They shut off the economy to foreign goods & foreign investment. Instead, they sought to control investment and business with a licencing system. The system was corrupt with the political elite prospering, whilst the vast majority were kept poor.

 

Jason. I sincerely hope that you go on to study economics seriously. But do not be fooled by the fancy graphs (or algebra at higher levels). They are but abstractions that can aid understanding, but also provide blinkers to that knowledge.. The real economy consists of billions of people, who by mechanisms that we do not fully understand, in serving their own immediate purposes, also serve the common good. A source of Britain’s Greatness was being the first country who let the market mechanism flourish.

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