On PMQs this Wednesday
just gone Jeremy Corbyn asserted, as he has repeatedly before, that it's about
time this government 'Invests in places
across the UK outside of London
Not quite. Corbyn's
confusion lies in not identifying that what he's describing are not
'investments' they are 'costs'. Whatever projects he wants the government to
invest in are actually costs of employing people to do things, and costs of
natural resources (metal, wood, plastic, fuel) to do them. When Corbyn uses the
term 'investment' he is making it sound as though he's describing the benefit
of doing something, when he's actually describing the cost of doing something.
And projects that cost money
and material resources only ought to be undertaken if they bring value to the
country. The reason should be obvious; any labour or materials used for one
thing are labour and materials that cannot be used for other things. The opportunity
cost of doing x is not doing y and z.
Most of our politicians
speak of creating jobs with taxpayers' money as a good thing. Using their
logic, then, the more jobs they create with taxpayers' money the better it is
for the country. But to see how foolish this assertion is, suppose for the sake
of argument that the government is about to spend £50 million on wages for a UK
Local Government building project, but then found out that they could hire a
more competitive firm to do the job at the same standard for £30 million.
According to Corbyn's
rationale, the government should hire the £50 million workers not the £30
million workers, because spending an extra £20 million on the project increases
the benefits of the project, and is better for the economy. It’s terribly obvious
that the £20 million saved is a benefit to the taxpayer, because it can be
spent on other public goods and services, as could all the labour gained be
expended on other projects.
Equally importantly,
whether a project adds value to our society is not a question that is best left
to politicians, because in business private investors are much more likely to
be prudent with their cost-benefit analyses, as it is their own money at risk.
If a project looks like a
good investment, then investors can acquire the money from a bank, because a bank
will usually lend if the borrower's ultimate gain from spending the money
enables him or her to pay back the loan with interest. A government won't have
anything like the same kind of risk signals, nor the same incentive for prudence
because taxpayers pick up the costs of any imprudence.
When politicians proclaim
costs as benefits, it leaves me wondering whether they are muddled economists
or disingenuous hoodwinkers. Let investors invest with their own money - it is
the best guarantee of value in the shape or consumer and producer surpluses, not
politicians with other people's money.
This does not, of course,
apply to financial donations given to the charity sector - but that is not what
Corbyn means when he talks about investing in places in the UK - he means taking
taxpayers' money to effectively subsidise British industries at uncompetitive
rates to shut out foreign competition, and appeal to the insularities of so
many regions of the UK.
Be very wary when
politicians declare that they want to 'Invest
in places across the UK' - the last thing you should ever do is encourage
them, for they usually make us worse off in net terms, as well as making foreigners worse off too, as they lose out in the ability to trade in our economy.
