Steph/ven's New Counter-intuitive Economic Policy

As we know, there is due to be a General Election next year. I fully expect to win by a landslide, and thereafter to be installed as Dictator for Life, in the old Roman style. Because that's an extremely likely sequence of events. (Yes, that's sarcasm. I'm trying it out; it's new and exciting.)

Having watched the unfolding mess, I have developed a new and entirely untested theory for the best way to run the economy. Clearly, it is infallible, and I shall therefore share it with the world.

As we know, we live in a global economy. This means that, in good times or bad, the government of the day actually has relatively little impact on the condition of the economy. They should no more take credit for the good times than they are really to blame for the bad. Governments should also recognise that there will always be good times and bad times. While, in theory, the current problems could have been avoided by some more ethical trading, a realistic appraisal of human nature, coupled with an understanding of the nature of the system itself (where the mandate is "increase stockholder value") should lead one to conclude that we would never have avoided this problem. And besides, even if we'd avoided this problem, there would just have been another.

However, what governments can and should do, recognising the inevitable cycle, is use the good times to prepare for the bad. And this means adopting a counter-intuitive approach to economics.

When times are good, lots of people are working, confidence is high, people are spending, tax revenues are coming in, and so there is the strong urge and temptation to cut taxes and spend money on services and projects. When times are bad, the reverse is true: people aren't working and aren't spending, confidence is low, low revenues are to be had, and there's a need to raise taxes and stop spending.

But it doesn't have to be this way. Instead, we should use our magical powers of divination to determine that there are going to be seven years of plenty, followed by seven years of famine. (It all came to me in a dream about sheaves of corn and big fat cows. It was bizarre.) More seriously, while we don't know how long the good times will last, nor how long or how bad the bad times, we can be sure that things will play out that way. They always do.

So, the thing to do is this: when times are good, judiciously raise taxes, and ease back on public spending. It won't be hugely popular, but the people won't be too upset because, hey, times are good. When you're working, and making enough to support yourself and your family with a bit left over, it doesn't hurt too much to have a bit less left over than you otherwise would have had.

Doing this will allow the government to build up a fairly substantial 'war chest', money that should be put aside somewhere safe, and not dipped into. Resist that temptation. No, RESIST!

When times are bad, then, we hit problems. People are out of work. People have less money coming in, or fear that they're about to have less money coming in. They stop spending. The whole system becomes gummed up.

This is where the 'war chest' proves its value. At this point, the government of the day does two things. First is a moderate but real tax cut. This gets more money to the people, gives them some more to spend on the little luxuries, and generally improves confidence.

At the same time, now is the time to increase government spending, by comissioning all those wonderful government projects that you've been holding off on. But you don't just throw money around like crazy - these have to be real projects, building real things that will really help people. And, ideally, things that will allow your country to come out of the bad times stronger than ever.

And so, the bad times are the time to invest in that efficient high-speed rail network you've always wanted. It is the time to build the infrastructure to ensure everyone in the country gets high-speed internet access. It's the time to invest in alternate energy sources and power plants. And new schools, and new hospitals. Doing so creates jobs in the immediate term (helping get things moving again), but also gives the country a long-lasting legacy.

But, of course, it all works together. In order to pay for the bad times, there is a need to gather money during the good times. Failure to do so leaves the country floundering, and being forced to take on absurd and cancerous amounts of debt, debt that our children will be paying off. (And, in a year or two, higher taxes and cuts in services, all for no appreciable benefit.)

Sadly, it will never work. Governments are elected for five years, and a policy like this would require a long-term view. A government that spend four years in 'good times' raising money would find the temptation to spend the 'war chest' in the fifth year almost impossible to resist. So, there's no choice. Dictator for Life it is...