(edited and expanded from my original response to http://www.taxresearch.org.uk/Blog/2013/02/23/on-aaa-and-what-might-happen/comment-page-1/#comment-631503)
I believe the simplest way to stimulate the economy is not found by faffing about with banks & big business but by increasing the net income received by the middle & lower strata of society – the people who will actually spend the extra income – starting the very necessary cycle. It’s like an engine, and ours has stalled.
– people have excess income
– they spend it
– increasing income for business
– increased income allows business to expand/employ extra staff (with the extra bonus of shifting more people off JSA)
– this means more people who have excess income
– rinse & repeat
Yes, I know it’s simplistic, I never claimed to have studied economics (ok, one unit in 1st semester 1st year > 25 years ago). But it makes sense.
If no-one has excess income (except the very rich, who don’t spend in the same way at all), they can’t spend anything, the businesses cannot expand as no-one is using them or buying from them, so everything either stagnates or gets worse over time. Every small, especially rural, town watches local business after business shutdown as no-one has any money to spend on anything but the absolute basics necessary to live. Cheap supermarkets & discount online sellers thrive, everyone else declines. Small towns end up with a High Street of empty premises, a few charity shops, banks, sometimes a pub &/or coffee shop and a never-ending cycle of hopeful businesses opening and closing shops every couple of weeks, with a large supermarket or “retail park” on the edge of town.
Oh, and surely boosting the economy (by increasing the income of more people again) would be done if we started with a bloody council house building program to replace the ones council tenants, like my grandparents, bought in the ’80s. As I said, I’m not an economist, but surely building your way out of a recession is more viable than austerity when all of your possible trading partners are in the same or worse state than you.
I look at our so-called leaders, their opposite numbers & those in the rest of the world and think they could all do with damned good talking to and a stint in the Naughty Corner (I’d say a smacked bottom but I’m afraid that too many of them would enjoy it). Rip off their blinkers and force them to take part in the real world for a year, with no outside help, before they are allowed to make policy that affects lives – make them live the life of those they would destroy & demonise before they do so. A friend said I’d make a good “World Mum” – I think I’d need a huge naughty step and a very big wooden spoon.