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Money… Money Changes Everything!

by John Brian Shannon

At this moment in UK history, more money is needed to fund the NHS, schools, roads, railways, airports and other national infrastructure, Trident, foreign aid — and to fund 500 million sterling worth of renovations to the House of Commons.

Money is certainly the problem, as more money would solve all of those issues and many more.

Unfortunately, some governments ‘rob Peter to pay Paul’ but with little change in the total amount of revenue actually collected by the government.

  • In some cases, a socialist (Labour) government will raise more revenue by raising taxes. Let the wailing begin!
  • In other cases, a conservative (Conservative and Unionist) government will cut expenditures via fiscal and budgetary belt-tightening. Groan!

Which is why governments everywhere are always on the hunt for more money.

But are they? Are they really on the hunt for money? Are they really trying to increase revenue? Or do they automatically hit their default mode every time a budget crisis looms?

Some observers think that governments dismiss attempts to increase revenue via increased trade with other nations too quickly and move to their particular default mode.


Where Could the UK Find 1.3 Billion Consumers Wanting to Buy British Goods?

Well, India, for one. And they’re a Commonwealth nation. Ta-Da! See? It’s sooo simple.

All the UK government must do is to reach out to India’s leaders (especially post-Brexit, but nothing stopping them from getting started now!) in the interests of ramping-up trade by at least one order of magnitude.

Why should India purchase trillions of rupees worth of goods from non-Commonwealth nations when they could purchase them from the UK?

Why does India purchase their aircraft carriers from Russia, their fighter-bombers from Russia, other significant navy ships from Russia, and billions worth of goods from China, the southeast Asian nations, and the United States?

A century ago, Great Britain’s trade relations with India were booming. Shipyards couldn’t build ships fast enough to keep up with the annual increase in trade.

Who dropped the ball?

Heads should roll for allowing that relationship to falter — a relationship of prime importance to both the UK and to India!


Never Mind Playing the ‘Blame Game’ There’s No Time!

UK Trade With India

Instead of UK government departments fighting each other for funding, the government should work to ramp-up trade with India to increase Britain’s GDP by 5 per cent.

We need to get a piece of that rapidly growing and rapidly modernizing economy, and thereby add five per cent to Britain’s annual GDP.

Yes! More money will solve all of Britain’s spending problems… but it isn’t going to fall out of the sky and land in the Treasury building by itself!

Someone! Anyone! Perhaps the Prime Minister or the Foreign and Commonwealth Secretary (or both) along with the Queen should invite Prime Minister Modi of India and his high officials to London, for an unprecedented and long overdue re-look at the macro relationship between the two countries to see how increased trade could improve the economies of both nations, and how each nation can play to their own strengths and work to offset each other’s weaknesses.


Instead of UK Government Departments Fighting Each Other for Funding – Increase the Available Revenue Pool for All Departments

Companies fight over ‘market share’ because that’s what companies do. And it is often a vicious competition.

However, governments have an unparalleled advantage here because they can increase the overall size of the market — which, using this metaphor, relates to UK GDP.

By dramatically ramping-up trade with India the government could increase GDP by five per cent, easily meet the spending requirements of all departments and still have the economic clout to run balanced budgets indefinitely.

This so badly needs to be done that Brexit is a side-show by comparison, although without Brexit it would be difficult to enter into new trade arrangements with any non-EU country.

In summary, Brexit is merely the means to an end — an end with a much stronger economy for both Britain and India, and a stronger Commonwealth partnership.

Britain’s Economy Firing on All Cylinders until 2050

by John Brian Shannon | February 10, 2017

Under the expert care of Exchequer Philip Hammond, Britain’s growth rate will outperform all developed nations until 2050

What a relief it must be for Prime Minister Theresa May that the UK economy is expected to grow strongly every year until 2050, with a growth rate that surpasses all developed nations.

Britain will grow faster than any other major advanced economy over the next three decades as the EU’s share of global output diminishes, according to PwC.

UK economic growth is predicted to outpace the US, Canada, France and Germany between 2016 and 2050, with average annual growth of 1.9pc. 

This is also double the average annual pace of growth expected in Japan and Italy. — The Telegraph

The chart below shows the average annual real GDP growth rate of G7 countries from 2016 to 2050.

Britain Infographic: UK set to outpace G7 in economic growth for decades | Statista

According to a forecast from PwC, Brexit is only going to prove a bump in the road for the UK’s economy. Even though it may take a significant financial hit as a result of it’s exit from the European Union, the UK’s economy is set to grow faster than any other major advanced economy up until 2050. PwC predicts an average annual growth of 1.9 percent over the next 30 years. That’s more than double the expected growth rate of Japan and nearly twice that of Italy.” — by Niall McCarthy | You will find more statistics at Statista

And to show where the UK ranks in terms of global GDP here is another graphic for you.

Britain Infographic: Only 5 Countries Have A Bigger GDP Than California | Statista

You will find more statistics at Statista

It seems that Brexit will barely register as an economic hiccup and that Britain’s economy will continue to thrive in a post-Brexit world — and that, after many dire reports to the contrary were published prior to, and since the June 23 2016 referendum on EU membership.

You see? The sky isn’t falling, it’s snowing. Get outside and enjoy it! The UK is going to be just fine.


Related Articles:

Free Trade or Protectionism for a Strong UK Economy?

by John Brian Shannon | January 17, 2017

Prime Minister Theresa May says that Britain must be a free trading nation to boost the UK economy and to better serve the aspirations of millions of Britons.

And Britain’s leader is correct, as history has proven that free trading nations outperform non-free-trading nations. From the seafaring Phoenicians of classical antiquity to the former British colony that became a superpower called the United States of America; Free trade and hard work have built our shared civilization, and any country that withdrew from free trade or liberalized trade agreements, consequently declined.

READ: Between Free Trade and Protectionism: Strategic Trade Policy and a Theory of Corporate Trade Demands by Helen V. Milner and David B. Yoffie | Published by MIT Press

That’s not to say that other economic practices don’t have merit, because they do. However, a group of non-free-trade nations will always be surpassed by a comparable group of free trade nations — due to the symbiotic nature of free trading relationships which produce small but measurable amounts of synergy that accumulate over time.

It’s the easier access to raw materials, the lower labour costs, and the ability to access larger export markets that make free trade work so well, but the ‘icing on the cake’ is the synergy produced by the symbiotic relationships which aggregate and thereby increase corporate profits and investor dividends that are often reinvested in the growing corporation. Over time, all this synergistic activity results in far greater outcomes than otherwise would’ve been the case.

Britain economy.

The British Empire in all it’s glory was built on free trade with many partners, but in 2017 it’s even more important for Britain to be a free trading nation.


A perceived problem occurs when vast disparities are present, such as when one nation is blessed with abundant raw resources allowing it to basically dig money out of the ground which eventually accumulates into billions or even trillions of dollars, while another country in the same trading bloc may have few natural resources.

As long as all partners within the trading bloc have equal access to those raw resources, such problems are likely to be nothing more than minor jealousies.

Countries like the United States, Canada, Norway, Saudi Arabia and the United Arab Emirates have vast petroleum reserves, and importantly, good economic stewardship — which allowed them both rapid growth for the economy and a high standard of living for their citizens. It’s telling to note they are free trading nations — while other countries blessed with large petroleum reserves but restrictive international trading arrangements, haven’t prospered. Venezuela (the country with the world’s largest proved oil reserves) along with Libya and Nigeria, have poorer development due to their historically somewhat less than free trade practices. For economists, those nations serve as a warning to politicians considering the adoption of less liberal trade policies or outright protectionism.

Such disparities between nations, unless handled carefully, can result in explosive economic and political consequences.

READ: What does Free Trade mean? | Investopedia


Globalization: Lower-priced goods, but fewer jobs

It’s easy for some to forget that free trade and globalization are two different things. Free trade relates to the removal of tariffs, or at least the standardization of low tariff rates between member nations of the same trading bloc, while globalization refers to a highly interconnected political and economic world of which trade of any kind, whether free or not, is merely part of a large picture.

Those who feel left behind by globalization (and there are millions) tend to blame free trade, when in fact it was free trade that created a booming global economy from 1982 through 2007 (and a somewhat less booming economy) from 2012 through 2016.

Led by global elites, the rush to create high growth and high GDP meant that quality of life fell steeply for millions of Westerners for the first time since WWII due to the offshoring of Western jobs to countries with lower labour costs and non-existent environmental regulations.

Britain must ensure that globalization and free trade work for everyone.

Britain must ensure that globalization and free trade work for every Commonwealth citizen.

READ: You Can’t Feed a Family With G.D.P. | New York Times


It’s Not All Bad

Westerners have enjoyed unprecedented low-cost, quality goods manufactured in other countries.

Two examples of this are; 1) the Apple iPhone, which, if manufactured in the United States would have cost $2800. each, instead of the typical $650.-$950. price range. The iPhone wouldn’t have ever seen production if it hadn’t been manufactured in Asia. Over one billion have been sold since the first iPhone hit the market. And; 2) almost every computer chip in the world was manufactured in Taiwan, an industrious country with a very diligent workforce, but few natural resources. Computer chips have cost an average of $40. since Taiwan’s entry into the semi-conductor business, but if manufactured in the United States those chips would’ve cost hundreds of dollars each.

While low-cost goods are welcome in the West, people in the bottom quintiles now wish for a return to high paying employment and would gladly forego low-priced goods.

Which is exactly what the election of Donald Trump is all about. ‘Cheap goods are great, but we’d rather have jobs!’ — seems to be the main message there.

It’s difficult to blame those who harbour such resentments when 3/5ths of the population are doing less well, while only 2/5ths feel they have progressed in recent years.

Yet to blame the very free trade agreements that brought wealth to Western nations displays a lack of understanding of how globalization works vs. how free trade agreements work.

Free trade creates additional economic activity (with many virtuous cycles, which are always a good thing) while unrestricted globalization (under existing personal tax laws) rewards the top-two quintiles at the expense of the bottom-three quintiles. And it’s this fundamental misunderstanding which have people in an anti-free-trade mood — when instead, they should be protesting against global elites, unfettered globalization, and crass-and-uncaring politicians.

Had the global elites applied as much effort to ensuring that globalization worked for every economic quintile instead of the top-two quintiles exclusively, movements such as Occupy Wall Street along with the general disenchantment voiced by the public against politicians and economists wouldn’t have materialized. Ever.

When it works for everyone, there’s no complaining.

READ: In Defense of Globalization | Project Syndicate


Free Trade with a Standardized and Reciprocal Tariff Regime – Instead of Unfettered Globalization

PM Theresa May and Chancellor Philip Hammond should work to obtain a mutually-beneficial free trade agreement between all Commonwealth countries as part of a Tier 1 trade accord.

Such an agreement should ensure there are no tariffs, levies, nor other trade impediments — save for a highly standardized and reciprocal 5% tariff on all goods — except books (in any form) or those medicines that actually save lives, because principles do matter. A more educated and healthier Commonwealth are desirable outcomes. No VAT taxes or tariffs should be levied on books or life-saving medicines, ever. Anywhere on the planet, IMHO.

Why the 5% Tariff?

What the 5% tariff would do for all signatory countries is to pay for upgraded port facilities and enhanced security at ports, railways, and for cargo ships at sea.

Why the 10% Tariff?

A Tier 2 trade accord should be negotiated with nations that aren’t Commonwealth members with a standardized and reciprocal tariff of 10% — except for books and life-saving medicines which should be tariff-free and VAT-free in every case. As long as the trade partners agree to standardized and reciprocal tariffs, such tariffs won’t break WTO tariff rules. And such revenue could enhance port security, of course, but could also be used to pay for additional infrastructure programmes to put millions of workers back on the job.

Why the 25% Tariff?

Finally, a Tier 3 trading scheme could be created for those nations that won’t agree to a standardized list of tariffable items at a standardized and reciprocal rate, and won’t agree to not tariff books and life-saving medicines, and that tariff could be 25% on all imported items until the day arrives that country begins to abide by the Tier 2 trading rules.

In all three scenarios it puts the UK government firmly in the drivers’ seat in regards to imported goods and guides UK trading partners towards Tier 2, or even Tier 1 status.

The goal is to arrive at a situation whereby every nation willingly decides to join The Commonwealth in order to gain free trading status with the Commonwealth and agrees to a nominal, standardized, and reciprocal 5% tariff regime on every good except books and life-saving medicines.

It is still free trade, but with a nominal, built-in tariff designed to enhance port facilities and streamline security in all partner nations.


What to do with the revenue generated by such tariffs?

The main point is to upgrade existing port facilities, to increase security at Britain’s ports, and at reciprocal trade partner ports to ensure the security of ships at sea and the thousands of kilometres of rail lines that carry freight.

Any remaining tariff revenue could be used to soften the economic blows to those in the bottom-two quintiles who have suffered quite enough over the past 16 years.

Whether used to boost social welfare rates (good) or to boost national infrastructure spending (better) or both (best) it will be money well spent, and it would be revenue that arrived in the government hand via imported goods.

Which seems fitting, doesn’t it?

READ: Interview with Theresa May, Prime Minister of the UK, from the World Economic Forum 2017 | CNBC