Thread by @AndrewPRLevi

Covid. UK well-being. What the heck’s up with the government? A 🧵.

There’ll be a public health disaster. Serious, mass, chronic illness. For many years. On top of 100K+ deaths. If this👇continues.

@BorisJohnson & @sajidjavid say ‘re-open’. There’s no economic need. So why?/1.

The country can well afford to continue, for many more months if necessary, to use large scale, government deficit spending to support all sectors of the economy & workers unable to go out to earn a living. /2.

That’s because there’s no inflation risk to the direct creation & spending of the many hundreds of billions of £ needed to pay for that.

Why?

Bear with me. /3.

The UK has a huge quantity of productive (& potentially so) resources. From a labour force with many different skills in the production of services & goods, to raw materials, science/ R&D capability & productive facilities, to infrastructure & natural resources, etc etc. /4.

Plus sophisticated means of maximising those resources’ economic output, through efficient processes, networks & legal arrangements. /5.

In an economy operating below the capacity of its resources, well-directed govt deficit spending boosts economic production, increasing prosperity. And carries minimal or zero inflation risk. As long as it doesn’t stimulate the economy beyond real resource limits. /6.

Normally, therefore, the concern is to make sure not to stimulate the economy excessively with deficit spending. Otherwise inflation will rise unacceptably. /7.

So, inflation - in the context of the real resources of the economy & the extent to which they’re being used to their full extent, their ‘ceiling’ (or not) - is the limit.

OK. /8.

But what happens if the real resources of the country are substantially destroyed? By war, for example (think Weimar Germany). Or by policy choice (think Zimbabwe & the decisions which led to catastrophic crippling of agricultural production). /9.

Then, the ‘ceiling’ gets lower & lower. Until any government deficit spending, or even a balanced budget (or even a budget surplus, potentially), can kick off disastrous inflation. /10.

That’s exacerbated, possibly very seriously, if the government has to make payments in a currency or commodity it doesn’t control (if, say, it has to buy gold on the open market with which to make war reparations). /11.

Fortunately, the UK isn’t in that position.

Unfortunately the UK has, however, made disastrous policy choices. /12.

The Johnson Brexit dislocates the UK from a $15T GDP, 500M pop. domestic market & associated labour supply. It shrinks its scope to a $3T, 65M pop. domestic market with a severely constrained labour supply in key sectors & greatly increased trade & supply chain friction. /13.

This lowers the ‘ceiling’. Suddenly, what was easily affordable (& vital) govt deficit spending, becomes a worrying inflation risk.

Protecting the prosperity & well-being, or even the security, of the country & its people starts to look unaffordable. /14.

Like a war, or a Mugabe-style policy disaster, the Johnson Brexit is systemically destroying UK economic resources & their productive potential. /15

That presents an unpalatable choice:

(a) continue to protect the population but stoke inflation or,

(b) to avoid inflationary risks, withdraw protection & maim hundreds of thousands. /16.

The government seems determined to choose (b): throw many to the wolves.

But hang on a minute. Why are we in this appalling bind?

Oh yes. Because of the Johnson Brexit. /17.

There’s a ready-made solution.

The single market & customs union, or substantially identical arrangements.

Not to choose that is to choose untold, entirely avoidable, suffering for the population the government exists to serve. /18.

As in so much else, when you wonder why an obviously wrong, cruel, fundamentally incompetent policy is on the table, the answer’s simple.

It’s Brexit, stupid. /19. End

Credit: the slide in tweet 19 is from @chrischirp of @IndependentSage.