One sector's boost is another sector's loss

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The slimmed-down Commonwealth Games opens in Glasgow today, featuring around half the usual number of sports, because Glasgow stepped in late in the day as host after Victoria, in Australia, pulled out. Slimmed down = less cost – a good thing, surely? Well that depends. Because slimmed down also = fewer athletes, fewer spectators, fewer hotel nights and meals, less of a boost to the local economy.

During the recent world cup, many pubs in England were allowed to open late, and enjoyed something of a bonanza as a result. Hard-pressed hospitality sector gets boost – a good thing, surely? Well, again, that depends. Where did the money spent come from? If it was money which would otherwise have been spent in the same pubs, but over a longer period, then it’s just a change in cash flow. If it’s money that would otherwise have been spent on other things, then a large short term boost for one sector probably equates to a smaller longer term reduction in spending in a host of other sectors. Maybe not even noticeable in the grand scheme of things, but there nevertheless.

The point is, as the wondrous invention called double-entry book-keeping tells us, that what looks like a positive entry to one party will always look like a negative entry to someone else. Unless there is an overall increase in the supply of money, it cannot be otherwise. And, as Richard Murphy pointed out a couple of weeks ago, there are only two ways in which the total money supply can be increased: deficit budgets by the government and commercial bank lending. In accounting terms, both end up looking like ‘borrowing’ to someone, although that’s an oversimplified view when it comes to the government. The questions to be asked are ‘which is better?’ and ‘for whom?’. Neoliberals (and that includes Andy Burnham, for all his rhetoric) will always favour commercial bank lending, which in turn always favours those who already own most of the wealth. It is not the option which is most favourable to the majority of us, but unless and until we break free of the assumption that it is always and inevitably ‘better’, we will never rebalance the economy in favour of the many.