You’ve got to spend money to make money

So on last night’s Newsnight Scotland, Joeseph Stiglitz, former Senior Vice-President and Chief Economist of the World Bank, said that the UK Government’s current “austerity drive” were “mostly wrongheaded” explaining that the UK is not in the same position as Greece and still has access to capital markets and further borrowing. He went on to say:

The real point that I emphasize is, not so much how much we’re spending, but what we’re spending it on. Every business borrows, it borrows to make investments, and investments in the public sector can yield returns, every bit as high and even higher than in the private sector.

While not a Nobel prize winner myself, I have been of the same opinion as Professor Stiglitz for some time now. We know that in the past, the United States and Germany didn’t pull themselves out of depression by cutting spending but rather by increasing investment in public works, and trying to promote local industries. Roosevelt and Hitler were both responsible for setting up their respective nation’s motorway network at that time, and FDR managed to go further by encouraging parents not to take time off of work to look after their children in the summer, but instead to send them to one of the new “summer camps” the government was helping to set up all over the country – a scheme so successful, that last year 10 million American children attended one.

Now Scotland isn’t in as bad a position as the US or Germany found themselves in the 1930s, but that isn’t to say there isn’t work that could be done. All but the staunchest Greens would say that our own road network couldn’t do with vast improvements, as could our railways not only in terms of upgrades to high speed rail but also the long awaited Glasgow Crossrail that will finally unite all services up and down the West Coast without having to cross the city on foot, and if SNP plans to bring Scotrail back into public ownership when First’s franchise expires go ahead then investment now could yield those great returns that Professor Stiglitz alluded to.

There’s also the new renewables industry and it’s spin-offs, if we are soon to haveĀ whisky powered cars is it too much to ask the manufacturing plant be based in Scotland? We could even try to introduce an entire industry from nowhere like the American summer camps, there are hundreds of ways in which a government that cared about Scotland, and had the powers at its disposal could help this country.

But it obviously isn’t as simple as throwing money anywhere as Professor Stiglitz goes on to say:

There is lots of room for cutting back, in the US where I know the data a lot better, we’re spending hundreds of billions of dollars on weapons that don’t work against enemies that don’t exist. Military expenditures like that do not lead to a stronger economy, that’s something you can pull back. So there are lots of room for redirecting spending and that’s where the focus ought to be.