WHAT’S THE ECONOMIC POLICY OF RISHI SUNAK? COULD HE SAVE UNITED KINGDOM’S DETERIORATING THE ECONOMIC POWER AFTER THE BREXIT?
November 2nd, 2022BY EDWARD THEOPHILUS
The change in the British Prime Minister has become a question of whether Britain needs a new leader with dynamic abilities for economic policy innovation and conceivable to direct such policies to the world as happened in the past. In this environment, another question emerges, why is apocryphal thinking respected by British people has failed to innovate policies for their own country and relegate to a difficult situation? The economic history of the world indicates that British economists contributed many views to change the economic policies of the world. It may not be the way as George W. Southgate explained in his history book. This situation has been reflected since Adam Smith. The contribution of J.M Keynes and AC. Pigou was in minds of economics students at the beginning of economic studies. J.M Keynes was a policy leader of the British Treasury and constructed a strong bridge between classical economics and modernized economics through Keynesian economics which was based on protecting aggregate demand. Later, Neo Keynesians and Monetarists such as Milton Friedman came up with ideas of demand for money and motives for demanding money in an economy and they also believed taxation will control inflation.
The Keynesian beliefs base policies are still in many countries and no economist was born after Keynes was able to change the economic policy based, departing from the British-based economists and many countries tried to make reforms staying and supporting for ideological based on Keynesian concept. After the recession experienced ending the Cold war, many attempted to say Keynesian economics was staled and the world bank promoted spending cuts and disciplines in investment management
After the election of Rishi Sunak as the Prime Minister of the UK, people have an opportunity to compare the economic policies of Rishi Sunak and Liz Truss, the vital hope of people is whether Rishi Sunak would be able to act like a policy innovator to attract the worship of people like J.M.Keynes. Washington Post published, in brief, the economic policies of both Liz Truss and Rishi Sunak. Now independent analysts could critically look at policies that would be attracted by the world. Although Rishi Sunak genetically associated with Indian flock his experience associate with African values.
High-income earners in any country of the world (US, Australia, France, New Zealand and Canada) cry for the tax cut which means they have a motive of gaining more money in hand after the tax payment, and a major revenue source of government in the West concerns charging tax from personal income and goods and services, and the significant point associated with this aspect is, it might be a greater concern to people in western countries, and without giving incentives to the poor in the tax reform, could a country maintains aggregate demand at the required level?. There is a clear conflict between the motives of high-income earners and low-income earners. Practically, policymakers need to assess who will positively react to the expectations of the economy from tax cuts while maintaining the saving level consistent with consumption. It believes as Keynsians assumed savings equals investment. Practically, the team of Sunak need to decide after consultation with advisors whether the British economy should go consistent with Keynes or need to invent new thinking to strengthen the economy. If this decision would not be happened Sunak’s policy and popularity will be failed.
The motive of both lower-income earners and high-income earners in this tax debate would be vital because when mathematically calculating, the reaction of consumers may decide which group of consumers either low-income earners or high-income earners would positively react to the fiscal policy. The difficult task is making the right decision without practical data on which group’s reaction is beneficial to the country and what would be the quantum of benefits to the country from the reaction of each group. This is a mathematical analysis, which associate with practical matters that cannot be mathematically calculate.
The benefit to the country from a tax cut and how positively impacts the macroeconomic variables giving advantages to all types of people in the country vital in this debate because an economy cannot manage to ignore whichever group of people related to a tax cut. If this situation could be incurred and reconciled by the policies of Rishi Sunak, he would be a marvellous policy dictator to the world, and no one in Britain could defeat him and all English-speaking countries will follow Sunak’s Britain. Sunak will be a new Churchill to the Western world.
Another vital point that should evaluate in the modern world is the behaviour of consumption, investment and saving in the modern world. The consumption of the community seems to align more with goods and services of information technology era, however, consumption in the modern world associated with different items that were not in the society, and investors will choose shares in innovative companies that will produce goods and services attracting consumers, who associated with non-traditional products, and investments would be the companies that produce of goods and services attracted by modern technology. For investment, stocks of companies that are producing goods and services are demanded by logical people in modern society. When compared to many countries in the world, the demand from overseas would be important as it would support and strengthen the foreign assets base of the country.
Another significant point is the motives of both groups regard to spending the savings from the tax cut should be accurately identified by the policymakers, it could be done by research. The real behaviour of the current world displays a huge difference between lower-income earners and high-income earners, in practice, the use of savings by lower-income earners may turn to consumption and higher-income earners might be interested in investment despite savings, and the changes the attitudes in the modern world might have a contradicting reaction or results. The value of money radically declines and people get away from groups who has speculative motives in this depreciating currency value. Look at the British Pound how it has been changed during the past decade.
Economists believe that the use of savings from the tax cut would be utilized by lower-income earners for consumption while high-income earners are likely to use them for investment. However, the use of saving from the tax cut may use for a different purpose in the modern technological era.
As it gets information every day, people on both sides may have interested in investing in crypto currency such as an investment preference that has high risk, sometimes, such investment choice might lead to bankruptcy. Neither in the classical era nor the Keynesian era was a popular investment in cryptocurrency that generate positive returns and quite difficult to interpret how it happens. In such a situation, a traditional belief of how to use savings from a tax cut should be carefully considered by government policymakers and cryptocurrency investors might destroy the economy. Whilst considering these points, spending savings from tax cuts may go to illegal dangerous drug consumption and business. The quantum of spending for illegal drug consumption was negligible in the past. Current world it is betokening and policymakers cannot ignore it despite the lack of data for decision making. This is a high-risk factor that should be considered by policymakers. Despite this requirement, policymakers have no data that support decision-making on this matter and Rishi Sunak might be a refuge in policy gimmick.
Which action is better for the world? If high-income earners use the savings from the tax cut for investment or consumption, it would have a positive impact on the economy. The aggregate income of the economy would be higher from new investments if they are used by new investments. Lower-income earners use it for consumption and it would cause to create an unstable condition in a country. The results of dynamism could not be augured in the modern world.
Rishi Sunak worked in British Treasury and may have read much research about consumer behaviour and investment. He is not a politician with a sympathetic heart for poor people and like an Indian businessman, he likes to grow wealth. His wife and family also indicate they are wealth growers by working.
After the taxing issue, the most significant policy invention required by Britain as well as other countries in the world seems to solve the problem of cost of living. In fact, it could be explained as earning is not sufficient to consume and saving. This is a more complicated problem that needs urgent attention and it is an issue of labour voters. Tory voters also concern with higher expenses for living, which is concerned problem all over the world. Theoretically, it is related to the price theory and the equilibrium point may be in a higher price with abilities to buy a lower quantity. The fundamental problem is balancing the demand and supply to reach the new equilibrium point. The problem is also related to factors on the production side.
