Is Current State Management of the Economy Fair or Foul?

Most governments are adopting austerity measures to address the worldwide economic downturn.  The cause of the downturn is not being examined and rectified leaving the world to face another similar crisis in the future.  Despite that, are the austerity measures fair on the nation or is it foul?

The people who are being made to pay for the downturn are those who had very little to do with the downturn.  They are mainly hard-working people who are paying through their blood, sweat and tears.  They are being forced to accept pay cuts and pay more for the essential goods and services they need.  In the United Kingdom, mainly in England, even small companies are losing out.  Many of them are going or likely to go out of business because public services are having to make huge savings.  Many of these small companies have public services contracts that they are losing or likely to lose.  Up to half a million people are also likely to lose their jobs in this upheaval.

One can understand why the British Government's thought that the best way of raking in tax was through an increase in VAT.  This has gone up from 17.5 to 20% from the 4th of January 2011.  If unemployment is likely to increase by half a million then income tax revenue from these people will also be lost.  There was a Labour Party plan for increasing national insurance, a tax on jobs.  Again one can understand that if half a million people are going to lose their jobs a tax on jobs is not going to be beneficial. The double hit of an increase in unemployment and a reduction in most working people's wages are both going to have a negative impact on income tax.  Hence the attraction of increasing VAT.  People will have no choice but  pay this extra tax.

What I can't understand is how the adopted austerity measures are actually going to solve the current problems.  All the measures being taken will reduce the money that goes around and drives industry.  There is no point in industry producing goods that people can't afford.  This is likely to cause a stagnation in the market and the economy and we are less likely to come out of the recession through these measures.

The British government suggests that by looking after the entrepreneurs, they are helping the entrepreneurs to create jobs and riches.  This is only likely to happen in essential industries such as food productions, utilities, and energy, and essential travel.  People will still need to eat and drink, use essential transport, and use gas, water and electricity.  This will be more so in countries where heating is essential in winter.  Some entrepreneurs are likely to get rich but most people and national coffers are going to get poorer. The Republic of Ireland is a prime example despite the fact that they only have a 12% corporation tax.  It must also not be forgotten that rich entrepreneurs are the ones most adept at using tax avoidance loopholes to keep as much of the money they make for themselves.  Several examples have recently been cited in reputable UK newspapers.

I am sure there are other convincing opinions on this issue.

Good Bye and Good Luck until the next time.