Economic Supplement 8

Subsidiarity and the Economy

Lonergan wanted to find a solution to the slump which would come ‘from below’, from the banks and businesses, from the workers and from the consumers. He wanted to avoid placing the economy in the hands of expert economists and the State. For this reason he was opposed to John Maynard Keynes who would deal with a slump by deficit spending. He thought dependence that way would harm human welfare, reducing the actual flow of goods and services. He praised Capitalism for seeking to meet effective demand, seeking to supply what people wanted and could pay for.
In the 1940’s he saw the problem as emerging from a lack of investment. In the 1970’s he followed critics of the multinational firms, but he did not produce a major work on the matter. He urged a creative collaboration from many disciplines.
One way of solving the lack of investment problem is of course to bring about a great new investment in a needed area, and I would suggest that energy supply is exactly an area which, with old plants failing, calls for heavy investment.
I am not for various reasons suggesting nuclear energy but I believe Iceland has beyond banks some thermal conditions which would allow the supply of a deal of energy. The financing of this could be a private, should be private. The capital injected would go out in wages and stimulate demand. Properly designed our future energy requirements would be met. Something similar could be done with the Wash and the Bristol Channel.
Of course, for a global economy to recover by way of investment there would need to be similar projects everywhere.
Howsoever, let us suppose we extend the boom this way for 20 years, when it comes to an end we would face the same problem again.
In the absence of such major investment my solution to the credit crunch is tax cuts on business, no VAT, and a care to charge only a reasonable mark up.
Sitting in the Presbytery the truth is I have no clear idea of what a reasonable mark up should be. Companies will need to repair their equipment, they may need new investment. May I suggest the mark up should just cover repairs? The banks are there to create credit for vast new projects. So if the water board is making a new reservoir it should not raise the money from the customer, except when by increasing supplies it increases revenues. It is not the task of the customer to be forced to be a capitalist as well, and without the benefit which comes from taking a well judged risk.