Wednesday, 6 June 2012
ECONOMICS: SIMPLE LOGIC -THE JUBILEE AND THE ECONOMY
Am I missing something here?
A couple of days ago I was watching BBC's News 24 and an economist was being interviewed on the financial effects of the Jubilee. Hold it, hold it! No, this isn't another excuse to have a dig at the monarchy.
The expert reckoned that around £700 million was being spent by people on the Jubilee -bunting, flags, celebrations, etc- thus injecting that amount into the economy.
On the downside, the expert reckoned that over £2 billion would be lost in production -the two bank holidays and people taking three leave days- thereby taking a total balance of £1.3 billion out of the economy.
Now I am emphatically not an economist, finding it an arcane obscure science at best, and having given up on it after a few weeks of an A-level course back in the days of my youth. Despite that, however, there seemed to me to be a glaring flaw in the argument.
The three days leave that people were taking are a normal part of their annual entitlement and happen to be taken now rather than later so surely this annual leave would already be factored into the equation.
The Spring Bank Holiday is a regular occurrence, not a one-off, and again has surely been factored in. (Aside: Britain has the lowest number of public holidays in Europe.)
So that leaves the Jubilee Bank Holiday. Now that is extra and should be counted.
By my reckoning (and I am also bad at maths), fourth fifths of this so-called £2 billion shortfall has been accounted for. This leaves a total of £400 million in production lost to the economy. On the other hand it is offset by the money spent on the Jubilee so by taking one figure from the other and we are left with an overall injection of £300 million pounds into the economy, not a deficit at all.
You could also argue that the feel-good factor engendered the celebrations (except among cynical curmudgeons like myself) is likely to boost production when people return to work.
Anyway, on simple monetarist grounds alone, the Jubilee has provided a boost to the economy rather than the opposite.
Or am I missing something here?