Letters they don’t print – Inflation doesn’t automatically occur when a government spends more

Leah Gunn Barrett

In the Scotsman on 6 February 2022:

My response not published:

Martin O’Gorman is wrong again. Inflation doesn’t automatically occur when a government spends more on productive areas of the economy that enhance the wellbeing of its people like the NHS, education, or a green new deal. 

After WWII, John Maynard Keynes demonstrated that when the Attlee Labour government increased public spending in health, education, housing, transport and energy, private investment was generated to meet the additional demand. The result was robust growth and full employment, the ‘golden age’ of the post-war UK economy that was emulated by the Nordic countries and served as the model for the US-led Marshall plan to rebuild a devastated European continent. Isn’t that the role of government, to ensure full employment and a stable and growing economy? 

Hyperinflation in 1920s Germany was caused because the government didn’t have enough gold to pay reparations to the victor nations, so it printed paper money instead which became worthless because there were no assets backing it. In Zimbabwe, hyperinflation ensued because Mugabe’s agricultural reforms destroyed the food supply so there was too much money chasing too few goods. The UK situation is not comparable to either of these.

Finally, energy prices were not soaring before the Ukraine war. Rather, private energy companies raised prices at the outset of the war before supplies were disrupted because as monopolies, they could. They profiteered, pure and simple, with the result that their profits have ballooned while people freeze and go hungry. 

Mr. O’Gorman should be better informed before putting pen to paper.


15 thoughts on “Letters they don’t print – Inflation doesn’t automatically occur when a government spends more

  1. Latest figure for a kWhr fed into the grid is 6.5pence from a Hydro unit.
    Currently the cost of a kWhr is limited to 32p.
    Not too bad a mark up.

    Much like the bank rate is 4% and the credit card interest rate is +20%.

    Who couldn’t make a profit at these samples.

    Seems some energy traders failed but the government bailed them out.

    Liked by 1 person

  2. O’Gorman’s ignorance is frankly unremarkable, it’s much the same guff as governments have trotted out for years and still do with the current administration, Thatcher’s infamous “family budget” lie.

    Covering the 2008 banking crisis did not stimulate rampant inflation despite billions expended nor did the pandemic nor did the Kwarteng & Truss recent farce, so why should pay rises, almost half of which would return instantly to the Treasury ?

    Adherence to this financial dogma has eroded the UK’s economy for decades instead of stimulating it, and it’s high time it is exposed for te scam it is.

    Liked by 3 people

  3. Spot on JR & DS . Keynsian economics , founded in conjunction with the Governor of the Bank of England Thomas Catto, set the UK back on It’s feet when things were at a very low ebb after WW2 . Spend then tax , the way to go , as Richard Murphy reiterates almost daily .

    Liked by 3 people

  4. Spot on Leah and everyone else.
    I have always thought Brexit had two aims.
    1.-The first is political. To satisfy Anglo-British nationalism, which felt threatened by a politics, economics and a judiciary not ruled by the Old School tie and family connections (city jobs) in the leafy ‘burbs of the Home Counties.

    2.- The second is economic. To downgrade the standard of living of the UK population, and make Britain a low wage, low benefit economy, whilst maintaining a high profit business environment.

    It is all going swimmingly well. Westminster is Top Dog again, with old Etonians in all the good jobs.
    The media are increasingly right wing and populist (not in a nice way), reflecting their megalomaniac billionaire owners.
    Workers are not getting the blame for inflation, greed and low investment. Big business is sitting on huge pots of money, waiting for the defeat of the unions–coinciding with the election of a, Labour government, steeped in Tory economic and political orthodoxy.

    There is hardly an honest Scottish journalist worthy of the name these days, and independence will be a hard focht battle to overcome the colonial gaslighting media.

    Liked by 3 people

    1. I think you meant to say workers are ‘now’ getting the blame for inflation etc?
      The health of the economy of the UK is being deliberately destroyed to make way for full privatisation of every public service, and especially via ‘Charter Cities’, ‘Free Ports’ etc.
      So health, education, social care, waste management, planning, the environment and councils, even policing and the law, will all be in the hands of rich oligarchs.
      Brexit is the main reason that Scotland must escape the ever more fascist, so called Uk, or Britain, or whatever it’s called these days, or be ruined and assimilated into England for good.

      Liked by 1 person

      1. Yup, stupid typo. Thanks ArtyHetty.
        Health privatization started with Labour and Market Testing.
        Sunak has met up with US heath industry giants. What has he promised them?
        BofE now admits Brexit has frozen foreign investment in the UK.
        UK investors now “sweating” assets rather than invest in productive industry. Adam Smith would have absolutely castigated this type of “Capitalism”, as ruinous to the well being of society.

        Liked by 1 person

  5. The ScotGov have to stress at every single opportunity just how catastrophic being dragged out of the EU is for the people of Scotland now, and especially for the young and for their futures.
    It’s going to get much worse, English Labour and Tories having secret meetings is very sinister indeed. Who knows what the and their ‘associates’ discussed in reality, and what they are plotting, whatever it was it will not be good for Scotland.
    Take note as with post Brexit talks (well what the EngGov called talks and negotiations!) the democratically elected Scottish government were not invited to the EngGovs’ secret party.
    Scary times, we must escape and soon.

    Liked by 1 person

  6. Comments about how good the NHS pension scheme is and how those who qualify to be in should take less pay while they work make me extremely angry. I worked in NHS IT in the 80s and 90s where exactly this argument of “inflation proof” public sector pensions was used to justify below market rate salaries.
    In the mid 90s my role was transferred to a private company (not mine) and my pension entitlement frozen. When I became eligible to claim my pension the rules had changed and it is no longer inflation proof.
    The likes of O’Gorman who trot out Mrs T erroneous homespun economics and expect public sector workers to work harder for less money than they probably got make me sick.
    Rant over


  7. In the IR people pay for healthcare. €60 for a Doctor. €100 for a hospital appointment. There are exemptions. children, pregnancy, those in need. (Gov) pensions/ benefits are much higher in IR. Not comparing like with like. Brexit has lost £Billions.

    The Tories cut healthcare funding 2015 to 2020 (£20Billion). They did not increase it.Brexit lost £Billions and healthcare workers. The ConDems cut Education £6Billion a year from 2015 to 2020. Cut welfare £18Billion. Austerity. Killing people.

    The Tories spent £918Billion 2019/ 20. They claim they do not havemonies to pay essential workers. The Tories spent £270Billion over to years on Covid funding, £370Billion over a lifetime. Spending £Billions on non regulated useless projects, HS2, Hickley Point etc. PPE wasted by the Tories and their associates Scotland pays too much for Defence and gets little back. Trident and redundant weaponry. Obsolete even before the contract is abandoned. The UK raised £819Billion, including Covid funding?. They claim the do not have monies to pay essential workers. The public monies wasted on the strikes would have paid for the increases. The Tories on their way out. Scotland needs Independence to make Scotland a more prosoerous, peaceful place. Without Westminster gross interference and mismanagement,


  8. UK war debt was paid off to the US in 2006. 2% interest. Germany gad to pay reparations. Worth the equivalent of £Billions. £38Billion (now) Germany makes the highest contribution to the EU. (Pro rata). France, Italy? Britain got a lesser payment.works out £4Billion. Scotland paid nothing. The UK down d get £Billions back. The nearest biggest CAP payments keeping food prices lower. Shared Defence costs. Freedom of movement. Etc Trading contracts with th3vrest if the world. US, China, India protective markets. EU bigger clout in negotiating better deals. 450Million – nearest biggest market. EU Renewable grants and loans.


  9. The UK debt was 70% of GDP 2012. After the 2008 crash. Non regulation by the Westminster, 1970s borrowing from international sources. 2002. Illegal wars. Ten years. Now strife in Europe. UK/US breaking 2014 Agreement. Laundering taxpayers monies through Ukraine back to corrupt politicians, Getting illegal payments. Killing people. Biden son, Pelosi son and their families and associated getting illegal contracts and paybacks. Corruption and disorder in Ukraine. Corrupt Gov. Not making peace. Warmongers.

    26million Russians died inWW2. Fighting Germany. Russia will not tolerate NATO on its borders. Missiles and weaponry controlled by the US. Twin towers. Attack on Iraq. The bombers came from Saudi. SA funding corrupt Gov and political parties in the West. Bribing EU Politicans. For influence. No universal Suffrage in the Middle East. Reneged upon by Britain/France. Illegally taking countries Oil. Churchill and the US. Persia. Britain/France carved up the Middle East for influence and the Oil. 1917. The illegal Balfour Agreement, Israel becoming ungovernable today. 4 elections a year and complete corruption of politicians. Total criminals running the country. They should be in jail,

    Denying people equal rights and causing havoc. Protest on the streets and killings.


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