Very strange from Ritchie

But what Brittan does not say is why we have that savings glut when the world is full of people living on the edge of despair about making ends meet and far too many are in real poverty. By failing to address that question Brittan misses the point which is that unless we address the very real inequality in this world and positively redistribute wealth we won’t get out of this crisis.

The strangeness is that it\’s the poor globally who are doing the saving. The savings rate here in the UK, or in the US, is trivial. The savings rate in China, a hugely poorer place, is massive.

Redistributing wealth from the UK and US to China would therefore, ceteris paribus, increase the savings rate, not reduce it.

9 comments on “Very strange from Ritchie

  1. …..why we have that savings glut when the world is full of people living on the edge of despair about making ends meet and far too many are in real poverty…..

    Because if you don’t know where your next meal will come from you try to save. In the west, the welfare state will step in, so saving for a rainy day is not necessary.

  2. And on a related point, I thought global inequality was falling? Individual industrialised nations are becoming less equal but on a global scale we’re more equal as poor nations (China) become more like rich nations.

    Want global equality? Try capitalism. “I’m lovin’ it”.

  3. The very low savings rate in the UK is the net effect of a high borrowing rate among the feckless to fund consumption in excess of their earnings, a modest dis-savings rate among elderly pensioners, students living off loans and the silent majority living within their incomes, some of whom are saving. If “we” – i.e. the almighty state redistributed wealth from the savers to the poor, most of that would be spent, almost certainly in excess of the reduction in borrowing, so Ritchie is right that the saving rate would go down.
    He may not have noticed that the UK has been doing this for over a century, which accounts for our low savings rate.
    I am just not sure how he expects to get the governments of China, India, Pakistan, etc to follow suit.

  4. So, poor people are saving – and hence, investing – because they are poor. They are trying to improve their positions, improve their lot in life – out of choice, out of free will. And if the Chinese stats are believable, they are doing that rather well.

    Can’t you all see – this must be stopped at once? If people work out on that they can get richer by consuming less and saving more… well. What would be the point in having the Courageous State?

  5. People who are of independent means and save to provide for themselves are less in need of a Courageous State. They are much harder to convince of it’s benefits too, not a group of people that Ritchie is ever going to have much time for.

  6. Not “strange” at all, Tim.
    Suppose you have a divided world, one with welfare, reasonable demographics; and another with no safety net and bad demographics.
    Which half would you expect to save more?
    All the bullshit about “imbalances” stems from this demographic. Saving means not consuming. Tim Geithner should save his breath.

  7. blokeinfrance: you are right. To the extent that there has been a rise in the UK savings rate lately, it is down to less dis-saving: less extra spending run up on credit cards and fewer mortgages ( most of which was financed by poorer people’s savings).

  8. I hope Ritchie is advising Moribund on this idea domestically. What a marvelous policy,a savings tax to fund welfare. Say, tax all savings over 10k (who needs more than that in savings? They’re only depriving some poor person) at 40%.

    It’s a winner for Labour right there

  9. Also, can’t he formulate some argument that saving is avoidance of VAT? thus against the spirit of the law?

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