Listening to the gleeful Osborne as he talks about cuts to services, one comment he made really stuck out.
Osborne said that in hard times, companies first cut back on advertising and marketing when in a recession.
He is correct, but he is wrong to think that is the right thing to do. Companies that cut back on such things tend to find not only their sales drop, but also their market share drops. If you really want to maintain profits in a recession you have to increase market share and good advertising and marketing will help you do that.
The same is true for the deficit. The Con-Dem coalition say they are desperate to cut the deficit and that public service cuts (they deem cuts to services as 'cutting waste' but I have yet to see any waste bein cut just frontline services and benefits of the poorest) are the only way. But as Keynes found out, in a global recession, public sector cuts depress growth even more and depress tax revenues which in turn means the deficit is not cut, it can actually increase.
The Tory-Dems are about to prove who is right on this. If the deficit is higher in 5 years than it is today after their savage cuts to public services and the economy is contracting, will their argument that it is all Labour's fault still wash? Lets hope not, because it clearly will be a lie.
"If you really want to maintain profits in a recession you have to increase market share and good advertising and marketing will help you do that." Nonsense - if that were true, businesses would do it.
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