The Macroeconomy: 2

Abstract

Before we turn to analyse the database a few introductory words are in order. Consumption holds the key to the behaviour of the UK economy. Adam Smith, who should be mentioned in all self-respecting books on political economy, knew all about this two centuries ago. ‘Consumption is the sole end and purpose of all production’, he wrote in The Wealth of Nations. Elsewhere, he noted that England was ‘a nation that is governed by shopkeepers’. Perhaps what he should have said is that England is a nation of shoppers. The British do not habitually take to the streets to protest, or indeed to vote in local elections. They know that, irrespective of who governs them, the shops will be full, and that they can express their position in society through what they buy. It should not be forgotten that Britain has an amazingly efficient system of retail distribution; just compare it with that of Japan, a country which is more efficient at making things but hopelessly inefficient at distributing them (it even has a law preventing the spread of department stores). However, the Japanese are hardly likely to agree with Adam Smith’s assertion that ‘The interest of the producers ought to be attended to, only so far as it may be necessary for promoting that of the consumer.’