Why The Economy Won’t Grow

I keep reading about attempts to encourage economic growth, usually by cutting interest rates, or something along those lines.

But the way I see it is that, once you’ve kicked a quarter of the population – the smokers – out of the economy, giving them nowhere where they can spend their money, you’ve created a permanent reduction in consumer demand, and therefore a permanent recession.

It’s easy to explain how it works. At the end of this week, I’m going to a wedding in London. I haven’t been to London for well over 10 years. And I ought to be excited about going there, and be looking forward to visiting shops and museums and art galleries and so on like I used to do.

But I’m not going to do that. I’m a smoker and I’m not welcome anywhere, so I’m going just for the wedding, and nothing else at all. I’m going and coming back more or less as quickly as I can. In fact, the whole trip will probably be a bit of an ordeal (except for the wedding). And I never used to see visiting London as an ordeal. After all I used to live there once, and I liked the old town back then. Now it looks like a sort of hell.

So my spending in London is going to be restricted to train tickets. There’ll be no food, no drinks (because that’s all laid on anyway, I think), no newspapers, no magazines, no coffees, no books, nothing.

It’s not just London. A few months back I saw that Lana Del Rey was doing a show in Birmingham later this year. I don’t live too far from Birmingham, but while I was greatly attracted by the idea of seeing her live, the idea of going to Birmingham for an evening, and being unwelcome there too, eventually outweighed the powerful pull of Lana. So I didn’t buy a ticket. I won’t be going.

And I’ll bet that all over England (and France and Spain and Italy and everywhere where smokers have been made completely unwelcome) smokers are making similar choices. After all, they no more want to visit places they’re not welcome than I do.

Antismoking zealots like Deborah Arnott say that, if smokers stop spending in pubs and cafes, they’ll simply spend their money elsewhere, and so there’s no net impact on the economy. So smoking bans simply shift spending from one thing to another. But what none of them ever explains is what smokers spend their money on instead. What is it? Books? Music? New curtains and carpets for their homes? The only thing that I can see that smokers spend more money on is going to countries or states where they still are welcome. And this inevitably means that their local economy doesn’t see their money, but instead some other country or state. The same applies if they buy imported or smuggled tobacco, where once again their money isn’t being spent in their local economy.

Unfortunately, such is the stranglehold that Tobacco Control has got on the media and government and more or less everything else that most people believe the likes of Deborah Arnott, and suppose that smoking bans have little impact on overall consumer demand. Probably most economists think that too. And in part that’s probably because they have never before seen what happens when large numbers of people are effectively expelled from society. It’s not part of their experience. And they don’t even know it’s happening, because the Tobacco Control lie machine is very good at pulling the wool over their eyes.

But, regardless of what they all think, I think that governments can do whatever the hell they like to try and boost demand and re-start their stalled economies, using tried and trusted expansionary measures. They can set all the economic traffic lights to green. But still the economic traffic won’t start moving. And I know this because I’m one of the drivers sitting in those motionless cars.

So, in my view, the entire Western world is set to experience continuing and gradually deepening recession/depression. And this will continue until smoking bans are lifted, and smokers made welcome again. And there’s precious little sign of that happening anytime soon.

In a couple of months time, Russia is introducing its own smoking ban along the usual draconian lines.  60% of Russians smoke. Their economists probably haven’t a clue what the economic impacts of smoking bans are either, no doubt having read all the upbeat Tobacco Control lies. So I predict that deep economic slump will hit Russia soon, most probably showing up in the figures for 2014.

And the slump will continue until economists finally figure out that Tobacco Control is lying about the supposedly beneficial consequences of smoking bans (e.g. increased productivity). Maybe a few people will eventually realise that every claim that Tobacco Control has ever made is a lie.

Still on the economy, much is made of the public debt these days, as a ratio of GDP. But Ambrose Evans-Pritchard published an interesting graph a few days back of UK public debt. The Telegraph is behind a pay wall these days, but I managed to see it.


He writes:

Britain’s public debt was 260pc of GDP in 1816 at the end of near perma-wars: Seven Years War, American War of Independence, and the Napoleonic Wars. This was whittled down to 24pc over the next century by the magical compound effects of economic growth.

The debt reached 220pc in 1945, the price for defeating fascism. This was certainly a drag on the post-War recovery, but it did not stop debt falling to 36pc by the mid-1990s.

But then, there isn’t going to be any economic growth to whittle down Britain’s current (historically rather modest) debt – for the reasons just given.

About Frank Davis

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28 Responses to Why The Economy Won’t Grow

  1. Marvin says:

    I believe this graph is wrongly labelled.
    What it actually shows are peaks of capital investment.
    The surge in “debt” around 1820, coincides exactly with the Industrial Revolution and the massive capital investment into heavy industry, steel, shipbuilding and especially the railways and its infrastructure (bridges, tunnels, track laying etc). Businesses borrow from the banks to expand in the boom (debt), eventually wages catch up and people can buy or use these products, businesses make profits and can repay their loans, so their debt reduces.

    The next surge in “debt” occurs around 1914, two things happened here…
    1) – Financing the First World War (ie. massive capital investment in armaments production) and…
    2) – Massive capital investment in the motor car and its infrastructure (oil refining, road building, garages etc) much like the railway boom 100 years earlier.

    You could categorise the period from 1692 to 1912 as “Free Market” capitalism (businesses have to borrow money from the banks to expand).

    Interestingly, after the automobile boom, the “debt” does not drop significantly until the outbreak of the second world war. The outbreak of this war sees again massive capital investment taking place, for the same reasons as the first war. But why has the post war “debt” consistently reduced, right up into the 90s? you would have expected it to have risen, with things like hire purchase, mortgages and credit cards. This graph tells us nothing but hides an important economic change that has occurred in the post war years.

    Since 1945 Capitalism has evolved into STATE monopoly capitalism. (The state is the main customer for their products). Giant Corporations do not need to borrow money from the banks, because of their huge and diverse market share, they can generate the necessary funds for investment and takeovers internally, thus their “debt” does not appear on the graph. Capital looks for profitable investment outlets, we can see this clearly in the graph at the peaks of investment in 1820, 1914 and 1933/34. If these outlets do not occur then capitalism is in trouble.

    • Frank Davis says:

      But why has the post war “debt” consistently reduced, right up into the 90s? you would have expected it to have risen, with things like hire purchase, mortgages and credit cards.

      Perhaps because this is a graph showing public sector debt. The UK government was in debt to the USA after the war, and that debt was only fully paid off in about 2005.

  2. harleyrider1978 says:

    The link you are visiting:https://cfrankdavis.wordpress.com/2013/04/24/why-the-economy-wont-grow/?fb_source=pubv1
    Facebook thinks this site may be unsafe. If you’re not familiar with it, please provide feedback by marking it as spam (you’ll be brought back to Facebook).

    Frank I got this message this morning as I took the FB link to your site! I gather facebook thinks your a threat to their world view an ANARCHIST!


  3. harleyrider1978 says:

    ”This year will go down in history. Foe the first time,a civilized nation has full gun registration. Our streets will be safer,our police more effecient,and the world will follow our lead into the future!” ADOLPH HITLER 1935

    Hitler passes anti-smoking laws 1937

    Tony Blair followed Hitlers lead!


  4. Mike_Iver_Village says:

    Hi Frank. You have absolutely hit the nail on the head. Since the smoking ban myself and my partner only buy the essentials. We rarely invest in new clothes – apart from thermals – as we are stuck outside the pub now. For the 1st time in years I had to buy a new top recently, but that was only because the previous one was thread-bare. It has affected my relationship, as we no longer dress up for each other (ie smart clothes for a Friday night out). I buy my cigarettes from Europe – half the price. Then we go on holiday to Portugal which has considerably better non smoking rules, and the weather is so good anyway, then we blow a fortune into their economy. I’d say at least 70% of Brits holidaying in Portugal are smokers, doing the same as us. I wrote to George Osbourne and our Fuhrer, sorry, I mean PM, saying this and was ignored by George and sent a copy and paste reply from the PM. When will they ever learn?!

  5. harleyrider1978 says:


    The Lucrative Business Of Cigarette Smuggling

    NEW YORK (CNNMoney) — Wanna make a quick $1,944,000? Buy a truckload of cigarettes in Virginia and sell them in New York.

    Yeah, it’s illegal. But that’s how much can be made from selling a tractor trailer’s worth (that’s 800 cases, each holding 600 packs of cigarettes) of low-tax Virginia cigarettes in high-tax New York, based on estimates from the Bureau of Alcohol, Tobacco, Firearms and Explosives.

    And that’s exactly what criminals are doing.

    In 2011, more than 60% of all cigarettes sold in New York were smuggled in from another state, according to the Mackinac Center for Public Policy, a free-market think tank. That’s up from about 36% in 2006.

    It’s not just happening in New York. Mackinac says 15 states have smuggling rates that top 20%. Add in counterfeit cigarettes from overseas, and ATF estimates the lost government revenue at more than $5 billion a year.

    Mackinac and others pin the blame on rising state taxes, and say things could get even worse if President Obama’s proposed 94-cent-a-pack cigarette tax hike goes through. Anti-smoking groups say the smuggling numbers are inflated, and that the public health benefits of fewer smokers — the ones dissuaded by pricey packs — far outweigh any lost revenue or other effects of smuggling.

  6. gimper30 says:

    You are right on, Frank. Since the state of Indiana banned smoking in hotels and motels, we/ve quit making any weekend jaunts. That means no gas, no restaurants, no local attractions, no nothing for the Indiana economy.

  7. mandyv says:

    I have to agree also, it is not just about staying at home more and not spending “smokers” money in pubs or coffee shops that canoot elp the economy, but I do not buy much in the way of new shoes or clothes for the nights out of old. It has to hurt the economy if enough people do the same. They must have thought we would go out and spend money on other things still and help the economy, anything i save does go on holdays and cigarette allowance. We share a villa with the family so we can smoke in comfort and warmth outside “Spain” but we do not go out as much we now cook at the villa. Every time they put the tax up on the ciggies, something else is given up if it is NOT the smoking, less food ect more bad news for the economy. it is not hard to work out and I failed at maths. When the USA prohibition went through, people still drank underground, many people died “government poisoning” gangs everywhere, no taxes for the government and I am sure it depressed the economy. We all know we are not far off of prohibition, it might as well be it if you now are a stay at home smoker, because that is what it feels like.
    I also got the it may be spam message harley.

  8. Rose says:

    Frank, the Telegraph does have a pay wall but it lets you see 20 articles a month free, the subscription for a whole year is only £20.
    I decided in the end that I would miss the Telegraph more than I would the 20 quid.

    For those interested in the allegedly Plain Packaging, campaign, it looks like anti-tobacco are desperately trying to put the screws on the Health Minister.

    Coalition must act on cigarette packaging

    “But with the Queen’s speech only two weeks away, we have yet to hear of any such decision. The arguments in favour of standardised packaging are compelling and we have yet to see any credible evidence from the tobacco industry against legislation.

    This has clearly been recognised by public health minister Anna Soubry MP, who made clear her support for standardised packaging of tobacco products on the Today programme last Friday.

    “With over 200,000 young people taking up smoking every year and 100,000 people dying as a result of their habit, we urgently need assurances from Jeremy Hunt that he will listen to health experts and stand firm against this industry pressure. It will take a lot of explanation if this crucial public health measure is not included in the Queen’s speech on 8 May.”

    Professor Lindsey Davies President, Faculty of Public Health, Dr Janet Atherton President, Association of Directors of Public Health, Dr Vivienne Nathanson Director of professional activities, BMA, Dr Clare Gerada Chair of council, Royal College of General Practitioners, Professor John Britton Director, UKCTCS, Simon Gillespie Chief executive, British Heart Foundation, Leon Livermore Chief executive, Trading Standards Institute, Penny Woods Chief executive, British Lung Foundation, Francine Bates Chief executive, Lullaby Trust, Professor John Moxham Chair, Ash

    Presumably the Public Consultation has not gone their way.

  9. nisakiman says:

    I decided in the end that I would miss the Telegraph more than I would the 20 quid.

    Heh! Same as that, Rose. I’ve been reading the DT for years (dead tree version since the 80s), originally because I enjoyed their cryptic crossword (not as difficult as the ‘Times’ one), but now because they’re the best (IMO) of a bad lot. So when they put in the paywall I coughed up. It’s cheap enough. I spent a lot more buying the actual newspaper ten years ago. Must have been 50p a pop back then? Somewhere around there, I seem to remember. That’s a lot more than twenty quid a year. And I had to go to the newsagent to get it!

  10. harleyrider1978 says:

    EU smoking regulation led by big pharma

    There are more than 10,000 lobbyists in Brussels, all funded by big business to form alliances with bureaucrats and politicians in order to overcharge citizens, claims UKIP MEP Godfrey Bloom.

    • Everyone knows smoking is bad for you, it is a ‘given’. I do not intend to embark here on my libertarian crusade that we should all be able to go to the devil in our own way. Chips, fizzy drinks, alcohol, tobacco, obesity, lack of exercise, drinking a glass of wine a day, not drinking a glass of wine a day – depending on the fad of the latest medical magazine or what any quangocrat, who worms their way onto breakfast television sofas, says.

    For those not in the know on electronic cigarettes, let me run some facts past you. Most of the health damage cigarettes cause is by the combustion in the smoking process. In short it is the smoke that does you harm, not the nicotine. I have spent some time researching this and can find no health scientist who takes a different view. The electronic cigarette takes smoke out of the procedure and replaces the experience of smoking and diminishes the nicotine craving in a similar way to the nicotine patch.


  11. cherie79 says:

    I don’t think any Government even thought about the long term economic effects of the ban which go much wider then just the loss of tax revenue from tobacco or didn’t think they would happen. Like everyone here I buy my cigarettes abroad, don’t go out much now so need for new clothes etc. Just wonder what it will take to make them see that tobacco control via the pharma industry is running rings round them for their own well paid jobs and profit.

  12. roobeedoo2 says:

    ASH’s Peter Kellner’s wife smoking story over at Guido http://order-order.com/2013/04/24/cathy-come-home-now/

  13. Sike says:

    the Telegraph does have a pay wall but ….
    if you delete cookies it resets the paywall

  14. beobrigitte says:

    Antismoking zealots like Deborah Arnott say that, if smokers stop spending in pubs and cafes, they’ll simply spend their money elsewhere, and so there’s no net impact on the economy. So smoking bans simply shift spending from one thing to another.

    This just shows HOW LITTLE anti-smoking zealots understand.
    Prior to the smoking ban I used to enjoy a “town – day” with a group of ladies, only a few of them being smokers. Nevertheless, we used to pile into various coffee shops throughout the day, having a coffee (+ cigarette) break, showing off what we bought so far. Gradually, after the dictation of this smoking ban, the smokers declined invites to such shopping days. In the end the non-smokers couldn’t be bothered going, either. It just wasn’t the same anymore.
    These days we all meet up privately just for coffee and a chat. And for us smokers there is an ashtray on the table.
    These days I only buy essentials. Clothes shopping to me has always been an ordeal that I only could survive in the above group. Nowadays, if I need some new clothes, I just quickly grab something on offer in a local supermarket. I don’t go out much anymore, so there is no need for nice clothes.
    I spend most of my holidays these days abroad in countries I know to welcome me and I spend my money there. I wish Scotland was more accommodating! It is an amazing place – yet they do not cater for me so I haven’t been there for a long time. I would have liked to explore Cornwall; apparently the coast is amazing but I have developed a serious allergy to non-smoking signs and the lack of ashtrays.
    In a macabre sense the bank I borrowed the money from in order to pay my share of my mother’s funeral has not profited; I paid the loan back long before it was due to be paid off and also not only settled my share of the headstone of my mother’s wishes.

    The longer this smoking ban goes on the less I’m interested in shopping.

  15. prog says:

    Whatever the total national debt is, it is only (barely) sustainable because of ultra low interest rates. If they doubled (still historically low), the economy and most of debt ridden citizens would be fucked.

  16. jaxthefirst says:

    There’s a staggering amount of double-think in Ms Arnott’s comment about smokers simply “spending their money elsewhere.” I mean, if smokers aren’t going to the pub any more because they don’t like the smoking ban, what on earth makes her think that we are all going to instantly rush off somewhere else where the smoking restrictions are exactly the same?? If I could think of a single place where I could spend my money where I wouldn’t be made to feel like an insulted second-class citizen then I’d spend fortunes there, but the only place where this applies is in my own home and the home of my friends where, of course, very little money changes hands – thus being not a jot of help to our faltering economy at all!

    To be quite honest, though, I’ve stopped worrying about the economy. It’s quite clear that our present spineless bunch of MPs don’t have the guts to do anything which will realistically improve things – including relaxing or repealing the smoking ban – and there isn’t anything that I can do to change their stubborn-minded insistence that they know what they’re doing. So as far as I’m concerned, I’m quite happy for the money I’m not spending to languish in my various bank accounts making me a bit of interest, whilst they flounder from one loopy idea to another and from one crisis to another, always carefully avoiding any mention of any of the various elephants in the room, of which the smoking ban is just one. If they think I’m going to start spending money doing things I no longer want to do, in places I no longer enjoy visiting, just so that they can pat themselves on the back as to how wonderfully well they’ve managed to turn around our failing economy then they’ve got another think coming! As far as I’m concerned, my personal economic message to all our politicians is very stark: “Repeal or die.” And if they choose the latter (as they seem to be intent on doing), then so be it.

  17. Chris W says:

    Don,t forget the Taxi Drivers who will be picking up less fares and takeaway shops serving less customers.also happy people spend more and stay at home smokers like me are definately less happy.

  18. Spain reaches the six million unemployed mark, over 27%. The hospitality industry fails to stop the trend even during Easter, when tourism was expected to bring about some hirings. In fact, bars, restaurants and hotels had the worst figures in employment during the first trimester of the year, pointing clearly at the blanket smoking ban as one of the main causes of the cataclism.

  19. hejno says:

    It is somehow a comfort to see that one is not alone in feeling like a pariah and second-class citizen. The feelings expressed here are exactly like mine, I never go to pubs and restaurants anymore, shopping is only for the essentials and the only thing I spend any serious money on is taking a week’s break 2-5 times a year in a country that hasn’t enforced this ostracising law. Just read reviews on Tripadvisor about the lodging I’m going to stay at in Prague,-one complained that they smelt cigarette smoke in the corridor (!) and another that they saw a man smoking in the reception, some people have gone completely bonkers about smoking- you never see them complain about far more unpleasant smells! But at least this gave me the satisfaction of knowing that I will not be unwelcome at this lodging!

    • beobrigitte says:

      I’m going to stay at in Prague,-one complained that they smelt cigarette smoke in the corridor (!) and another that they saw a man smoking in the reception

      Thanks, Hejno! Prague it will be. I’ll ask for the address nearer the time I am going there! In view of the forthcoming economic disaster I have decided to spend some of my cash on holidays in places where I am still a welcome guest.

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