The British economy is in dire straits, which look set to result in a permanent downward shift in our comparative position in the world. The five year growth forecasts from the Office for Budget Responsibility forecast that in the best year of the coming half decade, growth will peak at just under the average growth rate for the last two hundred years.
It is therefore worrying that we have a Chancellor who thinks that the appropriate response is a series of petty, peevish party political points. His attack on Gordon Brown for sellng off our gold reserve at a quarter of its current value, was perfectly true but absolutely irrelevant to the budget. And as for
“The principles of good taxation have been set out from Adam Smith to Nigel Lawson”
I can only observe:
“The prinicples of good batting have been set out from W G Grace to Craig Murray”.
The last fortnight has seen a series of disastrous economic statistics, as inflation, unemployment and the budget deficit all returned monthly figures substantially worse than forecast, The forecast budget defict this year is now £149 billion.
The extraordinary thing is, that nobody denies that this appalling financial situation was caused by the collapse of the banking sector. Nor does anyone appear to deny that the collapse of the banking sector was caused by a system which hugely rewarded individuals for short term gains on multiple high risk speculative transactions, in a way which made a “Bubble” inevitable.
While the perpetrators – a whole class of them – took massive rewards for the short term gains of the complex bubble scheme, they did not get punished by its collapse. Rather everybody paid up for them, resulting in there being a gross shortage of money to pay for anything else – hence the recession.
It has been argued that. in running this massive government deficit, we are in fact in the middle of the biggest Keynsian stimulus in history. The problem with that analysis is that, rather than be put into public spending which stimulates the demand, the money from this deficit has been put entirely into the banks, which use it to stimulate the appetite of their senior staff for cocaine.
But other than a token levy amounting to well less than 1% of the money that has been given, nothing whatsoever has been done to address the cause of the malaise, and the over-rewarded class who crashed the whole economy have been left free to crank up the next bubble and immediately to start over-rewarding themselves again. Politicians of all major parties then simply deal with the resulting damage to the economy by palliative measures as if the collapse were an earthquake and tsunami, which we had no choice but to accept will come, and no choice but to realise will come again. Indeed we have just had an entire budget speech which did not even mention the banking collapse as the cause of our troubles. The only mention of the banks was to repeat their own propaganda about freeing them up to enable them to compete on a global basis.
I am in fact entirely in favour of a small state, and am not against budget cuts per se. There are hundreds of thousands of people working for local authorities who are in office jobs which in fact do no good to anybody. Those who deny that local government in the UK is corrupt, overstaffed, overpaid and full of local political placemen, obviously have had very little contact with it. Sadly, the numerous “officers” and “managers” in local government are precisely those who will not get sacked in the spending cut round. The useful people who actually work will be cut instead.
The National Health Service is a prime example of how this government gets the public sector totally wrong. Public services should be delivered by the state simply, efficiently, directly and with the minimum administration. By seeking to introduce market forces into the equation, the simplicity and directness are both removed and the administration increased until it exceeds half of the total cost, as hordes of useless bureaucrats and accountants administer completely artificial market mechanisms and pass miliions of useless invoices and receipts for payment from one bit of government to another bit of government.
Cuts are a good thing. The cuts of this coalition are worse than useless. They have to be part of a fundamental restructuring of our economy, which ties financial transactions to actual payments for real goods and services, rather than speculation on the future value of goods and services. Most importanly, redistribution of capital to the workers in companies needs to be initiated. I favour economic competition, but capitalism as currently consitituted brings an escalating concentration of capital and consequent concentration of political power, and a quite unacceptable leap in the wealth gap between rich and poor.
Instead we have from Osborne a little adjustment here and there and the odd snide partisan quip. I have noticed an interesting phenomenon about Osborne. Every time he takes a measure to benefit the wealthy, his hair parting grows wider, and it is threatening now to take over the whole top of his head. His one big idea was that it is time to take the “historic step” of merging Income Tax and National Insurance. Actually that is precisely a hundred years overdue, ever since Lloyd George, with that twinkle in his dark eye. quipped “The secret is, there is no fund”. But then it turned out that Osborne’s “Historic step” was to launch a consultation over several years into the possibility of doing this.
An irrelevant budget from an irrelevant man in what increasingly seems an irrelevant government.
This is the man who sang the praises of the Irish economy and offered it up
as a shining example for the UK to follow.
In other words, a fuckwit.
Yes. Thought I should make it plain that was George Osborne and not me!
I voted for you. I wouldn't piss down Gideon's throat if his lungs were on fire. 🙂
I agree with your points, although I suggest that we explicitly identify the root cause of the problem – i.e. our debt-based monetary system.
Back in the 1940's, over half of the money in circulation was created by government debt-free. This helped to generate social programs such as the NHS. Over time, however, private banks created more and more money into circulation as debt, and now we have over 97% of the money supply created as credit-debt. With banks being allowed to create new money, at an increasingly faster pace, at an increasingly greater amount of complex-packaging (in the form of unregulated derivatives) at a global scale – it has resulted in widescale fraud, embezzlement and instability.
It's time that we changed the monetary system. This is not a partisan position, as you will see here:-
http://www.positivemoney.org.uk/
Hear, hear. The question for me is whether it is possible to achieve radical monetary reform without wider democratic reforms preceding it. After all monetary reform would strike at the very heart of elite power. To overcome stiff resistance from the extremely well-funded financial services lobbies, the co-operation of major agenda-setting media is surely a pre-requisite.
For whatever reason, the world's only true democracy to date – in the sense that its people are sovereign in practice and not merely "in principle", has not yet achieved media reform, nor monetary reform. Though it is otherwise financially more stable than, and less Orwellian a society than the UK. I mean Switzerland of course.
Good post.
What a time to be 50 years old. Too young to let go, yet too old to make a good street fighter. I will be astonished if this summer is riot free in the UK.
In every town there are large groups of young unemployed, as much a consequence of their sabotaged education as of the economy. These near feral gangs, are prime fodder for the simplistic political 'solutions' offered by the less orthodox political entities. Who ever can utilize this 'sea' of hate, will rule the chaos that I predict must come.
If the Feminist-Marxists unions win out, then we will have the high streets ablaze. If the nationalists win out, then the council buildings and 'foreign' interests (synagogues, mosques, etc) will burn.
It's not a good time to be 50.
Your post made me laugh! Captures exactly how I feel. i am sixty and I still feel like getting out on to the street but have to ask the question what use I would be as a 'street fighter'.
Actually, I have been having thoughts about mobilising 'the mature'. I wonder what the effect of a long marching column of grey -haired grannies and grandads would have? i know many who would definitely march willingly. After all we are more expendable (i.e. have less to lose) than young people. We (I think) are less easily intimidated or bamboozled or dismissed as hot-headed youth-even if we are easier to knock over, than a 20 year old, and we are more likely to more readily 'shame' what passes for our political leadership into some kind of action. I think a geriatric protest movement may be more effective than you think. I am certainly 'up for it'.
There's a lot to be said for the notion that we and the Americans have in fact been the victims of a financial coup d'etat. The whole of government economic policy is now restricted to a very limited range of options, while making sure to say or do nothing to irritate the Supreme High Panjandrums of global finance.
The bond market, I have been told, would be very disappointed in us if, for example, we raised top rates of tax sufficient to making short work of the deficit. But cutting company tax and enabling new and surreptitious loopholes is looked upon with great approval. Who knows – if there's another crash, perhaps we'll all end up as indentured servants to Serco or some other corporate godling.
I fear we are already!
Just one of the massive problems we face is that the central figures in the coalition, do, seemingly sincerely, believe in what they are doing, that it's the right way forward and will, after a period of pain and re-balancing, lead to increased prosperity for everyone. One should try to keeep utopian ideology out of economics, though one can argue that economics is fused with ideology.
What Osborne doesn't seem to grasp is that his own personal utopian vision of society would be fine if implimented in the eighteenth century, but his vision has precious little to do with the complexities of modern state-capitalism.
The Welfare State is, I would argue, essential for the maintenance and health of modern capitalism. Without massive state intervention and colossal subsidies to "cushion" the "instabilities" built into the marketplace, capitalism would not survive in anywhere near its present form. The Welfare State's biggest beneficiary was capitalism which thrived on massive state benefits for decades. One undermines this cosy relationship at one's peril, especially if there is nothing to replace the largesse of the state. One risks creating a permanent recession which one never really recovers from.
The official version of how capitalist economies function is only for public consumption, as folk ideology or mythology, which was why Thatcher's pronouncements on the economy were so embarrassing to hear, scaling-up the wisdom of running a cornershop to a nation, ho, ho, ho.
For primarily ideological reasons, the UK manufacturing sector was gutted and the financial sector boomed. Wealth, or really debt, was created on a vast scale by successive governments, of either shade. As real wages stagnated one allowed people to live on debt "wages" instead, but what was one supposed to do? The purchasing power had to come from somewhere didn't it? A marketplace without consumers with money in their pockets wouldn't last long would it?
But creating so much debt brought problems of its own in its wake, but these were successfully hidden for a long time, until the entire massive Ponzi scheme virtually collapsed.
Even now the coalitions policies are based on looking after themselves, which is natural, and ordinary people are being forced to pick up the tab. Cameron and Osborne are supposed to be worth a £100,000,000 between them; not bad. They can afford to have utopian visions about a free marketplace and a small state because they will never have to endure the rough and tumble of the marketplace like ordinary people. Cameron can pontificate about there being more to live than mere material values. Easy to say when one is a multi-millionaire, so different if one is unemployed at fifty.
What irritates one so about Cameron, Clegg, and Osborne, is that these fabulously rich people are so detached from reality so protected and pampered. They remind me of my ancestors. They wandered around inside the parallel society of Versailles and seemed to think that society was real. It wasn't. It was the outside world that was real. It was them that existed inside a fantasy bubbble which was doomed. And even though a handful of people inside Versailles tried to sound a warning and wake people up, it was too little, too late, the trajectory was fixed towards disaster.
I perhaps should add that I'm being really charitable with Osborne and the Coalition. It's worse than it looks. They aren't as incredibly stupid as seem. They know most of it's bullshit, but what are they supposed to say, they can't tell the truth, even if they recognised it.
I suspect they know the economy isn't going to recover anytime soon. What's happening now is "class warfare" the rich and powerful grabbing as much of what's left of the countries wealth whild they still can and it's still there, and bugger everyone else. Ordinary, hard-working, families don't matter, as individuals they have no power and they have no political representation to speak of. We live in a one-party state.
The economy is set to shrink and millions of people are simply no longer required. The jobs and the incomes have moved off-shore and aren't coming back. The middle-class are becoming an endangered species as the Welfare State is gutted, a model that provided them with social mobility, a free education and careers. A smaller economy will need fewer people. The cake will shrink, but the rich and powerful, characterised by Cameron, Oborne, and Clegg, their slice will not shrink, relatively their class will become even richer and more powerful. And finallyl, what is a bourgeois democracy without a strong middle class?
One of the curiosities of my extended experience in the US-and I do have very direct, personal experience-is to discover that the delivery of health services through the insurance system is woefully inefficient. What I mean is that there is a huge (private) industry of bean counters and an army of form fillers, box tickers and "letter" writers, to support the whole system, with hideeously complex arcane divisions of costs and liabilities. Half the time the operators themselves either make mistakes or are pressured to interpret complex contracts more favourably for the insurance company and the patient is almost helpless without another accountant to figure it all out on their behalf. The effect of this is that if someone, even with 'good' insurance gets ill in some moderately serious way, the volume of literature is truly stupendous, intimidating, often counters recovery, and goes on for months or even years.
The health system in the US supports a veritable ocean of this curious, pointless material, and armies of people to produce it. It would be laughable if it was not so seriously dysfunctional. My suspicion is that this material reality is not in any way taken into account.when commenting on the merits of the relative systems.
Another, separate issue comes from a physicians perspective-that there is constant 'upward ' pressure on providing some form of additional or more complex treatment, partially due to unrestrained advertising of technically complex matters, but also related to the way physicians are paid. The system then comes to run against simple effective measures and promotes methods or actions of little or no benefit, or are indeed , long-term harmful.
There is now a growing literature supporting the suspicion that the commercial structure of the health system is now so interwoven with commerce that it has become an 'unhealth' system. Now this is not a simple subject and it would be wrong to characterise the US health system as 'all bad' , but there are glaring problems which are political poison, so are not touched. Here is Craig's comment-and it is plangently accurate.
"By seeking to introduce market forces into the equation, the simplicity and directness are both removed and the administration increased until it exceeds half of the total cost, as hordes of useless bureaucrats and accountants administer completely artificial market mechanisms and pass miliions of useless invoices and receipts for payment from one bit of government to another bit of government".
we are opening a "pandora's box', yet another layer of dysfunction in introducing privatised health.
There ARE problems with the NHS model-no doubt-these mainly revolve around providing the most-up-to-date and best care possible, and getting investment into health care- that is what the US system does quite well- but at a horrendous cost to other lower level forms of care, and the skewing of need-creating redundancy at the top end-and woeful inadequacy at the lower end of need.
Rather like my favourite film, Brazil, by Terry Gilliam. Can’t do a thing without form 37b/6.
What an interesting perspective, thanks Michael K.
I would like to dispute one thing Craig wrote above. In my experience of a deprived South London borough Council workers are underpaid, overworked and try very hard to discharge their duties under very difficult circumstances. I don't work for the Council, I just have several voluntary projects that interface with the council officers and management. I don't know any that are feather-bedded, rather there are too few of them with too high a workload so it makes getting something done harder than it should be.
Otherwise another excellent blog from Craig.
"While the perpetrators – a whole class of them – took massive rewards for the short term gains of the complex bubble scheme, they did not get punished by its collapse."
Bankers were merely doing what all business people do, maximizing profits. The problem was inadequate regulation that resulted in a bubble economy. Bubbles collapse, and when they do, banks collapse too. Since the bubble was created by government decision to deregulate the financial services industry, it made sense for the government to shoulder the cost of the disaster that followed. The alternative would have been to ruin, among others, bank depositors, something that no government could hope to allow without itself becoming the target of a lynch mob.
Firing the army of petty bureaucrats who get in everyone's way and draw non-functional income is an appealing idea, but the result would be a massive increase in the number of those drawing non-functional income as welfare recipients.
The managers of western economies are fighting a losing battle to maintain a position of permanent disequilibrium between their own high wage, high cost markets and the low wage, low cost markets of the emerging Asian giants. The method adopted has been to outsource manufacturing to Asian sweatshops, while attempting to close the resulting trade gap with export of financial services, high-tech weapons systems, and infrastructure projects to oil producers subservient to the NATO powers.
This solution is now failing because, first, the Asians are developing their own financial services industries, and second, the Asians, particularly the Chinese, are offering much better deals than the West can provide on infrastructure development. What's more, the Chinese will soon be selling high-tech weapons systems as well as everything else.
Hence the war for control of Libya's oil and gas wealth. The aim is not to steal it outright, but to ensure that the revenue is recycled in the West, not to China.
The overall Western strategy is failing, as evident from the ten-year recession we've already experienced. The alternatives are (1) the protectionist option of tariffs and state subsidized industrial re-development, or (2) massive devaluation of currencies to bring wages in the West and the East into line. Option 2 is odious to many people because it would reveal what is in fact the case, that the West in not vastly wealthier than the East, even on a per capita basis. However, it would restore full employment and re-establish the incentives that are necessary if the West is to restore its fast dissipating industrial, scientific and technological skills.
Not entirely true. The government could have simply refunded individual bank deposits for about a third of the cost of the bailout. The underwriting of the bank's speculative debts went far beyond the value of the bank's deposits. By definition, when you consider they were bust. Those banks which were insolvent should have been allowed to go insolvent, and depositors compensated – with a cap, I would suggest.
I don't think the banks were really speculating. They had deposits and they had to make loans on the basis of those deposits, otherwise they would have gone broke. As the bubble expanded, deposits expanded so bank loans expanded. The trouble was that the loans consisted largely in crap mortgages, usually second-hand derivatives that the dumb blokes at Northern Wreck and that Scotch bank failed to understand. And the crap mortgages were the result of deregulation.
It was known at the time that the mortgage industry was rampant with fraud. Elliot Spitzer, who was done for whoring, attempted to persuade State governments to restrict the predatory lending practices that were bound to result in mortgage defaults, but the Bush Administration blocked his effort — they probably set him up for personal humiliation too.
You may be right that the cost of the bank collapse could have been pushed, in part, onto some New York hedge fundies or other shysters, but it would have led to something like a civil war, exposing massive corruption in government. Anyhow, Gordon Brown had to think of his career after government. No use, biting the hand that will soon provide the gratuity for services rendered.
If you are right Craig, the irrelevance is propped up by a coalition partner worried about becoming irrelevant, a catch 22 position. How sweet must power be to turn principles into floss, married by the circumstances to insecurity, how big the sheer Angst to disappear must be, the perceived dangers of letting go of the strings.
All this can be stopped in an instance, the struggle for some is being perpetuated by a lost coalition scrambling for positive headlines, whether its in Libya, or here, waving red boxes about.
This coalition is at an end, pandering to motorist with empty gestures will not create enough jobs to get us out of the inflation escalator.
When Osborne said 'more cuts' he meant yes to 2% corporations tax, now we know, he's sweet on his ilk.
"It is therefore worrying that we have a Chancellor who thinks that the appropriate response is a series of petty, peevish party political points."
After the 2010 election, outside Parliament, stood Lord Nigel Lawson and Jack Straw MP.
Nigel Lawson said words to the affect…Labour had left this country in a financial mess due to their economic mismanagement. Jack Straw then said…”The Tories supported our economic policies 100% for the first eleven years of the Labour government.”…Nigel Lawson then said…”Yes, but then we saw the light”…He said that with a smile on his face.
1979 – 2010 = Thatcherism.
2010 – To present = Turbo Thatcherism.
Quoting Craig Murray: "..By seeking to introduce market forces into the equation, the simplicity and directness are both removed and the administration increased until it exceeds half of the total cost, as hordes of useless bureaucrats and accountants administer completely artificial market mechanisms and pass millions of useless invoices and receipts for payment from one bit of government to another bit of government. "
I think this is an over-simplification. Just like Deep green puddock, I have direct experience of a health insurance funded healthcare system – that of Switzerland. Only in my case simplicity and directness was precisely what I experienced, along with a level of care that I think was better than either of the two state funded NHS systems that I happen to be familiar with – those of the USSR and the UK. (If you are not aware, the USSR's healthcare system was pretty OK)
There is clearly a way to harness the market forces for the benefit of all in provision of healthcare, and the Swiss have succeeded in this whilst the Americans have not. I am guessing the difference is that Switzerland is a fundamentally more democratic society than the US, and the evolution of the Swiss healthcare system could not have been subverted by special interests in the same way as it could, and was subverted in the USA.
A perfect, efficient market is possible – e.g. the traditional food market where the sellers and the buyers are substantially equally informed about the produce on sale. Only honest competition is possible in such a marketplace and this works for the benefit of all. The challenge is to construct such transparent and fair markets for complex commodities, be it healthcare provision, domestic energy supply, mobile telecoms or any other. It can be done with appropriate regulation from government, provided that government sets out to serve the interests of the people rather than the interests of narrow elites.
I posted previously on the topic of Swiss healthcare on 8 January. If you are interested the Swiss healthcare system is discussed in some detail here: http://www.euro.who.int/__data/assets/pdf_file/00…
Doesn't make sense, Craig. W G Grace played cricket, Andy Murray plays tennis.
From Pele to David Batty…
Ummm, that's Craig Murray. And I do play cricket. About as well as Nigel Lawson does economics. Arguably better, because I have never got out with my team having less runs on the board than before I started…
Evgeni, the tax avoiders in this country do not mind paying a petty tax for a post box in some picturesque village in Switzerland, as long as it cuts millions/billions off theitr tax bills here. Osborne has done nothing to regulate the financial system, indeed he is playing along with it, making off shoring acceptable and normal.
Globalisation has failed, letting loose fundamentalist radical capitalist without tying them to some social responsibilities has resulted in the wholesale ignorance and relocations of businesses to suit their aims, not that of those who produce the wealth for them.
Unless financial regulation has a world wide basis and is sustainable, the word initself is meaningless. What good environmental sustainable practises at home, when TNC's fetter global rapacious exploitation and environmental degradation?
Ingo, it is not very clear what point you are making in response to my post but I disagree that financial regulation has no meaning at the state level. Clearly it has benefited the people of Canada recently and probably other countries, perhaps Switzerland also.
However my original point was that the success or failure of government regulation depends entirely on who that government really serves. In the case of Switzerland, it is the people of Switzerland. In the case of the UK, it is the banking and other elites. Hence, the very different outcomes.
WhenI heard GO mock GB for selling gold at the bottom my immediate thought was,- but you bought dollars[.5t] at the top
“The bailouts of banks, speculators and manufacturers served their real purposes: the multi-millionaires became billionaires and the later became multi-billionaires.”
“According to the annual report of the business magazine Forbes there are 1,210 individuals – and in many cases family clans – with a net value of $1 billion dollars (or more). There total net worth is $4 trillion, 500 billion dollars, greater than the combined worth of 4 billion people in the world. The current concentration of wealth exceeds any previous period in history; from King Midas, the Maharajahs, and the Robber Barons to the recent Silicon Valley – Wall Street moguls of the present decade.”
http://petras.lahaine.org/articulo.php?p=1846&…
"This budget was about redistribution of wealth – from you, to the rich" http://www.johannhari.com/2011/03/24/this-budget-…
"redistribution of wealth – from you, to the rich"
http://www.theinternationalforecaster.com/images/…
Hossein – I agree the money system is in fact a myth – money is debt, debt is money. Interest steals from the poor!
Ingo – good point, Mr Osborne will inherit a company that takes advantage of the complex technical loop-holes in the British tax system – off shore accounts – Where is Lord Ashcroft?
"Where is Lord Ashcroft?"
Here http://www.thefirstpost.co.uk/61105,people,news,l…
Here http://www.thefirstpost.co.uk/50059,people,news,m…
Here http://www.thefirstpost.co.uk/56326,business,mich…
Here http://www.guardian.co.uk/politics/2009/dec/17/lo…
and here http://www.bbc.co.uk/iplayer/episode/b00vcch5/Pan…
Attacking local government corruption is easy. Doing something about it in practice is a bit more difficult.
It helps at the start if you have consistent joined up policy. You cannot advocate wholescale privatisation of and unregulated private sector involvement in providing local government services for profit without an accompanying joined up mechanism for preventing and tackling fraud and corruption and then complain when corruption occurs asa direct consequence of your failure to put in place measures to prevent it.
If you are really serious about attacking local government corruption then you need to be talking about things like:
– increasing the investigation and subpoena powers of scrutiny committees
– refreshing freedom of information legislation
– improving the libel laws to enable local media to report more fully on what goes on behind closed doors
– banning freemasonry outright among both councillors and council officers and
– making declaration of masonic links a condition of election to or employment in local government
– introducing a package of legislation specifically aimed at regulating the activities of supermarkets
– specific government ringfencing of funding for internal fraud and audit departments
– specific powers and mandates for the police, SFO and other related agencies to investigate fraud and corruption in high value contracts.
And that's just for starters. Does any of that sound doable overnight?
Just to correct slightly, the freemasonry measures should be linked by "and/or" instead of just "and"..