Malcolm Blair-Robinson's Blog, page 160
July 9, 2015
Budget: Labour Is The Loser
This blog will leave picking over the details of the measures announced by George Osborne to the vast industry of commentators, economists and analysts dedicated to do just that, and concentrate on the political change which it heralds.
In the post WWII period the centre ground of politics shifted to the left. Labour was the driver and the Tory party reacted, embracing the welfare state and public ownership of utilities as part of the national fabric. Thatcher turned her back on that consensus and moved way to the right, unravelling state control and privatising everything in sight. Thus the centre moved to the right and in order to become electable, and it took eighteen years, Labour had to move right and re-invent itself as New Labour. This was electorally successful, but the political legacy is less certain.
What Osborne has done, and nobody expected this, is move the Tories and therefore the centre, to the left. In an audacious move worthy of comparison with great historic feats of generalship, he has not only taken the Labour party’s high ground, but he has even gone so far as to lift policies from their manifesto and introduce them under the Tory brand. Labour is left looking scattered and pointless. New Labour is over. There is no electoral future in being slightly less right wing than the Tories, Thatcherism with compassion or whatever it was; the political ground now open is to the left of the Tories with distinctive left wing policies, adapted to the modern world, which can deliver a fairer society and prosperity more widely shared. That has to be done within the framework of a BIG IDEA. Labour has not got one. They are running round in circles chasing aspiration. Only one of their leadership candidates is from the left.
So politically this is a triumph for the Tories, who look much stronger whatever the arguments about who gets what out of the budget. Labour was ambushed, leaderless, on open ground and trounced. Behind them is a sorry line of the poor, the vulnerable, struggling single parents, people with disabilities and mental illness and those in need, who look on in dismay as the only champion they have is driven in tatters from the field.
Labour has now to return to its roots and rebuild itself as the driving force of the left, within a centre which has moved away from the right. It has one strong point on which to cling. To cut tax credits in advance of the new minimum wage taking effect was both mean and cruel. Taxing rich savers and private landlords provides a political balance, but it does not fill the plates of a hungry family. Labour’s future now depends on its ability to demonstrate that it understands that, it will do something about it and that it has that big idea which will lead to a nation in which all will be able to eat and heat at the same time. Tinkering with Tory policies and macro managing fractions of this and that is no longer enough. Anywhere near.
July 8, 2015
Remembering 7/7
Yesterday was full of poignant recollections from survivors and rescuers of the terrible carnage in London ten years ago. The ceremonies were dignified and imposing, providing a fitting backdrop to the nation’s tribute. Among the congregations and participants there were those who came alone in memory of a loved one whose life ended that day. Their suffering was special to all those whose loss of a loved one still tears at the heart.
There were many words spoken, all of weight; none had the power of those of the young woman who at fifteen years of age was on the tube. Choking back tears she said ‘it didn’t break London, but it broke some of us.’ This was such a courageous point to make. After these outrages there is much talk from leaders about not being broken and pressing forward. This bravado is essential to give direction to move on, but those words yesterday underline just how difficult it is for real people who were there and not just victims but onlookers and rescuers too.
It seems right now to ask that those who make foreign policy in future reflect more clearly whether their plans will truly make our country safer, or whether they may in fact increase the danger. The massacre in Tunis was orchestrated by an organisation which did not exist in 2005. The threat level is said to be worse. Are we truly innocent of stoking fear and hatred or do we unwittingly contribute by invasions and bombings to the very events they are organised to prevent?
July 7, 2015
Printing Money A Different Way
An idea to stimulate economic growth without further government borrowing. Written in plain English and very easy to follow, this is the only really fresh approach out there to the intractable problems of the UK economy, and it is just beginning to be noticed in important places. Buy! Download only .99p Paperback £2.99
What Next Greece? What Next Euro? What Next EU?
The answer to all three questions is that nobody has a clue. This is because there is so much wrong with both the institutions and dynamics involved that nothing can work without causing a whole new set of problems. Today we will list a few basic principles at the heart of the of the matter.
1 Setting up the Euro without a fiscal government and a treasury led by a finance minister was a disaster. Letting Greece join was a calamity.
2 The Greek political class is mostly a bunch of lying cheats who have cooked the books and bought votes with borrowed money whilst hiding the true state of the Greek economy until it collapsed.
3 Greece is a dysfunctional state which has no effective tax collection service and a moneyed class who think that dodging out of paying their taxes is okay.
4 The Tsipras government is the first since the Colonels were overthrown that is honest both with its creditors and its voters.
5 If Greece is pushed out of the Euro or falls out because a situation now out of control runs amok, while a new drachma would resolve the internal liquidity crisis, it would make it difficult or almost impossible to import food, energy and raw materials, because the currency would be hugely devalued in international trading. It might even be near worthless.
6 If Greece stays in the Euro by being lent more money to pay existing loans without a major write down of its debts, the problem will head to the next crisis. Each one is worse than the last. It should have been accepted five years ago that Greece was bust and a proper plan put into effect to rebuild its economy. As it is austerity has delivered no improvement, has shrunk the Greek economy by 25%, 30% of Greeks are unemployed (50% of young people) and as the referendum demonstrates, the social limit of financial policy has been breached.
7 It is wrong to punish the ordinary Greek people for the sins of their morally threadbare leaders with whom Euroland was happy to do business whilst knowing all along that things were not right. Those who lent money failed due diligence and must take the consequences of of big haircut. If they don’t they are likely to lose their heads as well.
8 There is a powerful case for Greece to leave the Euro, but it has to be orderly and controlled. The IMF would have to support the drachma, ideally with loans to purchase gold for the Greek central bank to underpin the currency and give it trading value.
9 If Greece stays in the Euro, the ECB will have to print money to restock Greek banks. This must be printing, not lending. It can buy Greek debt for PR purposes, but it knows better than most that Greek debt is tantamount to worthless.
10 Germany will have to agree to whatever is done, but if it continues with its hair shirt and rather cruel rectitude, things will go from very bad indeed, which is where they are now, to ever so much worse.
11 Germany should take a long hard look in the mirror. It should take into account that it has become rich and powerful, not just because it is hard working, practical and efficient, but because it has been given the incalculable blessing of a euro which has been valued much lower over the years than the deutschmark, allowing Germany to export on a scale which would otherwise have been impossible. It has thus become a surplus nation but that cash has come from the debtor nations such as, yes, Greece. Essentially now, Germany is having to give a good deal of it, most of it even, back. Like the spoils of war. Oops I should not have said that. But I have. But then 75% of my blood is German, so I can be direct.
July 6, 2015
Book Of The Day
Set in the mid nineteen nineties, this fast moving 
thriller lifts the curtain on sex, sleaze and corruption in high places as the long reign of the government totters to an end, following the ousting of the iconic Margaret Thatcher. The novel catches the mood of those times with a host of fictional characters who engage in political intrigue, sex, money laundering and murder, pursued by an Irish investigative journalist and his girlfriend, the daughter of a cabinet minister found dead in a hotel room after bondage sex.
Greece Votes Decisively
The worst nightmare of the eurozone, the EU and the markets has happened. Greece has not just voted No but by a large margin of 61/39. This is way bigger than anyone expected. Indeed most expected a narrow Yes. I am not going to comment upon the likely outcome, because the drama is unfolding minute by minute and nobody now knows what is going to happen. This blog has several times said what should happen, but we shall have to see.
This is a political game changer on a huge scale. Greece is the symptom not the problem. This is a massive blow to the whole multi-headed system of governance in the EU, which is undemocratic and incapable of functioning in time of need. It is probably a fatal blow for the notion that the Dutch finance minister can head some unelected financial council and tell another country how it should order its affairs and how its people should live, to include children living on the streets. And it makes manifest beyond challenge the idea that you can have a currency without a government, a treasury or a finance minister, which can at the same time measure in one value the economies of widely differing actual value. It is also a blow to German leadership of the EU which has led to this most spectacular repudiation.
Now at risk is the Euro, but also the EU. Unless this is sorted out in a credible way, which does not include every tighter austerity and ever bigger debts, a vicious cycle which has led to the social limit of financial policy to be breached, the Euro will at best totter froward to an uncertain future. Unless there is a greater connection between what people think and want in the EU and what politicians say and do, Britain will vote to leave. France, already in disagreement with Germany over Greece and disenchanted with the EU because it is not working for the people, could follow.
Believe me this is history in the making. What will be made is not yet clear. One can only hope it will be something good. But it could be something quite bad. Or very bad.
July 5, 2015
Osborne’s Economy
Readers of this blog know that I am far from happy with the complete failure to rebalance the economy away from asset inflation and towards wealth creation through production. I am also very unhappy about the excessive reward structure of executive pay in what has become a low wage economy. Most of all I resent the towering hypocrisy of the Tories in forever asserting that somehow the private sector is ‘paying for’ the profligacy of the benefits culture. If you want to be part of a functioning civilised state, there is a price to be paid. It is paid by everybody and it should not be begrudged. The state is not an enemy but a friend. If you disagree there are lots of failed states you can set off to and be happy in mayhem.
There is something increasingly unpleasant and divisive about this talk about fair to those in need and fair to those ‘who pay’. With the shift form direct to indirect taxation everybody pays. The NHS accounts for two thirds of all income tax and the balance is used up in debt interest. As for the private sector, to follow Macmillan, it has never had it so good.
There are two benefits which feed directly into the private sector; one allows wages to be lower than they should be and the other allows rents and therefore property values to be much higher than the market would ordinarily bear. Tax credits subsidise wages and let employers get away with the minimum and housing benefit pushes up rents to private landlords. The first costs £30 billion per year and the second costs £24billion a year. If both were abolished tomorrow the value of houses would literally collapse and unemployment would soar. But by keeping them going it is inevitable that asset inflation continues to be fed for the benefit of capital and wages are subsidised for the benefit of profit. The people who really suffer are those at the bottom of the increasingly tacky pile.
So much for the wonder economy which grows faster than all the other developed economies. So does the debt mountain it carries. This now stands at $ 9.5 trillion, which is £160,000 dollars for every living person in the UK including infants. It is more than 4 times GDP (Greece is 1.74) and more than any other country in the world bar the US (1.06). I bet Osborne does not mention that next week.
July 4, 2015
IMF: Rebuke to Germany
As Greece teeters on the brink of nobody knows quite what the IMF has issued a revealing report on the state of Greece’s finances which appears helpful to the embattled Tsipras government. It thinks Greece will need another 50 billion euros, its existing debts have to be subject to a major haircut as they can never be repaid and it will take twenty years for the Greek economy to recover. This may be seen by Tsipras and the No campaign as a straw in the wind as, let’s face it, everybody is being pretty nasty to them just now, but in truth it is much more powerful. It is a rebuke to Germany.
