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Wednesday, 29 March 2017

Mrs May wraps her damp squib in platitudes

Theresa May has taken the most emollient line possible for her in the presentation of Britain's Brexit notification to the European union, and in her explanation of her position to the House of Commons.

Arch-Brexiteers should take warning: the tone for the discussion has now been set, and on a first reading of her official letter it is clear that the compromising component of the government has predominated in the discussion.

In the wordy statement in the Commons, doubtless the product of a small army of speechwriters,  the Prime Minister repeatedly referred to the government's obligation to future generations; which made a 'hard Brexit' and a leap off the cliff into the unknowable territory of a future without an agreed relationship with the EU equally unlikely. The possibility of an extended 'implementation period' is scouted from the first, and will almost certainly become a reality.

One interesting aspect of the coming talks derives directly from the bloated bureaucracy of Brussels, to which the EU lead negotiator M Barnier is closely affiliated. At a date before 2020, Britain will stop paying in to the ongoing costs of the fat cats. Britain must accept obligations to pensioners and for EU debts that have been incurred with British assent in the past [and during the negotiations]. But Britain has no obligation to pay for supposed services and facilities that it will not access after the date of Brexit. So either the EU machine will have to be slimmed down by the break date or the remaining 27 members will have to pick up the tab for any wanton waste. Britain can fairly be charged a share in the redundancy costs of any eurorats who are to be 'let go', and other adjustment charges that will be incurred up to the date of the rupture.

This will be a delicate negotiation that must in the end rest on a truthfully computed set of accounts: which is something the eurorats are not used to facing. Britain must insist on it being completed, and must be willing to pay the UK's share in full. M Barnier has indicated that he will ask for more, some sort of penalty or fine on Britain for having a residual belief in democracy: any such nonsense must be exposed and resisted intransigently.

Mrs May has indicated that her approach to the EU negotiation will be fair and rational. It is therefore sad that she has linked this with a great deal of fantasising about building a fairer and better society that 'works for everybody' in the UK. Her government is doggedly continuing with the Osborne austerity proposals, which will reduce the quality of life for every man, woman and child in the country. As the Brexit negotiations drag on, social discontent about hospitals and schools and other public provisions will increase. The government will be more and more massively unpopular; and Brexit will more and more seem to be an irritating side show alongside the increasingly urgent crises that affect ordinary lives.

Brexit is important, but from today it should be seen as the second problem with which the government should be concerned. Tragically, they have no wish or capability tackle the big issue. Thus it will feature more an more prominently on this blog; from which Brexit will certainly not disappear.

Tuesday, 28 March 2017

'Onion Johnny', Brexit and M Barnier

One of my strong childhood memories is of men in navy-blue berets appearing in our street pushing bicycles that were laden with strings of onions. They came every year, and my grandmother said that they also used to come 'before the war'. The Second World War had prevented them coming, but by the late 'forties they were back. My father, keen on detail, explained that these men were Basques: which meant that they came from the borders of France and Spain: they were poor farmers who brought their bikes and the onions in large lorries, from which the small group of men would fan out daily to cover the streets of the small town in a couple of days. One never heard of any restriction of them coming and trading in the UK; and this was two decades before Britain applied to join the EU.

By the time the UK was admitted to the EU, Common Market policies to support agriculture had gone far enough to make the farmers' annual expedition to the mean streets of post-war Britain unnecessary. But I have a clear memory of their presence: with no recollection of any fuss about their status.

As a schoolboy, I went several times to Europe; usually by train, and ship to Calais or Ostend. Apart from the most cursory glance at the passport on which an official placed a dated stamp, there were no formalities at a frontier; nobody mentioned visas or admission criteria until one came up against the Iron Curtain.

Free movement of people within western Europe did not come as a benefit of membership of the EEC [even less as a benefit of the fantasy-world of the EU]; it predated the Treaty of Rome by a couple of centuries. There is no reason why it needs to be a monumental problem after Britain leaves the Union. Just go back to the simplicities of my childhood.

Today is the day when Mrs May's secret letter is revealed to the British people and to the European Council and Commission and Parliament. Then M Barnier will be given his brief to lead for the European institutions in the discussions on the wish of a narrow majority of the British people to leave the Union. All the huffing, puffing and speculating that have gone before this count for nothing. Today the real discussion begins: and there is no earthly reason why it should be other than civilised and sensible.

Britain's Battered Infrastructure

When he was Chancellor of the Exchequer, George Osborne talked big about encouraging 'investment' in the British economy, and did a lot to persuade foreign firms to buy control of utilities companies and thereafter drain the profits into their own [alien] coffers.

Today's papers report that with the transfer of the South-West Trains franchise to a foreign company, 75% of all UK railway operation will be in foreign hands. There will be minimalist requirements for the new franchisee - like all the others - to invest minimally in trains and stations, but they are free to import the components from their own preferred suppliers.

One indicator of why train travel is increasing is also in the news today, in that one-sixth of the roads for which hard-pressed local authorities are responsible is becoming so badly scarred by pot-holes and subsidence and loss of surface material that they will have to be closed in the next couple of years. They will be too unsafe to use; and local authorities can't afford to insure themselves to meet damage suffered by cars and their human contents due to the ill-maintained state of the roads.

It is also announced that as more licenses to construct and run offshore windmills to produce electric power are offered, with subsidies for their construction and operation, alien firms are expected to get most of the contracts. Thus most of the construction materials, control systems and cabling will be imported; and the UK will again be paying aliens to cash-in for years to come.

Meanwhile, today's media are presenting in-depth analysis of the fine of £42 million on BT for awful service to their corporate clients in 2012-15: for which they are required to pay £300 million in compensation [which BT has hitherto shirked from paying]. The more formal operational separation of BT from its 'wholesale' provider of services to rival telecoms companies - Open Reach - is only now going ahead [in 2017]; and is a half-cock separation because nobody wants to take the risk of separating the pension rights of Open Reach staff from those in the larger pot of BT pensions funds which have a state guarantee arising from the privatisation process. The provision of first-rate broadband connection for both retail and wholesale users is recognised to be the most important item in the nation's infrastructure that is woefully inadequate. It is vastly more essential than the white elephant HS2 railway and new nuclear power plant on which the government has preferred to place their guarantees of funding [and implicitly of future subsidy, so that alien 'investors' can be guaranteed a flow of funds to siphon off from the firms to which British users will have to pay their dues].

It is also noted today that the government and their quango for decommissioning old nuclear power plant have badly bodged a tendering process, and are now having to prepare to pay compensation for mismanaging the process to the tenderers as they also prepare to have to pay more for the replacement contracts.

The above are just five stories from one day's news: and there are more!

Interest rates have been at rock bottom throughout the tenure of the Tory-Lib coalition and of the Tories, since 2010. Billions of pounds could have been borrowed by state-guaranteed companies to update the railways, the roads, trunk telecoms, and electricity supply and distribution. Millions of council houses, housing association properties and buy-to-let homes could have been built with the mix of funding that was used by the Conservative governments in the nineteen-fifties [enabling the Housing Minister, Harold MacMillan, to assert that he had hit the target of 400,000 homes built in one year: and go on to be Prime Minister].

The claque who are rooting for President Trump to fail are rubbing their hands with glee every time he mentions massive borrowing to fund infrastructure investment. Given that he has made his pile as an investor in material construction, one could expect him to be more sure-footed in this area that he has been with immigration or health care. We can but wait and see!

Monday, 27 March 2017

What [supposedly] Grows when an Economy is reported to have 'Grown'?

Perhaps the biggest support for the delusion that the British is a healthy economy is the government's ability to claim that the 'rate of growth' is one of the highest among the formerly-advanced economies.

The same set of data are deployed [statically and comparatively] to establish the assertion that the British is the sixth-, or maybe the fifth-largest, in the world.

Similar data are deployed to derive a 'rate of inflation'. The rate of price inflation can notionally be deducted from the rate of growth of the total economy, and what remains can be asserted to be the 'real' rate of growth of transactions in the system.

These numbers are derived by making an estimate of the money-prices expended on transactions [acts of buying and selling] in the system [in this case, the British economy] in a set period. The most commonly-used periods are one month, or a three-month period, or a year.

The state statistical service announces a percentage change in the tally of turnover and in the rate of inflation in the economy in each period. These numbers are derived by comparing the data for the latest period with a preceding period: so comparisons can be made with the immediately preceding period, or with the same period [e.g. July 1 to September 30] in a previous year. The growth figure can be discounted by the rate of inflation, so that the growth is said to be 'real', "at constant prices".

If the published inflation figure is within the range that the government have decided is acceptable, they can claim 'success' in 'controlling' inflation: if not, this is seen as a problem and the press and the political opposition and government-party MPs in marginal seats all demand corrective action; even though this may have the effect of diminishing 'growth' in future periods.

If the economy can be said to be 'growing' at a rate that is comparable with those of similar countries, the government can claim that this demonstrates that their overall economic policy is successful; as George Osborne so often did during his tenure of the offices at 11, Downing Street.

There is a massive literature available on how the British government's statisticians [and those employed in a range of private think-tanks] define the activities and the data sets that they take into account, with what degree of modification and interpretation, in deriving the headline economic statistics. The statisticians make honest attempts to ensure that - as far as is possible to humans using significant analytical and computer power - the published data are 'true and fair'. The statisticians' professional bodies, The Royal Statistical Society and the Faculty and Institute of Actuaries, monitor the performance of their members and set professional standards for them to obey. The accounting standards bodies also do their poor best to ensure that the data that are issued by firms and trade associations are honestly and accurately assembled. But this huge endeavour is largely vitiated when the 'Econocracy'  then begin to apply and adapt these data into their economic models and projections.

Several generations ago, mainstream Economists moved away from observing material industry and physical trade; and focused on aggregate statistics. In the nineteen-fifties, the bowdlerising 'Keynesians' [who had no real appreciation or comprehension of Keynes's own thinking] established growth and inflation 'targets' that have been the curse of governments and of their people, especially in the most susceptible countries, ever since then. Though pseudo-Keynesian economic policies lost their credibility in the inflationary maelstrom of the nineteen-seventies, the growth and inflation data continued to be used, and to be the basis for targets that governments still use.

The validity of both data sets can easily be challenged by reference to what has actually happened in the economy in this millennium. Between the 'big bang' by which the finance sector was allowed unparalleled freedom to develop in the mid nineteen-eighties to the almost-total economic crash that the evolution of the finance sector brought on the world economy in 2007-8, the volume and value of transactions in the finance sector grew by many thousands of percentage points, whether it was measured on a daily, monthly, quarterly or annual basis. But trade in the finance sector [in options, swaps, derivatives, and a host of other 'instruments' and transactions involving such 'products', which were mostly bets] was not counted in the basic economic data: that whole universe of trade was left outside the published figures. So the many thousands of per cent by which the immaterial economy declined in 2008 was also unrecorded. The facts that underlie the recession of 2008-12, and which explain why the British people's average living standard is lower than it was in 2006, and which will not get back to the 2006 for several more years, if ever, thus remain largely unexplained; because they have not been accounted for openly or properly.

House prices are another area where the mainstream statistical output on the economy provides no real illumination. However, there has been a very recent attempt to include the lettable 'value' of housing as a factor in a new index of inflation; thus the possible benefit from that move will be evaluated in this blog in the future.

This has been a hard read [if anyone has struggled to the end] and I'll leave it there for the day.

Sunday, 26 March 2017

A Darker Morning

The annual imposition of summer time - "Lloyd George's time" as my grandmother called it - means that the mornings are darker for a couple of weeks, until the lengthening days compensate for the change in the clocks. Thus, although the London sky is virtually cloudless, this day seems to have had a dull beginning; which has been exacerbated by the notably cold night that has just passed. This could be take as a metaphor for our political situation here in the UK: what some take as a new dawn, the implementation of 'Article 50', is seen by many others [including the thousands who marched yesterday in London and Edinburgh] as the beginning of a new kind of Ice Age. I mentioned yesterday my questions about the competence of the Prime Minister to cope with the situation that she has embraced, and I will not dwell again on that today.

Instead, I refer to the gathering in Rome of the other 27 heads of state and of government who are celebrating the sixtieth anniversary of the Treaty of Rome; and trying to set aside the Pope's warning that the EU and its institutions can be seen as atrophied. For every self-congratulatory speech, there will be reservations about what is practicable for the future of the institutions that are known to be undemocratic [despite their formally democratic constitutions], irresponsible [as evidenced by the lack of any satisfactory audit of their finances] and fanciful [evidenced by the amount of lying that was accepted by other states in allowing the weaker brethren into the euro currency]. Most of the participants in the jamboree, not least those whose countries were under Communist domination when the Treaty was signed, will want to look on the bright side. But they will not be able to ignore the disparities within the organisation: and thus it is signaled that a major outcome of the gathering will be further to advance [though probably not yet finally to adopt] the idea of a multi-speed process of European integration. It is probable that the countries that are seen to be in the slow lane will continue to resist officially being classified as second-class members of the club: so another set of weasel-words will be found for the communiques.

Although Britain was not an original signatory of the Treaty, the UK did encourage the continentals to get on with the plans for an Economic Community: as did the USA, which also pressed the idea that this should metamorphose into a United States of Europe [which meant, of course, a union of the Americans' NATO allies on the continent].

Edward Heath fully accepted that concept, of a steady movement from a trading pact to a political entity. He welcomed it and wanted it to come about, citing his experiences as a soldier during the Second World War. But he knew that he would never get the British public or parliament to agree to that whole package: so he deliberately and consistently lied about the well-known and explicit intent of the continental members of the EEC to develop a Union, and thus conned the British into the EEC. The promise of a European Union was not a major factor in the referendum on EEC membership that was held under the Wilson government: it did loom large in 2016.

Remoaner extraordinary, the Lib-Dem leader, has suggested that one justification for a second referendum could be on the point that in voting against the European Union in 2016 the people had not knowingly and necessarily reversed the decision to remain in the economic community, which was the subject of the earlier referendum. That is a point I will revert to soon.

Saturday, 25 March 2017

The Dealmaker and the Politician

I was wrong in my assumption that Donald Trump would indulge the Congress in a lengthy trial of strength over Obamacare. He could not get his deal, on the due date, so he cancelled the whole reform plan. If he now sticks to his word - which is based on his business hunch - he will watch Obamacare implode [at huge cost to American individuals, American insurance companies and American healthcare providers] and then challenge Congress to have another try. Dealmaking skill depends very largely on the ability to exercise, and to execute, the threat to walk away from the whole proposition; even if the incident is costly: Trump has paid the cost many times in his career, and sees no substantial difference between a cancelled hotel deal and an abandoned Congressional bill.

Mrs May has no such experience. Her career has been in the back office of a public institution [the Bank of England], followed by non-decision-taking business experience, followed by politics and public office. While saying very little that could be taken as a binding declaration, she has given the impression that she is prepared to walk away from the post-Brexit negotiation with the European Union, leaving the country dangerously unready for true independence. Just two things are clear: her consciousness that as Home Secretary she 'failed' to reduce net immigration into the UK by amount that her leader had promised, and the simply dotty proposal that grammar schools must be promoted at a time when the overall educational budget is being painfully stretched over the existing schools system.

The economy patently needs immigrant labour; and parts of the university system will be brought more quickly to bankruptcy if the inflow of overseas students is cut off. Yet Mrs May has repeatedly stated that immigration control is a 'red line' even before negotiations begin. With a tiny parliamentary majority which is likely to evanesce as the Brexiteers and Remoaners become increasingly embittered, Mrs May's importation of a rogue element on grammar schools [which all the opposition parties oppose, either on principle or as a distraction from their main concerns] is evidence of a reckless naivete; such as is also seen in some of her remarks on the economic possibilities for Brexit.

Trump is widely seen [especially by European liberals] as an uncongenial bully: but he succeeds. Mrs May is a tabula rasa, even after her exposure as Tory Party Chairman and as a minister: and the great fear is growing that she will probably achieve nothing.

Friday, 24 March 2017

All change: or maybe not?

My webmasters are hoping to revamp the presentation of this blog as part of a new presentation of my ideas as I enter a new phase of trying to attract a wide audience to my ideas.

This is not mere egotism. I think it is important that hegemonic intellectual empires are challenged; and none deserves this sort of attack more than does Economics.

I have recently drawn attention to the bold work of the Manchester students who have produced the book on the ECONOCRACY that deserves far more attention than it has yet had. They estimate that ten thousand students every year are being required to accept and repeat dogmatic nonsense in their examinations, in order to qualify as 'economists' who are not equipped to understand the realities of the world that they live in.

Other people - including most politicians - assume that Economists are a sort of scientists, who possess valid expert understanding of the economy and thus the competence to make recommendations both for public policy and how individuals should manage their own affairs.

The whole burden of my recent book: NO CONFIDENCE: The Brexit Vote and Economics: is to show that Economists are very far away from valid scientists.

The vast majority of the Economics establishment grossly over-reached themselves in their support for 'operation fear' during the Brexit referendum campaign, but they remain arrogant and defiant. It could be a Herculean task to break their hold on their sphere of influence: or it could be that, like the Soviet Union, the Berlin wall and The Liberal Democrats in 2015, their obsolescence will be self-evident and definitive. To make a modest contribution to such an outcome is my highest ambition.