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Wednesday, 30 November 2011

Weasly Georgie and Blustering Balls

The big stories in the world today are the EU, Iran in the wider context of the Middle East, and the election in the Democratic Republic of the Congo; but I begin with the concerns of little Britain with Northern Ireland. This is because of the United Kingdom's significance as an example of Economics-in-action. For good or ill Britain has been a global leader both in the formulation of economic theory and in the implementation - often badly - of some of those theories.

Chancellor of the Exchequer George Osborne yesterday pushed his reedy, waspish voice to the limit in presenting his latest policies to the House of Commons: and met with a blustering blast of crude propaganda from one of the major authors of the British aspect of the western world's crisis, Ed Balls. Balls' line was to forget the history of the past 15 years - during which he has had a uniquely powerful influence on bullying Gordon Brown - and to mock the easy target of silly Conservative propaganda that had cited passing incidents such as the royal wedding as explanations for announced economic targets not being met. This was a continuance of the despicable tradition that was identified by Watkins and me in Can Britain Survive? [published 1971]. For more than 50 years the political parties have maintained a pointless game in which they offered increasingly convergent, but argumentatively-differentiated, policies for handing to the electorate wealth that the country did not have. Meanwhile the country has wantonly been deindustrialised and governments dominated by both major parties  have sold much of the national infrastructure [which has largely been alienated to foreign owners] to be operated at a profit that is taken from fees and fares paid by the lower-paid majority of the population.

As long as party politicians continue speciously to denounce each other in a singularly unedifying political Punch-and-Judy show there is no hope that the country can begin even to plan to recover from more than two generations of despoliation.Nevertheless the basic principles that Osborne seems to be adumbrating would be essential components of a Grand National Strategy to address the problem. Expectations of standards of living must be depressed from what had appeared to be available under the Blair-Brown-Balls government; but the pain must not be crowded on the labouring poor. The authors of the disaster - Economists, politicians of all parties who have ever cheered their leaders in the Hee-Haw show at the House of Commons, journalists, senior civil servants, 'bankers', and exploitative executives - must bear their share of blame and a due proportion of the cost of the rescue [though we must accept the old adage that the seizure of the whole wealth of the rich would not keep the poor in bread and cheese for a year: while it would devastate future national product]. Osborne's little steps to create a positive start to infrastructure development, to enable banks to maintain some of their loans to small businesses [even as they build up their balance sheets to meet regulatory requirements] and to encourage 'industry' are so small as to be trivial relative to the glaring need.

The suggestion that a significant programme of infrastructure construction should be funded by the private sector, therefore run for profit, is plainly regressive: the mass of the users will be the people who are already experiencing declining living standards. In keeping the cost off national balance sheet the Chancellor hopes to maintain the security of the public sector deficit management plan [it is no longer a deficit-elimination plan]; but this is clearly a short-term device. In  the longer term some capital assets would have been created; but they will be private and not public goods; so politicians should not expect that the electorate will rise up to applaud them. It is envisaged that pension funds should be major investors in new infrastructure projects; which means that they cannot invest the same money in state bonds or in commerce or in industry. It is implicit that most of the investment would come from private sector pension funds. As Osborne now anticipates the government needing to borrow more than expected for longer, it becomes problematic as to who the buyers of that debt will be, and which price the government will have to offer the possible buyers to persuade them not to invest in the favoured infrastructure schemes instead. The lack of joined-up-ness in the 'strategy' is painful to observe. The debate has been put on a new footing by the pessimistic data that were reported in the Autumn Statement, but the parliamentary name-calling that followed today shows that the big lesson is still not recognised. Politics remains on its ruinous repetitive path to oblivion.

In the wider world the Congolese election has begun: that it is happening at all is pretty wonderful. In almost half a century since independence from Belgium this massive territory has been despoiled by tyrants and ravaged by warlords both natives and those making incursions from neighbouring states. The world has sold arms to any group that had the cash to buy them, bought commodities from both legal and illegal sources, and blamed the benighted people for their misfortunes. The oxymoronically designated Democratic Republic has wallowed in its own sovereignty to the mighty disadvantage of the majority of the people: but it has huge known resources and doubtless massive natural assets yet to be discovered. It has a relatively low density of population compared to Europe or Asia. The long term prospects for those who can survive into the next generation are potentially among the best in the world: but little of that potential is accessible now to the mass electorate who face a bemusingly complex voting system. Europeans can pity them; but they can have higher hopes based on real resources than can any European nation west of Russia.

Iran periodically allows 'demonstrators' to sack an embassy chancellery. The victimised state makes a fuss, and the windbags of friendly chancelleries and the United Nations get camera-time to denounce the 'outrage'. The possibility of an American-equipped and authorised Israeli 'strike' on some Iranian installation is canvassed: and in all such circumstances to date the Israelis have been wise enough not to indulge in indecent exposure. So the net result is that the UK may have a small short-term saving on diplomatic representation. There may be some more nominal 'sanctions' on Iran which some states will be prepared to breach and the world will carry on undisturbed for the time being. So the story is not so big, after all.

What, then, about the EU and the eurozone? Stock markets have risen today on the back of rumours that the International Monetary Fund will join with the European Central Bank in 'partially insuring' eurozone member states' debts. There is absolutely no evidence that such a scheme would prove to be robust if it was called upon to 'rescue' Spain or Italy. So the shadow boxing between markets, states and European institutions slightly changes focus. There is no substantive development there.

What has seemed a very news-filled day is really very ordinary. Back home in the UK the one-day strike by teachers and other public sector workers turned out to be more of a jolly - an interesting alternative experience for some of the participants who did not just stay at home - than a significant event.Nobody really cares how many people went on strike, and very few people believe that the average public-sector pension is £4,000 a year as the unions have said, without any evidence of how that 'average' has been computed. But there is really big news lying behind this: alongside the warnings that the economy is entering a second phase of 'recession' there is an unprecedented social mood of depressed acquiescence. If some group were to set themselves up as a militant 'vanguard' of a revolutionary mass movement 'against the cuts' they would find that everyone else shrank away from them. A depressive psychosis is already well established. Society and polity are, if anything, ahead of the economy in accepting the inevitability of depression. Yah-boo politics can only make this worse; but that is all that Clegg and Cameron, Balls and poor little Milliband know: primary-school playground behaviour prevails when the country needs - at the very least - a Grand Coalition. This may be all that the machine politicians can comprehend: but the decent majority of the citizenry deserve better!

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