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Friday, 29 August 2014

Cameron Can't Do It!

One Conservative MP, described as a loner, has resigned to become a UKIP candidate for parliament. This has exposed the brittleness of the argument in the Tory Party as to whether David Cameron is telling the truth about renegotiating Britain's relationship with the European Union before putting to the British people a 'yes/no' Referendum on membership of the Union.

The Prime Minister may be telling the truth, but he deceives himself if he thinks that there will be any significant change in the Union at the behest of the United Kingdom [with or without Scotland]. 26 countries are not going to agree to any significant changes just to help David Cameron. Insofar as they think about the UK at all, they assume that the Brits will never vote for exit from the Union because they'll get too scared at the prospect of having to go it alone in a very difficult world.

Even more fantastic is David Cameron's apparent belief that the Conservatives can be at least the biggest party in the House of Commons after the 2015 election. Whatever the Scots decide, their Westminster MPs will sit at least until 2016: so the odds are in favour of Labour being the largest party despite their agonising leadership. UKIP strength and credibility is increasing, and it is now too late for Cameron to reverse his position and reach an electoral accommodation with Nigel Farage: so the Tories will lose seats. Cameron will not even be able to ask for a 'renegotiation' because he won't be the Prime Minister; so he need not have any terms for a negotiation that will never happen. He'll never need to say.

Thursday, 28 August 2014

Donetsk is a Russian City

In the era of deep communism I had the mixed experience of visiting Donetsk with twin-city delegations from Sheffield. At the time of my second visit the local miners were paying a levy to support the suffering miners of South Yorkshire during the long Scargill Strike: money which, it transpired, never got into the pockets of the striking miners.
The delegation was taken down a major pit where conditions were worse than in any Victorian mine because modern machinery created levels of noise and risk that had not existed in the nineteenth century. The seam was only 80 centimetres high, so it could only be approached prone; and at 1.4 kilometres below the surface conditions of heat and dust added to the sense of terror that gripped most of us. That men who worked in these conditions were paying to support the well-fed strikers who enjoyed the cheap pints in Sheffield Union Bar when attending meetings in University premises seemed unjust.
Over the subsequent days I discovered that a mine fire would be quelled by pumping in inert gas: and it was accepted that any people who were trapped in the area of the fire would be gassed. A visit to the sanatorium to which miners with breathing difficulties caused by dust in the lungs were sent revealed caring but primitive treatment.
On neither visit did I hear any language used other the Russian and English. Whatever may have been the ethnicity of the city before it was virtually destroyed in the Second World War, its repopulation under Stalin was overwhelmingly Russian [including Russian-educated people from other areas of the USSR].

I was already familiar with the consequences of Woodrow Wilson's naive assertion of the 'principle of nationality' by which the former Habsburg lands were parcelled into Czechoslovakia, Romania and Yugoslavia; namely that each of those 'national states' included very significant minorities of other ethnic and linguistic groups. Some of these issues were resolved during and after Hitler's war: the Sudeten Germans [and other German minorities throughout Czechoslovakia and the newly-configured Poland] were expelled from lands where many of them had been settled since medieval times. Magyar [Hungarian] minorities were second-class subjects of Slovakia and Romania, and a strong residue of those groups remains in situ. So it is unsurprising that when Stalin set the frontiers of the Soviet Republic of Ukraine there was little concern for the linguistic and nationalistic sentiments of people near the boundaries; which leaves a few million Russians within the frontiers of the Ukraine.

During the Revolution that began in Kiev in 2013 some right-wing populists, both inside and outside the parliament, spoke of the forced assimilation or even the expulsion of Russian-speaking citizens. This caused anxiety among the Russian-speaking minority, which was captured by separatists who were quick to grasp at the [relatively few] 'fascist' speeches that could be deployed as threats to the ordinary Russian-speaking population. The recent  rhetoric of Ukrainian politicians, including the new President and successive Ambassadors in London, has demonised the separatists as 'terrorists' who must violently be suppressed. This has sanctioned the volunteering of individual Russians to support the 'rebels'; and masked the supply of arms and equipment from Russia.

 Slovakia and even Romania have learned to be accommodative to their minorities; Ukraine must do the same: quickly. Otherwise, the risk of war will unsettle Europe and the wider world.

Wednesday, 27 August 2014

Recognising the obvious

A comment piece in today's Times by a leading business economist points out that Britain's vaunted good performance in terms of economic statistics has very little substance. In particular, the balance of payments is becoming increasingly adverse as we import more and more cheap manufactured goods, most notably clothing which can be sold within the UK at a significant markup of the factory-gate price. The increasing sale of such items is the basis for the 'growth' that is so naively welcomed by politicians.

Mr King even mentions the fact that productivity in British domestic manufacturing - such of it as there is - remains disappointing; and he specifically uses the keyword 'productive' to distinguish the really desirable investment that is hardly happening.

I sincerely hope that his words will strike home with just a few people who will remember his wisdom when the inevitable reversal of the supposed good news becomes apparent.

Monday, 25 August 2014

The Delusion of Success: The Real Economic Facts

Ministers, led by Gideon Osborne, boast about Britain having "stronger economic growth than any other G8/G10 country". What this means is that cash turnover in Britain is increasing, year on year.

That factlet stands alongside a host of much more substantial items of data.

Real wages overall, the rate at which cash incomes are increasing compared to the rate at which prices are increasing, are not increasing. More and more people are getting jobs: but the overwhelming majority of them are precarious part-time jobs; many of them based on zero-hours contracts. Personal debt is increasing, and savings are being spent; which indicates that the increase in consumer spending is almost certainly temporary. The promised rise in interest rates, when it comes, will make borrowing more expensive and savings better rewarded; and this is bound to impact on demand.

The deficit on the balance of trade is increasing: more of what we consume is imported, month by month: and the rate of increase in imports is not balanced by the modest increase in exports. More importantly, the prolongation of the limitation on incomes has meant that more and more of what people buy in the shops is 'own-brand' lines, both in food and household goods [including clothes]. This is important, because the implication is that the volume of imports that are bought relatively cheaply for own-labelling is increasing, while fewer consumers are able to buy branded products. Since brands predominate among British exports, the loss of home markets to brandowning companies weakens them, making them less likely to invest in new products and modernised plant.
The engineering sector has been doing modestly well, increasing both output and exports earlier in the year; but now the strength of the pound [relative especially to euros and US dollars] means that momentum is being lost in export markets. Over the past quarter-year wages in the engineering sector have been rising faster than other wages, but this optimistic phase may have faltered.

The deficit on spending by the government is increasing: even though the housing boom has given a boost to takings in the tax on house sales, known as stamp duty. Since 'deficit reduction' is the central plank of government policy, this failure to balance the budget is significant; but so deep is the public mood of cynicism about politics that it is much less of an issue among voters that it merits being. Meanwhile the continual drip of cuts in government spending - which are now scheduled to continue to at least 2017 - is lowering the quality of life to all the vulnerable groups in the community. Defence spending has been reduced below danger level, at a time when the threat of terrorism both at home and abroad is increasing exponentially: the country is in danger as a direct result of the incidence of the cuts.
There is a legend, much beloved of Economists, that 'growth' will eventually enable living standards to rise and the most painful cuts to be undone: but there is no sign that this will happen. Increasing turnover in the shops selling imported goods counts as 'growth' but it does not signify any strength in the economy.

What has occurred since 2007 is not simply a 'recession': it is a climacteric comparable at least with the period 1879-79 when the need to restructure the economy totally was recognised. More of this soon!

Sunday, 24 August 2014

"British Values"

Politicians are burbling-on about so-say "British Values" to which all citizens should subscribe. I have no idea what 'British Values' are; and I am sure that 99% of my fellow-citizens are in the same position as me. I remember in my school days the formal rhetoric was all about 'fair play': "play up, play up, and play the game!"; but if someone was able to take a point by an infringement that the referee or umpire did not see and therefore gain House Points or victory for the school, that was winked at [and occasionally, informally, commended].
 The much-vaunted adversarial system in the courts has licensed the most outrageous bullying of highly vulnerable, ill-educated, inarticulate victims of sexual violence and grooming: it may be open, but it is certainly nothing to do with justice.
Victory falls to the political party with the most seats in the House of Commons, which means that it is improbable that the government has the positive approval of even 30% of the notional electorate. The politicians who are elected do not represent the general population: they are careerist graduates who in more and more cases have no experience of poverty, ill-health or other deprivation: or of industry or commerce.
Chief executives are paid many hundreds of times the national minimum wage, while many of their employees are on the minimum.
Banks still protect their own interests - fair enough - but there should be no pretence that they altruistically support home ownership or the growth of industry.
The great bulk of Arts Council and Lottery funding of 'cultural' structures and activities is allocated to the ludicrously lavish productions of the Royal Opera House, and the 'avant garde' promotions of the South Bank and other favoured concert halls and theatres and art galleries that do not seriously reach out to more than 90% of the taxpaying and lottery-entering population.
Are these 'values', or aspects of life that we are expected to value?

No wonder that hundreds of thousands of British citizens assert their distinctness from these 'values' by wearing tribal clothes, maintaining alien languages within their 'communities', eating different food and following completely different domestic and social customs. They would prefer sharia to the common law and to statute based on the European Union's secularist Directives. How much of this lifestyle choice would people be expected to abandon in order to conform with 'British Values'?

Who is to make this definition? A gang of machine politicians? Civil servants who were in college with the ministers?
 Royal Commissions have been out of fashion for a couple of decades, but this may be the time to set one up: then we could all join in the row about the choice of the chairman and the members: at least it would kick the issue into the long grass

Saturday, 23 August 2014

What's in a word?

In the chaos that followed the collapse of the Central Powers at the end of 1918, the Ottoman Sultanate was abolished: and with it the title of Caliph which the Ottomans had held - generally benignly - for centuries.

Since then, there has been no titular head of the Islamic world.

Now the dictator of the self-proclaimed Islamic State [in Iraq and Syria] is claiming to be the new Caliph, to whom all Muslims should give obedience. In the extensive territory that the IS has captured, all Christians and other non-Muslims are offered a choice of conversion or death [in some cases, with the option of flight provided all their assets are abandoned]; and all Muslims are expected to conform unconditionally to the dictates of the Caliph.

This use of the word State is highly significant.

For almost a century, while many have spoken of a single 'Nation of Islam' that transcends the claims of national governments as recognised by the UN, there has been no successful attempt by any centre of power to claim the absolute allegiance of all Muslims. Now this totally ruthless machine is claiming just that. This point is central to the understanding of the phenomenon of "British jihadists" . These people accept that there is a greater power, a more comprehensive and commanding State: against that, the claims of British nationality and subjection to the Queen are trivial to vanishing point.

The enthusiasm of fighters in a succession of successful campaigns feeds on itself. Blood-lust is a recurrent and extremely powerful phenomenon throughout history. These tools are deployed by the ambitious Caliph, so far with huge success. The devices that are available in Britain within the framework of common law and human rights to attempt to prevent 'radicalisation' barely scratch the surface of this new issue: the fact that young people are susceptible to recognise a power that is transcendent above a system of exhausted democratic politics.  Perhaps the closest analogy in British history is the Anabaptist and similar groups in the sixteen-fifties who rejected not just the state of Charles I and that of Cromwell but the concept of any terrestrial state claiming - or usurping  - the sovereignty that belongs only to God. In the case of the Islamic State, the necessary command structure is incorporated into the structure.

The command of the Caliph is paramount: his reading of the Koran is the correct reading; his exegesis is not susceptible to any alternative interpretation. Thus for Tony Blair or Nick Clegg to speak about wrong and right interpretations of Islam is even more irrelevant than it is impertinent. There are no shades of interpretation, just a single simple truth to be bolstered and enforced through Sharia; by force, if necessary. So far, many more people have held back from committing themselves, only a few hundred people have taken the plunge. But they are great advocates of their cause, and the attraction is great.

Wednesday, 20 August 2014

More of Clegg's Fudge

The direct hand of the Leader has been absent from all the reporting of the squalid case of Lord Rennard; but it is generally accepted that when a party leader wants some outcome in any issue she or he gets their way. Every political leader throughout history has attracted minions who will do the dirty work, and the clever subordinates know that their futures are more secure if they protect the reputation of the leader while others deal with the detritus. Ergo it can be assumed that Nick Clegg is not unhappy with the whitewash of the weasel-worded tactician.

This all helps to reduce the reputation of a leader whose decline from a stance of moral rectitude has been quite spectacular. The episode of student fees was a bald betrayal of principle which the Liberal Democrat party embraced in order to gain a small share of supposed power. Having become Deputy Prime Minister - and thus not taken up the powers and responsibilities of a departmental minister - a role had to be found for Clegg and a major component of it was constitutional reform. During the 2010 election there was a consensus over all political parties on two constitutional issues. The half-cock reform of the House of Lords under which the government could appoint unlimited numbers of Life Peers to sit alongside a rump of hereditary peers who were elected by all hereditary peers who bothered to vote was patently unsatisfactory. The 'West Lothian Question' is a cute phrase to characterise the anomaly that Scots MPs can vote on English law, while Scots law is determined by the Scottish Parliament [which by definition has no English, Welsh or Ulster representatives]; and appended to that issue is the anomaly that Scottish constituencies for the Westminster parliament have many fewer voters than English, resulting in an over-representation of Scotland in the House. Clegg came up first with his crazy 'solution' to the lords issue: a wholly-elected upper house with crazy terms of election and an absurd duration of tenure. The proposals were rejected: so Clegg refused to take forward any work on the West Lothian Question and threatened to break the coalition government if he did not have his way. So the constitutional anomalies remain and Cameron has crammed more cronies into the House of Lords.

Clegg's latest acknowledged achievement is to induce his coalition partners to agree to providing free school meals for a large cohort of children [simply by announcing that it was government policy] without there being any appropriate funding in place. In order to comply, head teachers have been developing kitchens at the cost of withdrawing spending from other services and materials; then they will face the dilemma of where the children can be fed in limited premises without excessive disruption to existing activities.

Surely this squalor will influence voters next year?

Monday, 18 August 2014

Fag-end Politics

Given that there is less than a year to go before the next UK General Election it is remarkable how little campaigning is yet under way. A government announcement this morning, that new 'family friendly' policies are to be adopted shows most clearly that the 2010 Coalition Government has failed to find popular policies. As earned incomes stagnate and state benefits are pared back in the face of rising prices, the 'typical' family is now reckoned to have up to eight identifiable 'problems'. The Prime Minister had now declared that government departments must satisfy the government and the public that all their policy proposals are 'family-friendly': empty words that carry no price-tag. Tiny sums of extra funding have been allocated to relationship counselling and other small-scale spending that is supposed to mitigate some of the issues. Of course, Labour spokesmen have commented that this just shows how out-of-touch the Etonian-led government is on real-life issues.

Anyone with even a modest memory can recall the most nonsensical political slogan of my lifetime: David Cameron's tommyrot about The Big Society. Apart from actually giving government money to a Big Society Foundation - which is now accused of incompetence and profligacy [if not fraudulent misuse of funds] - the slogan was echoed only by people who wanted Prime Ministerial patronage: and those who uttered those words had no benefit from them.

The Scottish Independence Referendum has allowed the UK politicians to stand back from primary news. The media report the speeches in which Clegg and Cameron flog the moribund horses of the policies that have made no positive impact on the lives of most Britons; while the government has utterly failed to convince anybody that failed attempts at deficit control will bring ultimate rewards to 'hard-working British people/families'. Economic 'growth' is reported, but for more than 90% of the population personal benefit is impossible to discern. Whenever any improvement in living standards is paid for by a withdrawal of savings or an increase in household debt, in the medium term the impact of the extra spending is that when the depreciation on the new purchase has exceeded the cash spent on the item, the family estate is diminished. This experience is more common than any beneficial impact of a government policy. The great exception is from housing, where the increase in prices in the last few years in most of the country has so far offset the cost of borrowing. This price-rise has been funded by inflation, principally in the form of 'Quantitative Easing' and it is desperately fragile. House prices have collapsed many times before - and it will happen again: the only open questions are 'when?' and 'by how much?'.

The moral and intellectual bankruptcy of the 'political class' becomes more apparent in every failed attempt by its members to evade the truth.

Friday, 15 August 2014


The newspapers have been rather gleeful in reporting the facts that the German economy declined by 0.2% last month [and France flatlined] while retail prices in France and other Eurozone countries were falling.. The implications for Britain were seen as unhelpful, however; because the EU as a whole takes more than half of British exports; so any decline in demand in the EU  is a potential for decline in the UK economy.

Meanwhile the number of EU citizens working in the UK continued to increase over the past year. While the proportion of the 787,000 citizens of the pre-2004 members states declined by 1% in the UK workforce, the number of citizens of post-2004 member countries working in the UK increased by 25% in the one year [mostly Poles, Czechs, Slovaks and Hungarians, rather than Bulgarians or Romanians] bringing their number to 867,000. So the UK remains a beacon of hope and a land of opportunity to intelligent, qualified and generally hardworking young people.

Also in the available workforce are unprecedentedly large numbers unemployed and inappropriately employed of UK graduates: unfortunately qualified in the subjects for which there is no demand and often inculcated with a culture of idleness which emerges from spoonfed learning processes.  The fact that a major component of the available native workforce is unprepared for economically productive employment is depressing, and contributes to a developing consensus that Britain is trapped into a cycle of declining wages and depressing trade prospects.

But this is not inevitable.

Britain continues to be highly generative of inventions and innovations: and it is common knowledge that there is a failure of channels for funding innovative products and exploring new markets outside Europe. The crazy scheme to focus infrastructure spending on a fast railway to Birmingham - where the existing journey time is only one hour and twenty minutes - while shelving the opportunity to spend smaller amounts of money on massive transport improvements between the traditional - and continuing - centres of industrial and academic research of northern England is the apogee of ineptitude.

When Harold Wilson's version of new labour came to power in 1964 they promised to bring in a new economic era based on deploying the "white heat of technology", and by 1968 the Deputy Prime had led a high-powered team which produced a comprehensive national economic plan. It was published at the time when the failure of the existing economic policy led to a crisis in Britain's balance of payments and a forced devaluation of the pound [from $2.80 to $2.40]. The Plan was shoved into the bottom drawer and the usual round of spending cuts and defensive tactics was put in place: and so the depressing trend of the UK was re-set for continuance until the present day.

The details of the 1968 National Plan would not be applicable today; but a revolutionary revision of  the foundation assumptions underlying economic failure must be made. This really is urgent.

Tuesday, 12 August 2014

Mixed news

Although it may look like that, I am not constantly obsessed by the decay of the British economy and the consequential risk to society; but from day to day the news compel me to return briefly to the theme. Within the past 24 hours two sets of data again reinforce my point.

British consumers have increased their spending, and their borrowing-to-spend, through this summer. Household spending increased each month for ten months including July 2014, and in July we spent 2.4% more on ourselves than we did in July 2013. There is no reason to believe that this will stop in August or September.But the composition of the spending is worrying: turnover in restaurants was up by 9.3% in June and by 8.1% in July [compared to 2013]; while purchases of of clothes and footwear was down by 1.7%. Manufacturing in the UK was not greatly helped by the increase in spending at home, while export orders weakened; and the predominance of firms like Primark in clothing the less-affluent members of the community support imports rather than the residual industries at home.

Many of the staff in restaurants and shops are on very limited hours and basic pay, and the latest figures show that the employment opportunities that are arising in the economy are predominantly advertised on a part-time basis. Manufacturing industry posted 163% more part-time vacancies in July than in July 2013, retail 120% and construction 106%: many people are being hired, but on the most precarious basis. Zero-hours contracts [not guaranteeing any work, but tying the individual to the employer] have become more common. Investment has remained weak. Any reduction in economic optimism will result in large scale lay-offs of people who have been receiving minimal wages, so they have no savings and will immediately fall onto state support. The government's much-proclaimed strategy of 'getting people back into work' can reverse catastrophically and very quickly.

This helps to explain why the Bank of England is so cautious about even the smallest change in interest rates, which could be the trigger for a disappearance of the optimism that has been significant for the past year or so. Mr Osborne can change back from hero to villain in a twinkling of an eye.

Sunday, 10 August 2014

Deficit Disaster

It is a fundamental proposition of rational Political Economy that a country must aim over any run of a few years to have an equal balance of imports and exports. Britain has a regular annual surplus on trade in services: insurance, banking, legal services, hosting film-makers and offering a reliable market in stocks, shares and bonds routinely make a profit for the country.

But the national appetite for imported goods considerable exceeds the rest of the world's demand for British goods. The figures that have just been published by the Office for National Statistics show that the deficit in June increased to £9.4 billion; the highest this year. The main component in this worsening picture is the drop of £400 million in material exports: this reflects a declining demand for oil [of which Britain is still a small net exporter], but a much bigger factor is the rise in the exchange rate of the pound for other currencies. This makes British goods dearer in exports markets; while foreign goods are relatively cheaper in this country.

In turn, the weakness of export sales discourages British firms from investing in new machinery and developing new products; despite the fact that many companies have large holdings of cash. Many boards of directors have  decided to cheer up their investors by buying-back shares from the existing shareholders at higher prices than have recently been offered on the stock market. The shareholders who have sold have been inclined either to buy shares in more dynamic foreign companies [adding to their working capital] or to buy imported consumer goods or to invest in property - often buy-to-let homes. Thus there is a net diminution in the circulating capital available for investment in British economy: yet again!

The government and most commentators are oblivious to this disaster; and the main opposition party, Labour, plans to make this disinvestment worse by taxing productive businesses and individuals even more to give greater handouts to the beneficiary consumers who buy imports; and to compel employers to increase basic wages, which will make millions of marginal jobs non-viable, forcing the occupants of those jobs into the benefits system.

This entirely predictable [and predicted] tragedy is not inescapable, but the wasted half-century when the need to accumulate circulating capital and convert it into productive capital was ignored has established a very poor basis for a real recovery to begin. The pointy-heads still fail to understand the difference between productivity [the cash-per-job that is generated by firms] and productiveness [whether or not jobs add to the circulating capital of the country, that can be applied to increase future production]. Jobs can have high productivity in terms of each employee bringing in millions of pounds from retailing highly desired imported brands, while their negative contribution to national productiveness is massive in terms of the purchasing-power that is exported to the firms that own the brands. Until the incredibly simple basic truths are recognised and adopted as the basis for policy, the economy will fester and the stench of decay will eventually reach the nostrils of foreign investors who have hitherto been duped by postkeynesian statistics: they will then cease to buy British state debt and the vultures will come home to roost.

I will continue to do my bit to point to reality and realism.

Friday, 8 August 2014

Academe and Apprenticeship

Fifty-one years ago, in 1963, as a student in the University of Durham I took part in a Union Society debate on the issues implicit in the Robbins Report on the future of the Universities. The Report was the outcome of a long investigation by a Royal Commission [the highest level of public inquiry] which was chaired by Lionel Robbins, the great man of the London School of Economics and one of the earliest Life Peers. The panel included the General Secretary of the TUC and a series of captains of industry and that magic circle known as the 'great and good' [then much more respected than they are now].

The predominant conclusion of the Commission was that it was vital for the future health of the economy, and of society in the wider sense, that there should be a vast increase in the number of people in university courses. There should be both new universities and great expansion of existing institutions. It seemed obvious that Britain must at least keep pace with other countries in expanding higher education: and very few people gainsaid that. However, I based my speech on a caveat to that consensual position.

Britain had developed a massive system of qualifications for industrial and commercial occupations, mostly validated by the City and Guilds of London Institute. Tens of thousands of people underwent a mixture of workplace experience and theoretical underpinning derived from day-release courses in technical colleges all over the country. I argued that these qualifications were at risk of becoming under-rated, with a cataclysmic impact on the quality and advancement of production. I proposed that City and Guilds qualifications should be recognised as equivalent to many technical degrees in other countries, with a dramatic positive impact on the comparative statistics for the UK. Constant review of both the practical and the academic quality and content of the diplomas could ensure that parity was maintained.

This was - of course - ignored, and Britain allowed the system to be weakened dramatically as the university system devised more and more irrelevant degrees for more and more students who regarded factory-floor employment with contempt. Britain has now reaped the results of this idiocy. While 49% of French firms, and 40% of German firms have apprentices, the proportion of British firms with apprentices is NINE. British factories are falling behind all their competitors. Between 1996 and 2013 British goods exports increased [in cash turnover terms] by 74%: while US exports increased by 133% and Germany's by 173%. Much of this gap was explained by the significant slowing in export increases between 2008 and 2012, the years of the 'recession'. Even at this comparatively low rate of growth, employers are reporting their fear of a coming skills shortage.

Graduates in [real] engineering subjects are invaluable, and the pathetically small number of British engineering graduates who complete higher degree studies is particularly worrying. For decades now, the research opportunities in engineering that have plentifully been available in the UK have been taken up by foreign students, who mostly take their high-level theoretical skills back to their native countries. With a serious dearth of native engineering doctorates, and a massive shortage of skilled factory employees who have a good understanding of the theory and mathematics that underpin the processes that they perform, Britain is denuded of the productive human resources that the economy needs.

I am not at all special: hundreds of thousands of people have recognised and worried about the issue on which this blog is based; but we are powerless in the face of an impregnable Establishment and a flood of disastrous evidence. Something must be done: and it can only begin at the grass roots. Government and higher education are too deeply sunk into their error to be expected to recognise the simple truth,

Monday, 4 August 2014

False Optimism on the British Economy

Today the Institute of Chartered Accountants (ICAEW) and the Confederation of British Industry tell us that employers' optimism is high about the future of their businesses. The government data report that more people are in employment in the UK than ever before; but that industrial output and exports are still below the already-low level at which they stood in the fake boom of 2006. There is no good news here for the real economy.
Consumers' borrowing, especially for house purchases and imported goods, has increased while total bank lending has declined; pointing to the fact that lending to develop manufacturing firms' facilities, and their export.  markets is stagnant or even declining. Indicators of business confidence are up to the level last seen in 1988, the year that was followed by the slump of the early 'nineties which saw huge falls in house prices, not least in London.
Thus the portents are bad, not good.

This issue in explained in my book SINKING BRITAIN which can be accessed via this blog site.

Sunday, 3 August 2014

Why Didn't They Sack Haig?

As the commemoration of the tragedy of the First World War gets into top gear, there are already books and TV programmes focussing on the appalling carnage of the Battle of the Somme which began in July 1916. It was continued until the end of the year, despite the fact that there were 60,000 British casualties on the first day: with no significant gains. The British Commander-in-Chief, Douglas Haig (of the whisky firm)  committed successive waves of men to death in further fruitless pursuit of the same barren strategy. He followed the Somme by a series of further 'great pushes'  which had no significant success in the ensuing eighteen months.
uHis defenders claimed that by refining his techniques he eventually enabled the army to smash the German front in the late summer of 1918, by which time the German supply system was disrupted by civil unrest and the beginning of revolution.
Hundreds of thousands of men died in pointless repetition of the same boneheaded strategy as on the Somme, until new weapons and new training methods prepared the army to exploit the very different conditions that faced then from the middle of 1918.
Haig survived catastrophic failure, despite the repeated wish of the Prime Minister, Lloyd George, to be rid of him. The entire establishment, led by the King (George V) insisted that he should stay. 200,000 lives were valued at less than the vanity of Haig and of those who had appointed him.

I invite every reader to look at these articles and programmes, with the thought in the back of their minds that the position of the Economics establishment today is like that of Haig and his kind in 1916. " Just push harder and the strategy will work" said the boneheads; but it didn't.
Today the pointy-heads are saying " more competition, more cuts" and the economy will really rebuild itself.; but it won't. King George's granddaughter, Queen Elizabeth II, asked the assembled luminaries of the London School of Economics why they had not seen the crash of 2007 coming: and they had no answer. Haig had no answer for those who challenged him in 1917, but the old-boys' network saved him. Something similar is keeping the professors of Economics in their chairs now.

Friday, 1 August 2014

Actuarial Armaggedon

The greatest destruction of value in the British economy over the past quarter-century has been the erasure of most of the value of the savings made by women and men through their pension funds. It has often been pointed out that fees charged to funds by fund managers have removed much of that value; but it is trivial compared to the purblind misguidance given by the self-styled Actuarial Profession, with the cynical collusion of accountants.

Every pension fund must have a named Scheme Actuary, who has huge influence over the decisions that are notionally taken by the Trustees. In the face of the facts that the scheme Actuary and the Auditor [a Chartered Accountant] must sign off the fund at least once a year, confirming that it meets the law and the standards set by their professions, the [usually non-expert] Trustees are virtually bound to follow any guidance from these signatories. Despite rules and 'Chinese walls', the accountancy giants manage to sell a lot of advice to their clients: the actuaries, who have no comparable constraints, have huge 'advisory' power to steer the funds into investing the deferred pensioners'' money according to their very limited understanding of the economic system.

In 1987 almost exactly 50% of all investments by pension funds were in shares - equities - whose market prices vary regularly but over the long term rise significantly in market valuation. The other half was in government and other bonds, property and other assets that largely compensated in the stability of their prices for the volatility of the stock market. This ensured that whenever a fund member came to retire the fund could allocate them either a generous pension drawn from the future income of the fund or a large 'pot' of cash with which to buy an Annuity. The funds that backed Annuities were split between equities and other investments in broadly the same proportions as applied to pension funds.

In in the early 'nineties, Actuarial Tables [the basis on which scheme actuaries assessed how long fund members would live, and thus what each member's demand on the fund was likely to be, from the date of retirement] were hopelessly out of date: longevity had increased far beyond the assumptions shared by actuaries.. Hence they started to say that funds were over-funded, which came to the ears of the scavengers in the Treasury who decided to tax any 'over-funding' of pensions. So many firms declared a 'pensions contribution holiday', usually just on their payments-in to the fund, which meant that the tax on the employees' contributions was slightly reducing the pool of money available for the future pensions. Then the actuaries' idiocy was recognised, and many funds were suddenly under-funded according to the updated longevity tables. So firms and employees were asked to put more into the funds.

This was in the mad era of the 'dot-com bubble', which challenged comparison even with the idiocy of the early eighteenth-century 'South Sea bubble' when firms that had never made profit - in some cases had never received revenues - were valued in millions of pounds. The turn-of-the century [1999-2001] boom was 'valued' in trillions of dollars: and inevitably the collapse of that market dragged down the prices of sound industrial and commercial shares in a general panic. The combined impact of the miscalculations of the actuaries in the 'nineties and the crash of 2001-3 was to create in the 'actuarial profession' a panic conclusion that shares were a bad investment generically.

 If a bond has a date for encashment, and a stated sum to be repaid on that date, it is relatively simple statistics to guesstimate reliably what the bond is 'worth' on any date. So as share prices were cashing down right across the spectrum actuaries - encouraged by Gordon Brown's Treasury [which was already industriously increasing the taxation of funds' investments, in the notorious 'three-billion pound grab'] - demanded that funds sell their shares and buy bonds. This intensified the collapse of share prices, while raising the prices of bonds; reducing the total valuation of assets in the funds and removing most of the assets that could have replenished the funds as stock markets recovered. The same tactics, of selling shares and demanding bonds, were required in the crunch of 2007-9: and this time it really suited the government because they needed the future pensioners' funds to buy the bonds with which they funded the deficit.

The net result of all of this is that now only 5% - yes, one-twentieth - of pension funds [on average] are invested in equities which have risen strongly since the crunch, while most of the rest is in government bonds whose riskiness increases by the day. Most companies have closed their 'final salary' pension funds, giving the staff the chance of getting only defined-benefit schemes or of choosing a private pension entirely at their own risk.  Pensions are massively reduced from their equivalents as awarded by 1999.

George Osborne's cynical decision to give retirees with accumulated 'pension pots' the choice not to buy an annuity, and take responsibility for their own financial survival through a prolonged period of retirement, will potentially exacerbate old-age impoverishment. This sets the cap on a tale of devastation, by which millions of current and future pensioners will live in relative poverty compared to the lucky people who retired just a few years previously, So far, the accountants have taken some of the blame for some aspects of the crunch: but not very much for this facet of the present situation. The long-term depredations of the actuaries have yet to be attributed appropriately The contribution of these actuarial sins to the destruction of the material economy and the increase in the national debt deserve due recognition.