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Saturday, 24 June 2017

Rates of Interest 3

Once upon a time, between 1820 and 1914, a person who had legitimately acquired some money could invest it in any one of a wide range of opportunities; each of which offered a return to the investor in the form of interest or dividends. Dividends are the reward for handing your money over to some other agency, usually a company, which will pay you a share of the profit from the venture if it is successful. The amount of the dividend that any shareholder gets is proportional to the portion of the capital in the enterprise that the individual shareholder has provided.

Throughout that long period, shares in various sectors of the economy rose and fell in price according to the honesty and effectiveness of the managers of businesses and the success of the firms they ran. There were periods when share prices were driven up by speculators, as in the 'railway booms' of the early-mid-nineteenth-century and when the economic development of various countries reached a stage where the bright prospects for that region became widely known. Some such booms were based on myths or gross exaggerations, which resulted in unsuspecting greedy would-be investors loosing their money.

Underpinning all markets, however, were 'the Funds', government bonds, usually offering a return of 2%. The government was regarded as an absolutely secure vehicle to invest in: after all, they could take the money with which to pay the interest from everybody in taxation. Any investor who wanted to build up a secure portfolio of investments to leave to their widow or children would buy some state stocks, then add to them a mix of other investments, some of which brought in low returns but were regarded as secure, and some less steadily-remunerative stocks on which greater dividends could be hoped for with less assurance that this would consistently be delivered. Provided company law was adequate, and properly enforced, investors could expect to be fairly treated. The greater risk they were prepared to take that the companies they invested in would fail, they could hope for greater rewards arising from the speculative nature of their investments.

Provided the government also issued the necessary basis of steadily but modestly remunerative investments, in the Funds, there was a 'floor' to the whole market.

It was as necessary that the Funds existed as that the stock market existed; enabling investors to buy and sell shares. George Osborne's ambition to abolish the government deficit would [if it were achievable] would remove the opportunity [going forward] for the Funds to perform their traditional role. That would be more disastrous than selling too much government debt and thus increasing too far the amount that future taxpayers would have to pay to support that debt.

Friday, 23 June 2017

Rates of Interest 2

The present situation in the UK, where there is effectively no interest rate, leaves a free-for-all in financial markets. Mortgage lenders are able to raise cash at very low rates of interest, and lend it on to intending homebuyers at rates which are very much lower than those which prevailed in the years down to 2007. The Bank of England has several times become concerned at the amount of lending that is being advanced against peoples' homes, because they are aware that a collapse of property prices would leave millions of households in a situation of 'negative equity', where they owe much more in the debt that they took on to buy their home that they could get from selling the house. Thus the Bank and the government ask the lenders [principally, banks and building societies] to limit the amount that they lend. This limitation is set on the aggregate of money advanced to all home purchasers, rather than on categories of property or classes of home buyers [such as the young, or people of limited means].

Alongside the mountain of debt that house-buyers have been allowed to accumulate, the same people have been encouraged to borrow to maintain their standard of living as real wages have declined for the majority of the population; hence the amount of unsecured debt [that which is not 'covered' by the 'value' of the borrowers' material assets] has escalated alongside mortgage debt. In the bizarre Britain that has been created since 2008, sales in the shops largely depend on the customers borrowing a significant  proportion of what they spend. Thus Economists on the television tell citizens that the 'dominant service sector' of the economy is what 'drives' the growth of the system. So when government representatives talk about the UK as a successful, growing economy; indeed as the 'world's fifth-largest economy'; they are talking about a reckless growth of debt owed by the British people to the financial system and to the foreign firms that are prepared to advance credit to British firms and institutions. The whole thing is unsustainable; and unless rational economic policies are explained to the electorate, and adopted by them, a crash much more catastrophic that that of 2007-8, or that which followed the 'Wall Street crash' of 1929.

As the country most addicted to debt, we can be sure that the United Kingdom will suffer more than others when the inevitable crash occurs.

Thursday, 22 June 2017

Rates of Interest

The media employ thousands of Economists, whose principal roles are to unravel the impenetrable prose and the ludicrous dogmas that permeate their subject, and to explain economic policy to the victims on whom it is inflicted. These Economists have been allowed more air-time and column inches in the past few days to explain how the US Federal Reserve Board can raise the controlling rate of interest in the US economy, while the Monetary Policy Committee of the Bank of England has done nothing since it foolishly lowered the bank rate after the Brexit vote last year. This arid discussion is slightly enlivened by the fact that the Governor of the Bank of England and the Bank's Chief Economist have very recently made public statements which appear to be conflicted. The Governor says the time is not yet ripe to raise the rate, the Chief Economist seems to think that it is just the right time.

Interest rates in all the major western economies [though not in some well-run states, like Canada] were lowered to historically absurd levels in 2008, as governments and central banks strove to shore up the world's banking industry as the monumental extent of their past reckless gambling became clear. The supply of money to the banking system was expanded beyond all historic precedent, and interest rates were reduced to a fraction of one per cent. In effect, monetary policy was abandoned in face of the perceived need to avoid an economic collapse that would make the slump of the nineteen-thirties seem like a trivial glitch in the long process of growth in the global economy.

A whole generation of adults has grown up in a world where there has been no regime of interest rates. The lack of interest in Economic History on the part of most university teachers of Economics has compounded this issue. So here is just a brief reference to the 'real' world that existed before 2007. That world was epitomised in the British economy between 1819 and 1914.

After paying for the wars against revolutionary France and reactionary Napoleon by high taxation and high inflation, the British government decided to stabilise the monetary system. This was achieved through the implementation of a new Bank Charter Act. The Act specified that the Bank of England could issue a limited amount of paper currency, under the condition that the notes would be exchangeable, on demand, at the Bank for fine gold at a specified rate. Thus banknotes were as 'good as gold' and the amount of them could only be increased as the Bank's reserve of gold increased. The Bank could also lend notes, at a standard rate of interest that was known as the Bank Rate. If the Bank increased the Bank Rate, that signaled that money was only available to borrow on stiffer terms, and investors were thus discouraging from taking higher risks. When the Bank rate was reduced, credit was relaxed and business relatively boomed. While most private borrowing and lending was undertaken by agencies other than the Bank of England, at higher rates of interest than the Bank Rate, rates on private loans rose and fell in response to the changes in the Bank Rate. Thus control of the system was established by the Bank: and that has effectively been abrogated since 2008.

More on this topic to follow, but the above dollop is enough for one day.

Wednesday, 21 June 2017

Theresa May: Competence and Comprehension

It is increasingly a matter of speculation, as to how competent a person the Prime Minister is. Despite the great achievements of people like Professor Ron Johnston, the general perception of geographers among the intellectual hierarchy is pretty low. Mrs May read geography at Oxford, which may rank higher than media studies at Mid-Montgomeryshire but it is not regarded as a particularly powerful component of the university overall. She has had a steady political career, indicating that she is content to take orders and vote at the call of her party whips; most of the time. When in the safe-hands role of party chairman she voiced the popular view that the post-Thatcher Tories were regarded as the 'nasty party' she spoke no less that the truth: and the import of her message to the party was that 'we have to invest more in improving our image', rather than telling the Buffton-Tufftons to change their personalities. Her mention of the'nasty party' was frequently cited over the ensuing years, almost as her defining achievement; it certainly got her name nationally known, which ultimately helped to get her the leadership.

In six years as Home Secretary she 'failed' to get net annual immigration reduced below 100,000: by a margin of several hundred per cent. Now, as Prime Minister, she declares herself determined to try again, harder. The reduction of immigration is at the heart of her determination not to retain the EU obligation of free movement of people in the European Economic Area: it virtually sets the tone and terms of how she sees 'Brexit'.

She appears to be incapable of understanding that she had to 'fail'. If intending immigrants had simply been turned away from the ports and airports of a fortress Britain, the economy would have been undermined catastrophically. Market gardening would have collapsed, at least until the firms in the industry moved their capital to countries where they could find labour. Many of the rising 'knowledge industries' would likewise have emigrated. The City of London would have imploded as a global financial centre. British users would have had to pay foreign firms inflated prices for the goods and services that had ceased to be made or grown in Britain; with a disastrous detriment to standards of living.

Meanwhile many thousands of non-EU immigrants would still have got into the UK under threat of  appeals to the human rights industry on the ground that 'family reunion' is a human right: so there would have been more non-English-speakers appealing to the benefits system and using the NHS in the face of a collapse of the state's revenues. The 'racial' dimension to the anti-immigrant mood would not have been exorcised; though fewer ethnic  groups would be scapegoated.

Mrs May still seems to want all those bad things to happen. She is deaf to appeals from industry and commerce. Unless she can clarify quickly that she has not meant these things, her government must fall quickly.

Tuesday, 20 June 2017

Politics and Classification

It is reported this morning that 'angry worshipers' at Finsbury Park Mosque have been 'demanding' that journalists should classify the man who drove a truck into some of their number on the previous evening should be classified as a "terrorist". The Metropolitan Police have already indicated that they will attempt to use the terrorist legislation to charge and prosecute him; and the Prime Minister, goaded into precipitate comment in view of her ineptitude over the recent fire, has made remarks indicating that she would prefer to be able to use such a classification. Presumably the officials who have adopted this language think that by suggesting that the Muslim 'community' is under threat of 'terrorism' they are in the same position as the multi-national group of individuals who were struck down in Borough Market.

It may be politically helpful for establishment politicians to us such language, but that does not make it true. It does not help the forensic process that is under way; and it does little for social cohesion.

It is more likely, in my mind, that the occurrence of this incident [almost] on the anniversary of Jo Cox's murder by a lone nutter points to the more likely circumstances of the recent attack. It is equally inexcusable with all the other episodes that are glibly described as 'hate crimes'. That classification, too, seems to me to be profoundly unhelpful: 'hate' is a powerful word, but it does not describe the range of emotions and social pressures that cause some people to commit outrageous acts.

This set of circumstances causes one to look at classifications that have been used in past eras. Between the two world wars, "the unemployed" had a very powerful meaning: it covered the tens of millions of people in the then-advanced countries who were reduced to destitution by the great depression. The memory of that episode was evoked to justify the action by central banks and governments in 2007-8, which avoided a repetition of the 'thirties horror but which did dislocate the entire economic system in a way which is now haunting British politics and society. The USA and most of continental Europe have recovered much better from the trauma that followed the financial crash than has the UK: the worst is yet to come for the UK. If the government intensifies Osborne's austerity, even by a small amount, it could cause the tipping-point at which social acceptance of the effect of the cuts [to the police, to the NHS, to schools, to welfare and social care] cease to be tolerated.

An increasing proportion of the population have no significant assets, insecure and irregular earnings, and - as the last resort - low levels of benefit if they pass stringent tests as to their 'need'. These people are paupers - the 'poor' - such as have existed throughout history. There have been many attempts to abolish poverty. The whole endeavour of the post-1945 Welfare State was to eradicate poverty and ignorance and unattended illness: and it has slowly been dismantled over the past forty years. Society is coming very closely to an existential crisis: and divisions within society - including that between Muslims and those whom the militants among them call 'crusaders' - could horribly exacerbate a very bad  period of future history.               

Monday, 19 June 2017

How Thick are the Tory Brexiteers?

I admit that I voted for 'Brexit' under the impression that the 'Remainers' were likely to win; but sure that even if the 'Leave' vote gained a majority the government's policy would be to remain in the European Economic Area, probably within the structure of EFTA. My opposition to 'Europe' was entirely to the political Union, especially the drift towards integration of the military and the threat to NATO.

I now read that there are some sixty Tory MPs who want to sever all institutional links with Europe, and shove Britain off into the wide world with no context for trade other that the World Trade Organisation. It is also widely believed that Mrs May, a lukewarm remainer in the referendum, has swallowed the sixty headbangers' line. It seems that the Maastricht ghost that destroyed the Major era is gathering strength to destroy what is left of Mrs May's residual authority in the Conservative party.

That party has a centuries-long tradition of disposing of dangerous and embarrassing leaders. Let them get on with it: even if it means another election, another hung parliament and a consensual coalition.

Meanwhile the Brexit Secretary has begun the pantomime in Brussels. It is all so sad, that I have no more words for today.

Normal service will be resumed tomorrow....

Sunday, 18 June 2017

Political Credibility

M Macron is due to win today's election to the French National Assembly by a landslide. A party that did not exist - was not even publicly predicted - two years ago is expected to win a massive majority in the legislature. Its leaders then propose to go head-to-head with the trade unions in order to 'modernise' [i.e. Thatcherise] the economy. Their plan is to make hiring and firing of employees easier, to challenge the shortness of the standard working week; and generally to break the power of the unions over strategic decision-making by French firms.

M Macron is presented as having virtually 'appeared from nowhere' to create his 'France on the March' movement which would take the presidency and capture the Assembly; but in fact he is the epitome of the French establishment. Napoleon developed the old monarchy's technique of finding people of modest origins and developing them for high public office - by way of selective higher education, where appropriate - and then rewarding them with lands and titles if they succeeded. Macron stands firmly in that tradition. The child of teachers in a solid provincial middle class, white town he was selected for the highest level of 'administrative' education. Then he served in a series of government posts before moving smoothly into banking where he perfected his English while gaining an insider's knowledge of the 'Anglo-Saxon' dominated transatlantic banking system.

Then he was considered ready to be given middle-ranking ministerial office in the floundering Socialist government, from which he moved smoothly to the destiny of revamping the failing party system and achieving a populist following. Although the older-established parties ran candidates and campaigns against him, the field was effectively surrendered to him in circumstances where the rest of the established political class was becoming genuinely afraid that the National Front might otherwise win power.

Even his highly unusual matrimonial arrangements marked him out as special and memorable, without being open to censure.

The whole plan has worked all-too-smoothly to this point. Now the President can dust off his outdated Econocratic textbooks and set about trying to implement his mission. I am not a betting man, but if the bookies were to offer odds I may well be tempted to punt a few pounds against him.

Saturday, 17 June 2017

British Bananas

The media have made fewer references to 'banana republics' in recent years than they used to do, and I wonder whether this is because Britain itself is taking on more of the character of such a state as the imperial past fades from memory.

Popular reaction to Mrs May since the fire in Kensington justly reflects the anger and incomprehension that her deadpan, delayed response to the incident has stimulated. It is notable that the 'victims' of the incident are almost all immigrants: I have just seen reports of two white British occupants of the Grenfell Tower, both elderly people of the sort who are left behind when the rest of the originally-indigenous population remove themselves as a block or a district becomes a focus for migrant settlement. To put it simply [albeit crudely] less-potent, mostly alien people were dumped in that building; and treated accordingly. The building was cladded to improve its appearance in proximity to multi-million-pound properties; but at the risk that was summarised in this blog yesterday. Mrs May is learning - all-too-slowly - that a sop of £5 million is received as an insult.

It is tragic that the mostly-immigrant people who have lost everything in the fire simply do not understand - and now they will not accept - that it takes many months to identify charred fragments of bones as people rather than dogs or cats, and then to attempt DNA analysis of the human remains. Of course, most of the dead who are yet to be found will be identified within a few weeks, from their location in the building and because their bodies will have been less completely consumed in the flames that the extreme cases mentioned in the previous sentence. In the vacuum, a head of steam is being stimulated: by genuine grief and anger, and by agitators who are gathering from the whole of the home counties. The government is so gloriously inept in its responses, in the face of glib repetition of carefully adapted Marxist slogans by Messers McDonnell and Corbyn, that control of the situation is moving away from them.

At the very least, there needs to be an immediate national programme to remove all flammable panels from tall buildings, which will leave a massive mess of ugly exteriors which will need to be patched to make them temporarily weatherproof. Simultaneously, sprinklers must be installed; at first in circulation areas: and the doors of supposedly-compartmentalised flats need to be validated as fire resistant, or replaced. Such a programme needs to be effected in a very tight time frame: not more than two years; after which the residual eyesores will have to be refurbished properly and safely. That will be a ten-year programme, and its cost will necessarily override Osbornian austerity. Thus it will make necessary a massive release of funding, both by the government and within the private sector, to drive forward the real economic growth that is required to make such schemes affordable from future national income. The many dozens of references in this blog to the need for productiveness to enhance productivity show the only way towards achieving this.

Hundreds of thousands of people have been put at increased risk as a consequence of cheapened cosmetic processes undertaken by cash-strapped local authorities and spun-off housing management companies who have been constrained by capped council tax revenues and diminished government grants. The whole direction of policy since the fake 'prosperity' promoted b the Thatcher regime must be reversed: though not down the dark alley to which Corbyn and McDonnell are pointing us.

Friday, 16 June 2017

Fire, Tragedy and Prevention

The national news media have overplayed the awful tragedy that happened this week in Kensington. Both the BBC and ITV News have overconcentrated on this item, at the national level; and consequently even the catastrophic failure of the Prime Minister to cope with the election result from the previous week has been grossly under-reported. I am not advocating that that fire and its consequences should be ignored or trivialised; but [as a Lancastrian] I am sure that if the fire had happened in Glasgow or Liverpool it would have taken up less of the national news: though the local media would have performed the wonderful community service that has been available in London.

The greatest honour in my life is that I have twice been able to serve as Master of the Worshipful Company of Firefighters, and I have also been a Trustee of the Firefighters Memorial at the south side of St Paul's cathedral for a quarter of a century. Thus I have had the privilege of knowing many firefighting professionals, as well as my fellow-insurers and others who have an interest in fire prevention, fire protection and mitigating the consequences of fire. The response of the London Fire Brigade to the Kensington disaster was absolutely exemplary.

It is far too early to make any definite statement on the reasons why the fire spread so rapidly through the Grenfell Tower: but it was obvious that it spread outside the main structure, as well as within the building. People living in such blocks all over the country urgently need reassurance; and reference to the history and traditions of the fire service and the insurance industry can help a lot here.

Coincidentally, yesterday's piece by the Master of Economic Commentators, Anthony Hilton of the Evening Standard, dealt with a paper from the  recent conference of the Association of Risk and Insurance Managers in Industry and Commerce in which the authors argue that the insurance companies are missing the key fact of the modern economy. This is that around 80% of the recognisable risks that face modern firms are not the traditionally insurable risks of fire, flood and other sources of material damage. He is right to draw attention to that area, and I will refer to it soon: but today I just want to say a very little about the fire tragedy, which is [or should be] absolutely centrally in the insured tradition.

There is a massive history of factory fires in Britain, which have tended especially to occur in times of recession. Hence the early insurance companies insisted on making their own inspections of premises before they would insure them: and making regular sport-check inspections thereafter. The two essential aspects that the inspectors looked for were that the type of structure was entirely suitable for the activities that were to take place within it, and that fire precautions - specifically including sprinklers - were installed and functional.

Whether or not they were traditionally insured, the high-rise blocks of the post-war years had rigorous fire protection measures. The flats within the buildings were each constructed to contain a fire for at least half an hour, before it could spread to other units [known as 'compartmentalisation'] and the external structure had to be absolutely free of flammable materials. it was also imperative that fire escapes were equally free of flammable components.

It was tragically obvious that the cladding of the Grenfell Tower did flare up spectacularly; and that there were no sprinklers in the building.

Regardless of the aesthetic impact, all potentially-flammable materials should be removed from the exterior of high-rise buildings; and sprinklers should be installed - in the first instance, in circulation areas - immediately. Osbornian austerity is [no doubt] partly responsible for the enhanced fire risk in some buildings; and Osbornian austerity must be abandoned to ensure the funding for the necessary works now.

Thursday, 15 June 2017

Rates of Interest

In a much-heralded announcement, the Board of the US Fed has raised its basic interest rate by 0.25%. This tiny change has great significance. After almost a decade while it was at its lowest ever, as one of the two components of the 'rescue' of the US banking system after the crisis of 2007-8, the maintenance of almost-zero interest was considered vital to support the entire financial system. The move away from that minimum is seen as a major indication that the Fed Board is confident that the 'recovery' of the financial system is well advanced.

Through most of the ten years while rates were held low, business in general has continued more or less as was normal before the credit crunch occurred. The oil and motor businesses have had their ups and downs, and the 'technology' giants - Apple, Google etc - have displayed phenomenal growth. The stock market has moved to new heights, the rich have got richer and the poor have survived.

In the United Kingdom, where rates were reduced as much as in the United States, at exactly the same time, there seems to be no prospect of an increase in interest rates in the near future. There is little sign of a 'recovery' in the material economy, though the stock market is at a record high. The strength of the stock market is partly due to the fact that a very large proportion of the earnings on shares that are listed on the London market comes from global economic activity outside the UK, and partly due to the decline in the exchange value of the pound since the Brexit referendum which makes those overseas earnings even larger when the gains made in other countries are converted into pounds for recording purposes.

One aspect of the British situation that is more marked that the US equivalent is in house prices. The availability of money-to-borrow at historically low interest rates has enabled people who have jobs and modest deposits to bid higher and higher prices for residential property. In London and a few other centres the demand for properties at the 'higher end' of the market has been stimulated by foreign buyers who want to put some of their fortunes into the 'safe haven' of the UK. London is one of the safest places in the world, regardless of recent terrorist incidents and the horrific fire yesterday, and the flow of money into the property market. Property developers build for their most affluent customers, so much new property is purchased by aliens - much of it 'off plan'. The effect of these forces is that an increasing proportion of the native British population is excluded from being able to buy homes, especially in London. Thus competition for dwellings has been shifted to the rental market, where prices have spiraled.  This has created a massive social problem, which spills over into political discontent. Government has ignored the issue for several years; that cannot continue. The present impotence of the government makes it unlikely that they can act: so the resentment will grow. Labour gained London seats in the recent election, and that trend will continue.

So the interest rates issue, which is being resolved in the USA, remains a major problem for Britain. It must be addressed soon.

Wednesday, 14 June 2017

The 'Value' of Reputation

Christiano Ronaldo is the world's best-paid, and probably the world's best, footballer. He is currently in the headlines as a consequence of a pursuit by the taxman, who is challenging the amount that the footballer's accountants have declared to be his taxable income from sale of his 'image rights': the use of his name and his photographic [or sculptured] image. No doubt there will be an eventual settlement. The media are interested because their viewers and readers are almost all fascinated by the massive amount of money that is attracted to people with a huge 'image'.

In my book, advertised on this page, I stress that the utter failure of Economists to account for intellectual property [ik] - of which image is just one category - is one of the most significant demonstrations of the utter failure of their subject to explain the real world in which humans live. So long as the received wisdom of the Econocracy dominates the advice that governments receive on economic issues, questions like the appropriate taxation of image rights will be more contentious than they need be; and disputes about the eligibility of different streams of income for taxation will enrich accountants and lawyers, and benefit journalists.

Footballers, film stars and inventors keep the residue of their incomes that the taxmen leave for them: that taxation makes them a little less obscenely wealthy than they otherwise would be; and some of them dissipate their fortunes due to bad character or bad advice, but the resultant distribution of wealth is generally thought to be 'fair' once the due tax has been paid. A megastar like like Sir Paul McCartney is honoured because he has remained tax resident in the UK throughout his career.

Politicians who became prominent have the opportunity to make significant fortunes after their careers have ended in failure [as all political careers do, with relative degrees of failure]. Tony Blair is notorious for the wealth that he has acquired since leaving office. The loathed George Osborne has been offered lucrative contracts, and David Cameron and Barrack Obama are both 'working' on their memoirs, for which they have been paid massive advances. Gordon Brown, unusually, has stuck to his Presbyterian principles, allocating most of his post-premier earnings to charitable causes and deserves credit for this. Even Theresa May, who is currently dissipating what little political 'capital' she has ever had, will make a nice little pile of pennies when her career is terminated.

How long that career will last is currently being determined; and the outcome of the current discussions will ultimately define the reputation on which her inevitable failure will be judged. She is risking chaos in Northern Ireland by her proposed political alliance with the DUP, and strife within her own party as a result of having sided with Liam Fox, Boris Johnson and other apparent economic illiterates in planning to leave the European Economic Area. The division of the population in the 2016 Referendum was broadly one-third to stay, one-third to leave, and one-third with no answer: a sensible prime minister would take this as a guide to seek the best and broadest possible consensus - which is very clearly for a 'soft Brexit'. Mrs May seems to be ignoring those signs, just at present.

Perhaps she is reckoning that her memoirs will be worth more, the more spectacular is her coming failure and the damage that it does to the nation? Perish the thought!

Tuesday, 13 June 2017

Brexit and a Chance of Liberating London

We are now learning that the decaying corridors of the Palace of Westminster have been alive with an undercurrent of negotiation between the parties, as the Tory party has confronted its near-defeat in the general election. If Mrs May is able to pull off her shabby compromise with the Democratic Unionist Party, to enable her to face up to 'confidence and supply' votes in the Commons, her ministers will [apparently] go ahead with building a Grand Coalition in the form of a Commission or Committee on Brexit. Potentially this can accommodate all parties around a set of principles similar to those set out in this blog last week: separating the UK from the 'political' aspects of the European Union while keeping the country within the 'economic' community [possibly as a member of EFTA and the European Economic Area].

Soon, there will be a large literature on how the Remainer May became - to all appearances - an Arch-Brexiteer, reckless of the national interest: and how that Arch-Brexiteer May was so comprehensively rejected by the nation. With her defeat, and the consequent imperative to accede to the demands of the DUP [particularly the softening of austerity and the need for a 'soft' border in Ireland] a sensible consensus can be envisaged. This will all become swathed in legend, as everybody involves gathers around the new Brexit forum and carefully forgets what they actually said in May and the first week of June, 2017.

One issue of importance is prominent in today's press, however, and I want to stress here how important it is that the UK should be the apparent looser in this debate. This is the question of the location and regulation of the market in euro derivatives. Currently the market is overwhelmingly located in London, in terms of where the contracts are datelined and in specifying that any disputes are to be settled under The Law of England; though the actual trading is in cyberspace. The amount that is traded is reported to be around a trillion euros a day: that is, one thousand thousand million euros [given that a modern 'billion' is a thousand million]. European-based bankers and the European Central Bank and some members of the Commission and the Parliament think that this market should be datelined and contracted in a eurozone country under EU law. I strongly agree. Let the European system, the eurozone system, accept all the risk that is inherent in that market. The content of the market is not money, is not comprised of 'real' assets or assets exchangeable in any meaningful way for 'real' assets: it is an Everest of betting slips. It is a bigger accumulation of debts than that which is still being sorted out from the 'crash' a decade ago. The British state and the Bank of England should be pressing as hard as possible for that market to exit the UK: even as the UK softens the official perception of Brexit.

London-based traders would remain more adept at devising and trading in these bets than their continental rivals, once the datelines are shifted to Frankfort or Paris [or both], and their turnover would not saddle the British state with an immeasurably great potential burden. There would be no downside to that shift of responsibility: and as there is no possibility of Britain joining the euro, the regulation of the market should piously be passed to the eurozone. The UK economy need loose nothing but a burden.

Monday, 12 June 2017

Being Mr May

A huge burden has fallen on the shoulders of Philip May over the past few days. His wife opened her innings as Prime Minister extremely well; then within a very short time she embraced a clutch of harebrained policies that undercut her position - notably her advocacy of foxhunting and grammar schools. Then she opted for a general election, at a time when the opinion polls indicated that the Labour party was seriously unpopular; apparently without checking that her own situation was strong. Thereafter she relied an her two close confidants, who had been unpopular at the Home Office where they had [or so it is now alleged] led her into several delusory paths. Thus came about the catastrophic manifesto and the idiocy of constantly asserting that she was 'strong and stable' as she demonstrated herself, and her position, to be anything but secure.

Most significant, and dangerous for the entire country, was her inability to explain how she would lead the negotiations on Britain's exit from the European Union. Part way through the election campaign I decided that this was because she genuinely did not understand what was expected of her. I do not think that she begins to understand what a 'hard Brexit' would be, or what catastrophic effects in would have on the entire population. I do not think that she understands any economic issue at all, whether in terms of rational ratiocination or idiotic economic theory.

She has now put her party in a position when they are in office but not in power, and even Boris Johnson has been able to see that she has earned the painful position that she must now be kept in for as long as possible. Michael Fallon and other senior ministers have made it clear that she will be controlled from now on; that policy will be made in cabinet, and she must follow it. So there is a hope that the country will get a decent outcome, and the Tories may even achieve a little credibility.

Mrs May will not enjoy that situation. Recently it has been made even more clear than before that she it utterly dependent on her husband: to a degree that makes her marriage very different from Denis Thatcher's. Denis became a popular figure, who was seen as powerless but fully autonomous; and Margaret's loyalty to him was unquestioned. Mrs May's dependency is palpable and painful, and the removal of her guard-dogs leaves the couple dangerously exposed in their isolation from real life.

Prime Minister's spouses have long been important, but to go back just eighty years, no-one doubted the calming and cheering influence of Lady Churchill. Then, when Labour won by a landslide in 1945, as Harold Laski and Herbert Morrison were said to be plotting to remove Clement Attlee from the Labour leadership, Mrs Attlee drove the small family car to the palace and her husband was given the King's commission; thus the plotters were stymied. Lady Eden took her husband on holiday when he ran off his trolley after Suez, and thereafter the nation was polite about the difficulties of the MacMillan marriage. Mary Wilson became a national treasure, supporting Harold in sickness and in health and later taking care of Lady Thatcher when she was a demented widow. Cherie Booth's independent career - and her republican reputation - did her no harm, nor did she have any detrimental effect on Tony Blair's career. His relatively recent marriage, and the children it produced, gave Gordon Brown a positive future after his defeat; and the loss of office after the loss of the referendum reanimated "Sam Cam's" career.

How Mr May fits into that catalogue is yet to be proven: but few people could envy him.

Sunday, 11 June 2017

Economic Literacy

The amount that has been written about the economy, over more than 2,000 years, is far beyond the capacity of any human to assimilate. Even with the most up-to-date media for abbreviation, synthesis and simplification it is impossible fully to understand Quesnay and Adam Smith and Marx and Keynes [to name just four of the most significant] sufficiently well to compare their ideas and to reach a synthesis of what can be derived from all of them together that could be taken forward as a guide for the businesswoman, the politician or the ploughman of the year 2023.

It is impossible for anyone leading a busy life in this stressful era to obtain a practical guide to navigating the economy from the great authors: or from the data published by the government's statisticians, or from the Organisation for Economic Co-operation and Development, the United Nations or the World Bank. Thus we all have to trust the simplified synopsis that each organisation produces, assuming that these public agencies retain something of their founders' mission to work to the common good of the human species; and then to apply the data as best we can.

Five years ago, the OECD [the second source referred to above] was encouraging George Osborne to press on with his destructive mission to cut government spending regardless of any potential social or political cost. Now they are singing to a different hymnsheet, whose contents are more aligned with the Labour than with the Conservative manifesto in the recent UK election. Superficially transmogrified as a 'journalist', over the past month Osborne has been one of the most trenchant critics of his own party's manifesto: thus the wheels turn to a succession of dramatically changing fashions in economic advice and in political discourse; and these do not necessarily change at the same speed or even in the same direction.

One of the great local stories of my youth in Lancashire was of the distinguished Northrop company that had produced some of the world's best weaving technology in the second great era of the cotton industry, between 1870 and 1950. Then, in the 'sixties, as Britain's competition with the Swiss and German loom manufacturers became more intense, developing countries outside Europe began to make their own machinery. Several such countries simply ignored the inconvenient fact that Northrop and Schulzer [of Switzerland] inconveniently held patents, and they pirated their choice of those patents in their own machinery. Their courts refused to enforce exploitative capitalist monopolies, when the Europeans tried to assert their rights; and that was the end of it. Northrop's market shrank fastest, and the board decided that the company must diversify to survive. Advised at great cost by an early think-tank, they bought a firm that made advanced machinery for the civil engineering and construction sectors. Then they assembled a combined team of technical experts from  the two component companies, retained expensive external consultants, and built their first demonstration equipment: a sort of primitive JCB. The contraption was first demonstrated to the board of the company and an assembly of bigwigs, including potential customers. The machine was started: and it began to bury itself. The front wheels went backwards, the rear wheel went forwards, and it dug itself into the ground, incapable moving anywhere. I have frequently recalled that incident, as a metaphor for the succession  of changes in economic fashion, which are implemented disastrously in economic policy by cobbled-together groups of supposed 'experts'

Saturday, 10 June 2017

Women's Work

It is paradoxical that on the day when the number of women MPs came first to exceed 200 - still less than a third of the House of Commons - all the people who had to take a lead in potentially resolving the problem that Mrs May had created were women.

The Queen gave Mrs May the commission to form a government, Mrs Foster may be able to deliver the Democratic Unionists to give Mrs May a majority in the Commons; and Ms Davidson has already warned Mrs May not to allow Mrs Foster to set terms that would be unacceptable to the Scots. Ms Davidson's party has produced more Westminster MPs than the DUP can muster, so Ms Davidson is a power broker of considerable potency.

Just to add piquancy to that mix, the three Nationalist parties are all led by women as well.

All these leaders are currently most concerned with the dilemmas and problems that they face; but they should take time to reflect with satisfaction that the historic issues of gender have effectively been resolved in this country. The question of 'gay rights' might yet stymie the chances of Mrs May continuing in office, and it is obvious that she will never be in power. But the essential fact that women' rights have been consolidated is now self-evident, and is to be welcomed.

Mrs May has failed to convince the country that she can resolve the conundrum of Brexit. She excluded most of her cabinet from any decision-taking about the content and direction of the election campaign, and she put herself forward to the exclusion of everybody else. I have not yet heard anybody say that these are 'essentially feminine' characteristics; but I am sad to say that I expect to hear it - or read it in the paper -during the weekend.

Friday, 9 June 2017

What Is the Point?

I often ask myself, why do I make a daily post on this blog when virtually nobody reads it?

The answer is always the same: I can prove that I expressed my thoughts and views on specific dates. So, just as I can prove that I laid out exactly why there must inevitably be a crash in the global financial market [and especially in New York  and London], over several months before it eventuated in 2007, I will be able to show how the failure of Mrs May's hubristic election campaign was predictable stage-by-stage over the past eight weeks.

Mr Corbyn showed a remarkable capability to stick to a script that was profoundly unlike his utterances over the previous four decades, and his party was rewarded with a mass of under-thirties' votes. It was essential that Corbyn kept to that brief - and wore suits and ties as he did so - and he obeyed advice [most likely, from his chum the Shadow Chancellor] to insist that the programme in the Labour Manifesto was 'fully costed', even though the possibility that their funding plan would meet the spending promises was nonexistent.

I now predict that we will not be entering a period of two-party politics such as is presented as the norm in simple textbooks on the British non-constitution. Instead, it will increasingly become clear that a majority of Brits would vote to separate the country from the political institutions of the EU - the Commission and the Parliament, where the UK has been treated with contempt since the Brexit vote. On the other hand, the more the implications are understood, the more idiotic Mrs May's talk of a 'hard Brexit' becomes. The idea that she could walk away from a 'bad deal' [which she has never defined, due to her lack of vision] and take the whole country into an economic wilderness - where she could be accepted as the New Mrs Moses - is very sick fantasy. Britain must remain within the European Economic space, preferably within EFTA which the UK helped to create while deGaulle was keeping us out the the then-EEC.

The Tories will have to show formal loyalty to Mrs May in the period during which she tries to bring solidity and stability to her shattered party.

Thus it falls to the other parties to seize the opportunity to shape a new consensus for the UK. They should not be embarrassed about proposing some of the same things as Donald Trump has offered Americans, especially massive investment largely funded by state-guaranteed borrowing. It the is underlying mantra of this blog that production of wealth in this country can only increase if we improve the productivity of our jobs, and that rising productivity can only be stimulated and sustained by emphasising the need for greater productiveness in all sectors. The majority of Conservative MPs are not idiots: they will recognise sense if it emerges through consensually agreed policies brought forward by other parties.

The key policies include:
Leave the EU political institutions.
Stay in the European Economic Area, preferably within EFTA [The European Free Trade Area].
Replace the Cameron-Osborne-Clegg austerity programme by a bold national investment and expansion plan.
Move towards a consensus on pensions, welfare and social care that is rationally affordable.
Move towards a national consensus on the funding and management of education: no new grammar schools, no more racketeering chains of academies, no tolerance of 'schools' where dogma is substituted for learning, and rigorous oversight of failing schools - combined with adequate funding in each case. Review the purpose of higher education, what is should provide, for whom, at what cost to the state and to individuals.
Fund the NHS properly, with rigorous accountability.
Restore adequate police and military protection for the nation.

Thursday, 8 June 2017

Quality of Information

There is a buzz around the London Stock Exchange, stimulated by informed rumours that the government of Saudi Arabia is likely to launch the state oil company - Saudi Aramco - onto the exchange. The normal rules of the London Exchange require at least 25% of the equity in a company to be made available for purchase, for the listing to conform to the basic requirement that a price per share that is struck in the market is a reasonable reflection of informed stock-pickers' valuation of the shares. It is rumoured that the Saudis want to put as little as 5% of the stock on the market in the first tranche; and that there is some discussion going on as to where agreement might be reached as between a 5% and a 25% float. Any solution of this issue would have to be allowed by the Financial Reporting Council, and other regulators, if a London launch is to be effective.

Saudi Aramco is generally agreed to be the biggest firm in the world, larger than the star-studded 'technology' giants [Google, Apple etc] and producing about twice as much oil per day as Exxon, which was for a while the world's biggest company whose shares were traded. Verifying the data issued by a company of such magnitude, so closely associated with the ruling family of a secretive, absolutist state, raises it own problems. Are hidden discounts and premiums arranged in some of its sales, on political grounds? What settlement methods are used to ensure that revenue figures are even approximately reflected in transactions? And, what oil reserves does the company control?  By a remarkable coincidence, the company's books indicate year after year that almost exactly as many barrels of reserves are discovered as the barrels of oil that are sold in that year. It could be that much greater reserves have been discovered than have been disclosed, and that disclosures of genuine reserves balance sales every year: but it does cast doubt on the whole scenario. Thus, if a stock-market launch is achieved, the old rule of "Buyer take care!" - in Latin, caveat emptor! - will apply.

British voters, entering the polling booths today, are in a sense 'buyers'. The parties have made their sales pitches, and the time for thinking is over. Commentators in the media and in the pubs and bus queues around the country have said that it is a most unusual election.

Mrs May called the election 'unnecessarily', under the impression that she would stroll on to a big majority in the Commons just by declaring herself to be "strong and secure"; and although she repeated that phrase many times yesterday [almost as if it were an incantation in some primitive religion], virtually nobody who heard it believed it. She has shown herself to be weak, both intellectually and in the ability to judge the reaction that the electorate will display to the ideas pushed out by her politically-inexperienced kitchen cabinet. She has been outrageously tight-lipped on what she expects to achieve in the crucial Brexit negotiations, showing no empathy with the 48% of voters who favoured Remain or with the probably-thirty-per-cent who are passionately pro-EU. She has shown no wish, or capability, to reconcile the nation. She has told us nothing on which we could base a rational decision in her favour.

The Labour 'Gang of Three' are suddenly reduced to a duumvirate  by the removal from the front line of the huge embarrassment of Diane Abbot; too late for an abiding impression of her inadequacy to fade from voters' minds. The Labour party has a huge problem with the electorate today: they have hit upon policies that seem to many people to be a marvelous antidote to the idiocy and cruelty of Cameron-Osborne austerity: they are risky, but no less than the risks the Tories would take with the cohesion of the nation if they continue with Osbornism [as they threaten to do]. The huge burden that all the Labour parliamentary candidates carry is the long record of anti-patriotic utterances by Corbyn, McDonnell and Abbot; which show appalling misjudgment about the evils of terrorism. Such statements are inexcusable. It looks as if Labour will be sufficiently handicapped by this legacy that they will fail to be the biggest party in the Commons; and the party will then fall prey to internal disputation. If Corbyn refuses to resign [permanently] as leader, the moderate majority of Labour and Co-operative MPs will have to 'consider their position'; which means that the launch of a second May government would be met by no effective opposition.

Paradoxically, Labour has given the electorate enough information to inspire people with their policies, while the press has gleefully supplied enough of the downside to alienate the electorate from Labour's leaders. The Tories have told the voters nothing of what they deserve to have been told: yet it looks like a small majority of the nation will vote for the party which has insulted us with obfuscation.

Wednesday, 7 June 2017

The Edge of the Cliff?

There is just a possibility that Labour could be the largest party in the Commons on Friday; which would lead to talk of 'agreements' with the Scots Nationalists and [just possibly] a coalition with any Liberal Democrats who make it past the electoral hurdle that is to come. There is a greater probability that the Tories will be the largest party; perhaps, even, with an overall majority.

Mrs May has shown herself to be anything but 'strong and stable' and she has virtually excluded her colleagues from campaigning on a national scale. Her biggest ally, in my view, is Diane Abbot, whose utterly crass performance has shown the disbenefits of positive discrimination. May's biggest failure is not the vacillation on security that has embarrassed the entire country in the last days of the campaign, but her total failure to understand the crucial economic issues that will overwhelm any incoming government.

The precarious condition of the Health Service will become conspicuous in every community, just at the same time as the substantive cuts to school budgets affect every parent and grandparent in the country. Massive protests will spontaneously appear, and communities will take kinds of 'direct action' that will be entirely new [and alien] to the UK. If the Tories are in power, they will have to abandon the Osborne austerity. If Labour are the apparent winners, they will not be able to implement their manifesto promises quickly enough to prevent tragedies occurring. As the pound sinks in external value, prices will rise and that will massively increase the obvious underfunding of the essential services.

The next government will not rule: it will be subject to events. Neither set of leaders has displayed the capability to cope with the complex of problems that will overwhelm them. The civil service has been demoralised and stretched thinly: any contingency plans that they have been able to elaborate will be inadequate: and there are no real resources to allocate to them.

Hence a government of either party, or a squalidly shaky coalition, or even a 'grand coalition' will have no alternative: they will have to fund more police, more military, at least the existing numbers of doctors and nurses and beds, and the same cohort of teachers and other school staff. This can only be done by raiding the 'money tree': inflating the money supply. This will accelerate the rises in prices that will come from the diminished external exchange rate of the pound. Labour's tax policies would take far too long to implement, if they became the government, before the public finances were overwhelmed.

Whatever sort of government emerges as the 'winner', or is cobbled together over the next few weeks, will be in an incredibly weak position; and certainly not fit to press ahead with the Brexit negotiation.

Tuesday, 6 June 2017

A Board of Trade?

Fifty hours before the polling stations open for the General Election, I first heard the suggestion from the Tory party that the Board of Trade should be revived, with the intention to drum up trade for the UK after Brexit.

A Liberal Democrat source was reported to have given the snap reaction that this was a seventeenth-century 'solution' to a twenty-first century problem. That was a clever comment, and it shows a fair knowledge of history; but it also shows that that source has not yet caught up with President Trump's thinking. As I have pointed out in this column recently, the policies that secured Mr Trump's election victory can be characterised as reminiscent of some that flourished in the seventeenth-century. I have suggested that Mr Trump has thought on parallel lines to those of the great J-B Colbert, who built up in the French economy massively in the reign of Louis XIV. But I explicitly said that I had no apprehension that Mr Trump was consciously citing mercantilist writers: my view is that in the present conditions of global trade and technology it is entirely rational to form policies that have resonances similar to those that worked triumphantly in the mid-seventeenth century; and through the eighteenth century, in those countries where they were intelligently applied.

Britain had a Board of Trade for centuries. It was allowed to become dormant - as a committee - in the very early twentieth century, though it was not abolished; and successive Archbishops of Canterbury were surprised to find that they were members of the Board which never met. The title President of the Board of Trade was given to a member of the government who bore some responsibility for trade matters|, including the supervision of the insurance industry until Gordon Brown's restructuring of financial services when he was Chancellor of the Exchequer. Ancient titles, including Chancellor of the Duchy of Lancaster and Lord Privy Seal, remain to this day to be allocated to 'spare' ministers whose duties are determined on a short-term basis by the Prime Minister.

The new Board of Trade, if it is established, is seen as a body which will find customers for British products and services in the post-Brexit world; and seek 'inward investment' to the UK. The second of these objectives indicates that the little thinking that has been applied to the concept follows on from the second most destructive of the policy imperatives that was laid down by George Osborne. The ruinous policy of austerity [which Mrs May implemented at the Home Office in the reduction in the police force] was Osborne's number one priority. Osborne's number two objective was to attract 'inward investment' to the country; and its consequence was to sell infrastructure and the companies that operate it [such as water, power supply and railways] to foreigners. For a one-off sum flowing into the British economy, control of the firms and the income streams that they attract go to foreigners; and thereafter British consumers pay tribute to the alien owners. Even more damaging was the succession of innovative firms that had established now intellectual property that were sold to foreign owners before they had even begun to make significant profits for UK investors. Those investors, and the inventors themselves, were well-paid for surrendering their rights to future returns from the companies that could make vast amounts of money for their owners: to whom British users of the products and services would have to pay high retail prices.

Even the Econocracy* have recognised that Britain's economy is blighted by low productivity. This blog has repeatedly emphasised that productivity follows on from productiveness. As was emphasised in Millicent Fawcett's Political Economy for Beginners [1870] productiveness is the situation where firms make profits which they can invest in improving their products and processes and thus raise the productivity of their businesses. That key fact has been ignored by Economists since 1890, to the massive detriment of the economy. Selling the profit stream that comes into a business to a foreign firm gives the aliens the option to invest where they see fit, and often does nothing to enhance British productivity. So it looks as if the Tories have found yet another way of despoiling the economy, at no benefit to the population.

* For an explanation of ECONOCRACY, refer to the website of the Manchester Post-Crash Economics Society.

Monday, 5 June 2017

Sugar, Hunger Bonds and a Sour Thought

British  Sugar has undertaken a survey of the nation, which shows that two-thirds of us do not know that sugar is grown in the UK. It is also noted that during the emergence of the 'obesity pandemic' the UK's consumption of sugar has gone down by 1.5%, notwithstanding the growing population. It is far too simplistic to blame 'sugar' for the obscene sights that now infest our streets.

Goldman Sachs, the 'vampire squid' of Wall Street, has recently bought a very large tranche of Venezuelan state bonds at approximately one-third of their face value. Although the bank did not buy the bonds directly from the Venezuelan authorities, this purchase has bolstered the whole market in such bonds and thus has eased the situation of the violent and incompetent 'socialist' government. Within Venezuela there are shortages of food and medicines, and the government is increasingly dependent on the security services as it ignores election results which have produced a 'dissident' parliamentary majority. At least sixty demonstrators have been killed this year. Given the already awful reputation of the bank in humanitarian circles, the description of this asset as 'hunger bonds' has elicited a great deal of adverse comment. Whether it can have any impact on the future behaviour of the giant squid is problematical.

And now to the main point, the 'sour comments'. Theresa May rushed back to Downing Street after the London Bridge/Borough Market terror event, to appear 'prime ministerial' at the lectern on Downing Street. Over six years as Home Secretary she cheerfully administered the full measure of cuts in the police service that was required by the Osborne austerity programme. She presided over the control of spending on information gathering on and surveillance of 'radicalised' suspects. Now she recognises that some flexibility needs to be given to increase the capability of the police and security agencies; but she apparently intendeds to go ahead with damaging cuts in the armed services.

Donald Trump recognises that jihadist groups must be rooted-out of the middle east, as far as is feasible, even though that raises the prospect of retaliatory measures being brought to Europe and the US; with Europe more obviously in the firing line than the US. If Britain does not have armed forces sufficient - and sufficiently well equipped - to take part in external operations, that will not protect the UK from the 'vengeance' of jihadically-inclined people who are already living comfortably as UK citizens. Britain is firmly lodged in its 'special relationship' with the USA, and this includes taking a share of the comeback for American interventions in Islamic states.

Islamist groups described the children killed in the Manchester suicide bombing as 'crusaders'. The demonology that has been formulated among these people is deeply rooted, and platitudinous verbiage about 'British values' and 'our way of life' will have no mileage at all with the zealots. Mrs May's grand words have no weight, because she has no back-up to offer within the context of her policy horizons.

Jeremy Corbyn has a shameful record of giving aid and comfort to virtually any terrorist group that has emerged in the past thirty years. He has opposed almost all measures to contain terrorists, on the clever but indefensible pretext that such measures are 'administrative' devices which do not create a judicial process that would enable the would-be terrorist to legitimate his [or her] status. His personal standing in such matters is deeply in the mire; but he and his party have a more rational proposal now for dealing with the terrorist threat. They are proposing a significant enhancement of the resources for police and security, and they oppose the cuts to the armed services. Labour does this in the context of policies to expand the economy, and thus the country's capability to pay for the forces. The fact that much of the investment would be undertaken by the state, using borrowed funds, is no exception to the long history of policy that enabled the country to finance two world wars and the equip for the cold war.

The Conservatives stand against historical experience, while Labour is concordant with it. That is not their popular image, but it is the contemporary fact.

Sunday, 4 June 2017

No Safe Haven

I sit down to write this blog entry at seven o'clock on a bright and tranquil Sunday morning. But I am acutely aware that I am exactly one mile from Tower Bridge, where the latest reported terrorist incident occurred. When I went to bed last night, it was being reported that all three killers had themselves been shot by the police; within half an hour of the first call being made to the emergency services.

The assailants, who had been armed with knives, had apparently said; in English: "This is for Allah!" as they stabbed people at random.

Although my flat is on the north bank of the Thames, many of my friends and neighbours regularly go to Borough High Street and Borough Market [as I do]; it is an easily accessible place for dining and shopping. It is quite likely that in the coming days I will learn that someone I know is a victim of the incident; but now it is most important to give consideration to all the people who were victims of the attack and to their families.

It is usual to say - and to mean - after such incidents that 'we are not afraid', 'we will not be intimidated'. Yet there will be an intensification of the admonitions to be on our guard and to report anything suspicious. The pressure on the police will intensify, and this pathetic government will try to cut some other aspect of public spending to pay for some increase in the security services.

It is likely that shoddy plans to reduce still further the number of soldiers and sailors and airforce personnel will be hardened to cover some of the funding gap; thus ensuring that the UK is even less likely to be able contribute sufficiently to the growing threats to peace and security around the world.

The current General Election is increasingly being recognised as a surreal event. The Conservatives have almost no policies, relying on the silly notion that the nation can be made to trust the prime minister to dream up policies that she has not yet enunciated, once she is returned to power. Meanwhile Mrs May is making an appeal to 'hard-working families' to support her, despite the fact that the social and community services around them have savagely been cut: and more cuts are promised. The Conservatives have abandoned their usual attempt to woo 'the business community', despite the fact that they are again generously being supported by backers who believe that the Tories are still a less-bad option than the Labour Party.

Mrs May has returned to Downing Street to be able to appear 'prime ministerial' as she makes statements of the usual vacuity and chairs a meeting of the COBRA committee that has command of no additional resources with which to enhance the security of the country.

The paradox of the election is that Labour's plans to re-energise the economy could produce resources both to strengthen industry and to fund more resources for the security services and the police. Only by investing in the growth of the economy can our society secure its future. For centuries, the state has been a major investor; often through militarily investment, but also in the nationalised industries when the UK had a functioning 'mixed economy': that was not a golden age, but it was infinitely more comfortable for hard-working families than is Mrs May's depressing environment of cuts and dissimulation.

Saturday, 3 June 2017

Using Science

It is a common assumption in the contemporary world that science provides solutions to otherwise-intractable problems, such as disease, hunger and climate change; as well as presenting governments and individuals with ethical and practical dilemmas. On balance, it is the general view that humanity has gained more than it has lost [and suffered] from the innovations that science has brought to use over the past few centuries. It is also a widely held view that the more science, and the better the science, that a country can produce determines that state's place in the hierarchy of wealth [per capita and in the aggregate] in the world and in the strength of its defences.

Some states, most notably North Korea, have developed nuclear and ballistic capabilities almost to the exclusion of all other factors, such as the general nutrition of the population. This is generally seen as a 'bad thing', and today the USA and China are jointly sponsoring proposals at the United Nations to increase sanctions against North Korea.

The United Kingdom has a very special record in scientific and technological innovation, which extends from the sixteenth century to the present day, and from biomedical sciences to astrophysics and a huge range of advanced engineering. One aspect of the development and application of scientific invention that is easily forgotten in the contemporary context is that a major component of British scientific advance has been the deployment of that science by the state.The defence requirements for newer and more destructive weapons has funded much of the innovation that has been funded over the centuries, and the current unprecedented level of cuts in defence expenditure is having a significantly detrimental effect on research and development, which is only partially mitigated by the income the defence industries receive from contracts in the USA and Saudi Arabia, in particular. Cuts in the real spending of the health service are already impacting on revenues to the big pharmacological companies, and there have been rumblings that the companies will have to take major trials of innovative drugs to countries where the hospitals can afford to buy them. The catalogue of British innovations that have been sold off to foreign investors because of a pathetic joint failure by the British state, the banking sector and large corporations to invest in their development is depressingly long.

Donald Trump's promises to spend a trillion dollars on US infrastructure projects will greatly improve flow of cash to innovative firms who will bring more modern techniques to bear in waterway management, road construction and maintenance, bridge-building and so forth. Meanwhile, the president's determination to maintain the defence of the USA will necessarily provide funding for new ideas and a stimulus to further exploration of what may become possible. The funds that the rich put into medical research, through their foundations and personall as users of innovations, will maintain a momentum in American pharmacology that will magnify the gap by which that country pulls away from the UK.

The Conservative policy of cuts and caution will accelerate the relative decline of Britain. The state has always been the most massive investor in science and technology, through the defence department and in nationalised sectors [from energy generation to the health service]. In proposing renationalisation of utilities the Labour party has not mentioned this aspect of the case, but it is powerful: inadvertently, the Labour manifesto is massively more friendly to scientific and technological advance than is the Conservatives'. The crass 'anti-business' imputations of Mrs May's ramblings reinforce one's impression of her complete incomprehension of how the economy works. Donald Trump's mercantilism may be sounder that the blathering of the Econocracy: Mrs May has demonstrated her economic illiteracy most convincingly. The way that politicians have come together across Europe - and, indeed, across the continents - to lecture to Donald Trump about his recent decision on the Paris Accord shows the extent of the grip that the Econocracy has over the mindset that pervades politics. I am looking forward to seeing what alternative Mr Trump will put forward for the renegotiation of the Paris deal: it may well make his critics look pretty silly.

Friday, 2 June 2017

Louis XIV at Trump Tower

Yesterday Donald Trump made the well-heralded announcement that he was pulling the USA out of the Paris Agreement on Climate Change; though he did indicate that he would be prepared to enter into discussions on a replacement. As expected, the claque of politicians in Europe who had been irritated by his America-first rhetoric during the previous week trotted out their pre-prepared round robin in condemnation.

Trump did not merely make a statement about the Paris Accord, but made a long speech that was exactly framed in terms of seventeenth-century mercantilism [though he almost-certainly has no direct knowledge of that literature]. He made exaggerated claims about jobs already flowing back to the continental USA under his presidency, though several firms have indicated plans in that direction, and he said how much he loved coal miners. A new mine is to be opened in the near future, and he expressed the hope that he could arrange his schedule to be able to attend. This was the clearest practical defiance that he could show to the climate change lobby: who had been under the impression that their science had been accepted internationally and assimilated into a global political consensus.

His attitude was confident, his argument simple. He would readily be understood by Louis XIV - the grandest of French monarchs - and his minister, Jean-Baptiste Colbert,  who did so much to build up the economic infrastructure of France in the sixteen-sixties and seventies. The great wealth that was consolidated for the state by Colbert was quickly dissipated by Louis in fighting wars, in building ever-finer palaces and in running the most lavish court in known world history. The magnificence of Trump's monuments and residences can be compared with that of Versailles, though the architecture is of a different era. It will be interesting to see whether Trump is drawn down the imperialist path that ruined the French monarchy: at least, he is restrained by the fact that the power to declare war lies with Congress, though the Executive has considerable autonomy in ordering specific military action. This could became a field for tension quite soon in this presidency.

The most important consequence of Trump's announcement for Britain is that the US has stepped away from setting an example in the 'greening' of the economy. At the start of the millennium the advanced economies, to a considerable extent led by the United Kingdom, set themselves targets to reduce emissions of carbon dioxide in the immediate future: while China and India were given licence to increase their emissions over a period of years, on the promise that as their economies reached maturity they, too would set and follow emissions-reducing targets. By setting a statutory framework for this policy, and pretty well sticking to it, the UK has provided an example for the world; at a huge cost to companies and households who have to pay massive subsidies for 'green energy'. The standard of living in Britain has been lowered by this policy, and industries like steel have been put in a precarious position.

Trump has opted out of this notion, for the USA. It is probable that he will be prepared to enter new negotiations only on the basis that the USA is not to any degree disadvantaged in terms of jobs and of living standards by having to set an example which others may not follow. He sees no sense in impoverishing regions of a prosperous country when other countries are still expanding their pollution overall. He may also be a 'climate change denier'; which is a different issue. At this point he has simply stated his answer to the crucial global geopolitical question that arises from the creation of the US rustbelt: is regional impoverishment worth setting an example to the world, when there is no guarantee that the world will follow?

This is not an irrational stance it is not based on disinformation or perverse thinking, though it is beyond the purview of the typical Grauniadista. The political economy that prevailed in 1775 [the year before Adam Smith set the hare running, that was to become Economics] was a sound science, and Trump has instinctively formed parallel conclusions. He has expressed scepticism about global warming, as such: if he were to take this anti-scientific dogma into the formulation of policy, he would deserve global condemnation. The almost-universally accepted science is broadly convincing. But so far Trump has not taken that step: he simply says that the measures towards mitigation of the warming process that place the USA at an unnecessary economic disadvantage [and, in his perception, make his country a laughing-stock] are not acceptable. He should be understood in that context.

Thursday, 1 June 2017

Capital, Labour and Donald Trump

In the long history of political economy [the science that existed before Economics was invented] the starting-point for understanding the economy was recognition that there were three 'factors of production', three inputs that were necessary to achieve any output that was useful to [or desired by] the human race.

'Land' stands for all the resources of planet earth: the surface of the earth and everything that is on it, under it or capable of capture above it [such as birds].

'Capital' is all the output of past periods of time, that people hold back from consumption so that it can be used to facilitate production in future. This came to include tools, equipment and machinery and the buildings that house them, breeding stocks of animals, stores of seeds for future crops, and [after the invention of money] a stock of money that some people accumulated with which to employ people over time to produce output in the future. Those people became known as 'capitalists' because they became the controllers of a large proportion of the capital the any nation carried forward from each period into the next.

'Labour' is the capacity of humans to work physically and mentally to extract the materials of the earth [and, in the case of capitalists, to organise the activities of other humans] so that the product of successive years could increase: subject to the risks that can arise from climate, geology and human behaviour to disrupt a smooth process of wealth creation.

After the creation of human society and political entities, some of the risk that were assumed to exist for humans in a 'state of nature' were lessened by the system of law and order. Other risks, such as subjection to tyranny and the possibility of destruction in war, were inherent in society.

From the very beginning of political entities, the people who gained control of communities, of cities and of states recognised that they could achieve a good lifestyle for themselves, and acquire the means of influencing and dominating others, by controlling and exploiting exchanges between the common people. Governors facilitated trade by creating money; then creamed off taxes from markets where exchanges took place. In early stages of social sophistication it was recognised that if some people concentrated on activities in which they had special skills or experience, or access to knowledge that was denied to other people, they could specialise in a small range of production, maximise their output and exchange some of their produce with specialists in other fields. Thus specialisation and exchange developed together, and produced economic expansion; and if the government facilitated this process there would be even more available in taxes to make for a luxurious court and a powerful military resource.

By 1700 there was a considerable literature on political economy, especially in northern and western Europe; and among the writers there was a general assumption that a 'good' government facilitated production. It was also recognised that due to climatic and other factors, no country produced everything that would satisfy the wishes - the wants - of the people and their rulers. So international trade [or the development of colonies in different climatic and geological zones of the earth] should be facilitated: provided it increased the aggregate wealth of the nation. International exchanges that led to a loss of wealth to a country were to be prevented wherever possible; except where a short-term dependence on some import facilitated an accumulation of capital that would, over a series of future periods ensure an even greater national product.

These might seem to be arcane points in terms of the second decade of the twenty-first century: except that, just last year, a man was elected to the presidency of the United States who accepted pretty well the pure understanding of political economy that I have just summarised. This leaves open the question: was the invention of Economics - foreshadowed in Adam Smith's 1776 Inquiry into the Nature and Causes of the Wealth of Nations - an intellectual aberration that has dogged humanity for 250 years?

That is a question to which I will return; not least, as relief from the depressing daily news about the UK General Election.

Wednesday, 31 May 2017

'Costed' Manifestos

The opinion polls show a narrowing gap between the Labour and Conservative parties, with just a week to go until the actual election.

Mrs May, who famously called the Conservatives the 'nasty party', has descended to the very nasty technique of attacking the Labour leader personally: and her close supporters appear to be indicating that this will be the main focus of her speeches from now on. This is a stupid decision: Mr Corbyn does enough to re-emphasise his own shortcomings and inadequacies every day, so for Mrs May to hammer on that theme will almost certainly elicit increasing irritation from the electorate.

It also shows up Mrs May's own inadequacy. In government, she has been an assiduous implementer of Osbornian cuts to public services and a total failure in reducing net immigration to the UK. Simply to assert that she will be more competent than Corbyn in a negotiation with Brussels is mere rhetoric: especially as it is obvious that 99% of the negotiating will have to be done by diplomats and sectoral experts.

Voters are increasingly willing to consider what Labour has on offer. Commuters into London are open to the suggestion that railways could not be less concerned for them under nationalisation than they are as corporate franchises. The chance of having lower water bills and power charges is not to be spurned. The possibility that the health service and social services might be improved is to be welcomed. Even the recent tendency of George Osborne's Evening Standard to attack Mrs May can have no impact in the north-east or on Merseyside, but it could be damaging to the Tory vote in London.

Yesterday Corbyn's conspicuous failure to remember how many millions of pounds his childcare policies would cost made a one-day wonder, to which came the riposte: well, nobody can remember everything all the time. It is not news any more.

More importantly, Labour does have several expansionary ideas. Like Donald Trump, they are prepared to borrow billions of pounds to unleash economic activity; which compares very favourably with the continual attrition of all public and social services that the Conservatives promise. It is not at all clear that Mrs May has any clear idea of the economic policy that her government has been following, or will follow after the election, if [as is still likely] she is the narrow winner. She certainly has no grand plan for investment in any sector of the economy. When she talks of 'more money' for schools or the NHS, the sums involved are always less that the perceived real-terms need as the population grows and ages.

Tories warn that Corbyn and his close team have no serious or senior government experience: but they cannot demonstrate a significant record of achievement for their own side. All governments overspend: even the Cameron-Osborne-Clegg regime did not eradicate the deficit, though some of the methods they chose to reduce it, notably student fees, effectively destroyed the Liberal party in parliament.

Mrs May chose to have the current election, and could be on track to loose it. That will be a blunder bigger than Cameron's gamble on the Brexit Referendum and open to way to a bizarre coalition government that might just manage to govern.

Tuesday, 30 May 2017

'Rational Markets'?

The New York Stock Market will open today, after the Memorial Day holiday, at a record high. London will also open at or close to a record high, following the Bank Holiday.

There is no obvious reason for these phenomena.

The US has a demonstrably erratic president. His business-friendly approach is offset by his commitment to restore basic industries to middle America; but the strong businessmen whom he has put in his cabinet, combined with the broad spectrum of views among Republicans in both houses of the Congress, will ensure that nothing wildly irrational becomes more substantial than a presidential tweet.

The general view of commentators is that the 'strength' of the stock market arises principally from the predominance of the 'technology' giants: Google, Apple, Facebook etc, whose popularity ensures that the prices of their shares rise almost continuously, The biggest companies in this area now have larger total share valuations than do the major real-world companies in fields like oil, mining, motors, transport and the construction of computer hardware. The valuation of such businesses depends on the number of people who use them: the more users they have, the more valuable it is for firms in the 'real world' to advertise food, drink, holidays etc alongside other IT experiences. As increasing numbers of older people wean themselves from addiction to the new media, and younger people are attracted to newer competitors of the big networkers, the market dominance - even of Facebook and Google - will crack. The bubble in the valuations of the big boys will be deflated: how many firms and individuals will be devastated by that collapse will depend on how rapid the deflation is.

The 'strength' of the London stock market is very largely due to the large proportion of companies whose shares are listed in that exchange, but their main activities take place in the rest of the world. For them, the fall in the value of the pound means that they are able to declare rising profits [in terms of pounds in which their shares are priced] and thus their 'value' increases. Given the political circumstances in the UK, the pound is unlikely to harden against other world currencies: so the phenomenon of a rising stock market within a weakening domestic economy will continue. The result of the coming General Election is impossible to call, but the balance of probabilities is that the Conservatives will win: but by a much narrower majority of Commons seats than seemed likely when Mrs May called the election.

Mrs May talks of 'strong and stable' leadership, in what is virtually a one-woman campaign. As was clear again in the non-debate on TV last evening, she has no idea what her policy will be in the Bexit negotiations. She had no notion what is a 'good' or a 'bad' deal for the UK. She does not even consider any option to the inherited policy of austerity which is undermining the cohesion of society, the defence of the nation, the education of the young, social care [about which the Tories' "policy" becomes vaguer and more contradictory every every day] and the health service. She is a desperately bad leader: but she still comes over as probably more acceptable than Jeremy Corbyn.

Corbyn is an idealist. He would 'campaign for a nuclear-free world' if he were prime minister. Would not everybody, if they thought it even marginally feasible? We would all like a disease-free world, a pain-free world, a poverty-free world. At the same time, he would abandon the million Ulster protestants to the vengeance of the militant republicans, washing his hands of responsibility by saying that he believes in peaceful discussion. Corbyn is Labour's problem: he is a major reason why millions who are totally unconvinced of Mrs May's fitness to lead the country will either decline to vote, or reluctantly vote Conservative.

In my book on BREXIT I conclude that disenchantment with politics, politicians and the Economists who advise them was the principal reason for the decision that people made [against Mrs May's advice] in the Referendum last year. That mood of deep despondency will be much magnified in the coming months; and neither party leader has an inkling of it.

Monday, 29 May 2017

Putin Near Paris

President Putin is today due to visit France, where he will open an exhibition on Franco-Russian relations over three centuries and have lunch with President Macron in a house once lent to Peter the Great of Russia during his study-tour of western Europe.

Macron will go into the meeting with a list of conversational objectives, all of which will be to some extent constrained by his commitment to the European Union. The French president's smirk during last week's Trump tirade against those members of NATO who under-provide for their defence spending will have been copied into Putin's file; together with a reminder that France [unlike the UK] has a truly independent capability to deliver nuclear weapons. Britain's nuclear missiles are under joint American-UK control; France's are entirely at the disposal of M Macron. This alone makes France a 'power', and the commitment that Macron has expressed to a closer EU must be set alongside that independent capability. France is also one of the permanent members of the UN Security Council, which alone will justify the two presidents comparing their positions on the major global issues that have recently been on the Council's agenda, and those that might appear there soon.

France was, in effect, the colonial power over Syria from 1919 to the nineteen-fifties, under the Franco-British carve-up of the Arab lands that were separated from the Ottoman Empire as a result of the First World War. More recently, France has played little active part in the awful war in Syria, as the Russian commitment to the Assad regime has been increasing. France has huge background knowledge and understanding of the country, and the opinion of the French establishment [of which Macron is a selected product] may be helpful to Putin as he looks through the murk that is deepening in Syria as Trump appears to be more willing to take more military action against Assad. France's role in helping to keep the EU states [and NATO, as such] out of that conflict can be useful to Putin; and reinforcing the pressure for a benign neutrality of 'Europe' towards Russia will be well worth the visit.

Closer to home, for Putin, are the questions of Ukraine and Crimea. France has supported the NATO and EU policies of utter opposition to the recent Russian seizure of the Crimea, including the imposition of sanctions. The French economy has suffered slightly from the loss of trade with Russia that has resulted from the sanctions; and gained no benefit from them. There may be time in the two presidents' wide-ranging discussion to exchange hints on how that standoff could be resolved.

Russia regards Ukraine as an integral part of a single homeland. Kiev, now the Ukrainian capital, was the centre of the first city-state that grew into Russia. Moscow [the Grand Duchy of Muscovy] is a much more recent development; and deep in Russian history and sentiment are the sense that Moscow and Kiev belong together in a single state. The fact that the people who speak Ukrainian were abominably brutalised during Stalin's collectivisation of agriculture made many of them willing, at first, to welcome the German invaders in 1942 as liberators. Within a year most people recognised their mistake: the racist brutality of the Nazis exceeded  even what Stalin's police had imposed, and thus the eventual Soviet victory was welcomed; at first. Then the Communist regime imported ethnic Russians who had been made homeless by the war to rebuild the shattered industrial cities, especially in the Donbas, adding linguistic complexity to the situation within the Soviet Republic of Ukraine [which, along with Belarussia was a given a separate seat in the UN, alongside Russia, as an inducement for Stalin to join the organisation]. The separate soviet republics had no independent power anyway, until the Union of Soviet Socialist Republics simply fell apart when Gorbachev lost his grip. Then the former soviet republics gained international recognition as sovereign states, as that term was generally understood in international law. Colonel Putin and his colleagues in the KGB watched, aghast, as the Baltic states, the Balkan states, Poland, Czechoslovakia, Hungary and even Putin's former workplace East Germany joined NATO and applied to be admitted to the EU.

While Belarus was consolidated as a puppet state to Russia, Ukraine made attempts to establish itself as a significant, independent European power; but fell prey to corruption, faction and alien interference. Russia would like the Ukraine to form a close federating with Russia, accepting Russian foreign and defence policy. France has joined with its allies in opposing Russian attempts to push that situation along. There is every reason to expect that Putin will push Macron to take a more pragmatic view of the Ukrainian [and thus the Crimean] situation than have his predecessors; and it would be interesting to know what quid-pro-quo Putin is able to offer France on that delicate topic.

Sunday, 28 May 2017

Bank Holiday Reflections

Britain's two May Bank Holidays are relatively recent introductions. One, brought in by a Labour government, was an indulgence to the left wingers who wanted the May Day tradition of Marxist parades and speeches to become part of the British way of life: no chance! The other, that is taking place tomorrow, is an expression of the secularisation of the United Kingdom and the inadequacy of the contemporary church establishment: it replaces 'Whit Monday' which, certainly in the north-west of England where I grew up was the greatest show of religious adhesion [and of the disparity between Roman Catholics and Protestants].

Whit Sunday was when Jesus' Apostles realised that they had received extraordinary powers of communication, and the self-confidence to become preachers of the faith even though Jesus himself no longer existed in human form. It comes seven weeks after Easter, when Christians believe Jesus rose from the dead and appeared to various of his followers until his Ascension into heaven, which is remembered ten days before Whitsunday. The seven week gap between Easter [a movable feast] and Whitsun allows the weather a good chance to get much better, so out-of-doors celebrations were more likely to be able to be staged. Women and children got new clothes to celebrate the day, which could then be worn through the summer. On Whit Monday every church had a procession through the local streets, with banners and scout bands; and it was a matter of pride for the clergy to get the biggest possible turnout of adherents, however little those people were involved with the church through the rest of the year

As people drifted away from the churches, and the churches became wishy-washy shadows of their former selves, so the state captured the Whit Bank Holiday and moved it away from the religious commemoration. As people have become more affluent, the idea that they would buy their summer clothes for a specific date then use them through the year is increasingly remote from their memory [if they are old] and the whole concept seems incredible for the younger generations to take in. It would be impossible for a revivified church - if such a thing were imaginable - to put the clock back to the relatively poor and simple way of life that made such a big thing of a second-rank Feast of the Church.

In the nineteenth century Karl Marx has written that religious observance was the 'opium of the people'. The masses could not afford opiate drugs, and there was a huge prejudice against anyone who made himself or herself unfit for work by ingesting or inhaling such substances. But the churches tried to provide a total framework for living. Besides Sunday services and Sunday Schools [for men, women and children] there were weekday 'classes' for women and for men, men's social institutes with billiard tables and smoking facilities, 'field days' when the whole church congregation would go to a field and enjoy games, races, and a substantial high tea [no alcohol allowed to Methodists]. Just as drugs are fashionable now, so participation in the whole range of church activities was fashionable until the affluence of the nineteen sixties gave people more choices: they could go out in their cars, join golf clubs and generally participate in a new consumerist world. Marx's comment was truer than he knew: and when time-consuming church activities were no longer needed to alleviate the misery of life in a small terraced house with minimum furniture, a large family and a very restricted diet, the whole thing died.

It is not a matter of regret: it is simply a socio-economic phenomenon that has occurred. The only sad aspect to it, is that few people now remember about it, and it is not an aspect of social history  that it has ever been fashionable to write about.