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Thursday, 25 May 2017

Campaigning to Resume: The State of the Parties

Today UKIP will launch its manifesto for the upcoming general election, and the party's implausible leader will have considerable media coverage: much of it unfavourable. Then UKIP will sink to a low rating in the opinion polls, with no prospect of being represented in the House of Commons.

The other parties will re-start their campaigns tomorrow, though local leafleting will resume in some areas today.

In the limited time on the media that has been allocated to Jeremy Corbyn in the past two days, he has spoken sensitively and sensibly about the Manchester tragedy. Labour has certainly not lost ground during the shut-down of the campaign.

Mrs May has had a big opportunity to appear to be 'prime ministerial', and has not overplayed her part. However, her campaign was faltering before the suicide bomber shut down partisan discussion, and the Prime Minister can have had little time to review the mess that she had made for herself, particularly on the costing of social care and how that bill is to be met. Like all Conservatives, Mrs May has the dilemma that the policies pursued by her party - in power for the best part of seven years - has largely stifled real economic growth. A government that is hemmed in by obsessions with austerity and the [probably notional] elimination of the deficit on state spending can only contemplate shifting some fragment of the already-existing national wealth into the state budget to meet the cost. Thus people are being asked to accept that the inflated 'value' of their homes can be raided to meet the costs of their personal care, at need.

One significant aspect of the situation is that the management of social care lies with local authorities. Therefore local authorities, whose budgets have been squeezed very hard by the Osborne-Hammond policy of cuts, are to be expected to create mechanisms for valuing property, and further mechanisms for funding the care of property-owners [whether in care homes or at home] over periods of several years until the supposed 'value' of the property is realised in a sale. To maintain the 'value' of the property, it has to be maintained properly: which is a further element of cost that the local authority will have to meet. The implication is that local authorities will have to become massive borrowers: if anyone will lend them the money.

The segment of the massive complex of financial markets that led to the crisis of 2007-8 was the exposure of 'sub-prime mortgages' in the USA. Financial institutions were bullied by the Clinton regime into allowing people with no successful record of paying their bills, often with no secure employment, to buy houses on mortgage. When economic conditions tightened, in 2005-6, thousands of people simply handed the keys to their properties to the lenders and drove away. The 'value' of those houses in the books of the lenders - who had now become, will-nilly the owners - were the prices at which they had been bought. They could not be sold on for the same prices, as thousands of such houses were dumped on the market at once.

Thus one can expect lending institutions to be very cautious of advancing large sums against properties whose 'value' will be incalculable on the unforeseeable future dates when they will be available to be sold. If the government becomes the lender, or the guarantor, of the loans that local authorities will need to fund the care that has to be given to the owners of the properties that will be drawn into the scheme on the death of the owners - or of their partners [who may, obviously, also need years of care in the further future] - that guarantee must be added to the national debt: which obviously blows away any hope of reducing or eliminating the the deficit. The more this question is emphasised in the last fortnight of the election campaign, it will be clear that the Tories' plans are no more 'affordable' than are Labour's.

At the least, Labour is claiming that their plan, especially borrowing to fund infrastructure investment, will stimulate growth of the material economy. Mrs May offers no such prospect.

Wednesday, 24 May 2017

The Nation's Knickers

In these days of Primark, I am impressed by the survival of market stalls [all over the UK and beyond] whose owners seem to thrive on selling clothes, especially underwear and nightwear for women and children. Compared to Primark the range is limited and the prices are relatively high, but these stalls [particularly in market halls] provide full-time employment for their managers.

Virtually everybody uses underwear, therefore they need to buy it somewhere. It can come by home delivery after being bought online, in plain packaging, however 'exotic' or bizarre it may be; but most people buy it in person.

For three generations, the predominant supplier of underwear to the British nations was Marx &Spencer, M&S, which was an essential component of every high street and shopping mall in the land. They set the pace in design; but they were never the cheapest option. They increased the range of outwear that they sold, especially after the second world war, and through the age of austerity that was followed by the 'mixed economy'. Then, in the nineteen-sixties, new sorts of rivals emerged. M&S had itself originated as a market stall and as long as the founding families were in control it retained something of the open-market approach to stock purchases. The new chains of shops emphasised that they were 'fashion' outlets; while M&S - whatever its image-makers tried to present - was seen as essentially a utilitarian source of supply focused on the lower middle classes. Thus the market changed around the old staple: which then - in the 'seventies - had a serendipitous moment. M&S started supplying food for the busy housewives who had jobs, and quickly developed a positive reputation for ready-made or part-prepared meals.

Fast-forward to today. There are still M&S shops on all high streets, but the balance of trade in them has changed dramatically. After decades of redesign and restructuring [and financial losses, and changes of chief executive] the firm still has not caught up with the customers' behaviour. hence this morning they have announced a 64% drop in profits for the past year. This is ascribed to the need to spend ever-more money on shutting down acreages of clothes hangers and sock-and-knicker-stalls, and to open or adapt more smaller sales floors for food.

The dilemma that the firm has faced - and still faces - is that they are locked into property contracts [including the ownership of large buildings] which were ideal for extensive departmental stores, but which are not much wanted by their rivals and are vastly greater than their own requirements. To sell or lease whole or part of buildings to rival clothing suppliers would anyhow accelerate the decline of M&S as clothiers, by assisting the competitors to gain high-street prominence. Yet M&S need physical shops where the families can buy their part-prepared meals. There is mounting competition from the fast-food delivery firms, which chip away at the ready-food market as fast as M&S can adapt their estate to supply it: and it is probably too late for M&S to enter the market with a fleet of motorbikes, unless they are able to merge with [or take over] a market leader in that field.

Thus we are likely to see continuing phases in the decline and fall of a predominant name in British retailing: while the market stalls serenely carry on.

Tuesday, 23 May 2017

More on Universities: Fees and Cost

Within the past 24 hours, Labour has 'upped the ante' by declaring that their cessation of university tuition fees would apply to existing students and new entrants from the start of the next academic year. The Tories' riposte, that the Labour scheme is 'uncosted' has absolutely no merit, because it is quite clear that the prime minister and her 'scullery cabinet' have no idea of the costs of any version of their confused 'policy' on social care, either: and it is agonisingly obvious that the Tories do not want to know how much a revitalised National Health service would cost.

I refer to a 'scullery cabinet', rather than a 'kitchen cabinet', because it is obvious that the Prime Minister's close claque of chosen minions should not allowed near hot pans or ovens. Once a party has been unsettled as much as the Tories have been by the thought of loosing the 'grey vote', there is no chance for them to recover poise and confidence in a couple of weeks: especially if the Prime Minister doggedly sticks to her decision that some pensioner benefits will become means tested. Meanwhile, thousands - perhaps millions - of pensioners have for the first time considered not voting Conservative: and once the thought creeps into their minds it will recur. I know nobody who thinks that the IRA-supporting Corbyn is fit to be the Prime Minister: but millions now want his party to drive the government to a narrow majority in the next House of Commons. A mass student
vote for Labour, plus a couple of million hesitant pensioners, could achieve that target.

The question that I was considering yesterday was that of what is the use of a higher education system, and how much should such a system cost when the price is set alongside the demands of the Health Service, Defence, Social Services, support for rural communities, schools, lifelong learning and housing? Several days ago, I referred to Cardinal Newman's nineteenth-century book on The Idea of the University in which he advanced the totally non-utilitarian view that the purpose of higher education was simply and solely the development of the intellectual and moral capabilities of the individual scholar. In Newman's day, there was no state funding of the few universities that existed: he was himself involved in developing an essentially catholic university College in Ireland, and capitalists in Bristol, Birmingham, Manchester, Sheffield, Leeds and Liverpool were funding higher colleges to teach the skills that local businesses needed in their future employees.

The First World War revealed that Germany was ahead of Britain in many areas of production: and in some fields - such as optical glass for telescopes, binoculars and periscopes [used both in the trenches and in submarines] - the UK had no facilities comparable with the Germans'. The exigencies of war demanded that those gaps had to be closed, regardless of cost: and for more than half a century thereafter the Department of Glass Technology in Sheffield University, with the associated British Glass Industry Research Association, was fostered by the state to provide a national focus for developing the higher technologies in glass and related materials.

Throughout the twentieth century the utilitarian approach to funding universities was constantly challenged by graduates in the liberal subjects - history, classics, modern languages, music and philosophy - that had been funded by benefactors [ancient and modern] in the older universities, who now argued that to be 'civilised' any modern university had to offer those 'soft' subjects alongside science and technology. Once that became part of the received wisdom, applications from students to study the arts and 'social sciences' swamped science applications. The benefits for an individual holding an indifferent degree in arts or social sciences are exiguous: recent research shows that such graduates do not command higher salaries - or even more comfortable jobs - than people who have not been to university. It has also been revealed that mathematics graduates who do [idealistically] take up schoolteaching in the hope of raising the national skills base in science and engineering resign after a very short period, as in most schools the pupils have no wish to learn 'difficult' subjects and disrupt the lessons.

Mrs May would not do it, but the country deserves a full and fearless assessment of what the nation needs in terms of higher education. The size of such a system should be postulated, the cost estimated, and the optimum means of paying for it identified. During World War II Sir William Beveridge and a small team devised a model for the 'welfare state'; and the Minister for Education, R A Butler, himself co-ordinated the workstreams that led to the definitive 1944 Education Act. In the absence of such seminal template models, policy is lost in a drift that the economy can no longer support.

Monday, 22 May 2017

Tuition Fees

Due largely to the naivete and inflexibility of Mrs May's thinking, combined with the hegemony that her clique of advisers has achieved, the Conservatives are losing ground to Labour significantly as the election campaign continues. Two obvious areas where the Tory vote could crumble quickly are a consequence of the threat to the incomes and assets of older people - most of whom have worked all their lives, in the belief that they had a social contract with the state [pay national insurance and receive benefits in health care and pensions] - and the opportunity offered to students, their parents and their younger siblings to be emancipated from tuition fees.

Within my personal memory are the facts that in 1960 only about 5% of eighteen-year-olds could go to university: they paid no fees, and were eligible for means-tested maintenance grants that were sufficient to maintain a young person in modest comfort during termtime. There were plenty of casual jobs to be taken up in the vacations, also; but the majority of students were from the middle class who were happy to support their children to the extent of topping-up their maintenance grants and keeping them in the vacation.

In the late nineteen fifties Harold MacMillan's Conservative government became concerned as to whether the UK was preparing enough graduates in science and engineering, and eventually they appointed a Committee of the 'great and good', chaired by Lionel Robbins the dominant Economist at the London School of Economics. The government welcomed their report, which recommended a massive expansion of the university system to cover both the expansion of the existing universities [and colleges of advanced technology] and the foundation of several new universities. The government accepted the report: hence we have the universities of Warwick, Sussex, Lancaster, York etc. There was also a parallel expansion of city technical colleges into polytechnics, which later merged with local teacher-training colleges to become nascent universities [to be 'legitimated' as universities in the early 1990s].

The system grew; but it grew awry. Far from producing an abundant supply of scientists and engineers, the universities struggled to fill their spanking new laboratories with adequately prepared students. Even when they offered introductory programmes for students whose maths and physics were shaky, the science faculties were under-employed with teaching: so the staff spent more time and resources on research, which benefited the economy in general and attracted overseas students to take up some of the vacant places. For half a century the British schools system has failed to inspire young people in sufficient numbers to take the preparatory subjects they would need to study science or engineering; while the universities have prepared tens of thousands of engineering graduates from Asia. Asiatic countries have continued to send their students to the UK as fees for 'international students' have increased massively; maintaining some [but not all] of the engineering facilities envisaged by the Robbins committee.

Higher education was made a 'right' for all qualified eighteen-year-olds and 'mature students'; but maintenance grants were reduced and fees were imposed as the numbers rose to more than 40% of the age cohort and most of them opted to take non-scientific subjects. University became a growing-up experience for the millions: as Oxbridge had been for hundreds of the most privileged youths before 1850. Tuition fees have risen to £9,000 a year, loaned to the individual on apparently-manageable terms. Labour has promised to abolish the fees, that have never been imposed in Scotland.

The question of whether university is worthwhile for the nation would loom large, if Labour won the election and implemented its promise to end the fees. Billions of state funds would be spent on young people to study 'useless subjects' for a few hours a week, as the economy continued to go down the pan.

More on this issue tomorrow...

Sunday, 21 May 2017

Trump Triumphs?

President Donald Trump is having a great time in the Arab world. His hosts, led by Saudi Arabia, expect that he will reverse President Obama's raprochement with Iran [which will cause problems for the newly re-elected President of that country] and open up trade and other relations - including access to US territory - to some of those who would have been excluded from the US if Trump's attempted decree to 'ban Muslims' from the US had not been stymied by the lawful authorities.

The upside from all of this, besides The Donald getting a 'very heavy' gong from the King of Saudi Arabia, is that the Gulf States will buy advanced American weapons [some of which Obama refused to let them have], thereby increasing the profitability of the arms industry - including its British contractors; and the Arab states promise to invest heavily in the next generation of US technology and production. President Trump, of course, is claiming that this is a very quick response to his campaign promises to regenerate the rustbelt: which was a major factor in delivering him the election victory last year. But it is clear that the Arab managers of sovereign wealth funds, who have decades of shrewd investment behind them, are not going to invest in steelworks and metal fabricating factories in the midwest that will not have a chance of profitability in competition with low-wage output from emergent economies. The Arabs will select the knowledge industries and high technology projects that will have a very high probability of being doubly productive: they will have high productivity which means a high turnover per employee; and great productiveness which means that they will generate large profits for the firms that own them, that can be allocated to further projects and to high shareholder payouts and to rising wages for employees [which will raise the general level of demand in the US economy]. Trump and his colleagues may be able to offer incentives [such as have existed through the Obama presidency] for some of the investments to be located in the midwest, rather than on the Atlantic or Pacific coasts; but the plant will not offer mass redeployment of the horny-handed sons and daughters of toil who voted so enthusiastically for Trump. There will be a few posts for janitors, car park attendants, caterers and cleaners: but the tragedy of middle-age uemployment will not be removed by the direct outcome from the President's trip.

Other outcomes from the middle-east leg of this tour will be irritation in Iran, an escalation of the conflicts in Yemen, in Syria and possibly in Iraq, and deeper disillusion on both sides in the Palestine conflict and among the US Jewish population that has hitherto backed Trump enthusiastically. The tour goes on to the Vatican [a photo call], to Belgium [ a meeting of NATO which Trump appears to be learning to love: in contrast to his rhetoric on the campaign trail], and to a high-finance gathering at which he will be, at best, a passenger.

The pot of dissent from his actions as President is bubbling on in the US, and may overboil at any time.

I read that US Psychiatrists maintain strict patient confidentiality, and there is a rule against any doctor with specialist skills publishing any speculative piece about the mental state of a currently-serving officer of state. On the other hand, there are just the beginnings of breaches in that rule as the antics of a very non-standard head of state cause more embarrassment. I am sure that the top women and men in the profession will hold to its highest standards; but as international incredulity expands, there will be more speculation on every level.

The deals that the Donald has done this week are between the US and other governments: they will stand; and that should benefit some few of the American long-term unemployed, as well as the rising sectors of the US economy.

Saturday, 20 May 2017

Difficult to Believe - But True

I am not often astonished by politicians, but this week has been the exception. While Mrs May has hit out hard at those who should be her most secure voters, Jeremy Corbyn has subscribed to a manifesto that just has a chance of mitigating his own negative impact on the majority of voters.

The reason why the Tories have struck at pensioners' benefits and capped what they will put into the National Health Service arises from the Treasury obsession with eradicating the deficit on government spending; though this is now deferred [again] until after 2025. The Conservatives' assumptions are that economic growth will be sluggish over the period of the next parliament, that productivity will not improve significantly, and that the recent dependence of the economy on citizens borrowing more to finance continuing consumption will weaken as real incomes decline. Hence they make 'cautious' assumptions about the government's ability to increase taxation, which force them to a very limited vision for government spending. Implicit in the data are that defence spending will not increase, that the police will continue to be starved of necessary resources, and that some 'savings' can be made when we are no longer chipping-in to the European Union budget. Behind the personal campaign being fronted by Mrs May there is a void in policy and absence of realistic hope.

Labour, by contrast, are proposing massive spending on the economic infrastructure and on science and technology: which is the only way in which the productiveness of the economy can be enhanced. Gordon Brown greatly abused the word 'investment' when he was piling up the government's deficit in his last years as Chancellor of the Exchequer: he categorised a lot of government's ordinary spending as 'investment', while he also supported the external financing of school and hospital building that is so much of a burden on the institutions that now occupy those premises. This inherited Labour legacy is unfortunate, because the shadow chancellor [who has the reputation of a dangerous 'leftie'] has imposed on the manifesto - and on Mr Corbyn - the crucial understanding that real investment is the only way to achieve substantial economic growth that can fund both greater real wages and higher standards of social and health services. The public is rightly cynical as to whether Messers Corbyn and McDonnell are the people who can deliver what they offer: but their offer is based on good common sense: which has not much been visible during Corbyn's long political career.

It is a depressing prospect that millions of pensioners will vote for their own disbenefit, rather than take a risk of supporting Labour. By contrast, millions of younger people with nothing to lose might as well plump for Labour, and the hope that tuition fees will be abolished, more homes built, the NHS protected and the police reinforced. The last fortnight of this election campaign will be one of the most interesting periods in which to be alive and active.

I'm going to buy a lottery ticket with my newspaper today, in the hope of being able to buy some publicity for the proposition: "don't vote for Mrs May unless you really want to experience what she is offering".

Friday, 19 May 2017

May's Happy Hour in Halifax

No doubt, Mrs May's claque had reasons for setting her on the platform in Halifax yesterday, to deliver a speech of almost grandiloquent pompousity; and of equal vacuity. It would appear that they [and she] are so confident of victory in the coming election that the detail of the speech - other than the quaintly anachronistic phraseology - was unimportant.

Inevitably, she reiterated her target of reducing 'net immigration' to a maximum of 999,999 souls by a date to be announced. Later in the day her Defence Secretary admitted that there might be an 'economic cost' imposed on the nation; but it would not reduce national income immediately because there is no target date from when the policy is expected to take effect. Thus the prime minister's obsession can be tossed into the long grass, at least temporarily and rhetorically.

More significantly, the squalid face of the government has been revealed in the rumour that the government is trying to suppress data on the extent of aggregate overspending by NHS trusts until after the election. The politicos know that the state of the NHS is a very weak spot in the Tories' case, and showing how bad the situation is cannot help them. If the Conservatives win the election and stick to their present policies, people will die: who, in an ideal world, would be saved [at least temporarily] by an adequate health system. That is a material consideration, especially for the elderly who are being freed from the triple lock on their pensions and released from the bus queue by the withdrawal of the service.

The prospect that the Tories are creating is as unwelcome to the most reliable cohort of voters as that set out in the Labour manifesto.

Elections should not be this interesting!

Thursday, 18 May 2017

Dangerous Politics

In a superficial sense, the current UK General Election seems quite dull. The press is overwhelmingly taking the view that Labour's manifesto is so ridiculous that it confirms their general argument that Mr Corbyn, therefore his party, is unelectable. Mr Farron, the LibDem leader, looks and sounds like an untutored novice: some members of his party may gain [or recover] seats in the House; but not enough to change the situation overall. The Conservatives do not need to seem to try: they just push the image of a 'strong and stable' Mrs May leading an almost-invisible but allegedly competent team to a certain victory.

But yet: the Labour manifesto stirs up a lot of issues that have given rise to much digruntlement over several years. The opposing parties' machines can say that Labour's plans are unaffordable, and produce tables of numbers to show this in terms of statistics from the Osborne era, but against that are two potentially significant demographic appeals. Labour can attract the young, with their promises on tuition fees and on the health service; and they can attract the old by reference to their proposals for the health service, pensions and allowances: and now by reference to the Tories' 'mean' policies on pensioner benefits, pensions and the seizure of the properties owned by deceased former recipients of care in old age. These factors may not succeed in overcoming the image of Corbyn as a bumbling Marxist antique, but they could make the election a lot closer than was thought even last weekend.

The real disappointment is in the Conservative manifesto. They have absolutely no positive policy for the regeneration of the country. While Labour talk of spending billions on the infrastructure of the economy [that would then support growth: as promised in the USA by Mr Trump], the Tories are entirely confined within the constraints of Osborne's austerity.The dull, dull Chancellor of the Exchequer acts as if he were a puppet of the Cameron-Osborne regime. While government spokesmen still talk hopelessly about putting billions into 'education' and mitigating the chronic inadequacy of the NHS, the real and present crisis of funding in the Health Service is apparent to all. The Southern Railway is facing another strike; but their franchise seems secure. The do-nothing regime is neither strong nor stable: it is weak and impotent, like a rabbit caught in the headlights of Osborne's ongoing juggernaut, conveying the economy to national impoverishment.

Britain's economy urgently needs billions of pounds of investment: and not in silly schemes like HS2 or unproved foreign nuclear power sources. As stressed in this blog yesterday, the key to a successful economy is to reach out for higher productiveness: if an economy achieves that, the productivity of workers and investment will grow [and even economists can measure that].

As the details of the Conservatives' manifesto are released, the grey vote may be thrown away. Young people may be attracted to Labour, while they will see nothing in a second referendum on the Brexit issue.

The central proposition of my book: NO CONFIDENCE: The Brexit Vote and Economics was that the British people used the referendum to reject the Cameron-Osborne regime and the political class from which they came. Mrs May is currently turning this election campaign into a defence of what was defeated in June last year. The time for voters to realise this may be too short to determine their votes, and they may rightly be afraid of the uncosted aspects of Labour's programme. But the lady and her close team of minders seem at present to be turned dramatically against the national mood: and that can turn the election against her.

Wednesday, 17 May 2017

Productiveness, Science and Politics

In the book that is promoted in the strapline of this blog, I emphasise the difference that several great nineteenth-century political economists made between productivity and productiveness. Millicent Fawcett, whose statue will soon be unveiled at Parliament Square [the first woman to so be honoured] was an advocate of the distinction, though it is not for her achievements in economic science that she is to become a permanent feature of Westminster.

Productivity means the measured output achieved in a set time from a defined economic activity, set against the cost of the measured inputs: for example, the cost of one hour of one worker's time, plus all the resources required to enable that worker to be effective, set against the estimated 'value' of the output achieved in that hour. I have often pointed out, that a high level of productivity can be achieved by workers who unpack and sell cheap imported clothing: but their work serves to increase the balance of payments deficit and, insofar as the shop's customers borrow money to buy the clothes it increase net personal debt. The turnover of the business that employs these people is included in the national income statistics, and if that turnover increases year after year this shows 'growth' of the business [and is a potential contributor to claimed overall 'economic growth'] while its long-term detriment to the economy is obvious.

Many modern Economists argue that it is not detrimental to an economy if the country buys cheap clothes from other countries, provided it sells them high-tech exports: and that can be true, provided the overall balance of trade is favourable. When the balance of payments is adverse to a country, however, as is the case of the UK, every extension of the deficit is potentially painful [and eventually some trivial import could trigger a catastrophic recognition by global commentators - perhaps in a rating agency - that the country's situation is irrecoverable under the present regime].

Hence comes the importance of productiveness, the business outcome that meets all the costs actual production, plus providing a significant surplus to fund expansion of the factories that produce the surplus, and/or t fund research to devise even better and more innovative products by the firm, and/or to pay high returns to banks and other investors in the firm who can allocate their enhanced income flow to investments in other firms that can have innovative new products and techniques to offer, and/or some of the surplus can be paid as higher workers' wages and increased shareholders' dividends, giving individuals the power to buy the new and improved products. The more money consumers can use at their discretion to buy the products that they most prefer, that will help to steer the next generation of investment into the most lucrative channels, leading to the most successful firms in the market to have the highest level of productiveness.

Most innovation requires scientific input: new applications of proven techniques, modification of techniques, new computer applications, and new materials. A country must have a sufficient output of science graduates and high-level technical experts to serve these activities; and that must be backed up by the highest level of research.

In the current UK election, some lip-service is paid in passing to a perceived need to maintain the science base on which much of Britain's surviving material export industry depends [and which could be threatened by massive tax increases on both firms and on key employees]; but there is a tendency by politicians of all parties to put in the 'too difficult' tray the whole issue of how badly the scientific community can be harmed by a crass approach to Brexit. This key aspect of achieving greater productiveness is not at all understood, anywhere in the political class. Oh dear!

Tuesday, 16 May 2017

Fundamental Economic Principles and Politics

British and Northern Irish voters are about to be assailed by a wave of propaganda and comment on the major political parties' manifestos for the election next month. The idea of basing a party's electioneering on a printed document is generally understood to have originated with an open letter from Sir Robert Peel to his constituents in Tamworth, which became known as the 'Tamworth Manifesto'. Far from uniting his party - the old Tories of the eighteenth century, plus the new capitalist class - Peel's partial espousal of the popular free trade movement led eventually to the formation of the new Conservative and Liberal parties that dominated politics in the UK until the First World War; after which Labour emerged as the 'left-wing' opponents of the Conservatives, to replace the Liberals.

Now, in the second decade of the twenty-first century, we are left with the Conservative and Labour parties as the only perceived contenders to form a government; and on the basis of opinion polling it is clear that the Conservatives are most unlikely to need to ally with a minority party to have a clear Commons majority until 2022. Cynics are pointing out that parties with massive majorities - especially in highly contentious circumstances, such as the Brexit negotiations - are likely to split into factions. Chancers are hopefully suggesting that a defeat for the Labour party - if it is sufficiently overwhelming - will lead 'moderate' Labour politicians to seek to establish a new party of the 'centre left', possibly in combination with what remains of the Liberal Democrats.

The two major parties have a very clear ideological differentiation between them, which is being emphasised in the Labour manifesto and in the speeches of the Labour leader and his closet associates. A majority of Labour candidates in the election are equivocal in their support for the policies that the leader is advocating; but their futures depend on them campaigning as Labour standard-bearers: so they are stuck with the leader's rhetoric. The leader and his claque are also determined that Mr Corbyn is the elected leader of the party, and he will remain leader however disastrously the electorate rejects the party in the election. The last defeated leader, Ed Milliband, led changes to the party's rules that enabled a new cohort of members to join on very modest fees and have a vote for who was party leader. An unknown number of the new members wish the defeat of Labour and have joined as agents of disaster; and another unknown number are from the 'hard left' who have voted Mr Corbyn into his position because of his impeccably left-wing, neo-Marixt record.

The parties have made it relatively easy to explain the difference between Mrs May's Conservatives and Mr Corbyn's Labourites in terms of ideological stereotypes.

Conservative ideologues cite the eighteenth-century Scots Philosophy professor, Adam Smith, who argued that it is impossible for a government to control and economy perfectly, in the general interest; so the politicians should not try to do that. They should leave the field clear for people to follow their natural instincts in their dealings with other. Smith reckoned that there was a fundamental force in the economy: human self-interest - that provided unity and balance to the entire economy; and that politicians should just let that self-correcting mechanism work.

Mr Corbyn's critics [much more than Corbyn himself] ascribe his ideas to Karl Marx, a mid-nineteenth-century opponent of Smith's doctrine, who argued that under a semblance of free trade the system of capitalism - in which fewer and fewer people control the economy, effectively enslaving the majority of the population, whose living standards are pushed downwards - had become dominant in the world. Marx argued for the revolutionary overthrow of the capitalist
 system, and the governments that fostered it.

Nobody suggests that Mr Corbyn is a revolutionary Marxist, though he has been open to neo-Marxist opinions all his life. Nor does anybody suggest that Mrs May is an ideological devotee of the 'rational markets' nonsense that has captured the hierarchy of academic Economics. But generalised references to Smith's and Marx's arguments can be deployed to differentiate between the two major parties; and such references will be a welcome relief from the intensive propagandisation of the next three weeks.

Monday, 15 May 2017

Probability and Political Certainty

Today the Chartered Institute of Personnel and Development [of which I am a Fellow] has produced its latest forecast on living standards in the United Kingdom. Their survey of many thousands of employers predicts that earned incomes over the whole economy will rise by one per cent over the next year: the same amount as is promised to nurses, to their great distress: as revealed in their Conference over the weekend. The Institute notes that published forecasts of retail price inflation are running at around 2.6% for the year: so living standards are set to fall.

The relative strength of consumer demand over recent years - and during the months since the Brexit referendum - has been ascribed to some people being willing to spend some of their savings, and to many people increasing the amount they owe: mostly on credit cards. In the face of rising prices [largely due to the decline in the value of the pound against other currencies] it is generally expected that consumer demand will decline in the coming months. Since some of the most successful retail chains have already experienced falling demand [exemplified by Next] and it is expected that the coming winter will see even lower demand, that will quickly result in a fall in demand for shop workers. The Conservatives rely on assumptions of such slackening in the economy to assert with great confidence that Labour's proposals could not be afforded: even where they can be costed.

The Conservatives are being careful to make promises that will seem to cost the state nothing, beyond minor expenditure on bureaucracy and publicity. Thus they are promising massive benefits for workers, in the form of 'rights' such as the opportunity to take unpaid leave for up to a year to care for a relative, during which time their jobs must notionally be kept open for them. Mrs May is also promising that local authorities will be able to buy derelict sites more easily, on which to build homes for rent: but no money is being made available for such a programme. Various other desiderata have been identified that can be accomplished 'within existing budgets', and the government's spin machine will be emphasising the great benefits that the public will derive from such tinkering if the Tories get the expected 'mandate' from the people.

Mrs May's team are presenting her as the focus of a 'strong and stable' government, contrasted with the 'chaos' that they perceive in the Labour party hierarchy. The primary assumption is that a Conservative government, backed by a large Commons majority and with a set of ministers handpicked by Mrs May, can focus on the Brexit negotiations. This is a massive delusion.

There is every sign that the economy is on the edge of a precipice, with falling demand and a huge potential for disruption of firms and public institutions - not least, hospitals - by staff who will feel that they are goaded into drastic action after years of austerity. Brexit will be shoved further and further down the agenda as the economic crisis matures; and that will make it more essential for the government to accept the best terms that the continentals will offer them for a close trading relationship with the European Union. On the first full day of his Presidency of France, young M Macron is flying to Berlin, supposedly to tell Frau Merkel how he wants Europe to change: it is odds-on that he will return to Paris having been told firmly to learn a lot before he tells the continent's power-lady anything. But France and Germany will stay closely aligned on Brexit, and Mrs May will have to lump it.

As Noel Coward sung: "Bad times are just around the corner".

Sunday, 14 May 2017

'Robin Hood' Taxes and Bitcoin

Yesterday, the Labour Party added to their repertoire for the coming election the concept of a 'Robin Hood' tax; so-called because it can be represented as a tax on 'the rich' [financial institutions] to aid 'the poor' [HM Treasury]. It was explained by the BBC as a tax on bonds and on complex financial instruments, such as those called 'derivatives', and it was projected that at the outset it would raise over £20 billion for the national budget.

If any such tax were to be introduced, we can be certain that it would regularly be increased both in its rate and in its extent; as has happened with Insurance Premium Tax. During this election campaign, some Labour figures have suggested that Insurance Premium Tax should be increased on private health insurance premiums, to provide funds either for the NHS or for social care. The direction of travel is obvious, when any new tax is dreamed up.

The original concept that gave rise to the idea of 'Robin Hood' taxes came from the American Economist James Tobin, who proposed that there should be a tax [perhaps of 1%] on 'spot' trades in currencies. Thus if a trader went into the market and swapped dollars for yen, either the seller or the buyer would have to pay the 1% tax: and thereby disclose the transaction formally to the authorities and accept the liability for the tax to be paid. The spot trade in currencies was seen as potentially disruptive to business generally; and potentially disastrous to a government's management of its economy. The reality of this threat was made clear when Britain was forced out of the ERM [the European Monetary Regime, which was the precursor to the Euro] by the weight of speculation against the pound in international money-markets. Thus it was shown that the market could be more powerful than the government that supposedly controlled the world's most sophisticated financial system.

The speculative international monetary system has never been brought under control; and it almost overwhelmed the global economy in the 'crash' of 2007-8. To prevent that collapse from becoming fatal, the US, UK and other major governments whose banking systems were closest to bankruptcy in effect nationalised the banks' debts, putting an indefinitely great taxpayer guarantee behind all the banks' contracts with each other and with their customers - except in the cases of Bear Stearns, which the US authorities steered into the arms of a much bigger bank that was rich enough to absorb its liabilities [and, eventually, to cash in on them], and Lehman Brothers which was allowed to fail but which over the next decade was revealed to have had enough assets to meet all its liabilities [when they were unscrambled slowly over the next ten years; though they could not meet their immediate obligations on the day before they were declared to have failed].

Since 2008 there have been recurrent proposals, especially within European Union institutions, for a sort of Tobin Tax to be imposed on various types of transaction. Often these have been mooted by continental interests that are envious of the London market in finance.

I have several times advocated that the Tobin concept be developed along a different route, to mark out clearly the difference between banking [the essential function of conserving customers' money, and lending it judiciously to worthy borrowers] and betting [which everyone understands, in essentials; it is always a voluntary action in which a person or a firm stakes money in the hope of making more money: while accepting the downside risk that the stake - at least - may be forfeit if the bet fails].

Despite the near-meltdown of the entire legitimate banking system in 2008, regulators have continually backed off making this distinction, between banking and betting; which I believe is fundamental to understanding and controlling high finance. Real bankers accept savings into their safe [state-guaranteed] institutions and lend a permitted proportion of the deposits to worthy borrowers. That has been the essential mechanism for funding trade and industry for millennia, and it remains so today.

But betting is mere speculation, and the daily global turnover of that business now greatly exceeds legitimate banking. The most advanced and incomprehensible class of bets, as far as the general public is concerned, is called 'derivatives': they are simply bets: however complex may be the data on which the bet is formed and the contract in which it is expressed. Other forms of bets are many kinds of 'swaps', most 'futures' and 'spread bets' and 'options'. Very clever men and women have devised an impressive range of bets, and some of them can be dressed up as means by which the risks facing a real-world business [such as the basic rate of interest changing unexpectedly or a sudden and dramatic change in the price of some essential commodity like oil or iron] can be compensated to a greater or lesser extent. Sensible regulation can be framed to distinguish genuinely prudential purchases of options or futures by firms that function in the material economy from merely-financial bets. Both are classes of bets, but it would be possible to classify them such that different rates of betting-tax would be applied.

The segment of the financial market that Tobin would target first with his tax is the trade in currencies. Now, in a world context that the good professor could not have envisaged, computers responding to highly sophisticated algorithms trade billions of dollarsworth of imaginary currencies every minute; and even a 1% tax on those transactions [if it could be levied] would fund all the national budgets in the world. But if any national authority demanded 1% of the notional transactions, to be paid on a specific date in a specific currency, that would kill the business stone dead; because collecting 'real' money that features in a state's banking statistics in respect of fanciful transactions in the cybersphere would require a link to be opened up between two universes that cannot be conjoined. The real world remains under threat for so long as the megabetting industry masquerades as part of 'finance' [or even, in some cases, as 'banking']. The financial establishment would act quickly and effectively to see off any proposal for a UK Robin Hood tax, however big a parliamentary majority Corbyn's people could round up from their flying pigs.

Meanwhile, a global attack of 'malware' [aka ransomware'] that locks up computer files against a demand for ransom, has affected over 100 countries, including much of the NHS in this country. The ransom demands ask for payment in bitcoin. Bitcoin is a wholly pernicious invention of unnamed computing geniuses, which purports to be a form of money that can exist without the sanction of any government and without control by any central bank [or an international agency such as the International Monetary Fund]. From the day it was established, it has been agonisingly obvious that it is perfect for many sorts of criminal settlements. Nevertheless, some licensed bankers and traders have seen themselves being able to add to their business portfolios by trading in bitcoin; and hitherto they have been able to persuade their regulators and the central banks to let bitcoin payments develop. The catastrophic criminality that has been evident in the past 24 hours must, surely, set the thing in true perspective. All use of bitcoin - or of any clone or derivative of bitcoin - must be criminalised

Saturday, 13 May 2017

Electioneering into Depression

The current General Election campaigns seem to have been running for a long time. "Strong and stable" has become a national joke; and the more earnest Mr Corbyn shows himself to be, the less convincing he is as a possible national leader. UKIP shows no capability to recover from the terminal condition in which the Brexit decision plunged them; and the LibDems have absolutely nothing to offer.

The Tories' over-emphasis on Mrs May is a very high risk strategy, and if their chances of loosing the election were at all significant it could be ruinous. She has utterly failed to show her hand on the vital questions that must be negotiated with the European Union, to an extent that causes millions to doubt that she has any ideas at all. We can expect that very shortly after the new government takes office the inevitable leaks from the negotiations will display the weakness of the government's intellectual grasp of the task in hand.

Meanwhile, the extreme economic weakness of the United Kingdom is openly to be seen: even during the election campaign. The current government dos not even try to pretend that the NHS is adequately funded, relative to the demands falling upon it and the capabilities of modern medicine. Even more bizarre, according to some government researchers, most schools are 'overfunded', and the May campaign does not offer any increase in the education budget. It is clear that the Conservatives, when elected by a surprisingly small plurality of votes, will press on with austerity; and that there will thus be no significant attempt to lift the economy into a new era of growth supported by state spending.

Labour's plans are dismissed as 'unaffordable' both by the rabid press and by relatively balanced commentators: the implementation of any significant proportion of them would massively strain the national finances to an extent that would deter investment in industry and commerce and would thus reduce the capability of the system to bear increasing taxation.

Donald Trump is daily proving the lack of maturity that will blight his entire  presidency; but there can be no doubt that he was sound in expressing his gut feeling that a chauvinistic, mercantilist economic policy would bring jobs and growth into the US economy. This is happening as a result of companies making their own decisions, in the context of Federal government policy. Whether Trump stays or goes, his impact is unstoppable.  Britain needs a similar mindset shift. The country that made the first, most significant industrial revolution; the country that pulled itself together after Dunkirk well enough to share with the Americans in the invasion and occupation of western Europe - while supplying the Russian war machine on a mighty scale - can change the world again: and it must do so.  To become a moldering  museum off the shore of the EU is not acceptable and is certainly not affordable.

May, Corbyn and the others do not have a scrap of understanding of the big issue between them. That is why the election will be a depressing experience for all of them: and for all of us.

Friday, 12 May 2017


I am lucky to have two homes in England; one a flat in Wapping with outlook to the Thames just east of Tower Bridge, and the other in the middle of Bakewell, which is one of the nicest little towns in the country.

I moved job, from Sheffield to London - and from academic life to a professional institute - in 1989, and have been in Wapping ever since. In 1986 I acquired a home in the Peak District, just outside Bakewell, and have retained my connection with the area ever since, Both homes are fully equipped, so I travel between the two with only a briefcase.

Both communities, Wapping and Bakewell, have experienced significant demographic change over the past three decades; and I have been privileged to live through the changes in both places. Both have seen a significant breakdown of multi-generational  indigenous British families. In Wapping, as the former warehouses became expensive flats and as more new-build luxury apartments were constructed, so the prices of former council flats that had been sold to private buyers also rose dramatically. The construction of the Canary Wharf complex to the east of Wapping meant that the former London Docks area became a highly desirable base for living [at least on weekdays] equidistant from the City and Canary Wharf. Old dockers [and their wives] who had not moved east to Dagenham or Buckhurst Hill have mostly died. Almost all their children and grandchildren live outside London, even though a very large proportion of them still work in London. In the 'eighties and early 'nineties, an incomer to Wapping [still a relatively rare beast], who used the local shops, pubs and church was quickly accepted into conversations; and I was astonished within a few weeks to encounter people in the street [whom I did not recognise] greeting me with a cheery "'allo, Dave!"
The survivors from among those 'old Wappiners' still greet me, and I able to return the salutation to them, but it is an increasingly rare phenomenon: though it still happens on a daily basis.

While it was possible, before the millennium, to predict with considerable accuracy who would be in each pub  in Wapping, and thus what the conversation would be; and often to look forward to it; that entire scene has changed, One pub has opened - the Captain Kidd, with a wonderful riverside beer garden - and four have closed: the Scots Arms,the China Ship, 'Bullins' aka the Three Swedish Crowns and the Jolly Sailor. Only in two of the surviving pubs is there anything like a traditional bar-room conversation, and that only occasionally. The excellent butchers and bakers shops are at least as busy as ever, but with a new clientele, Most of the pubs thrive on catering and on Wapping becoming something of a 'destination' thanks to the excellent upgrade of the Overground East London Line and to events at Tobacco Dock. Wapping is wealthier and more orderly than at any time in its history: but the docklands character that I was privileged to see [albeit two decades after the docks closed] has entirely gone.

Bakewell has undergone similar changes in the same period. It is much more intensively a residential town, with a large population of reasonably affluent pensioners. Almost all the pupils from the outstanding Lady Manners school who go into further and higher education make their careers outside the Peak. Employment opportunity for other under twenty-fives is limited to the council, the cattle market, the shops and the pubs. Shops and pubs are focused on the millions of visits to the town that are made by the millions of people who live within a day-visit distance of Bakewell in greater Manchester, Sheffield, Chesterfield, Nottinghamshire, Leicester, Derby and Staffordshire. Local residents can use the facilities, at the prices that are set for the tourist market - and many do, within budgetary limits -but they also travel to Chesterfield, Sheffield or Derby for competitive prices. Most of the pubs are now good quality restaurants: though a couple of them still welcome conversing local non-diners. Like Wapping, Bakewell is more affluent and orderly than ever in its past.

Wapping without the docks is a purposeless place where it is good to live; and so is Bakewell. Most of the locals who are to be seen about Bakewell are not farmers or engineers [which were the trades on which the town thrived in past centuries] but employees in the service sector. The place is prettier than ever, but the spirit is infinitely weaker.

Thursday, 11 May 2017

University Free For All?

The leaked Labour Party Manifesto that the BBC [among others] is brandishing this morning aims clearly at 'old Labour' voters and at first-time voters, in particular.

The promise to abolish tuition fees in UK higher education in England will be hugely popular with students; and also with the millions of working people who are struggling to cope with their own student debt repayments and would love to avoid their children becoming trapped in the same debt tangle in their adult years.

However, there are many consequential issues that need to be considered. The question of how 'free' higher education would be funded needs realistic answers, rather than platitudes. This immediately knocks-on to the question of "how much higher education should be funded by taxpayers?" To which a respondent must ask further questions, of which the first and most fundamental is that which was addressed by Cardinal Newman in the nineteenth century; since when, the opposite of his argument has been the basis on which governments have funded universities. Newman argued unequivocally that the purpose of universities is, and should only be, the humane education of the individual: no utilitarian objective should be allowed to intrude into the process of self-fulfillment.

Meanwhile, in the last third of the nineteenth century, the masters of industry and commerce in Manchester, Sheffield, Birmingham, Leeds, Liverpool and Bristol were collecting funds from each other to establish university colleges that would teach the young men of the area [by full- and part-time study] the essentials of textile technology, metallurgy, engineering and other applied sciences; with the necessary underpinning of mathematics, physics and chemistry. Into the twentieth century, especially in the light of deficiencies in British technological capability revealed by the First World War [which exposed areas of shameful technical dependence on imports from Germany], government funding for universities - especially in applied sciences - was increased. But technology is hard to learn, and has never had the high prestige that the literate classes have given to music and literature. History is popular relaxation reading: higher mathematics has a very small appeal to the mass market. So it has proved with student preferences: especially in the 'Robbins expansion' of the higher education system in the nineteen sixties [which saw the doubling of the older civic universities, and the establishment of several completely new universities] the arts were allowed to take in many more students, while the science capability of the universities was expanded beyond the level that could be filled by capable and willing UK students. Hence by the nineteen eighties, when the Thatcher governments welcomed university expansion to absorb otherwise-unemployed twenty-year-olds, a pattern was set whereby the arts, social studies and 'media' grew in response to demand; and science labs were stripped out to make more lecture space that could be crammed with people doing 'useless' degrees.

Although teaching media studies requires only a fraction of the unit cost of teaching mechanical engineering [which involves high expenditure on machinery, workshop space, materials, technical support etc], the aggregate cost of allowing hundreds of thousands of people to undertake materially non-productive courses every year was seen as excessive: so tuition fees were brought in; and the 'arts side'of institutions, at least, became virtually self-funding. The residual capacity for teaching and research in applied science was increasingly filled by overseas students, who took their knowledge back to support competition with British industry, while the UK schools system encouraged their pupils to take the cheaper and more popular arts options in which nice children from nice homes got goods grades and so got their schools good gradings. The consequential mega-disaster for the British economy needs no elucidation in this blog today; though it is a subject that must recur frequently in future.

Having opened up the subject, Mr Corbyn and his little friends need to explain how - and why - the universities should be funded. Is there any national interest in maintaining over a hundred and thirty such institutions, many of which have no functioning applied science capabilities? Are the taxpayers really willing to fund a million Newmans a year? Now that the issue has been raised, it needs to be addressed clearly and in full.

Wednesday, 10 May 2017

Mrs May's Caps

Theresa May has been a lifelong fashionista who asked [on Desert Island Disks] for a lifetime subscription to Vogue: which makes it odd that she has chosen to wear for much of this election campaign tweedy jackets that hang oddly around her distinctive anatomy. She looks to me like a chargehand beater on some minor grouse moor; in which case a cloth cap would complete her ensemble perfectly.

Her election campaign has featured two very un-Tory caps: one on energy prices to households and the other on immigration to the post-Brexit UK.

Critics and commentators from the whole political spectrum have pointed out - as nauseam - that a cap on energy bills was one of the policies that vanished with the 'Ed stone' when Labour lost the last General Election. Mrs May has decided that it is an election winner. As I have mentioned in previous blogs, any change to the model of privatisation brings into question the rationality of the whole concept. To cap a major segment of the pricing structure is a fundamental move away from the Economists' model of privatisation: in the direction of arbitrary government interference that smacks more of a dictatorship than of a free market; or even a balanced mixed economy such as the UK enjoyed in the period 1950-70.

Electricity bills, in particular, are increased by the huge subsidies and tax reliefs that are given to windmills, solar panels and other forms of 'renewable' energy: at the expense of the customers. It is a result of government policy that these charges are loaded on the consumers, threatening household budgets and the future of energy-intensive industries, notably iron and steel. In these circumstances, it is simply silly to make another intervention and hand over the implementation of the idea to an 'economic regulator' that is meant to apply the nonsensical models that were fashionable in the 'eighties. No doubt Mrs May will win the election, and will have her way on electricity bills: and there will be plenty of time to rue the decision before the next General Election. Eventually, the whole idea of economic regulation of utilities will have to be stripped back to first principles and replaced.

Mrs May's other cap - on net immigration to the UK - has attracted a lot of comment on the assumption that there is almost certainly a deep psychological need for her to persist in this policy, which has featured in the last two Tory manifestos and fallen to her, as Home Secretary, to 'fail' to implement. I have been told by British-Asian friends that some of their communities voted for Brexit on the assumption that if European immigration was restricted there would be more room for greater Asian migration into the UK. The statistics of the last several years show that net migration from outside the European Economic Area into the UK exceeds EU citizens' immigration to the UK very significantly. So even an extremely 'hard' Brexit will not reduce immigration to anywhere near the level [less than 100,000 net per year] that Mrs May is proposing as the maximum. Her refusal to exclude international students from the tally is simply silly: damaging to university finances and to the balance of payments generally, and significantly weakening the talent pool within the country [if she can pull it off].

Industry and commerce are struggling to explain to this purblind person that the country unconditionally needs to call upon a wider pool of skills and talents than the UK itself is generating. As long as the austerity regime continues - especially if resources are being misdirected to harebrained schemes such as grammar schools - the British educational system will not produce the skills that are needed. Fake apprenticeships are an expensive travesty: they do not produce skilled workers, but young people who are even more sure that the system has cheated them. The immigration cap, if Mrs May actually tries to implement it, will poison the whole Brexit negotiation and cause deep anger among immigrant communities: as well as real detriment to the economy [not least, the creative industries]. There is a real peril in this crazy concept.

Tuesday, 9 May 2017

The Inevitable Collapse of the Thatcher Legacy

Margaret Thatcher was a forceful woman; but I have heard or read no suggestion that she was an especially intelligent person. She gained an Oxford degree, in Chemistry, when most men in her age-group were on active service; so there were plenty of places for girls from provincial grammar schools to read for degrees. Margaret Roberts - as she then was - was guided to her modest achievement in the examinations by a postgraduate tutor whose war-work was the important search for inert gasses that could be used to fill fuel tanks on aircraft after the fuel was used, thus reducing the very high risk of the tanks catching fire and taking the 'plane down. Forty years on, Margaret Thatcher rewarded him with a peerage. He was a man of the highest non-religious integrity, and I was privileged to know him modestly well.

I begin with that reminiscence because I think it important to recognise that the concepts that Thatcher espoused in her mature political career were not hers. The came from others who were prepared to share her political agenda: and, indeed, to push it further than she would naturally have been inclined to take it. Prominent among these were the several economic advisers who progressively led her into the set of ideas that are still characterised as 'Thatcherism'. The core of all the thinking that she accepted was the idea that markets are 'rational': the notion that the economy is a natural system that operates according to its own natural laws [just like the material universe is subject to Newton's laws - except where it is not]. Those who advocated this principle, of whom the first in Mrs Thatcher's environment was Keith Joseph, argued that the manifest weaknesses that had engulfed the British economy in the nineteen seventies were the inevitable outcome of decades of the 'mixed economy' in which both Labour and Conservative governments had been prepared to over-rule market forces in order to achieve social and political priority objectives. Thus when Mrs T became the Prime Minister the economy was completely disoriented from what would be achieved if it was working 'properly'.

It was inconceivable that half a century of state direction could all be removed at once, so a progressive pattern of removal of the state from the economy was initiated. A major component of this project was privatisation of the major utilities. Water, gas, electricity, airlines, railways, telecommunications, radio and TV and a huge range of other supplies and services were predominantly controlled [and owned] by the state. The clever new idea was that they should be sold to the people, who would become active shareholders who would hold the boards of the privatised companies to account, thus ensuring that they competed openly and fairly in an efficient market. That didn't happen; large swathes of the shares were bought by financial institutions when they were first offered for sale; and the hundreds of thousands of citizens who did buy such shares happily sold them on to institutions at prices higher than they had paid for them: so in a short time institutions owned virtually all the shares. In many cases the utilities were then sold on to foreign investors.

Later, particularly under the Cameron governments, it became clear that the supposed 'markets' were not functioning at all well. Customers of the gas and electricity retailers did not spend many hours every year deciding which company to use for the coming period, as the Economists' market model demanded. Very recently, the May government has indicated that it will 'cap' prices - because competition has failed to keep retail prices 'competitive' or affordable.

Behind this retail market failure is an even more fundamental failure of the market in supplying 'wholesale' electricity. In total defiance of market Economics, successive governments have opted to subsidise 'green' energy, notably windmills, in order to meet arbitrarily assessed targets for the reduction of emissions of the gasses that are said to cause global warming. In principle, that can only be a 'good thing'; but when the cost of it is laden on the customers' bills, the pretence of creating a 'market' in energy is exposed as mere rhetoric. When customers are additionally laden with the forward costs of the 'most expensive structure in the world' - the Hinckley Point nuclear power station [that may never work] - the whole myth of rational markets is destroyed.

Point-by-point, the Thatcher legacy has unwound; and as relief  from the current election rhetoric, I will extend the point of today's message over other sectors of the economy.

Monday, 8 May 2017

Good for France? Maybe. Bad for Britain? Definitely!

Today is VE Day: the celebration of victory in 1945. One of the most amazing aspects of that victory is that deGaulle's France was counted as one of the winning allies. It was awarded a permanent seat on the UN Security Council, a small slice of the occupation of Germany and of Austria, a sector of Berlin and an honoured place in the conferences where post-war Europe was carved up between the USSR and the 'western allies'.

Yet from August 1940 to the middle of 1944 France was effectively occupied by the Germans: though a small sector of the country called Vichy France [after its capital] was run as a Nazi puppet state. Most of the French nation acquiesced in the situation; a great hero of the First World War served as Head of the Vichy State and a leading politician acted as his first minister. Many more French men and women than has ever been admitted collaborated actively with the Germans. Nevertheless, Churchill was able to persuade Roosevelt to accept deGaulle as a junior partner in the alliance, and for his own reasons Stalin went along with that. deGaulle and his 'Free French' set about purging the most conspicuous collaborators. They executed Laval and imprisoned the extremely aged Petain. But they allowed most of the old establishment to reinvent themselves as democrats in a 'Fourth Republic' that eventually collapsed in its own corruption, to make way for the current Fifth Republic.

It was commonly said, in Britain as I was growing up, that "The French will never forgive us for saving them in two World Wars" and that has proved to be tragically true.

Today France has a new President-Elect, who was not born when the Fifth Republic was established. He has a great reputation as a pianist, an Economist, a banker and a chancer. Like Donald Trump, he owes his elevation to no party, though in the coming days we will see a coalition of the longstanding parties forming to give him a comfortable majority in both houses of parliament. He has said - in English, in Downing Street - that he will do all that a President of France can do to encourage financial services firms, especially banks, to move from London to Paris; and he will act vigorously and knowledgeably to frame both EU regulations and the negotiators' brief in the Brexit talks to the maximum extent possible to impede the continuance of London's lead in world finance. Fortunately, the French legal system and the capacities of French nationals cannot be changed enough, fast enough to enable Paris to take over London's role; but he may be able to engineer things so that New York is a net gainer from Brexit, rather than Paris or Frankfort.

Everything that Macron has said in the election campaign marks him out as a fresh face fronting a typical, traditional member of the French elite. As an Economist who is surrounded by Economists, his promises to 'restore' the social structure and the economy will prove nugatory. There is very little that he can do to reduce the alienation of the largest Muslim population in Europe, or to eradicate terrorism. He will court President Tusk and Chancellor Merkel, be polite to Donald Trump and woo the Chinese for French trade, especially in finance. Having worked in international banking he can not be unaware of his huge disadvantage: the world is not going to learn French to trade with him: he knows that he must use English as Mrs Merkel uses Russian, and this will always emphasise the limitations of aliens trading with and within France.

In summary, he may be able to do a few good things for ordinary French people, as a new front for the French establishment; but he will be a damned nuisance to Brexit Britain.

Sunday, 7 May 2017

It's No Secret!

Throughout human history, inventors have had to borrow money to make their machines; then have to borrow more to scale up their innovation to the point where profitable production can begin.

In the era of the industrial revolution the infrastructure of better roads, then canals, then railways was provided by raising money from shareholders in Turnpike Trusts, then in Canal and Railway Companies. In case you had not noticed, selling shares in a company is a form of borrowing: the directors of a company ask their investors to make their money available to the company, under the promise of long-term partial ownership of the company and the hope of recurrent profits. Usually investors have come forward if there is a reasonable prospect that the returns to shareholders over a ten-year timescale will put more money at their disposal than they would get in interest if they had just kept the money in the bank.

Richard Arkwright had to borrow the money to build his first spinning machine; then he established patents on all the technologies involved, including the work supplied by a clockmaker who cut and assembled the gears that were indispensable for the project. Other people who wanted to open spinning factories had to pay Arkwright royalties on the technology until, many years later, the extent of his patent coverage of the device was reduced. James Watt developed his concept of a steam engine in the university laboratory at Glasgow, where he was a technician to Professor Black. Eventually the good professor moved on in his research, and to make the engine a commercial proposition Watt had to find an investor with deep pockets. Matthew Boulton was a successful serial entrepreneur based in Birmingham; so to Birmingham Watt had to go, and Boulton's name came before Watt's in the name of the firm that successfully patented and sold the first steam powered devices that were ready for the mass market. The first engines were for pumping, and their principal customers were mines, breweries, dye works and other consumer-goods suppliers: the steam engine that could provide motive power to road and rail vehicles and to vessels came later - which ties in with the fact that roads, canals and railways needed to be built first, at vast capital cost.

The essential problem of the British economy, certainly since the swathe of industrial destruction that is the strongest characteristic of the Thatcher era, is the lack of big industrial development. That picture of failure is reinforced by the poverty and antiquity of the infrastructure on which the UK economy depends. The shining exceptions of Sir James Dyson and of the Bamfords' JCB stand alongside the massive pharmacological companies as rare exceptions to the general picture that the remaining British-owned large firms are either dependent on their overseas operations or on the popularity of long-ago registered trade marks and copyrights. There are many wonderfully innovative small firms; most of whom find it difficult to impossible to secure funding for their expansion, to the extent that many of them sell their technology [and thus the potential for future profit] to aliens.

In the current election campaign, it is clear that the Tories are content to continue the stagnation, and [as the economy is contracting, in real terms, with a huge balance-of-payments deficit] they will continue with their socially destructive austerity programme. Labour is suggesting that investment is needed: and the Tories assert that this would create a great 'black hole' in the national finances. Labour is not bold enough in its investment programme, which doesn't matter anyway, because they can't win. Every time you see Mrs May in a 'factory' context, you will see that she is in a clean, small-scale workshop: because that is pretty well all that her minders can find to indicate 'industry'.

It is not at all secret, that nothing happens without investment: and Britain's investment drought is exacerbated by virtually every action of the present government.

Saturday, 6 May 2017

Put not your Trust in Politicians

The Conservatives did not succeed as well as they had hoped in this week's local elections. This is a great thing for democracy.

Jeremy Corbyn again showed his utter unfitness to lead a local pensioners' rambling club round the local park. His besetting problem is that he has absolutely no gift for saying the right thing at the time, convincingly. No doubt he has the principles that he professes: they were framed in a long-ago world and - though they are still ideals - the rise of cynicism made them irrelevant in the Thatcher era. He has the support of nostalgists, idealist socialists and radical disrupters, who have joined the Labour party by their hundreds of thousands in order to keep him in post and unelectable.

As Nigel Farage has said, UKIP's purpose is fulfilled: but only if Mrs May is able to conduct a successful set of negotiations with the European Union on Britain's future relations with the corrupt continental in-crowd. If Mrs May fails to get a deal, UKIP imagines itself as the resurgent enforcer of the popular will; a really scary thought!

As I expected, my gobby fellow-Lancastrian has led the Lib-Dems nowhere. Before 2010 his party could offer themselves with apparent transparency as a genuinely fresh and clean alternative to the two larger parties. But for five years from 2010 they were co-producers of Osborne's noxious austerity programme, and thus they threw away any chance of being regarded as honest or independent for a couple of decades. Their lack of sympathy with the old as care budgets and bus routes were cut, their inability to protect the NHS, their acquiescence in a crazy system for funding schools and their complacency in office quickly became nauseous. Farron avoided personal involvement in the squalid coalition, so he remained personally popular in his party and his constituency; but the party could not escape the nasty smell that hangs over them from the Clegg era.

By being specifically Welsh, and having a locally well-known leader, the Welsh Labour party avoided a wipeout in the local elections. It will be fascinating to see how Wales votes when it cannot ignore the fact that Corbyn 'leads' Labour on a UK basis.

The Scots Nats hit their ceiling in the Referendum on Independence two years ago. The continuing inevitable decline of Scottish Labour helped them a little in the local elections, but the great result in Scotland was that the Conservatives - under a charismatic and effective leader, Helen Davidson - emerged very clearly as the rational unionists. Areas with no recent record of Tory voting elected Conservative councillors. The result of Scotland's General election will be fascinating: and is likely to put a block on any campaign for a new independence referendum.

Which brings us to the English Conservatives. Mrs May's choice of tactics is on a par with her dress sense: unconvincing. She and David Davies have been scarily imprecise on the sort of Brexit that they are hoping to achieve, While the Prime Minister talks about delivering 'strong and stable' government, the nations needs - and wants - intelligent government with a clear [and well-publicised] set of guidelines for the coming negotiations. They should have a line-of-country figure that they think it fair to pay for the 'divorce', as individuals do in entering their personal divorce cases: and the nation should know it, then we can assess whether it is sensible or not to flex that sum as the talks proceed. It is obvious that we need a deal in which our financial services can have parity with their inferior competitors on the continent. This requires us to accept free movement of people: so be it; but the Barnier demand that they be given unlimited licence to bring in their relatives to draw British benefits indefinitely is obviously absurd. It is not evidence of strength to present the country with a black box and say 'trust me!'. Mrs May should not be able to get away with that. There is a month for the nation to teach her that lesson.

Finally, we have evidence of the utter lack of realism in the rookeries of Brussels. The chairman of the Commission declares that he has detected a decline in the importance of English throughout the continent. Does he really think that Chinese, Indians and Americans are going to learn French to do business in Europe? An intelligent, well-motivated British negotiating team should make mincemeat of his cohorts: but there is no evidence of Mrs May building such a team. Perhaps she hasn't even thought of it? She certainly has not told us.

Friday, 5 May 2017

Hot Air at the Bank

Today the Bank of England is spending a few thousand pounds to host a conference, convened by its Chief Economist Andrew Haldane, to air the twin subjects of why Economists in general failed to predict - and warn against - the 2007-8 financial crisis, and why the public has no confidence in Economists.

They have not invited me, so they won't hear my version of the true explanation, as set out in my book, NO CONFIDENCE: The Brexit Vote and Economics. That is their loss.

Mr Haldane has shown sympathy for the Manchester [and other] students who established the Post-Crash Economics Society and published the book THE ECONOCRACY that I have commended in this blog. I hope that that group pf brave young people, who have challenged the intellectual hegemony of the Economics professoriat, are given a platform in the event. If they do hear them, I have no doubt that the self-important establishment of the subject will remain impenetrable to their good sense.

BBC Radio 4 gave a few minutes this morning to a preview of the event in which two luminaries of the Economics profession, one from each side of the Atlantic, asserted the old view that the public was wrong to distrust and disbelieve their profession. A professor from Bristol said that Economists do useful things, like assessing the efficiency of health provision through the lens of an economic model. This shows the profundity of the Economists' ignorance: the world needs students of the economy who build a new subject in the light of our experience of making universal health services available to the public; in sharp contrast to the present situation where meaningless and inapplicable 'models' are derived from absurd theory and presented as advice to ministers.

I don't expect that much sense will appear in the meeting room today: but hope springs eternal, even in the lofty chambers of the Bank.

Thursday, 4 May 2017

Geopolitics, Free Trade and Politicians

Today Donald Trump meets the Australian Prime Minister. His visitor has every reason to be angry with the US President, in the light of the way Trump has treated Australia - one of the US's closest and most assiduous allies - since he came into office. I have no doubt that for a few hours Trump will have a new 'best friend': just as he did yesterday with the beleaguered Palestinian president. Equally I am sure that after another few weeks the encounter with Mr Turnbull will be as remote in the Great Deal-maker's memory as the visit by Theresa May in the early days of his presidency has now become. However, today Trump will 'press the flesh' and be polite, and a superficial image of good will will promulgated. The best that can be hoped for thereafter is that Trump leaves his Secretary of State and other officials to re-set the seventy-year collaboration of the two countries, while he goes on with his frenetic contact-building.

Meanwhile, in the grimy real world of the economy a quite remarkable thing is happening. In recent days both US and foreign-domiciles companies have announced that they are setting up, or expanding, production, distribution and research facilities on US territory. Without the Trump Administration doing anything definitive, the Donald's campaign rhetoric has been taken as a genuine expression of his deeply-held conviction that a perverse Economists' dogma of Free Trade has sucked jobs out of the USA to the temporary advantage of countries who have paid for their early-stage industrialisation by exploiting low-cost labour to sell low-priced produce to more developed countries. The outcome from the recent announcements will not solve the rustbelt problem, but it will give extra momentum to the schemes for upgrading the economies of deprived areas in the United States that were enacted in the Obama years. Mr Trump has never bothered to conceal his contempt for the theories that underpinned the past policies that he has so angrily asserted to be the cause of much misery and deprivation across the mid-west and inland from the Atlantic seaboard. Firms are flocking to conform to the new reality of Presidential Mercantilism; and it is possible that the global distribution of capital and employment will be shifted measurably without any major legislation being required, and at the cost of little new expenditure by the US government.

Meanwhile, as was mentioned in my last blog, the latest effusions from the European Union on the Brexit situation are revealing just how profoundly perverse the financing of the Union has always been. Germany was blamed almost exclusively for the horrors that were visited on Europe in and after the Second World War; and nobody has ever tried seriously to deny the profundity of the evil that was unleashed. But the fact that millions of non-Germans collaborated, with various degrees of enthusiasm, with Hitler's economic exploitation and political tyranny has largely been suppressed. After the war, a few Quslings were executed: very many more collaborators were allowed quietly to continue with their lives, sometimes after death sentences had been commuted to prison terms which could then be shortened. The focusing of primary blame on Germany has been the basis on which that country has accepted the need to agree to the removal of about a third of its pre-war territory to compensate the Poles for Stalin's territorial aggression against them and to allow Benes and other unsavoury politicians to take the bitter 'fruits of victory' by expelling Germans from their homes of many centuries.

Equally, Germany accepted an obligation to pay heavy tribute to Israel as a surrogate for the millions of European citizens of Jewish origin who were killed and abused. And, for their European neighbours, Germany agreed to serve as the cash-cow to support the dubiously democratic regimes that followed Fascists into power in the parts of Europe where the USA and Britain [with the uncertain association of French forces whose recent history was, at best, equivocal] found themselves in occupation.Thereafter, France gleefully entered into European institutions that covered the cash flow from Germany to the other participants.

Britain made ultimately futile attempts to rebuild the Empire, and took little direct part in the evolution of western European institutions for the first decade after the war ended; by which time the Treaty of Rome was in formation. Under MacMillan's premiership, Britain's misguided, belated attempt to be allowed to join the EEC was at first snubbed by deGaulle's France. Then along came the ultimate mug, Edward Heath, who was determined to get Britain in to the new entity, regardless of the profundity and frequency of the lies he told to the British nation. There is no doubt that his concern to join in came from his experiences of the Second World War as a serving officer: which gave him a profound belief in the need for permanent peace on the continent by abolishing the nation states. But the UK need not have agreed to become a secondary paymaster, after Germany, for the whole fantastic scheme that was being constructed. He did agree to pay. More than ten years later Thatcher got the concessions that were mentioned in this blog yesterday, and the entire sad saga got under way. Under the pained premiership of Mrs May, Britain is most likely to make a major contribution to the new pattern of Geopolitics, involuntarily and with little understanding.

Watch this space!

Wednesday, 3 May 2017

Brexit: Liars and Fantasists

The Remoaners puff up with indignation at the mention of the slogan on the Brexiteers' battle-bus, claiming how much could be returned to the UK budget if payments to the EU ceased to be made. This, the Remoaners declare, is the biggest 'lie' [among many others] within a fraudulent campaign by which a small majority of the electorate opted for the 'disaster' of Brexit.

Now, fantasists in Paris, Warsaw and Berlin are said to be trying to prove that the Brexiteers' figures are correct. Apparently, the Poles and the French - major beneficiaries - are demanding that Britain continues to be a net contributor to EU funds, and specifically to support payments for farmers, even after Britain has left the Union. The estimates for what they will demand as the exit price is 100 billion euros. This figure is somewhat inflated as a result of the decline of the pound against the euro since the vote was taken.

Germany has been the biggest net contributor to the EU since it was the Common Market, and that position will seem lonelier and less rational when Britain has gone. Insofar as Britons know about these things, it is generally believed that Margaret Thatcher threw a tantrum, and secured a rebate from the excess net contribution that the UK had made until that time. Having 'won' that point, she cheerily surrendered massive areas of sovereignty as the EEC became the EU. Britain carried on paying-in; just a bit less per year. Since then, the fact that Britain and Germany have been subbing the other member countries, especially those with traditional patterns of agrarian settlement, has largely been suppressed. While Germany has resisted any scheme to subsidise southern European eurozone countries since the single currency was reduced, in the cause of currency manipulation and to reduce the strain on the budgets of the less-honest countries within the euro system, it has allowed the inaugural subsidies for farmers [and other traditional communities] to continue. Britain has paid a reduced share of this tribute to continental conservatism.

In addition to claiming that Britain's contributions to the EU's assets were one-way one-off payments on which no return can be expected, EU countries are now claiming that it would be too unsettling for EU budgets if Britain's net contribution ceases when the UK leaves the Union. So Britain must carry on paying - for absolutely nothing to the advantage of Britons - up to the end of the current budgetary periods [at least]. I can imagine nothing that would strengthen the Brexiteers' case more than will such aggressive demands from the Union. If the pro-EU Financial Times is correct in its estimate of 100 billion euros as the exit bill, it will be the Remoaners who will be shown to be fantasists as the supposed 'lies' promulgated by the Brexit campaigners are shown to be close to the truth. The larger the sum turns out to be, the less likely it is to be paid.

The EU is demanding financial settlement before trade talks can begin. At the figure now stated, the UK can only refuse. Then what?

Tuesday, 2 May 2017

Retail Electricity Prices: Defenders of the Indefensible

The TIMES on May Day carried a letter from a group of self-defining luminaries of the privatisation era, arguing against the current government's tentative proposal to impose a price-cap on electricity prices for households. They appear to endorse the point made in a recent report by the Competition and Markets Authority on electricity supply that even a temporary cap on prices 'would run excessive risks of undermining the competitive process'; with the implication [from both the Competition and Markets Authority and the signatories to the letter] that the competitive process is an unequivocally good thing.

Everyone who questions their electricity bill learns that the issue is one of exceeding complexity. The actual bill comes from a retailing company, which maintains the customer's connection to the national grid and processes the bill and any complaints from the customer. These companies compete with each other only in the management of the final connection and the customer relations: the supply is delivered to the street cables by the grid, which buys the power from generating companies [and, in small measure, from storage facilities].

Depending how efficient the retailing companies are in buying the power, they might be able to get contracts with the wholesale suppliers that enable them to make a little more profit than some of their rivals while the current contracts last. So if a retailing company guesses correctly what will be the market conditions and the wholesale providers' pricing parameters they might be able to offer some [or even all] of their customers a lower price than their competitors'. But no company can make perfect predictions and forward provisions all the time; and no company can escape from a general rise in wholesale prices due to inflation and other macroeconomic constraints. Each company has periodically to adjust its own employees' pay, its marketing budgets and other cost centres. So a trend upward in prices in unavoidable, and this will affect the different competitors at different times [as their wholesale contracts expire] so that the retail companies have to demand higher prices from their customers at different times.

Hence comes the notion that customers must continually be willing to 'switch' from one retailer to another, in order always to get the lowest available price where they need their supply. Since it is endemic to the market that companies are always becoming relatively more expensive and relatively less expensive, the marginal gain from switching is vitiated within a short period: most unlikely to be as long as two years. Thus it is a perfectly reasonable consumer choice to stay with one supplier, in the hope that over a decade the times when it is relatively cheap will balance out the periods when it is dearer than its competitors. If one company should always be more expensive than its competitors, that would become notorious and customers would then switch from it in sufficiently massive numbers to make it change policy.; but then they would be likely to stay for a long time with their new choice of supplier.

The idea that millions of household consumers will spend many hours each year comparing the complex pricing structures of all the suppliers, and making 'rational' choices that might be vitiated at the next adjustment of suppliers' prices, is plainly potty. The entire concept of 'rational' market behaviour, leading people to constantly monitor the market and 'switch' frequently, is dotty. It is in line with Economists' dogma, which has no relativity to real-world human behaviour: or to common sense.

Monday, 1 May 2017

'Technology', Ethics and Business Realities

As one who grew up in the era of massive cotton mills, woolen mills, potteries, steelworks and engineering plant, the fashion of the last twenty years to call software companies 'technology' firms seems curious, if not perverse.

However, one must go with the language, as it evolves, if one is to purport to relevance in commenting on the contemporary scene. Today's headlines, alongside puzzlement and concern at Mrs May's increasingly apparent incomprehension of the Brexit situation, feature a parliamentary committee's concern that the leading 'technology' companies in the field of social media have been both reluctant and incompetent to remove material that is considered harmful to children. Vicious bullying is clearly unacceptable, and the incidence of suicide that is has provoked should have led the companies to improve their filtering processes more than they have.

In addition, terrorist groups and advocates of minority tastes and fads have been able to intrude their distasteful [to many] and dangerous [to all] messages alongside material that people want to be able to access. Since the pleas of social benefit have not been sufficient to persuade the leading providers to tidy up their sites sufficiently, the MPs are now proposing that fines should be set for companies that do not comply with set social and political norms: with the rider that such fines must be sufficiently large for the firms to be hurt by them.

One obvious difficulty of trying to implement any system of sanctions and fines is that although Google, Yahoo, Facebook, Alibaba have states of domicile where their regulators can exert some degree of authority, they are transnational organisations which are much more difficult to monitor than are national telephone or radio networks. The task of controlling the content over the whole of such a web is of mind-blowing complexity; to which the political riposte must be 'where there's a will, there's a way'. But should the provider of a global platform make the whole of their global user base conform to the specific requirements of Turkey and of China and of Israel; or should they attempt to deliver bespoke subsets of their system to countries with particular security and other requirements? At what point would the weight of regulation bear so heavily on the media that their social appeal is undermined?

It is probably unavoidable that, in the absence of a global regulator, regulations and sanctions  applied by the most powerful governments will be enforced. That necessity would be unfortunate, because it would seal the failure of the major players to adopt rigorous ethical standards that could better dictate their policy and practice on the eradication of harmful material. Ethics is a hugely complicated and controversial area as a branch of philosophy; and when it is brought out of the ivory tower and set as the basis for conduct in business a raft of technical questions appears, leading to the reduction of the ethical stance to a series of rules which a significant proportion of the regulated firms and individuals begin to reinterpret and circumvent. Most practitioners in business respond to surveys by asserting that they individually do have areas of ethical understanding that they try to implement in their dealings; but they do not believe that there could be a consensus of the practitioners as to what the basics of such a code must be. Towards the end of the last century the Worshipful Company of Insurers engaged a very distinguished philosopher to assess the state of ethics in the insurance business. The members of the Company are, by definition, senior members of their profession, largely drawn from the world-leading London market [including Lloyd's]. In response to a survey, the Livery of the Company evinced an awareness of the need for standards in the conduct of business, and agreed that the publication of common basic principles would be beneficial for entrants to the business. But when asked whether they thought that ethical standards were higher or lower than in the past, a very large majority firmly said that standards had declined. It was thought that publication of this finding would be damaging to the reputation of the industry at large [and to the reputation of London in the global market] and the report was received quietly within the company and shut away. The professional body, the Chartered Insurance Institute, introduced a basic introduction to ethical principles into its syllabus, without any great fanfare but with a beneficial effect; and so the matter stands.

In most areas of business, especially where the practitioners claim to be members of a 'profession'  there are pretensions to maintain 'ethical' standards; even in journalism. But these are very fragile structures compared with the legal forces that have to be brought to bear to eradicate fraud and other malpractice.

'The Law is a ass,' as one of Shakespeare's colourful characters tells us; but it is necessary in this region.