The Present State of Economy and Society

Official statistics are compiled by honest professional people, and tell the 'truth' in simple numerical terms. But much can be done to interpret them, either favourably or unfavourably, according to the wish of the interpreter. Hence, although the United Kingdom now has the highest proportion of its available adult citizens in employment since 1975 [one of the three years during which the mixed economy was tested most severely] it is sobering to note that in almost every way the present pattern of employment is massively more fragile than was that which NeoKeynesian inflation undermined. The effect of the inflation of prices, especially after the oil price hike of 1973, was that production was interrupted by strikes when the authorities took action to suppress wage rises in their clumsy attempts to cap the wage-price spiral. In each period of pay 'restraint' government costs rose while government revenues declined, and the balance of payments with the rest of the world became strongly negative. In those circumstances, the Labour government [which relied on minority parties to retain control of the House of Commons] sought a loan from the International Monetary Fund; and the conditions applied to that loan [in retrospect] can be seen as a demand for the state to bring in Monetarist policies to replace they failed pseudo Keynesianism that the Economic establishment had applied.

The Labour Party was torn apart by the consequent dissent from the new policy, with the trade unions - the traditional paymasters of the party - doggedly opposed to the government. Consequently the Conservatives won the 1989 general election. The new Tory leader, the largely-unknown and completely untested Margaret Thatcher, embraced monetarism enthusiastically; and she deplored the less-than-half-hearted attitude towards her radical policies from most of the Tory establishment [including most of her cabinet]. They had been broadly content with the mixed economy and were scared by the new radicalism. Mrs Thatcher and her close cohort dismissed the majority as 'wets', and became more intent on radical change in the economy. As to the social consequences of disruptive economic policies, Mrs Thatcher was simply to say 'There is no such thing as Society'.

The people who could be identified as the 'enemies' of the new Monetarist policies began with the Economists, 364 of whom signed a letter to the TIMES condemning her policies from a standpoint of NeoKeynesianism [and who succumbed thereafter, with amazing speed, so that those who remained in their 'profession' become locked in to the new Econocracy by the millennium]. Next among the 'enemies' were the trade unions, that had frustrated the attempts by the Labour government of 1974-79 to control the wage-price spiral. Here the Thatcher gang decided on a radical solution: if you close the coal mines and a large section of the iron and steel industry [including shipbuilding] you take the cash and the members away from the unions, leaving them as shell organisations with no real power. These radical solutions were adopted; and the majority of the electorate was unmoved by the pleas of miners and steel workers whose communities were largely isolated geographically and socially from the cities where banking, finance and smart retailing were providing more nice, clean jobs for the middle classes. While the traditionally unionised areas continued to return Labour MPs from constituencies with very high percentages of the industrial and ex-industrial population, other urban centres and the less-densely-populated majority of constituencies were content to return Tory [or, in some cases, irrelevant Liberal] MPs; and thus the wrecking job was done.

It is now more than thirty years since the steelworks of Sheffield, the pit sites across the country with their unmistakable winding-gear, the massive cranes on the dockyards to the Tyne and the Tees and the Upper Clyde, and other symbols of the most basic and essential industries were first left derelict; then cleared away. It is hard to believe that Meadowhall in Sheffield was once the world's leading steel and engineering centre, or that the placid banks of the Upper Clyde were once the proudest shipyards in the world.

No thanks to successive governments, pharmaceutical and biological companies have developed lucrative new products; creative industries [including computer games] have developed magnificently and - despite the idiocies that created the financial crisis of 2007-9 - the financial services based in London lead the world in expertise and innovation. So Britain has high spots, and remains uniquely innovative; but fools in government have congratulated themselves on 'attracting inward investment' as one after another the innovative firms [along with the intellectual capital] are snapped up by aliens. This almost-constant alienation of the most valuable assets that the British continue to create means that the balance-of-payments becomes increasingly adverse, as British consumers have to pay foreign firms to access British inventions, even if they are manufactured here.


The final knell of heavy industry has been sounded today, with the news that Tata is selling its steelworks in the UK to Thyssen-Krupp: whatever promises are made [and especially if we really do leave the European Economic Area] Port Talbot will go; and with it the last evidence of heavy industry will be consigned to the film archives and to history books.

The Iron Lady Cast in Bronze?

In this blog a few weeks ago, I welcomed the report that a statute to Millicent Fawcett was to be erected in Parliament Square; the first woman so to be honoured. She was not a parliamentarian: her husband was, as a Liberal he was the Postmaster-General who made many innovations. The range and depth of Millicent's contributions to economic and social improvement, particularly during her long widowhood, more than justifies her place beside the Mother of Parliaments and Westminster Abbey.

It is now reported that the management of the Royal Parks, who manage the square, is minded not to allow the erection there of a larger-than-life bronze statue of Margaret Thatcher; on the grounds that Mrs Thatcher's family has not supported the project.

It is also  matter of open discussion as to whether the statue would become a favourite target for vandalism. Margaret Thatcher remains a highly contentious figure almost three decades after she tearfully quit the office of Prime Minister, after holding it for a decade during which her government had radically redirected politics and restructured the economy.

It will be obvious to anyone who has looked at this blog in the past [or who does a word-search on it at any time in the future] that I am of the view that Mrs Thatcher had no serious grasp of economic theory or reality, beyond the corner shop mentality of keeping the books balanced that she imbibed from her parents.

What was blindingly obvious when she became leader of the Conservative Party at the height of the inflationary crisis of the mid-nineteen-seventies was that the status quo was unsustainable. A Labour government that was dependent on votes in the Commons from minor parties went cap in hand to borrow a large sum of money from the International Monetary Fund in order to have a hope of stabilising the external payments position: and the conditions that were set on that loan would radically change the direction on national policy from that which had - generally - been followed by both Labour and Conservative governments for a quarter of a century.

Through the 'fifties and 'sixties a generation of Economists who could broadly be classified as neo-Keynesian had promised to be able to deliver policies that would give the country pretty-well continuous economic growth. When the politicians applied the policy, after twenty years it became a recipe for inflation of prices that stimulated increasingly vociferous demands for matching pay increases.

The International Monetary Fund's conditions on the loan required the British government [of whichever party was in power] to introduce Monetarist policies. In the 1979 general election the Labour Party was riven between those who felt obliged to impose the policies required by the IMF and the mass of trade unionists who hated that policy. The Conservatives accepted the policy, and some of them embraced it. The consequences of the Thatcher 'revolution; in the economy were immense. Unprecedented wealth came to those who operated in the financial services, especially in the south-east; while whole swathes of the country faced mass unemployment and dereliction as long-established industries and their underpinning assets of coalmines, steelworks, shipyards and railways were shut down. Many areas still have not recovered from the devastation that the Thatcher pack caused, and the whole economy has been set back by the crisis measures that were taken in 2007-9 to save the overblown financial institutions that emerged from the 'big bang' of 1986.

Even in 2020 there is a strong likelihood that a larger-than-life-sized bronze image of Mrs Thatcher could indeed be the much-painted target of expressions of hostility to the entire policy direction that 'Mrs T' embodied. The family and the Royal Parks are right to have reservations. The first woman prime minister should be honoured, as should Mrs Fawcett; but felings are such that the statue could well have a very mixed reception.

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.

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.

Colonists Smash Consensus

George Galloway, a former Labour member of the British parliament, has spend the past decade establishing his new Respect party which seeks pacifist and Muslim votes against wars on Islamic countries. He won an election in east London but left the seat to be retaken by Labour in 2010 when a majority of his Bengali supporters were snatched back to their former voting pattern by the complex of tribal networks to which they are susceptible. Galloway transferred his primary efforts to the ethnically different people from the northern parts of the Indian sub-continent who have colonised the former mill towns on both sides of the Pennines. There is a good chance that those populations will be less amenable to recapture by Labour. While the voting in recent by-elections has been only 30% of the roll, yesterday in Bradford West 51% turned out. In round numbers, 18,000 voted for Galloway, 8,000 for the [Asian] Labour candidate, 2,000 for the Conservatives and 1,000 for the LibDems: Galloway's vote exceeded that of all the established parties altogether.

The political class will spend the next week pretending that the Bradford by-Election result that was announced announced this morning was utterly unimportant. In a couple of weeks, when their pollsters and focus-group technicians report back on the new questions [those their masters had not cared to ask previously] that are raised by the Galloway result, they will find that there is elation among the mass of immigrants who voted for Galloway feeling that they have been patronised and mollified with benefits for decades. They will also report new pressure on the Asians who remained Labour voters to reconsider their position, and despair among the ethnic British who have been coaxed and bullied by patronising politicians who have suppressed discussion about immigration and the benefits bonanza.

These are not trends that the government are capable of understanding. The leading cabinet ministers simply do now know that in addition to the massive Greggs chain of bakers' shops is a mass of well-loved local bakeries and well-used garage forecourts where hot pies and pasties have for generations provided modest refreshment for millions. They are uncomprehending of the fuss that has been created by their decison to levy Value-Added-Tax of 20% to the prices of hot pies and pasties. They have no comprehension of the social structure and daily habits of their fellow-countrymen. There may well be some 'sleeper' in the Treasury who advocated the pasty-tax in full awareness of the probable impact on the popular press and the mass of voters. The nauseating scene of Gordon Brown's mass welcome to the Treasury by its Grauniadista denizens should have been sufficient warning for the Tories when they returned in 2010 to beware of a coven of socialists. But the major political issue is the incomprehension of the future Sir George Osborne Bt, the craven eurorat Clegg  and the Etonian Prime Minister. The pasty tax had no influence on the Bradford West election: but it did enhance the gulf between the government and the people; which is a completely outre way was also George Galloway's charge against the political establishment.

The Labour opposition is almost equally composed of 'intellectual' life-long would-be politicians, most of whom are as remote from the mass of the electorate as the similarly clad people on the government benches. They go through puerile rituals to make themselves seem - in their own conceits - to have speech patterns not unlike some of the lower orders; but examples like the fake-fishwife utterances of a shadow treasury minister [who spent years as a Bank of England official] produce only ridicule. Those like the Labour leader, Ed Milliband, who cannot even affect working-class accents equally fail to display the sort of articulateness that makes Galloway so devastating.

Galloway has exposed eighteen thousand of a million-plus Asian Muslims in Britain to the euphoria of defeating the political establishment. There are at least fifty seats that could fall to the Respect Party unless the indigenous British, with Hindus, Sikhs, Afros and EU immigrants can unite in voting for single candidates: the emergence of another party or network, with the primary object of stopping Respect, is highly probable.Unable to influence Respect, the established parties would bend all their efforts to denigrating and obstructing that new movement; with the result that in some places the new group will fail and in other places the established parties will be eliminated.

British politics suddenly got more exciting, more dangerous, and more likely to be followed by increasing cohorts of Islamic colonists and by those who become scared by the Muslims' new militancy all over Europe.

Nobody predicted this: one can search in vain for any hint in the press [up to and including early editions of March 30 newspapers] that Galloway's victory was even a remote possibility. I was not even aware that he was a candidate. But I live in the parliamentary constituency for which he formerly sat as MP: I recognise his intellect, his speaking ability and his political agility. He has changed British and world politics, and anyone who tries to ignore the fact will come to rue that day.

Stupid Liberal Democrats

The Liberal Democrat Party in the UK had never been in government until it made the coalition agreement with the Conservatives in 2010, after the Conservatives had failed to win the election on their own. Because the continuance of government depends on their parliamentary votes, the Conservative leadership repeatedly infuriates its own Members by allowing the LibDems to dictate policies that are alien to conservative thinking. It is recognised that the LibDems have damaged their future electoral chances by reneging on firm promises: notably by agreeing to triple university fees when they had individually sworn not to allow any increase [and thereby at a stroke revealed the cynicism that pervades the political class to a new generation]. So the Conservative leadership tries to give the LibDems a few little 'wins'.

One quid-pro-quo of the coalition, which the Conservatives have not yet delivered, is the LibDems' demand for a 'mansion tax'. This would be an annual levy on houses with an estimated value above one million - or maybe two million - pounds sterling: the level to be decided. It is assumed that a new bureaucracy would be created to determine the value of houses and to administer the tax. This idiocy is a perfect example of politicians building waste - and jobs for the boys and girls in the public sector - into a system that could probably cause a collapse in top-tier house prices.

All residential properties are already liable to pay a council tax which is collected and administered by local authorities. This tax is charged in 'bands' that are broadly dependent on the value of the premises. If some properties are considered an appropriate target for extra taxation, why not set a higher top rate of council tax?  The central government makes an annual settlement every year with every local authority, giving differential levels of  subsidy to authorities according to their income from council tax and other sources. Such a subsidy can be negative: the local authority can be charged by the government which can then allocate the receipts to its general budget. That system could easily cope with an extension of the scope of the council tax.

If such simple sense prevailed, the LibDems would be deprived of the 'triumph' of imposing an identifiable new tax [diddums!] and they would not create a new bureaucracy [so no new jobs for their chums] but exactly the same revenue impact would be achieved. Some of the allegedly better-off would pay more tax, that would become revenue available for distribution in benefits and in subsidies for fake jobs. Many thousands of people of modest means whose homes have  notional sale prices that have been inflated by reckless monetary policy over the last thirty years would be screwed by a mansion tax. Mechanisms for modifying the impact of council tax already exist, so the LibDems would not need to set up new benefits offices for mansion tax payers if the proposed tax was replaced by a new top-tier council tax [so another chance to make jobs would be removed].

Given the idiocy of the political class, look out for a mansion tax!