Growth: naked cake-ism

 "Growth" as a substitute for willingness to pay for what you want, has been around for at lest 60 years. It is a prize example of "having your cake and eating it." I first came across it in the campaign for the 1964 election when the then  Labour leader, Harold Wilson,  assured us that the UK could build the New Jerusalem with a modern infrastructure, effective social services, vibrant local government, well financed health and education services, without it  costing the voters  a penny.  

It would be financed out of  growth.  

Growth would be achieved  by setting up a government planning department  which would replace the uncertain progress achieved by hit and miss private enterprise.

 Labour won the election and  the Department of Economic Affairs under their Deputy Leader George Brown was set up as an antidote to Treasury staidness.  Eventually the project was blown off course by "events."

Most developed economies had, however, achieved and continued to achieve substantial growth in the 30 years after 1945.  The French called them "les Trente Glorieuses.".  The most outstanding success was Germany.  Most others achieved  a  modest annual average of around 3%.  As R A Butler, an earlier Tory panjandrum, pointed out, this enabled us to "double our standard of living in 25 years." 

However, from the mid 1970s such rates of growth became difficult to maintain.  The backlog of the war years had been eliminated, new technology had been absorbed, the economies with lots of peasants (eg France) had transferred them to the more productive industrial sectors (the UK hadn't many peasants so used immigration from the Commonwealth instead) and the economies had matured.

Nevertheless the struggle for growth continued, largely becasue it seemed to be the essential to maintain full employment.

But for those who cared to look.the writing was on the wall from the early 70s   The "Club of Rome "  (unrelated to the EU, I believe) published "The Limits to Growth" which claimed that current rates of growth among the developed countries, with less developed countries catching up, would exhaust the planet's resources and make it uninhabitable through pollution.  Their conclusion  was; "Either civilisation or growth must end." 

There have been many more recent and more readable accounts since.  In particular I recommend:

Prosperity without Growth, Tim Jackson, Earthscan, 2009

 

 Enough is Enough, Dietz and O'Neill, Earthscan, 2013

 

 Dan O'Neill is (or maybe was) chief economist of CASSE, the Center (it's American) for the Advancement of a Steady State Economy.  You'll find all about it here: 
https://steadystate.org

 

O'Neill was for some years on some sort of secondment from CASSE and ran seminars at Leeds University, at which I was a regular attender.

 

In "The Spirit Level"  Wilkinson and Pickett (Penguin 2009) show  that in the UK the fruits of growth have been unequally  shared (most go to the already rich) and the resulting inequality leads to less healthy and happy societies. 

So it beggars belief that the British government, so prone to claiming that the UK is "world leading," continues to advocate (as though they had just discovered it) not just "growth" but "Grow Growth, Growth" as the solution to all their their and our problems. 

 

Although they normally (they are suffering from an aberration at the moment) solemnly preach that the government must not borrow excessively  becasue that would place an unfair burden on future generations (which isn't true, but that's a topic for another post) they don't seem in the least worried about passing on a poisoned planet to those precious children and grandchildren.

 

For a while it is possible to compromise by advocating "sustainable growth,"  such as investing in renewable sources of energy.  Alarmingly, for this government, any sort of growth will do, even permitting fracking and re-licensing exploration for oil in the North Sea.

Future policy needs to concentrate on reducing the adverse impact of the existing pie, and looking for more equitable ways of sharing it.

At present our major parties are light years away from this.

 

 

Trussonomics

 Our new Prime Minister, Liz Truss, seems to have reduced the complex science/art of macroeconomic management to two dimensions: tax cuts and deregulation, which she believes will stimulate economic "growth."  The first is based on a false premise and is  potentially counter-productive.  The second is likely to reduce the quality of life of the over-whelming majority of us, whatever difference it might make to the monetary measurement of growth

Truss's reasoning appears to be that high taxation is holding back the "animal spirits" of our entrepreneurs.   Cut taxes and, lo and behold, adventurous entrepreneurs will invest like billy-ho, creating jobs and increasing output of all sorts of products (whether we actually need them or not.)  

But we are not a high tax country, as anyone who bothers to "research" via Google can find out. See:

https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_to_GDP_ratio

The percentage of GDP taken in tax  in the major developed countries with which we like to compare ourselves is:

France          46.2%

Italy:             42.4%

Germany:    37.5%

UK               33.3%

US               27.1%    

 It is true that, for the moment, the US economy has grown by 2.6% above pre-pandemic levels, compared to Italy (1.1%), France (0.9%), and Germany not al all. (Guardian 1st October). Were there a correlation between taxation level and growth we should expect to see the UK placed somewhere between  Italy and the US.  

In fact, not only is the UK not in this position,  we are the only G7 economy  to be still below (by -0.2%) our pre-pandemic level.

So whatever it is that's holding back UK growth it is not too high a level of taxation.  That is not to say that there isn't ample scope for re-organising the UK taxation system, in particular towards taxing "bads" such as the use of fossil fuels rather than "goods" such as employment.

 Given the present dire inadequacy of our Health and Care services, the impoverishment of our Education System, and the perceived need to increase expenditure on defence, it is plainly obvious that the level of taxation needs to rise rather than fall.  The increases should be on those areas which impact least on current activity (eg wealth, inheritances and land)

 M/s Truss's policy, giving shedloads to the already wealthy and a pittance, if that, to the low-paid, creates resentment rather than the level of wiling co-operation from one and all which would be a feature of a much fairer economy where  the wealthy paid their share rather than evaded it.

 Regarding  M/s Truss's second dimension, it beggars belief that, in the wake of the recent scandal of the discharging of raw sewage into our rivers and on to our beaches and the Grenfell Tower disaster, which took over 70 lives in horrifying circumstances, both the result of entrepreneurs cutting corners to increase their profits, this suggestion could be put forward by any government claiming to have the people's welfare at heart. 

 These are just two examples. I'm sure there are plenty more: not least house builders evading their responsibility to build a reasonable percentage of "affordable" homes becasue they make more money out of so-called "executive" mansions.

Regulations are required  to protect us from exploitation  by con-men (and women), chancers and the amoral.

 It is just possible that deregulation might  raise the monetary level of GDP by  increasing the incomes of the wealthiest at the top through reducing restrictions on their ability to exploit scarce resources (eg green belt land) and vulnerable people (the very low paid).  Their increased wealth could raise the average, hence giving the appearance of success whilst actually lowering the living standards of the majority.

 The so-called "bonfire" of EU regulations is also counter-productive.  If we agreed to observe them we would  have unrestricted access to the vast EU market.  If we don't then there are harmful obstacles to the free-flow of trade.  Surely we now realise that the promise of "cake-ism" was a blatant lie.  We don't  have all the advantages of membership with none of the costs.

 Miss Truss has embarked on a doctrinaire gamble unsupported by any of the evidence.  

Yes the UK economy, and our constitution, need to be reformed, but by serious politicians  after serious consultation and discussion, with the support of the majority of the people. Let's hope that her government is short-lived and is replaced by one prepared to work constructively for a better future for us all.          

 

 

Is "outrage" enough?

 The outrageous actions of the last three Tory governments have come so thick and fast that the Opposition parties are running out of words with which to describe them.  From the blatant lie of £350m weekly for the NHS if we left the EU through the illegal proroguing of parliament and threats to break international law to the denials of "Partygate"  we've thought again and again that we had reached the nadir and things could not possibly get any worse.

But the Truss government keeps up the tradition, and they do.  With less than a fortnight gone here are already four examples.

 1.  The decision to cap gas and electricity prices but still to pay the  energy companies  the full price in order to allow their shareholders to continue to receive excessive dividends,  and to finance it by borrowing (which the "public" are going to have to pay back in some so far unspecified way)

My benchmark is to try to imagine what the reaction of the media, and in particular the "Mail" and the "Express," would have been if a Jeremy Corbyn Government had proposed something similar.  Say, simply increasing social security payments to maintain the standards of living  of the poorest and making no plans whatsoever as to how this would be financed.  

Outrage: an end to our AAA rating (I think actually we've already lost it) provoking a run on United Kingdom  "paper," and national insolvency?

2.  The decision to sack the permanent Secretary to the Treasury, Sir Tom Scholar, who is presumed to question the viability of M/s Truss's determination to cut taxes at the very time that the NHS, Care Service, Local Governmental services and much else are on their beam ends.  

Sir Tom might very well have argued that this was based on a discredited  theory and that tax cuts alone would probably not  prove the magic wand which would l regenerate the stagnant British economy.  He would have hoped that his boss, the Chancellor of the Exchequer, would listen, but in the end he would have implemented whatever the government instructed.  That is the tradition of the British Civil Service.

Again applying the Corbyn test, what  would have been the reaction if he had sacked the key officials who challenged his views?

3. It is a proposed to remove the cap  on bonuses for bankers.  This was originally imposed by the EU, with UK agreement, in order to discourage the reckless behaviour which led to the Financial Crash of 2008.  The insensitiveness of suggesting that those who already receive  shedloads should be allowed to receive even more while nurses, railway workers, teachers and even barristers  are urged to exercise restraint is beyond belief. *

4. This could be a threat to distract us from  the above matters, but  we are told that the government is planning to scrap the Johnson government's"anti-obesity strategy,"  The strategy incudes such things as the ban on sugary products being displayed at checkouts,  and "buy one get one free" deals which encourage the over-consumption "bads" which make us unhealthy.  

One can see the logic: it is an example of the "nanny state" which interferes with the freedom of businesses to exploit our weaknesses (and those of our children.).  Much the same was said about  speed limits,  compulsory set-belt wearing, measures to discourage smoking, and somebody probably complained  abut being forced to derive on one side of the road only.  

But two-thirds of adult Britons are overweight or obese and the treatment of their resulting health problems cost the NHS about £6.1b a year.

* Post script, added 17/09/22

A friend has passed on to me an article by Phillip Inman in last month's Observer (14/08/22) which contains information which adds flesh and bones to this outrage:

In this year up to May total pay including bonuses in finance and insurance was up 13.6%.  The bottom 20 per cent [in all sectors]received just 1% extra.

Pay and bonuses in the finance sector have exaggerated  average earnings data [making it look as though the majority are doing rather better than we really are.]

In February the Governor of the Bank of England urged  workers to show "quite clear restraint" and in May that they (we) should "think and reflect."  [Presumably in an effort to set an example,]  he capped his own salary at  £575 000.

 There's probably more to come.  Without seeming to turn these issues into a linguistic joke, here are a few descriptive synonyms culled from Roget's Thesaurus:

 Arrant; arrogant; despicable; flagrant; monstrous; preposterous; scandalous.

What to do

 In the comments to the previous post my "Anonymous" interlocutor challenges my dismissal  of M/s Truss's two-fold plan for Britain (tax cuts and deregulation) and demands to know what I would do.

Well, had I kissed hands with HM the Queen yesterday and been about to launch a programme to restore our civic harmony, political respectability and economy prosperity, this, off the top of my head, is the 22 Point Plan I would put to parliament.  I'm sure I will have missed something, so further suggestions are welcome.

Preamble; there is no magic lever that can be pulled that will transform the British economy before the end of this parliament, or even a complete parliament.  Any progress will be gradual and probably take at least ten years to become effective.

 These are, in no particular order (other than the first)  the steps I suggest.

1.     1. Urgently, protect the poorest from the effects of the coming inflation and energy crisis.  Help should be generous and targeted, probably at those whose incomes do not reach the threshold for paying tax, and paid for by taxing those forms of income and wealth that have least impact on current production and expenditure. (See earlier post)

2.     2. In the longer term we must take steps to make Britain fairer.  We can not expect the lower and moderately paid to restrain their income demands while those at the top reward themselves with shedloads. 

3.     3.  Re-join the EU single market and customs union. This can be done quickly and will immediately stimulate economic activity.

4.    4. Revise employment law to reduce zero-hours contracts to very limited time periods and circumstances, and bring more security to other forms of employment (eg university lecturers)

5.    5. Revise company law to include employee and community representation on boards and for their interests to be considered.

6.    6. Revise the taxation system to make it more progressive and skew it towards the taxation of “bads”  such as pollution rather than “goods” such as employment.

7.    7. Welcome immigrants.  Most are young, energetic and may provide the entrepreneurial zest we need.

8.    8. Restore  overseas aid to 0.7% of GDP and recreate the Overseas Development Department  as a separate department with a cabinet minister at its head.

9.   9.  Scrap the limit on foreign students in our universities.  Higher Education is one of Britain’s export strengths.

1110. Stop harassing the BBC, Channel 4 and similar creative organisations. The arts are another of Britain’s strengths and should be encouraged.

1111. Fund our health, care, education and legal systems, including the probation and prison services systems, adequately.

1112. Scrap the charitable status of private schools.

1113. Scrap vanity projects such as HS2 and large, dangerous and vulnerable nuclear power stations.

1114. Instead invest in regional transport projects such as the northern rail network, and smaller scale nuclear generating plants.

1115. Set up a commission to examine the ownership of the media …

1116. .…and another one to examine the UK’s role in money laundering and tax  havens.

1117.  Encourage public and private investment in sustainable energy generation, including on-shore wind power (potentially the lowest cost, I believe) and, long overdue, tidal and wave power.

1118.  Either gradually take privatised services and utilities back into public ownership, (eg railways as the contracts expire) or regulate them effectively to stop exploitation of their monopoly positions.

1119.  Have a house building drive concentrating on social housing and affordable private housing, along with an insulation programme for existing houses.

17 20. Devolve serious powers, including tax raising powers, to the representative bodies of Wales, Scotland and Northern Ireland, and the regions of England  (ie not to elected mayors).  Local people know best what the local economy and society need.

1 221.  Call a constitutional convention to consider plans to overhaul Britain’s democratic institutions (including but not exclusively House of Commons, Second Chamber, regional and local government, electoral system(s), legal system.)   We cannot expect the country to thrive if the leadership from the top is unrepresentative and malfunctional.

1 22.  Create a Heritage Department with the responsibility for funding the maintenance of cathedrals, historic churches and other buildings and features of interest.  

 

        QED

Truss: it may turn out for the best.

 Like many I have been quietly hoping that the opinion polls were wrong and that Rishi Sunak would emerge as Tory leader and our next prime minister. His record as Chancellor was deeply flawed but he does at least look and sound respectable.  M/s Truss has campaigned in slogans rather than policies, and, of  the two policies with which she has hectored party members, one is nonsense and the other positively dangerous

The nonsense is that tax cuts will release entrepreneurial vigour and stimulate growth, (though not necessarily sustainable grown).  But Britain is not a high tax country,  (though the tax take could be more equitable distributed).  So the problem must lie elsewhere.

 The dangerous one is that our entrepreneurs are hampered by over-regulation. 

 The recent and continuing  "sewage in the  rivers " scandal illustrates the disaster which can ensue through light regulation and ineffective machinery to enforce what there is.  Recently George Monbiot expressed more succinctly  than I can precisely remember, something on the lines that : "Regulations exist to protect us from liars, chancers, and bullies."

The good news is that there is a precedent for what happens to a party whose leader  is elected by the party members but who is not the choice of most of the party's MPs.  That was the situation when Jeremy Corbyn was elected Labour leader and  led the  party to two defeats.

M/s Truss is in that situation.  In he first round of the election process only 64 Tory MPs voted for her.  Rishi Sunak received 101.  In the final round of MP voting Sunak received 137 votes, Truss 113,  and Penny Mordant was eliminated  with 105.  Even after the "also-rans" were eliminated Truss has the support of less than a third of her parliamentary party.

Rightly or wrongly MPs probably have a better idea than do run-of-the mill party members of who makes a competent leader

So Truss should be the easier one to beat.

Let's hope history repeats itself.

It's unfortunate that our economy, repartition and quality of life are likely to go further down the pan, with  many of our people suffering unnecessary, before the process takes effect.

Risible x 3

 My somewhat  dated Pocket Oxford Dictionary (bought when I started teaching in 1959) defines "risible" as: "laughable, ludicrous."

1. Almost everyone in the "Wester World" will regard  Russia's claim that the Nord Stream 1  gas pipeline to Europe is closed solely for "urgent repairs" as risible.  Anyone who thinks otherwise must be wrong in the head (or just lying).

2.   Prime Minister Johnson's,claims that "no COVID rules were broken" a the Downing Street parties, and, in any case, he wasn't there, and if he was he didn't realise they were parties, are  risible.  Any one who believes them must be wrong in the head or want to preserve a political system where anything goes, provided that your lot can benefit from it. Or they're just lying.

3.  Strangely the most difficult to believe is the argument by David Pannick QC that if the Commons Committee on Privileges and Standards were to go ahead and sanction Johnson for misleading MPs that would "have a chilling effect on [future] ministerial comments in the House."  That too is risible.  Any minister who does "inadvertently" mislead the House can get herself/himself off the hook by merely going back to it, fessing up and apologising.  Johnson has had every opportunity and done no such thing.

I hope the Committee goes ahead, tells the truth, sanctions Johnson, preferably causing him to be expelled so that his continued political ambitions hit the buffers.

 Then what would truly be what a "New European " headline has called "The End of an Error"

Sadly, that may not be the end of Britain's political shame.  If Liz Truss is elected, as is widely predicted, then, as the Chief Priests and Pharisees explained to Pilate, "the last error shall be worse than the first. "  (Matthew 27 v 64). 

Something we thought impossible.

Labour's post-war failings

 A recent post outlines the many failings of the UK's post- war Conservative governments.  A friend suggests that, in fairness, I should construct a similar list for Labour.  Although I suspect he is a former Tory supporter, he speculated that the list would be shorter.  It is (though I'm open to suggestions for additions), though largely a list of missed opportunities rather than deliberate errors.

1.    1.  Over-centralisation in creating and in running of nationalised industries.

2.     2. Antagonism towards employee representation on the boards of both publicly and privately-owned industries.  This came largely from the unions, who preferred to preserve their monopoly of negotiating with the employers, thus preserving conflict rather than generating co-operation.

3.    3. Disastrous partition of India at independence. Perhaps this was not so much the responsibility of the Labour Government, but rather the cumulation of the policies of “divide and rule” carried out by Imperial governments over the decades, in generating antagonism between previously happily co-habiting Hindus, Muslims, Sikhs and other faith groups.  Labour were , however, "in charge" at the time.

4.    4. Failure to participate in the setting up of European Coal and Steel Community, Common Market, (Gaitskell’s “1000 years of history” speech,) Harold Wilson’s “re-negotiation”, ambivalence to EU membership in the referendum - and counting. .

5.    5. Failure to devalue in 1964.  Instead, fighting to preserve the $US/£ exchange rate at $2.80 to £1.  Hence the plan to build a “New Jerusalem” was unnecessarily constrained  by a constant battle to balance external payments. Defeat followed in 1967 when the £1 was devalued to $2.40.  Under Mrs Thatcher it actually reached parity (£1=$1) but Tories prefer not to mention that.  It now bumps along at around £1=$1.20.  So much for World Beating Britain over the last half century.

6.    6. Continued failure to promote co-operation rather than conflict in  industrial relations (“In Place of Strife”  reform proposals, again largely scuppered by the trade unions.)

7.    7. Blair/Brown Governments’ failure to use their massive majorities to achieve:

a)    Substantial devolution (eg home rule with tax-raising powers) to Scotland and Wales;

b)    Electoral reform;

c)     Devolution of more powers to English regions or local government;

d)    Democratically elected second chamber;

e)    Reform of company law to include responsibilities to community and employees as well as profits for share-holders.

8.    8. PFI.  This scheme for enticing the private sector to fund public projects (hospitals, schools) was actually introduced by John Major’s Conservative government, but used extensively by the Blair/Brown governments in a rather naïve  attempt to make the public accounts look healthier.  Ministers and public officials were not very competent at negotiating contracts, the private sector took them for a ride, and  many public projects are now being forced to pay for themselves several times over.

9.    9. The Iraq War.

1   10. The infamous Miliband-approved mug:” Controls on Immigration: I’m voting Labour.”  A shameful attempt by Labour to undersell even the Tories on this issue.  It was pleasing to see in yesterday’s paper that Scouts in Kent are designing  and sending  “Welcome to Britain” greetings cards to migrants landing on their county’s shores.  One lad encourages them to “try the fish and chips.”

1111. Austerity proposals in the 2010 election which rivalled those of the Tories. Here's some exact quotes from their manifesto (page 6):

TTTough  choices for £15billion efficiency savings  in 2010-11;

toTough choices  on cutting government overheads;

toTough choices on pay: action to control public sector pay;

TTTough choices on spending;

TTTough choices on welfare. . . .£1.5 billion on savings being delivered.

1112.Failure to support the Liberal Democrats’ Coalition proposals for;

a) Electoral reform

b) Reform of the House of Lords.