#50. Everyone a loser

There can surely be no-one – politician or voter, investor or trader, bookmaker or punter – who really knows exactly what the outcome of the general election is going to be.

There is, though, one depressing prediction that can be made. It is that the result will be bad for Britain. Whilst it is obvious that a hung Parliament would create damaging uncertainty, the campaign has surely made it equally clear that neither of the major parties really offers effective leadership either. Their numbers do not add up, their policies do not address the critical issues, and substance has been ousted almost entirely by trite symbolism.

This being so, we really need to think about how to reform the processes of politics and government in order to make them fit for purpose.

Numbers that don’t add up

In terms of descent into trivia and avoidance of substantive issues, the campaign behaviour of both major parties has been deeply depressing. At the very least, the public is entitled to no-nonsense proposals in three main areas – tax, spending and debt; foreign and defence policy; and the economy.

No such clarity has been provided by parties whose policy vagueness has been leavened only by waffle and by trite, meaningless symbolism. Moreover, any government formed after the election will already have bound itself hand and foot with unwise, populist promises.

Starting with the fiscal situation – the balance between revenues, expenditures and borrowing – both of the major parties have behaved with lamentable irresponsibility.
Both claim a determination to eliminate the deficit. Both have promised not to increase any of the big money-raising taxes. Both have promised to spend more on the NHS. Both have offered hand-outs in other areas. Yet neither has admitted to planning any significant cuts in spending on public services.

Almost unbelievably, the Conservatives plan to tie their own hands by law, whilst Labour boasts an even more surreal plan to carve its own promises in stone.

The abdication of responsibility

Believe it or not, there have been two collective failures bigger even than the attempt to dupe the voters over fiscal matters. First, the economy is an obvious area in which fundamental issues have been ducked. Second, on matters of defence and foreign policy – in other words, of Britain’s security and standing in the world – there has been a deafening silence punctuated only by gimmicks.

Neither party has addressed the glaring weaknesses in conventional defences, yet both have committed to the vastly expensive replacement of Trident. Neither has ruled out cutting numbers of soldiers, aircraft and ships even further. Neither has had anything worthwhile to say about the threats posed by Russia and Islamic fundamentalism.

Labour’s sole foreign policy commitment has been a promise to appoint “envoys” to promote religious and sexual freedom, something which isn’t exactly going to set ISIS or Mr Putin quaking in their boots. The Tories have their own gimmick, promising to create an award for service in the reserves. For that matter, neither party has really had much to say about the EU – though David Cameron has promised a referendum, the proposed date (2017) is far enough away to achieve nothing other than investment uncertainty.

In short, the parties’ very limited commitments on defence and foreign policy have been a triumph of symbolism and waffle over substance. There might be envoys and a new medal, but there is no strategy for defeating ISIS or restraining Russia. Britain is to replace Trident without even plugging the maritime air surveillance gap that could enable an enemy submarine to track the deterrent boats from their own doorstep. The Navy is to have two aircraft carriers, but without the vital escorting ships and, very probably, without adequate numbers of aircraft either. There is not even a commitment to spend the NATO-required 2% of GDP on defence.

The economy – a policy black hole

And then there’s the economy, where again we have had waffle about incentives and apprenticeships instead of a debate about how the economy is supposed to function. As you will remember, my previous article set out a stripped-down, “at-a-glance” contrarian view of the British economy, which explained that the strategies of successive governments have been asinine.

To leave you in no doubt about this, let me just point out that we have let productivity and living standards drift whilst producing too little, consuming too much, and plugging the gap with borrowing and the sale of assets.

Far from promising to free up some of the vast potential investment buried in the “capital sink” of overvalued property, our politicians actually want to inject further demand into a supply-constrained housing market by offering “help” to first-time buyers.

There has been no serious discussion of how to rebalance the economy away from debt-purchased, internally-consumed services and towards the production of things that foreigners – upon whom Britain depends for imported food, energy and manufactured goods, and for £100bn annually of new debt – might actually want to buy.

Getting a grip

In sum, then, the politicians – and, more pertinently, the political system – are failing Britain, perhaps as never before.

What is needed now is new way of doing politics. That isn’t going to come from the incumbents, or from within the corporatist system itself. It can only come from the public, perhaps through a charter movement of the type I’ve described before.

If there is any optimism to be found in the present situation, it is that the unfitness of the major parties to govern has been laid bare.

37 thoughts on “#50. Everyone a loser

  1. Excellent; yet a very depressing commentary on the current state of so called political parties “thinking” and an indictment of our democratic process. One is left with a complete lack of understanding as to what the strategy is for the country as a whole and a path way to the goals of that strategy.
    The politicians seem to treat the electorate as dolts and the media seems in the main to go along with “their” party’s message with little incisive comment.

    Is there a way forward to change the whole process.?? Would a charter process work?

    best Peter

    • Peter

      Thank you. I’m pretty clear that the leaders of the major parties have no strategy, and no vision beyond getting themselves elected.

      I think there are various factors to consider here.

      We need to realise that this situation will go wrong, one way or another. First, the economy isn’t sustainable on its present basis. Second, foreign affairs and defence are a dangerous shambles. Third, the public is disenchanted. These are three ways that things can/will go wrong. So we need to think ahead.

      What is needed is peaceful change – and that’s where the charter idea comes in. I do think it could work, if organised effectively.

  2. This morning I walked to my village Post Office/Store to buy the local Press & Journal newspaper. On my way back to the house I was aware of somebody walking behind me. It was another villager, whom I recognised immediately, walking his dog down to the beach. As I turned to greet him, he’s a Scot, he smiled and said, “Was that your letter in The Northern Scot this week?”

    “Yes”, I said, “why do you ask?”

    John (who must be 70 years old, if he’s a day) then proceeded to tell me of his total disillusionment with the election campaign. He said that we’ve been let down badly by the political class; that the opinion polls are almost certainly wrong and that the outcomes on Friday will surprise everyone; that our electoral system is no longer fit for purpose and will have to be changed as a result of this election; that most Scots will NOT vote SNP, but virtually every Scottish MP in Parliament will be from the SNP: “How crazy is that?”, he said.

    Meantime, if all those who intend to vote UKIP (for example) had their votes directly reflected by representation in Parliament there would be up to 100 UKIP MPs at Westminster. As it is, the British public will be lucky to see a handful of UKIP MPs, if that. How equally crazy is that?

    Like you Tim – and no doubt like tens of millions of other Brits – I’m sickened to the back teeth by the crass incompetence of our politicians, with a few notable exceptions. Frankly, and I know I might be/sound biased here, only UKIP has come across as a political party with some connection to economic, political and social realities. The rest of them treat us as imbeciles. Goodness knows quite how this shocking state of political and constitution affairs has come about; it really is a mystery to me how this chasm between government and the governed has developed over the past 10 – 20 years.

    All that said, we can only hope that this country is going to get the mother-of-all wake up calls on Friday morning and in the weeks and months thereafter. The British political class needs a reality check to end all reality checks. I just hope that the agony of it all overwhelms them and that we – ordinary citizens – become the beneficiaries of some creative destruction as far as politics is concerned. Then we might see those same ‘creatively destroyed’ politicians reincarnated with some semblance of understanding of economics, world affairs and what it takes to govern a society responsibly. We can but hope.

    Here’s my letter to which John referred:


    All the best. Another great post on your part …

    • Thanks M, and I did read your letter. The questions here are (a) how to dislodge the incumbents, (b) how to change the system to let this happen, and (c) how much more damage will have been done in the meantime.

  3. Hi Tim, have you considered amending the title of your blog to “Surplus credit economics”?
    The surplus energy, we really cannot afford to waste it, is riding on the great credit overhang in every western economy and now infecting asia’s economies.

    Your summary of the UK position mirrors well the same disenchantment we here feel about our mob of incompetents in Canberra. This appalling situation is rife across the planet!

    • Thanks John, an interesting notion. My next article will certainly be in the credit area – “secular stagnation” versus “debt supercycle”.

  4. Hi Tim, we live in interesting times indeed. As a fully fledged tree hugger the party that gets my vote as the stupidest has to be the Greens. My personal take on austerity is that it is living within your means whether it’s your own, the country or the planet’s. And, the only thought that seems to have gone into their house building proposal is that it’s the biggest. I fear they’ve destroyed the true Green movement completely. That’s a pity because there are next to no swallows in our part of the world, or hedgehogs, cuckoos, sparrows….

    • I’ve not been impressed by the Greens, but they face tough competition in the idiocy stakes from the three main parties! I think austerity (or for that matter balance) has an ecological as well as a financial meaning. As a boy, I can remember tree sparrows and yellowhammers, plentiful then but hardly to be seen these days, whilst streams and rivers used to be full of minnows, sticklebacks and bleak, again these seem to have vanished. A lot of this is down to monoculture and pesticides – and if you go to places where pesticides are not allowed, the variety of wildflowers is remarkable, whereas in Norfolk (for example) there are very few. This is one reason why I like protected areas (such as Pembrokeshire, Menorca and La Palma).

  5. I’m amazed that apparently intelligent people regard Russia to be some kind of serious threat to us whilst the US drone-strikes the world to ashes with complete contempt for the rule of law or civilian life, and what it can’t drone strike it destabilises the old-fashioned CIA way, or failing that sends in the Rangers. And now it’s suddenly running its biggest military training exercise with every branch of the military across seven Southwestern states. But yes, it’s Russia we need to worry about. We must stop them preventing the expansion of NATO to the east! Because…

    P.s. from one free market capitalist to another, I completely agree with the rest of your well-written article. 🙂

    • Thanks . I think we can agree about the US, but my view of Russia differs from yours – so it’s just as well that this discussion is about the UK and economics!

  6. Watching the demise of my beloved home Country from afar, as an ex-pat .. As each year drifts by I find less and less reason to return to the UK. Working in an environment where leadership and diligent effort is rewarded, children are well educated and well respected if they study and do well in tests/exams (rather than being school nerds) and the general community is striving to do well. No hand outs, no benefits .. just reward for effort and achievement. How the UK has slumped in the last 20 years is just shocking. A wake up call for politicians with a UKIP vote might just be what the Country finally needs.

    • I don’t know where you are, but I am very seldom in Britain myself these days, as I find it pretty depressing. You are certainly right about the need for a wake-up call, and I see a poll today shows 61% want the electoral system changed.

      Unfortunately, a UKIP vote won’t translate into seats, though it would still help. I don’t, though, see the Conservatives absorbing UKIP ideas any more than the SNP’s more left-wing views will reinvigorate Labour – both main parties are corporatists, not advocates of principles – as Disraeli famously said, “Damn your principles! Stick to your party!!”

      One thing that really did depress me was when Nigel Farage’s quiet dinner with his family was disrupted – there is no need for this sort of thing; people are entitled to disagree, but surely this can be expressed in a civilised way.

  7. Its worth mentioning that only one NATO partner is investing 2% of GDP and that’s the US, so its clear that the continuation of the group is more important to the US than the economics of it. Nevertheless I doubt they will come to our aid quickly unless any crisis is existential or in their own interest.

    • Point taken, but I wouldn’t rely too much on the US – why should American taxpayers defend a country that can’t be bothered to pay for its own defence?

  8. One of the things that shows that these politicos are incompetent – in terms of not getting done what they say they will – God only knows what they truely intend (something shallow I guess), is defence.

    What a total %^ck up. My limited understanding of all things military is that it is the system in its totality that is important. Perhaps we see a reflection of this in our national football team. An obsession with “stars” and no care for systems or the fact that if the defence, can’t defend, the midfield have no vision and can’t link play – then it doesn’t matter what overpaid White Elephant you have up front.

    Whilst I am on my rant, along with the football the political campaigning this time just smacks of self defeat, no one except the new small parties even feel like they are trying to win.

    I am off out to smack myself in the head with a brick now….

    • Agree 100%. Let’s take two examples:

      – Trident. Without maritime air surveillance (which we scrapped in 2010), the Trident subs can be followed from their base, so are not secure.

      – Carriers. These need at least six destroyer/frigate escorts. We have 19, which sounds OK, but at any one time only 1 in 3 are available for deployment.

      Also, nuclear weapons are not likely to be used until conventional forces are facing defeat – so the weaker your conventional forces, the sooner you are likely to push the button.

      Would any UK leader really trade Moscow for London or Birmingham? I doubt it.

    • Exactly. Also take into account that the carriers can’t even launch AWACS, a lesson I thought was learned in the The Falklands campaign.

      If anybody thinks that Putin is not a menace, that just underlines what a molly-cuddled reality absent bubble they live in. He will use any weakness as he needs Russians to be looking at abroad, not home at all times for his position to be maintained.

    • The principles of power projection are well-known. At the minimum a carrier group needs AEW (airborne early warning), which we can just about do using elderly Sea Kings; and CAP (combat air patrol) which we cannot provide (since the Sea Harriers were sold off). They also need surface-based air defence (which Type 45s can provide, but we have only 6, replacing 12 Type 42s) and anti-submarine protection (Type 23s, but only 13 of them, where we used to have 20+). Without this lot, troop-carrying ships are at huge risk. We also need the vague menace provided by hunter-killer subs, but 6 isn’t enough – a potential enemy can guess that art least 2 are in refit, training or transit, another is in the N. Atlantic (perhaps joint with the Trident boat) and 1 in the Gulf. As for the RAF, we know that our 7 squadrons of fast jets will be reduced to 6, we have no maritime patrol aircraft since scrapping Nimrod, and only a handful of our 102 Tornados are operative.

      My fear now is that we’ll see the Army reduced from 80,000 to 60,000, lose the Tornados without replacement, not replace Nimrod, and delete maybe 3 or more frigates plus one or two subs.

  9. This is a little bit off topic but with reference to your anti corporatism theme and your call for democratic action, I wondered what your views are concerning the current and rising popularity of peer-to-peer lending / crowd funding? Do you think it feasible that a significant amount of business could be taken away from the banks, and if so what might be the implications for the money supply and the effectiveness of monetary policy?

    • As I see it, the problem with expanding peer-to-peer lending will be regulation, with more (and more formal) regulation required as p-2-p becomes bigger and more anonymous. And, of course, as you say, this may take business away from banks – which means they will lobby for more regulation.

      Incidentally, we need to think of banks as “sellers of credit”, because this explains how prosperous bankers have become. If there was a big increase in demand for bread, bakers would prosper – likewise, the huge increase in the demand for credit has made bankers prosper.

      The difference, of course, is that if there was a big increase in the demand for bread, the number of bakers would increase, promoting competition – but the huge increase in the demand for credit hasn’t been accompanied by an increase in the number of banks, so their income has risen. Corporatism is the negation of competition!

    • The description of bankers as sellers of credit is a good one. It’s also a reminder of the fact that they have been given the privilege of being able to increase the money supply with a keystroke rather than sourcing credit from the lending of pre-existing money. I suppose the implication is that in an economy hooked on debt, a non-inflationary activity such as p-2-p could never come close to satisfying the demand for credit.

    • Thanks. It’s a comparison I’ve used before to illustrate why bankers have made so much money – basically, people will make a lot of money in any trade where demand for their product soars, which is exactly what’s happened to demand for credit in recent years. And I agree that p-2-p seems unlikely ever to take over a big chunk of the market, even for corporate debt.

  10. Ah, but the government would subsidise the price of bread and imported bread would flood the market putting the bakers out of business until the government subsidises the baker’s worker’s pay enabling the bakers to employ people on zero hours contracts. Those bakers that are left go to the banks for incredibly cheap money to increase production and launch a counter offensive against those pesky foreign bakers. Bread wars ensue and the price drops so dramatically that the grain farmers go out of business so the government subsidises……silly, I know, just having fun. Whatever happened to market forces and price discovery?

    • Perfectly true, of course, so the comparison cannot be pushed too far – and you have reminded me of my history student days, learning about how the Corn Laws (which set a minimum price for imported corn) literally dominated English politics for decades, and their repeal in 1846 split the Tory party down the middle and kept it out of office for a generation……but I digress!

      Banking (and money creation) has always been a state-influenced activity, for perfectly good reasons, but this is all the more reason for regulatory activities to be at arms-length from the lobbying and self-interest of the banks.

      I have still to hear a good explanation for why, when saving the banks, the govt saved the bankers as well – if they’d created a new holding company to take over, say, RBS, this holding company could have assumed all the assets of RBS, and all the liabilities except senior employee contracts, re-hiring anyone really useful.

  11. What do you feel are the “threats” posed by Russia to the UK?

    • Briefly – because the main topic here is Britain – Russia is a threat because (i) expansionism threatens our allies; (ii) the Livinenko case surely needs no comment; (iii) extent of involvement in organised crime in Europe; (iv) incursions into British airspace.

  12. Dear Tim
    My take on the election results? One liberal party smashed, one liberal party defeated (New labour), and one liberal party going nowhere in the polls, though they have gained a thin majority. Liberalism of any colour is retreating. What is up? Nationalism of many colours, whether the left national of the Scots and Welsh, or the right economic nationalism of UKIP, and if you include the Greens emphasis on the local economy, many people in the UK are seriously falling out of love with international liberalism, and its corporatist sponsors whether political, media or corporate. Yes, apart from Scotland, they gained very few seats, but it becomes harder and harder to govern a country where most people are won’t not to cooperate with the government or big corporate businesses. The time of the little Englander may be coming! This term of abuse was created in the early 19th century to vilify those who opposed Britain’s Imperial expansion, the liberal ideology of the day, against conservatives who saw the costs; moral, social, and military. However the lure of wealth won out at that time. But liberalism can be a viscous mistress, and can strip a country of wealth as well as endow it if geopolitical power moves elsewhere. The battle over the liberal economy may go the other way in the days of contraction ahead.
    Best Regards
    Philip Hardy

  13. First of all, none of the main parties is “liberal” in my terms – they are all corporatist, to a greater or lesser extent. In general, though, I agree.

    Overall, 14.4% of voters abandoned the coalition, a bigger anti-incumbent swing than 1997 (11.2%) or 2010 (6.2%). Of these 14.4% “deserters”, only 1.5% switched to Labour. The big winners, numerically, were UKIP (9.5%), ahead of the SNP (3.1%) and the Greens (2.8%). Clever politics by Mr Cameron ensured that the Lib Dems received the full blast of the swing against the coalition. There seemed no reason whatsoever to vote Lib Dem – but the Tory vote held up (increased fractionally), for two reasons – fear of “the Scots hordes” (!) and fear of Labour on the economy.

    Most commentators didn’t see this coming – in fairness, neither did I – but the “commentariat” is still wrong-footed. I don’t accept that David C can be held to ransom by his backbenchers, because the Parliamentary opposition is extremely fragmented. Neither does the SNP’s bloc of 56 seats mean much in voting terms. Even on Europe, the government can anticipate a huge pro-EU propaganda campaign from the state and the corporate sector, money no object. Add in a few cosmetic concessions from Brussels and the voters might yet do what they’re told, i.e. vote to stay in.

    The big problems are in “real world” issues like foreign policy, defence and the economy. Our foreign policy is a shambles, and defence seems likely to be cut even further. The coalition was clueless on both of these.

    Then there’s the economy, which continues to rely on debt-funded consumption. My own suspicion is that a big economic day-of-reckoning is coming.

    • the winner has to deal with the housing ponzi scheme.
      On one hand ownership is decreasing and on the other hand they cant let the prices drop. They have no way to solve this and suspect they will try to hope that Fed does not raise rates within the next 5 years.
      £ is toast.

    • Hello Dr Morgan
      Thank you for replying, sorry that I mislead you a little by including two different comments in one sentence when I referred to seats gained in Parliament and the non-cooperation of people with government and big business, I was trying to keep it brief. By non-cooperation I meant people in general. To give two examples; I took my nephews to a multiplex at Easter, the demeanour of the staff was ‘we have to work here but we don’t have to happy about it’, not the best invitation to go back. Not one of the dozen or so staff I would say was over 25, and I have seen it increasingly in quite a few other corporate work places. The other, I have friends who work or worked recently for Cargill, Lombard, BP, IBM, RSA, Thales, RBS, BAE, BA, in senior technical positions, or lower management. They know their jobs won’t exist in ten years’ time, probably not five. They are going through the motions, totting up as much as they can in their pensions and redundancy packages before the axe falls. It does not matter how well the company is doing or they are performing, it can always be done somewhere else cheaper, they have seen it happen too many times before. One of my friends has reapplied for his job three times, and gone from a department of two hundred to just him, everything else has been out sourced mostly abroad.

      As you point out the term Liberalism has different meanings to different people. My reference is to economic liberalism with its belief that free trade increases wealth, and that the more trade the better. The three major liberal parties support this belief in a more or less pure form, the smaller nationalist parties and greens balance it with concerns for citizens or national welfare, the environment and democratic control.

      With International trade mostly conducted by a small number of very large corporations, their failure would end trade as we know it, turn to waste a huge amount of capital investment, and gut the industrial world’s economies. Hence why they protect themselves and are protected by vested interests, which feeds into your work on corporatism. Not that they are going survive anyway!

      Thank you for all blogs they have been very informative, and though I have been taking action to protect my future for some time, the odd kick up the **** helps the focus.

      Best regards
      Philip Hardy

    • Thank you. Your comments on attitudes to work are very interesting, as this is clearly a problem area. I think this starts at the top.

      In times past, businesses were run on what might be called “quality” lines. The firm did everything to maintain and enhance its reputation. This was reflected in treatment of customers and of staff. Staff were encouraged to see themselves as representatives of the firm. Reputation was important, because repeat business, and word-of-mouth recruitment of new customers, depended on it. All of this was particularly true in the so-called “professions”, which included banking, though it was the norm in business pretty generally. No self-respecting business wanted to be seen in a spivvy, “here today, gone tomorrow”, “used car salesmen” sort of way.

      There are, of course, businesses which retain these values, but the generality has changed. Reputation seems to matter much less – customers can be attracted by advertising and low-price promotions, making reputation less important. Customer treatment is defined by what you can get away with – which in turn can be defined by one-sided “terms and conditions”. The attitude seems to be “caveat emptor”. Customers can be treated as suckers, and staff as commodities..

      However, I have found that this is by no means globally universal. Rather, it seems characteristic of Britain, America and perhaps Australia. Businesses in places as far apart as Spain, Germany, China and Japan DO continue to value their reputations, and to see their staff in an inclusive way. Bluntly, I used to prefer dealing with British firms, but now I prefer the treatment and service that I get from other countries – customer service from Japan is marvellous, incidentally, in my experience. There are some British firms that I put my trust in, but I’m sceptical dealing with British firms that I don’t already know.

      One implication might be that this “sod you” attitude to customers and staff is part of the Anglo-American “liberal” model, but it doesn’t seem to be as bad even in the US as in Britain. I don’t know what is really behind it. It might be part of social attitudes in the UK.

  14. It’s easy to over think this, I suggest that it’s possible the Scots decided that, with the referendum out of the way it was ‘safe’ to vote SNP and the fact that the Tories are offering the 2017 referendum it was safer for the English/Welsh to vote for them. As for Labour, maybe they simply didn’t like Miliband.

    I feel a little easier about the impending financial crisis, I’m not saying its gone away but, perhaps not quite so imminent?

    • I don’t think this really changes anything much. 14.4% of voters abandoned the coalition parties – but only 1.5% of this 14.4% switched to Labour. The Conservatives probably won as “the least bad” of the three.

      In economic terms, we continue to base our economy on consumption funded by borrowing. The net cash outflow (net trade + net interest + net dividends) has soared to £100bn annually. Living on tick is not sustainable.

  15. A question for Philip Hardy – I would be interested to know what action you have taken to protect your future? I have my own ideas but unable to convince my significant other that any action is at all necessary!!

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