#96: May’s day – or mayday?

THE CASE FOR REFORM – NOT REVOLUTION

If memory serves, bookmakers offered odds of 200-1 against Jeremy Corbyn becoming leader of of Britain’s Labour party, a contest he then won by a very comfortable margin. Though their politics are diametric opposites, Mr Corbyn and Donald Trump do have one thing in common – an uncanny ability to put red faces on the “experts” by pulling rabbits out of electoral hats

As recently as a week ago, some of these experts were suggesting that Labour might struggle to get even 25% of the vote. This was a prediction which always flew in the face of logic. My hunch has long been that pollsters would understate Labour’s support by at least 5%, because many of Mr Corbyn’s most committed supporters are not the kind of people who answer pollsters’ questions. If that rule-of-thumb is right, he could yet confound the pundits again, this time by becoming Prime Minister after Thursday’s vote or, at the very least, by taking away the government’s slender majority.

It isn’t hard to understand why Mr Corbyn might garner a large enough proportion of the vote to pull off a shock. Average wages have been falling adrift of inflation since 2009, and of the cost of household essentials for even longer, and security of employment has been weakening for at least as long. Rightly or wrongly, many people think that a wealthy minority is prospering at the expense of the majority. These are fertile conditions for a popular repudiation of “the establishment”.

Strikingly, this is an election which, as the Prime Minister’s critics allege, quite probably was only called because incumbent Conservatives expected a huge victory. If this is the case, it’s another instance of the same sort of complacency that we have witnessed before, notably over the Scottish independence referendum and the “Brexit” vote on EU membership. As so often in recent times, the establishment – in this instance, the government, its advisors, the “experts” and the mainstream media – just don’t seem to “get it” where the popular mood is concerned.

There really is no excuse for such complacency. Where purely economic issues are concerned, there are two factors guaranteed to make an incumbent government unpopular. One of these is hardship, and the other is a perception of unfairness – and both have been present in abundance in the UK in recent times.

Hardship, at least, is factual. According to a recent report from the Joseph Rowntree Foundation, 19 million people – almost a third of the British population – are now struggling to get by on “inadequate” incomes, up from 15 million (25%) six years previously. Comparing 2016 with 2009, a 12% rise in average wages has been exceeded both by CPI inflation (of 16%) and by the cost of household essentials (22%). By the latter measure, at least, the average wage-earner has now been getting poorer for a decade. This is a longer period of deterioration even than the 1930s, and might be unmatched since the 1840s, or even earlier. Neither does anyone really expect a reversal any time soon, not least because of the increase in inflation following the slump in Sterling after the “Brexit” decision.

Anyone who thinks that this can make an incumbent government popular needs to get out more.

If hardship is electorally bad, perceptions of unfairness are truly toxic, and such perceptions cannot be countered by official statistics. A fair summary is probably that, whilst income differentials haven’t widened over the past decade, inequality of wealth certainly has. Monetary policy, including ultra-low interest rates and “quantitative easing”, has inflated the value of assets – and you can only benefit from this if you had assets in the first place. Back when ZIRP and QE were introduced, those of us who believed there was an imperative political need to accompany asset-inflating policies with higher taxes on the resulting capital gains (and lower taxes on income) were ignored.

The popular narrative, then, and rightly or wrongly, has been that policy has benefited a wealthy minority at the expense of the everyone else. Until quite recently, government ambition in this field was limited to helping the very poorest, which is no answer at all to those who, whilst not in absolute poverty, are hard-pressed to make ends meet.

Beneath the surface issues, a motivating perception is that politicians of all parties have abandoned “the working class”. Under Tony Blair, “new” Labour adopted essentially the same economic policies as the Conservatives, and sought to claim radical credentials on grounds not of redistribution but of “identity politics”. This sense of abandonment by “the establishment” has included not just economic but social issues as well, notably immigration. The estrangement between governing and governed almost certainly proved decisive over “Brexit”, where each and every plea from politicians, business leaders and “the commentariat” for a “Remain” decision probably drove more voters into the “Leave” camp.

One of the more striking features of the “populist” – or simply “popular” – backlash against Western elites has been the failure of politicians of “the left” to capitalise on it. Essentially, social democratic parties are perceived to have sold out – and it’s hard to be a credible campaigner on issues of economic inequality once you’ve bought the second home in Tuscany and packed the children off to expensive fee-paying schools. This is one of two reasons – the other being immigration – why angry voters have veered to “the right” rather than “the left”.

This is where Jeremy Corbyn is different. Because its stilted, “first past the post” voting system effectively reinforces established parties and prevents the rise of a Syriza, a Podemos or an FN in Britain, very limited routes exist for a popular backlash against the elite. The “Brexit” referendum was one such opportunity, and voters took it. But the only other realistic democratic route for challenging the establishment was to seize control of one of the major parties, and this is what Mr Corbyn did.

In the election called by Mrs May, a big part of what is really being put to the test is the extent to which the voters want to kick the establishment in the teeth.

The irony is that Mrs May is not a quintessential establishment candidate in the mould of Tony Blair or David Cameron. She seems to recognize the need for reform, and for narrowing the divisions which have widened alarmingly between the winners and losers from two decades of essentially neoliberal policies in a context of globalization. When she famously told her party to its face that it was widely seen as “the nasty party”, many seem to have failed to recognise that her call for changes to party policy would extend to the economy as well as to social issues.

As the election campaign has unfolded, the sure-footedness of the Corbyn camp has contrasted strikingly with the stumbling of the Conservatives. Voting choices are as often about perceptions of competence as they are about policy. Apparent attempts to frighten voters away from Mr Corbyn seem to have misfired, whilst he has been as determined to distance himself from his own party’s recent past as from his opponents.

The view taken here, which will not surprise readers, is that the Western elites have failed, and nowhere has their failure been more conspicuous than in America and Britain. Allowing market capitalism to mutate into corporatism has been damaging, both socially and economically. A large part of Donald Trump’s appeal was simply that he wasn’t an establishment figure in the mould of Hillary Clinton. In Britain, Jeremy Corbyn has been winning over voters simply by distancing himself from the elite. He has set out to prove, were proof necessary, that he isn’t another Tony Blair or David Cameron.

In reality, Mrs May isn’t another Blair or Cameron either, but this differentiation has proved difficult to establish.

Mr Corbyn is right, then, about many of the ills that he identifies. The economy has indeed been mishandled, which is one reason why Britain is now – in the words of Bank of England chief Mark Carney – dependent on “the kindness of strangers”. The economy has become progressively less balanced, with a continuing decline in manufacturing output contrasting with growth in the real estate and financial services sectors. The majority have indeed suffered, not just through deteriorating real wages but also through the increasing casualization of employment as well. The authorities – though ironically Labour, not the Conservatives – did bail out bankers as well as banks.  Not enough has been done to break up the domination of critical sectors by small numbers of companies, or to ensure that those at the top – not just in business, but in the public services as well – are held to account for their mistakes. There has been a failure to recognize that secure, well-paid employment is a necessary basis for robust demand.

Where Mr Corbyn goes wrong is in his solutions. In this respect, by far the most dangerous of his proposals is nationalization. He seems not to realize that a current account deficit of 4.4% of GDP, or £85bn, means that Britain must – stress, must – attract matching capital inflows. In a very real sense, the UK depends to a truly frightening extent on foreigners – those overseas investors who buy British businesses, invest in Britain, retain their profits in Britain, and lend Britain money.

There are plenty of reasons why foreign investors might already be getting nervous. “Brexit” may not be a bad thing, but the uncertainty around it is undeniable. One of the more persuasive bear arguments lies in the deterioration in wages, because low-and-falling real wages are bad news for any business trying to grow its sales. The current account and fiscal deficits combine to suggest that neither the economy nor the government appreciates the need to live within its means.

The danger of a Sterling crisis is quite palpable, as is the failure of politicians and planners to recognize its implications. If the threat of nationalization turned the inflow of capital into an outflow, there is a very real danger that Sterling could crash. If this happened, not only would inflation spike – to the detriment of wage-earners – but interest rates could soar as well, the latter causing the property market to crater.

Britain does need to wean itself off a diet of cheap credit by moving rates up – not least to counter the alarming deficits in pension provision – and would benefit, over time, from letting property prices drift lower.

But nothing would be gained, and a huge amount could be lost, if these things happened suddenly, in an atmosphere of panic. Britain survived “Sterling crises” in 1967 and 1976 – but the risk of “third time unlucky” is perilous.

From an avowedly pro-capitalist – but anti-corporatist – perspective, Britain needs to break up (but not nationalize) over-concentrated sectors, do much more to help small and medium-sized enterprises (SMEs), empower consumers, tilt the balance towards innovation and away from speculation, and re-commit itself to the mixed economy. But swinging from failing corporatism back to already-failed collectivism isn’t the solution.

The best outcome – the one likeliest to pluck the flower of safety from the nettle of danger – would be a Conservative government with a workable majority, led by someone committed to popular capitalism rather than to corporatism, and robustly opposed by a Labour party that has gone back to its roots.

The worst outcome could be a government committed to nationalization, barely opposed at all by a Conservative party tearing itself apart in a welter of recriminations.

 

62 thoughts on “#96: May’s day – or mayday?

    • @houtskool

      Don’t worry, if anything you say is interpreted as too rude, it’ll be quietly censored if it doesn’t match the allowed opinions here.

    • We do need new ideas – the old ones have failed, most spectacularly on Thursday. That’s likely to be the next article.

      Incidentally, ideas are never censored here. Obviously, language may need to be, very rarely, if debate is to remain courteous and constructive.

  1. Cracking essay. We also need a party committed to reducing our population in my view. None of the parties want to do this; yet, but at least there is some awareness from the Right that increasing our population may not be economically sustainable. I agree with houtskool that growth is essentially over, bar the shouting, and the Left, unfortunately, has yet to come to terms with this fact. ps my political leanings are towards the Left, by the way.

  2. Hi Tim

    Many thanks for another enlightening essay.

    I think your analysis is spot on but I think it very unlikely that we will get the optimal solution you suggest. As you imply things have gone awry for many years and we have very few alternatives. I believe that TPTB know full well that there is no solution to these difficulties and are simply waiting for the crash to grab the sort of powers which they couldn’t otherwise; when folk are fearful they will accept sacrifice and not look too closely at the detail or long term implications. You may say that this is a counsel of despair, and in some ways it is, but I think that is where all the indicators are pointing to now and have been pointing for some time.

    • TPTB, bankers, the 1% etc etc. Who are these people, Bob? I’m not a fan of conspiracy theories; too religious for me. Rather than look at some vague external ‘reason’ for why things happen we are better looking within ourselves, and how short term motivations, within all of us, shape our world.

    • I started out thinking that Mrs May would win – as all the “experts” said was inevitable – but that it wouldn’t be quite the landslide they were predicting.

      Then I noticed that the Conservative campaign was stumbling, whilst Labour was looking more sure-footed. This made me think that Mrs May’s majority might be no bigger than it is now. This would have been the “best outcome” that I describe here.

      But momentum now seems to be favouring Labour, suggesting a very close result and a hung Parliament. This was why I decided to look into it, resulting in this article.

      I note that GBP has been weakening, suggesting markets are no longer taking a Conservative win as given.

    • Ed

      You are right of course but TPTB to me is a concoction of government, finance. media, a variable group over time; an amoeba of variable shape but existence as an entity.

      Like you I am not a fan of conspiracy theories (cock up probably predominates here) but I do have difficulty in believing that the position outlined by Tim is so outrageous that it is beyond the pale; let’s face it an awful lot of folk do believe that we’re headed for a crash and that there’s no way out; it’s almost mainstream.

      Given that and the clear reluctance for giving the electorate bad news it makes such a conspiracy view actually rather sensible; if folk won’t accept bad news one way then they’ll have to stump it another.

      As to whether we should look within ourselves you may be right but it does beg the question: are our motivations our own (whatever that might mean) or are they themselves manipulated? At the end of the day I don’t know.

    • Ed

      Like you, I find most conspiracy theories far-fetched. Instead, though, there can be groups united by commonality of thinking. Since the late ’70s, we’ve witnessed a revival of market-based thinking mutate into corporatism – and the common factor linking the groups you mention isn’t any kind of “cunning plan”, but a shared identity of interests as “winners” from this trend.

      As I see it, we’re in the second stage (of three) of the financial crisis. If the first stage was the banking crash, the second has been the era of cheap money, designed to keep the show on the road. This is distorting the system towards the third stage, which is another and bigger crash.

  3. But Ms May is not a capitalist she is another Blairite all for keeping the status quo, hence why she deserves to lose.

    Corbynism has to be better for the average working man than the last 2 decades of Blairism … FFS most working people can no longer afford to buy a simple houses on wages well above the average.

    • There has been a common strand in British politics for at least 20 years – basically, ‘don’t ask too many questions about the economic system; focus on the very poorest to distract attention from the very richest; and promote politics of identity rather than economic inequality’.

      Cameron was part of this, but at least he was avowedly a Conservative. Blair, for me, was the worst of the lot, together with his hangers-on. Corbyn is a breath of fresh air, because at least he believes in something – which even those like me, who disagree with a lot of his policies, can respect.

      I don’t know what to make of Mrs May. But I credit her with realising that two decades of corporatist “Labservatism” are over.

  4. I’m not so sure privatization is such a bad idea. It has to sort out the foreign ownership angle. but a Monetary Sovereign government can do what Bernanke did for the banks during the GFC. They can be bought out simply by crediting their bankers with numbers to match the values. It’s time to ditch the governments supine position regarding profit as wanted by the bankers. It’s they who are the big donors to politicians susceptible to graft and corruption. Corbyn’s problem is his ignorance of modern economics. He desperately needs bringing up to speed with that discipline!

    • Privatization and nationalization are both about ownership, but this is a second-order issue – the real concern should be competition. Thus, privatizing a monopoly just transfers ownership without furthering competition – and much the same applies to nationalization.

      In Britain, the Conservatives have a fetish about private ownership, just as (old) Labour worships state ownership – but, neither, as such, promotes competition, or the empowerment of consumer choice.

      Both parties have tried “internal markets” in public services – but fake markets aren’t markets, they’re just fake. This has resulted in fragmented services with too much costly management – a centralised (or regional) command system would be better, with the protection of transparency and accountability.

      This is one reason why I disagree with Corbyn over nationalization – he should aim to break up big players in electricity, water and other sectors, not simply change private into public market concentration. The other reason is that nationalization would frighten off international investors – very probably crashing Sterling.

      Mr Corbyn does need to learn economics – but so do the incumbent regime. Specifically, they need to learn about (a) competition, (b) the sheer impossibility of a developed country competing with EMEs on price and cost, and (c) the merits of a high-wage, high-skills economy!

    • Competition is not a good excuse for privatization, certainly unlikely to save any money. Just look at the mess that is the US health service industry. It just needs to be run with competence and audited regularly. So I don’t buy it.
      I don’t see why nationalization need frighten off investors. We won’t need them really as the UK can fund everything itself. It has no need to save or borrow and especially doing so in a foreign currency should be avoided at all cost. Existing investors can be bought out. Simple op.

      Everyone in politics needs to understand how the REAL economy works! That’s urgent. It’s much more basic than what you say they need to understand. I suggest monetary sovereignty as lesson No1.
      Here’s a good breakdown of what is needed to be understood, clearly set out in cartoon form;

  5. Hi Tim:
    No sarcasm intended…….but it is a good thing you posted it yesterday.
    If we gona pause at every “event” …….we might not as well hear from you for a while!!!
    What a useless mess……..but as usual the culprits are GREED & STUPIDITY.

    Cheers.

    • I agree – we can’t put normal life on hold every time some sick individual kills innocent people, not least because that’s part of what they are trying to achieve. This time, the pause has been brief, probably the right balance, though a difficult judgment to make.

      Greed and stupidity do indeed explain a lot.

    • I thought the attacks we’ve been seeing were more reasonably chalked up to revenge than to greed and stupidity. On second thought, perhaps one of these is the proximate cause, while the other is the original cause.

    • Hi Dolphin

      I think there are different issues here, and I’m not keen on going into the attacks, as there is so much discussion of them elsewhere. As I see it, these attackers are followers of an extreme sect, one of their aims being to foment conflict between Muslims and non-Muslims in the West. We mustn’t let them provoke us into Islamaphobia.

      Meanwhile, the UK has an election which shows no sign of leading to rational economics.

      Mrs May does seem willing to rethink economic policy, but how committed she is – and how effective she can be against powerful vested interests – has to be doubtful.

      Mr Corbyn has some good ideas (as well as some bad ones), but I don’t see the folly of collectivism as the solution to the greed of neoliberalism.

      No-one seems to be focusing on the biggest deficit of the lot – the ethical deficit.

      The neoliberals think you can run a market economy based on caveat emptor and law of the jungle – but we’ve known that’s nonsense since Adam Smith. Mr Corbyn seems to think state oligopolies are better than private ones.

      Unless someone shapes up, foreign investors won’t keep putting capital in. If I were them, I wouldn’t, either. If capital inflows turn into capital flight, GBP is toast, inflation rises, interest rates rise and property prices crash back to a more realistic ratio of average earnings. Last one out, please turn off the lights.

    • Dr. TM: Agreed that this comment thread is OT given the content of Post #96. I was simply replying to Peter’s “greed & stupidity” comment. I wasn’t quite sure exactly what “useless mess” he was referring to. Terrorism? Brexit? Jeremy Corbyn? Theresa May? Radical Islam?

      I settled on terrorism/radical Islam as the most likely reference. The one thing that’s usually overlooked here is our own role in fomenting radical Islam. We have repeatedly interfered in the internal affairs of muslim countries and in recent years have devastated many Islamic societies. When law and order break down, as has happened in Afghanistan, Iraq, Libya, Yemen, Somalia, and now (among others) Syria, people tend to fall back on more basic means of obtaining justice. The people can no longer count on a weak and overmatched government to redress grievances when wedding parties, hospitals, and schools are bombed by aggressive foreign powers, and so they seek redress on a personal level. In chaotic situations, revenge is viewed as mandatory response to injustice, lest one’s rights and security become trampled altogether.

      Interestingly enough, this cycle of violence can often be broken by the offending party making monetary restitution to the families of the victims. This the west has repeatedly refused to do. Thus my prognosis is that the terrorist attacks will continue, with western countries seeing terrorism as something that must be stamped out by force, and the Islamic groups seeing themselves a being victimized and revenge by terrorism being a mandatory response to foreign aggression.

  6. The Maybot has no hope of trouncing the entrenched Thatcherites. I voted for Mrs T when she was around, but now I’m going to hold my nose and vote socialist. The disparities in wealth are obscene, and the Toryservatives wouldn’t have a clue what to do about it, even if they wanted to.

    • Though she had her faults, Mrs T differed in two critical respects from her successors. First, she took power when organized labour had put the country on its knees. Second, she privatized industries – not public services.

      Inequalities of wealth are too wide now -worsened, of course, by asset-inflating policies. One solution might be a wealth-tax – not uncommon in Europe. But I’d prefer to see capital gains taxed at least the same as earnings. The reason for this would be to swing incentives away from speculation (favoured now) towards earnings, in which I include profits.

      But we’ve seen what happened when Mrs May suggested people pay for their own care in old age out of the eventual value of their property. My idea would be that CGT should apply at the same rates as income tax (in which I include National insurance). There would be an annual exempt allowance, the same as that for income. So capital gains would be taxed exactly the same as income, except there should be some incentives for those who build up non-property businesses.

      But can you really see voters buying that – even if income taxes and/or VAT could be reduced as a result?

  7. Hi Dr T., I fully agree with your analysis but differ on the ideal solution. To the extent that she’s committed to any actual belief beyond hanging onto power like a drowning rat, May’s rendition of reheated Thatcherism will just extend neoliberalism’s run albeit with a new mask. We really need a centrist party, but the reason the LibDems rarely get over the 20% mark is simply because the English are mostly neither liberal nor democratic in their political leanings, unlike the Scots for example. (so the clue’s in the Party name ironically) If the UK broke up, it would be hard to see anything other than England being ruled by the Tories alone into perpetuity. So sadly, I predict more of the same formula that has failed up to now, there are just too many parasites & predators benefiting from the austerity gravy train.

    Even if Corbyn is as naive as he is portrayed/demonised by the billionaire-owned, establised media, he would be the best bet we have to get some Keynesian policies reviving a sustainable & more balanced economy. I would rather have someone who isn’t a corrupt shill for the establishment have a go with genuine good intentions. But this wont happen as long as the electorate continue at the current level of gullibility. They’ve voted knowingly for austerity 2 or 3 times now, depending on your definition.

    As for the intimidation of political violence, the civilised response is to be sensible in precautions but not at the price of ceding our rights as that would defeat the object by gifting them victory. Those who would give up their freedom for the promise of security neither deserve nor will receive it – that is sleepwalking into dictatorship.

    • Well, I knew I was opening a can of worms when I published this! My fear is that the corporatists have mismanaged things to the point where the UK depends on capital inflows from overseas – so my big problem with Corbyn is his nationalization plan, which could easily create capital flight. If that happens, and Sterling crashes, inflation would rise (further hurting real wages), and I can’t see how a rise in interest rates could be prevented, which would be a disaster, especially if it crashed the property market and crippled banks with big mortgage exposure. I suppose what I’m saying is that Britain is too fragile and poor to risk nationalization.

      This aside, I’m with you on a lot of this. I’ve said before that Britain’s biggest deficit isn’t fiscal or trade, but ethical. Unlike many foreign companies, a lot of British ones are all too quick to use one-sided “terms and conditions” to get away with shoddy products and services. The degradation of ethics is evident in society, as well as in business and government. I don’t know how the UK can overhaul its ethics, though I’ve made a few suggestions. Neoliberalism, which favours a “law of the jungle” (rather than a regulated and ethical) view of markets, has been a direct contributor to this state of affairs.

    • Agree entirely. I like to think that this blog combines reasoned argument with courtesy. There is far too much of the other sort around.

  8. What worries me – my interests both politically & professionally are Universal Credit & Housing, is that The Conservatives are creating the conditions for civil unrest in the UK, almost as though like Labour in the 80’s they have been taken over by the far left.

    • Historically, the British aren’t easily angered into unrest, which is good. The best way to strengthen civil society would be to adopt a lot more democracy – including an elected upper house (instead of the current mess) and adopt some form of proportional voting. The claim that FPTP voting produces “strong” government isn’t credible, since other countries (such as Germany) seem pretty well governed under PR.

      Housing (shortage of, overpricing of, and excessive rents) is a mess – but it seems to be a politically-popular mess! High house prices disadvantage the young, absorb capital that could be better employed elsewhere, undermine labour mobility, and encourage speculation over investment. Politically, though, can you imagine any party winning power on a promise to tax gains made when house prices rise?

    • Sounds a lot like Australia ‘s position. Asset inflation sends all the interest to the banking sector, depriving the real economy of spending power since so many are under mortgage stress and cannot afford to spend freely. It’s not a problem for the 1% as they don’t have mortgages so high end restaurants are not in stress.
      Why do you think the UK borrows foreign capital? To me it’s just unnecessary, as I said earlier.

    • Asset price inflation has been the corollary of ultra-low rates, introduced once debt became too enormous to be serviced at more normal rates of interest. This distortion of the relationship between assets and earnings has done enormous damage, widening inequality, disadvantaging the young, preventing the “creative destruction” essential to renewal, and putting pension funds into deep deficits.

      Since these policies (including QE) were always going to inflate asset prices, why on earth didn’t governments impose higher taxes on capital gains?

  9. In doing some volunteering for the Progressive Alliance I have read the Labour manifesto and would like to make the point that the media are mischaracterising Labour’s plans on nationalisation of the energy industry. What the manifesto actually states much more evolutionary than that.
    To quote :-
    1 Regaining control of energy supply networks through the alteration of the National and Regional Network Operator license conditions.
    2 Supporting the creation of publicly owned, locally accountable energy companies and co-operatives to rival existing private energy suppliers, with at least one if every region.
    3 Legislating to permit publicly owned local companies to purchase the regional grid infrastructure, and to ensure that national and regional grid infrastructure is brought into public ownership over time.
    As a long time renewable energy person this strikes me as eminently sensible if one wishes to move to low carbon, sustainable energy and increase employment over the whole country. Compared to the Tory idea of going all out for fracking and not helping renewables I do hope Labour wins – good for our sustainability.

    • Thank you, Charmian. I must admit that I hadn’t read the manifesto – and my fear is that markets won’t have read it either. Personally, I’ve no particular objection to the policy – but I fear that the UK cannot afford to antagonize foreign investors.

  10. Hi Tim I agree with your posts – but even if we get to the best outcome of a highly skilled high income population haven’t we still got the problem of enough cheap to extract oil to power it?

    • Welcome, and yes – low oil prices, which are cyclical, are making people remarkably complacent about this. My view, though, is that sound economic principles become ever more important as the energy-related issue worsens.

  11. Thank you for your kind reply – I think I usually post as Don but used my parent’s PC which didn’t have my user name. Yes oil prices are far too low and not providing money for the investment needed for future extraction.

    Incidentally I’ve just been reading about energy in Nicaragua where their aiming to get 90% of their energy from renewables by 2020. Mind you they have geothermal plants – windmills hydroelectric and plenty of sun so they are rather lucky.

    • If the key to renewables is solar – as I think it is – then the sunnier it is where you live, the better off you’re going to be. This could create a huge swing in wealth from a shivering north to a prospering south, thus turning hundreds of years of history upside down.

      I’ve been spending a lot of time on a remote island with almost continuous sunshine on one side, high rainfall on the other, fertile soil and good agriculture, a small population, steady and predictable prevailing winds, and almost every conceivable micro-climate depending on altitude. Lucky people!

  12. Tim, another cogent and erudite instalment that provides plenty of food for thought. The general election campaign has been notable for the almost total absence of any serious discussion about the trade gap, the funding of it by way of selling assets into foreign ownership and issuing debt, and the deteriorating situation in respect of national investment income. Maybe I am not very bright but to my mind these are among the Big Issues that need discussing. The national polity seems to be gripped by a bout of delusion that quite honestly is bordering on insanity. We appear to have no national leaders of stature who properly grasp the reality of our current economic predicament, and even fewer capable of formulating the right economic questions. It is really quite depressing and alarming.

    • Kevin

      I was just drafting an article on this very subject. Economic policy has not been discussed, and is therefore likely to remain idiotic. One really would have thought that “Brexit” alone would have triggered debate on economic policy – whether it’s a good or a bad thing is a matter of opinion, but it cerainly means change.

      In my opinion, Britain needs huge changes. Relying on flogging off assets, and borrowing from abroad, to fill the current account gap is crazy – it just increases the net outward flow of interest and profits.

      Equally daft is the idea that, by driving down real wages (and undermining working conditions), the UK can compete on price with emerging economies. This is impossoble. A low-wage economy inevitably means low skills, low productivity, low quality of output, weak demand and weak tax revenues. So the UK needs to compete on quality – to do this, you need the stimulus to quality that competition can provide through customer choice, so long as over-concentrated sectors are broken up, and customer rights enhanced.

      Then the UK needs to tilt the balance from the speculative to the innovative – support SMEs, free them from Business Rates, and exempt them from a lot of well-meaning but troublesome regulation. Reverse a situation where capital gains are taxed less than income – so increase and extend CGT, and use the proceeds to remove millions from income tax.

      I’m sure you can add a lot more ideas – but voters are being offered nothing at all, except more of the same, or a partial return to the ’70s.

  13. Hi sounds fantastic – without a doubt solar is very important – although I doubt we have enough sunshine in this crowded island to power solar furnaces economically. Personally I’d love to live somewhere where travel wasn’t dependent on oil. Imagine the year 2067 where renewables aided by nuclear fusion power this country.

    Small computer controlled electric cabs are everywhere for short journeys and the motorways have been converted to take a modern take on the Trolleybus. One lane could be for stopping services while the other for semi fast. The third (and where applicable) fourth would be used to transport freight to various hubs.

    100 seater electric planes would now have a 2 hour flying time thanks to advanced batteries but most people prefer using the superfast train links to the North of England and Europe (via the 2nd channel tunnel).

    Private car ownership is rare as the electric autonomous cabs – with a safe top speed of 35 mph – fulfilling most people’s needs short journey needs although there are plenty of electric buses on the main routes which run on time on the uncrowded roads.

    The economy is strong driven by flair and innovation – we can’t always beat the Chinese on cost but they envy our steady flow of new ideas – many say that their lack of multiculturalism has had a profound affect on original thought.

    Robots do many tasks – from the basic ones that simply collect the waste bins to the highly sophisticated models performing surgery. Sadly there had been a fad of some people spraying graffiti over the basic models – however they often forgot that all robots are linked to both conventional and quantum computers making facial recognition or recognition by gait very easy.

    There are also premium house robots for cleaning – security – teaching and company. They can hold intelligent conversations about anything – although scientists are still unsure though if there’s anything they can define as machine consciousness.

    Of course robots exist for other needs – although these are usually delivered for self assembly in separate packages to avoid sniggering neighbours.

    Television only exists for news and factual documentaries – many people just immerse themselves in virtual reality (a popular game allows you to become a timelord and go forwards or backward in time and space to anywhere you desire. ) although there has been a growing trend to go and watch live plays.

    So with its self sufficiency in energy – flair – innovation – the UK has become the envy of the World. Pupils often look back at the energy and investment poor early decades of the century with pity.

    If only………

  14. Hi Dr Tim!
    I don’t see good economics as being political, it’s simply practical management of the economy,
    you seem clear headed and honest enough to see the follies of the left and the right,
    the right has had more than enough time to pick up on and incorporate your views yet they seem adamant on keeping on keeping on,
    surely it is in the national interest to make your analysis and suggestions available to all political parties,
    I for one think you are very centerist and realistic instead of being besotted with an ideology,
    I think the Greens would admire the reality of your viewpoint,
    conventional party political positions are in flux,
    my best example of political paradox is the fact that Ron Paul of the American Libertarian Party and supposed grandfather of the Tea Party holds a position on foreign policy that seems very similar to Jeremy Corbyn’s,
    I don’t care who comes up with an idea if it is good, simple, broadly beneficial and suitable for the situation,
    my fear, which you may share, is that Labour doesn’t have access to people with insights and understanding of how The City works,
    would you offer Labour an olive branch if they did secure some tenure?
    you certainly aren’t a Blairite!

    Matt

  15. Tim as I write I’m assuming that the Conservatives will do a deal with the DUP otherwise your last paragraph could come true. I’d predicted 323 seats (opposed to the 314 revealed by the exit polls) simply because no polls have ever been totally right.

    However it wouldn’t have surprised me if Labour had got in due to the hardships the Conservatives are fostering on many families / individuals – be they single parents – families with children suffering from mental health issues (wickedly underfunded) – bedroom tax and general lack of social care.

    Now all the above have to be funded – and I keep remembering our 1.6trn debt – so without growth it can only come from increased taxation on those who can afford it.

    Personally I would be happy to pay more to fund the NHS and social care programs – but I could be in a minority. I wonder now with a weakened party in power if we can make the economic changes that are needed.

    • Thanks. The result is almost exactly what I expected – not that I’m claiming any great prescience, as it was a logical outcome.

      In other ways, however, it is mind-boggling.

      Think about it like this. This election was called by the PM in order to boost her majority. Her advisers must have agreed. The party heirarchy presumably agreed. The “experts” thought she’d win it at a canter. So, the finest minds in politics and government were convinced she’d get a landslide. So we can only conclude that these “finest minds” are….. well, let’s just say that, if brain cells were dynamite, they wouldn’t have enough to blow their hats off.

      And these same masterminds now have to negiotiate “Brexit”……

      This is pretty close to chaos theory. The political establishment has been discredited. If there had been a “None Of The Above” Party, they’d have won easily. It’s eerily like 1974, and the idea of governing with DUP support is as daft now as it was then. There will have to be another election. Meanwhile, the UK starts “Brexit” negotiations without a credible government.

    • I have posted this before, and I think that I am now proven to have been right on this;
      Theresa May did not call this election to win it, she called it to lose it.
      The objective was to derail Brexit and to take down the SNP.
      The British establishment did not want Brexit to happen:- the City of London has got too much to lose from it.
      Similarly, the threat of a second Indy Ref in Scotland, with the accute danger of the SNP winning, was enough for the establishment to put troops onto the streets.
      Calling a GE was a better second option, always best to keep the facade of democracy alive. The Establishment can always replace a theresa may.
      As you say yourself Tim, yet another general election is on the cards, my guess is within the next 3 yrs.

  16. Tim – yes ‘finest minds’ who couldn’t see how younger people felt about Brexit or funding for study. I voted remain as I’ve worked abroad and loved the relative freedom of movement – I also voted Conservative after being convinced by your last post that it was in the UK’s interest.

    I’m not sure who the Conservatives would elect as their new leader – May does seem to be tottering and clearly needs a new voice coach.

    David Cameron started this mess at a time we can least afford uncertainty.

    • Don, if I might add my tuppenceworth to your comment.
      There is a famous quotation, ( paraphrasing ) ” .. the most thought provoking thing in this thought provoking age, is that nobody is thinking !” – (Heidegger).
      Anyway, politics in the UK has degenerated into one knee-jerk reaction after another.
      Our politicians react to each and every headline in the red-top press, and there is no underlying strategy to anything. Nobody is taking the long term view, nobody is thinking about the consequences of their actions.
      On an intellectual level, I believe that the UK is sadly lacking in competent politicians.
      They say that People get the politicians that they deserve.
      Is the ordinary UK citizen really so undeserving ?

  17. Johan – I agree with what you’re saying – it’s almost like a game of neverending tennis with each playing reacting to the other’s shot while ignoring the needs of the spectators watching.

    I remember – back in 1977 – when I was a spotty teenager having a discussion with a University lecturer. He was getting wound up about the lack of a long term energy strategy. I remembering him saying that all we were doing in the UK was consuming (on the back of North sea oil) – and if we couldn’t consume we complained. He said there was no long term strategy for industrial investment and a replacement source energy. He was right – and that was 40 years ago.

  18. All good fun and games, eh?

    I think I can say that what has happened was along the lines laid out in my article.

    That’s not great prescience on my part.

    It was obvious.

    Corbyn appealed to Labour supporters who hated Blairism. The Tories lost votes because millions are struggling with declining real wages and rising costs. Plus, the country has seemed angry and divided, even more so since the Brexit vote. The result reflected this division and anger.

    So, why did the PM, her advisors, her colleagues and her party heirartchy expect a huge win? And why did “experts” predict the same?

    Come to that, why did Democrats in the US expect Hillary to win? Why did the “experts” give Mr Trump no chance at all?

    Why did the authorities think sub-prime, soaring debt, MBSs, was all just great? Why do they now think escalating debt (now worldwide, not just Western) is fine? And so on….

    So here’s my question – comments please:

    Are we living in “the age of the idiot”? Are the inmates running the asylum?

    It’s beginning to look that way!

    • Well obviously they’re not sensitive to ‘Once bitten – twice shy’ . A lot of people just want to enjoy things while they can – they might be aware that another massive crash could be coming but secretly hope – and have made themselves believe – that it won’t happen.

      I once decided to stop watching the news on television – reading it on websites and did my best to avoid looking at newspapers to prevent myself reading about bad news. However my own bubble burst when a friend asked me about my reaction to the Sandy Hook Elementary School shooting. Of course I couldn’t answer and replied truthfully that I hadn’t read about it. My friend was incredulous and questioned how on earth could I have missed it.

      So this could be the problem that certain people are in some way divorced from events around them – if you like – walking around in their own bubble of reality – not wanting to face up to the real World.

      So to some – or all of us – who read this site the election result may have seemed obvious – but clearly we have a group of people in charge who have a truly parochial attitude. They don’t like reality as they perceive it disturbed – and then are left open mouthed when something they didn’t expect happens. Of course they then see that it was obvious – but have waited until the unwanted reality happens before they acknowledge it.

    • Excellent question Dr. Tim !
      Is this the Age of the Idiot ?
      Well, Now is certainly the Age of the Image, ( after the Age of the Printed Word ).
      Where the “Age of the Word” was quite structured, the “Age of the Image” is much more open to interpretation. We also find ourselves bombarded with thousands of Images every day. Try watching a TV commercial, or a Music video, Yes I know its hard to do, but do try. We see so much, flashing images everywhere, and so much of this is open to different interpretations and meanings. Advertising agencies, the Media and Politicians use Images to appeal to peoples emotions, and to sway them against rational judgement.
      People are no longer making decisions based on facts, too many decisions are being taken based on feelings.
      Show a picture of a Toddler, drowned and washed up on a beach, and there is a public outcry. Politicians feel forced into making determined decisions, even to the point of declaring war, and yet nobody questions the fact that it was the father’s irresponsibility that caused his son’s unfortunate death. Other children are killed daily but their deaths go unrecorded and unnoticed and play no role in shaping public opinion. The deaths of 400 children can be just a footnote on a page.
      The fate of nations can hang on the whims of a newspaper editor, or that of a staged propaganda photograph. Nobody asks what is behind the image.
      Feelings are fleeting, and change very quickly. ( Feminism not only allows this sort of behaviour, but seems to encourage it ! .. let me just duck while a few plates get thrown at me for saying that ! -Not PC to say things like that ).
      Add in a general “Dumbing Down” in our education system, which discourages any form of questioning or open minded thinking, and couple it with the censorship of Political Correctness ..
      .. and there you have it !
      Welcome to the “Age of the Idiot” !
      .. but to be fair, we are ” informed idiots”.

    • Staged doc. Brexit is not good for the globalized status quo.

      Quid pro quo isn’t an option, at least not voluntarily.

  19. I’m starting to think that quoting Private Wilson sounds rather to jolly given the circumstances………………

    • “I’m starting to think that quoting Private Wilson sounds rather to jolly given the circumstances” ‘Do you think that’s wise?’

  20. Idiots running the show taking us for idiots. Mrs May called an election to get her the mandate needed to deliver the ‘strong and stable’ government’ she considered vital to deliver Brexit.
    Now having destroyed what mandate she had and with much diminished strength and stability she has decided to press on anyway. She even had the gall to tell us ‘lets get back to work’ having wasted 8 weeks of precious time on a completely unnecessary election.

    I do hold the view that sub prime, soaring debt. etc. are the product of the new age of political correctness they are a symptom of a disease not the root cause of what is making us sick. May failed because her PC ‘a country that works for everyone’ ..’tackling long standing inequalities’ and targeting the elderly with housing equity are all part of the ‘all must have prizes’ levelling agenda. Politically correct truth (‘doing the right thing’ as the politicians call it ) has displaced the factually correct truth so our leaders are essentially blind to reality. They see how the world how they would like it to be rather than how it really is.

    The 41% that didn’t turn a blind eye to Corbyn’s IRA sympathising, Marxist leanings , or the treatment of child grooming gangs in Rotherham were never going to be impressed by a Tory talking the language of ‘fairness’…all she did was turn off a great deal of her core supporters.

  21. Pingback: #97: While time allows – part one | Surplus Energy Economics

  22. Regarding the issue of Theresa’s advisers in the Conservative Party not recognising the possibility of a Labour Party resurgence and giving better advice to Theresa May, This I think may be attributable to Theresa’s performance at parliamentary question times.
    Theresa May always got the better of Jeremy Corbyn in their slanging matches.
    Unfortunately, few voters watch the question time sessions and are struggling to earn a living, many of whom may be on zero hour or minimum wages.
    Conservative advisors were probably misled by Jeremy’s performance, often struggling to read notes against Theresa’s verbal fluently.
    Inevitably it gave the Conservative Party advisors overconfidence.

    • This is interesting. My own perception of those “question time” engagements was that Corbyn won the majority once he got the hang of it.
      Funny how we don’t all see the same things.

  23. I enjoyed this essay, the first I’ve read of yours.
    Are you certain that the re-nationalisation proposed by Corbyn is as bad as you say it might be? Railways are, essentially, government owned anyway, just franchised out to the public sector.
    Much of power and water distribution is controlled by public-sector owned companies anyway, just not British ones. I don’t think Corbyn proposed nationalisation of “the means of production” or anything like that.

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