While waiting for the Main Event to kick off...

...a few bits and pieces.

The current Private Eye (No 1259, 2-15 April 2010, p.5) has its usual  'Number Crunching' piece:

2% increase in number of qualified nurses working for NHS in England last year

6% increase in number of consultant doctors working for NHS in England last year

12% increase in numbers of managers working for NHS in England last year

This echoes figures I saw earlier in the week concerning recruitment trends in Higher Education:

...figures obtained from the Higher Education Statistics Agency...show that in the UK higher education sector in 2003-04, there were 10,740 managers, while in 2008-09, this had grown to 14,250, an increase of 33%.During that time the number of academics increased by 10% from 106,900 to 116,495 while the total number of students rose by 9% from 2,200,180 to 2,396,055.

I hope all those extra managers has made us all healthier and more educated in recent years.

For those, such as me, who like a bit of intelligent bank bashing, you may enjoy the thoughts of Simon Jenkins and Larry Elliott. Mr. Elliott also takes issue with the idea that we are living through a 'Spring of Discontent' of industrial action equivalent to the 'Winter of Discontent' of 1978-9 which proceeded the Conservatives' 1979 General Election victory. To put it crudely, it is like comparing a hurricane to a fart. He also says that we have already had a recent 'Winter of Discontent', which saw (that hackneyed media cliche) 'bully-boy rule':

...we had the winter of discontent for finance, in which the bankers downed tools and withdrew their capital. Nothing moved in the credit markets. Governments were held to ransom by the strikers and eventually capitulated. In the autumn of 2008, when it seemed no western bank was safe, there was a huge injection of public money to recapitalise those who had proved to be self-seeking and incompetent.
...the banks were rewarded for their failures with loan guarantees, unlimited borrowing at 0% interest and an opportunity to offload their toxic assets. The upshot has been a rapid return to profitability in the financial sector, which has given the banks the opportunity to pay lavish (and undeserved) bonuses. Whingeing in the City about Alistair Darling's one-off bonus tax adds insult to injury.

Let's hope rational, intelligent discussion on the growth of public sector managers and the baleful influence of the City of London will take place duruing the forthcoming General Election campaign. Then again...

I hope to knock out one post on the Net and related stuff in the next couple of days. Then it should be Show Time ad nauseum...

Links for your perusal

 

For those of you bored with everything in politics being labelled 'The New Hitler/Nazis/Stalin/Communists etc' you may be interested in the piece where I found the above.

Similarly, you may be interested in this if you are bored with people who use 'fascism' and 'fascist' ad nauseum.

John Harris wonders if the next General Election (which may be less than 9 weeks away...stop yawning at the back!) could be won  by a party with the support of just 20% of the electorate. Whoever gets in, argues Larry Elliott, it is not going to be much economic fun.

 

You have been warned! (Hat-tip: Weekly Worker)

Over in Canada, Larry Gambone wonders if social democracy can be revived in the West.

Various bits and pieces on media, publishing and the internet you may want to have a gander at.

How big business is getting to grips with social networking is discussed here.

How long can things stay free on the Net? He may work for Rupert Murdoch, the arch-enemy of free access, but Santham Sangara has some interesting points to make. It wasn't until reading this did I know that the typical author here makes an average of £7,000 a year from writing. This raises interesting questions about intellectual property, although as Kevin Carson argues, the current laws on IP are not designed to benefit the proverbial 'little man.' For those of you wondering about a career in writing, Robert McCrum's piece may be of interest.

Finally for now, Charlie Brooker discusses the bane of the Net: the password.

February: 'a detestable month with no virtue except shortness.' (George Orwell)

 

UK recession over: rejoice, rejoice...

Every time I look 45 degrees to my right I see a pile of books on my table that are demanding to be read. I may have to take the blogging easy for a short while, but before then I have a few links you may want to peruse.

At AngloNoel Towers I have vaguely being following the opinion polls. It appears the Cons are a bit ahead of NuLab but the lead appears to be falling. Then again it may not be. No-one really knows and I doubt anyone really cares that much out there in 'the real world' which bunch of professional shyters in suits (almost typed 'suites' then...Freudian slip) get the keys to Number 10 in a few months time. I think any time the public looks at one of the main parties for any considerable period of time, they are generally revulsed. Then they look at the other lot, and the polls start going in the other direction...It reminds me of being a neutral sports fan and seeing two teams playing who are full of individuals who, whatever their talents as sportspeople, are pretty obnoxious as human beings. Who do you cheer on? Those who are sick of politics being treated as mere showbiz or sport may like to read some Marina Hyde.

Whether or not the Conservative poll lead is falling- if it is I blame MyDavidCameron.com myself!- it appears people are more 'conservative' politically after 13 years of New Labour telling everybody that, yes, the Conservatives were right after all. Comment on thse survey findings can be found here and here. Frankly, to try and rally extremely disllusioned Labour support for the General Election on the grounds by saying  how bad and nasty the Conservatives will be in Government comes across as extremely shallow and pathetic politicking by New Labour. Moreover, those who have a longer memory than a proverbial goldfish know that New Labour will probably implement most of the policies they say the Conservatives plan to bring in after the next General Election. Cuts are cuts, whether they are implemented by 'Nasty' Tories or "Nice' Labour.

 

Is British Politics now all about a bunch of cuts?

Those of you who wonder whether social democracy is dead or not (or just stunned as it was waking up, to quote the Monty Python Parrot sketch) may be interested in reading Larry Gambone. The other Larry, Mr. Elliott, looks at how far New Labour, despite its pre-General Election rhetoric, is away from economic policies which can even be considered to be post-social democratic.

On of the benefits of the Net is the help it gives you in tracking down the origins of great quotes that you heard years back. Hence I was able to nail this one a few days back, which I heard back in 1990:

‘In early 1919 Max Weber wrote a letter of doom to his younger colleague and friend Georg Lukacs, who had by then become a Communist and whom he regarded as the great promise of German theoretical culture. In this letter Weber
warned Lukacs that the audacious Russian experiment would bereave socialism
of its reputation and authority for a hundred years. Let us conclude with
the most optimistic sentence of this book: of these hundred, sixty years
have already elapsed.’

Ferenc Feher, Agnes Heller and Gyorgy Markus, Dictatorship over
Needs: An analysis of Soviet Societies. Oxford: Basil Blackwell, 1983, p.299

November 2018, here we come...

Finally, if you want to get away from 'conventional' politics (and who does not want to do that?) you may want to look at the Electronic Frontier Foundation.

Now back to scaling Book Mountain...

Things Fall Apart?

No-one has a clue where the world economy is heading, do they? It will probably get worse (and feel worse) before things get better (or feel better), but apart from that, whose to say? I think all that money- obscene amounts- that Governments and international institutions have thrown into the global economy will have some sort of effect in mitigating the worst consequences of the 'downturn' (it's a euphemism), at least in the short-term, but no-one knows how it will finally pan out. As Keynes said, in the long-term we are all dead.

Instead of making predictions, I'll just post two articles that have caught my eye in recent days. This one by Larry Elliott will appear in tomorrow's Guardian:

Never give a sucker's rally an even break
Larry Elliott, guardian.co.uk, Sunday 8 March 2009

Even when times are really hard, stock­­­­markets never go down in a straight line. There are periods – often lasting months – when prices rally amid hopes that recovery is under way. Then the selling resumes and the market takes another downward lurch. Dealers call it a sucker's rally.

Bear this phrase in mind, because it is not only financial markets that can have false dawns. In the late 1970s, for example, the UK economy appeared to bounce back from the recession of 1974‑75 and the sterling crisis of 1976 only to be plunged into an even deeper slump in 1980-81.

The chances of a sucker's rally over the next couple of years are high. Hard though it is to envisage during these dark days, there will be a resumption of growth – and probably sooner than the financial markets envisage. Policy was so heavily geared to expansion – even before the Bank of England announced that it was to start creating money – that it would be a miracle if green shoots did not soon start to appear.

Just consider: six months ago, anyone with a £150,000 tracker mortgage was paying more than £600 a month to finance their home loan. They are now paying about £60 – a colossal increase in spending power that is bound to affect behaviour, despite the fear of unemployment. Falling inflation means those in work are seeing increases in real income, and that tends to be a key determinant of consumer spending. Add lower taxes to the mix and it is a heady cocktail that, in normal times, would be enough to generate a wild boom.

Clearly, though, these are not normal times. In normal times, the Bank of England likes to keep the bank rate at about 5% rather than 0.5%, and it would not be pursuing monetary policies more normally associated with banana republics. One City financier has what he calls a Gono index, which charts how far the UK is along the road travelled by Robert Mugabe's central bank governor. He estimates that we are halfway there.

Normally, Alistair Darling would be preparing a budget next month of such austerity that it would put Sir Stafford Cripps to shame. But the chancellor is considering an expansionary package that will lead to a further increase in the budget deficit. On some estimates, the Treasury may need to borrow £180bn next year to balance the books – 12% of GDP and unprecedented in peacetime (and probably wartime, for that matter).

The justification for all this is that the banking system has been rendered dysfunctional by the credit crunch. That is true up to a point. Homeowners and businesses are finding capital harder to come by, but the supply of loans did not entirely dry up even when the financial pressure on the banks was at its most intense last autumn.

Consider what the financial system was like before the crash: the Icelandic banks and specialist lenders filling the gap between domestic savings and demand for loans; mortgage providers gaily handing out home loans worth 125% of the value of the property. We have merely gone from one form of dysfunctionality to another.

Be that as it may, the re-capitalisation of the banks, the insurance scheme for their toxic loans and now quantitative easing should increase the supply of credit in the coming months. To make a difference, of course, there has to be a matching demand for credit, and the question is whether the impact of the policy stimulus will outweigh the negative effects of falling house prices, a bombed-out stockmarket, rising unemployment and weak global trade.

It will, not least because Mervyn King says the Bank will continue to print money until the policy has the desired effect. When will this happen? No one knows but after a horrendous start to the year and a poor second quarter the economy could begin to bottom out in summer. My guess is that there will be evidence of modest growth by autumn, at which point – sucker's rally or not – Gordon Brown will claim vindication for his handling of the economy.

There are, however, reasons to treat any recovery with caution. One is that the causes of the original problem – an economy heavily dependent on property speculation, easy credit and debt – have not been addressed and, indeed, will not be until Brown admits that the economy he presided over as chancellor was nowhere near as strong as he thought it to be.

What is true of Britain is also true globally. The problem in the boom years was that one half of the world spent too much and the other half saved too much, thus creating a fatal imbalance between creditor and debtor nations. One of the great fallacies of the bubble years was that the surpluses from the export booms in China, Japan and Germany could be recycled to finance the trade deficits in the United States, Britain and Spain.

What actually happened was that the flows of hot money into London and New York drove up the pound and the dollar, making exports dearer, and the higher exchange rate bore down on inflation and put downward pressure on interest rates. That kept consumer spending high, sucked in more imports, which in turn made the surplus nations even more dependent on exports.

Ironically, the recession is hitting the big exporters – Japan and Germany especially – harder than those that were living beyond their means. The exporters will enjoy their own sucker's rally on the back of the pick-up in demand in the US (and, to a lesser extent, Britain) but for a lasting recovery, the surplus countries have to increase their domestic demand and the debtor countries have to save more. There is no evidence that this is going to happen on the scale needed.

Even so, tentative signs of recovery will put pressure on policymakers to apply the brakes. Here, we are back to the dilemma Alan Greenspan had after the dotcom bubble in the early years of this decade. The then Fed chairman ensured the recession was short and shallow by cutting interest rates to 1% and leaving them there until he was absolutely certain that the economy was recovering. But monetary policy works with a time lag, and by the time Greenspan started to jack up interest rates it was too late and he then had to tighten aggressively to prick the housing bubble.

This is now Groundhog Day. Policy has been loosened to compensate for the tightening in mid-decade, which in turn was to compensate for overly lax policy at the start of the decade. Policymakers now have a choice: they can move early, anticipating recovery, but with a risk that they will move too soon – as Roosevelt did with his fiscal tightening in 1936 – and push the economy back into recession. Or they can do what Greenspan did and risk the build-up of inflationary pressures and a new bubble, this time in the bond market.

Policymakers are more comfortable dealing with inflation, a problem they feel equipped to solve, than with a slump only Japan has experienced. They will do what they always do: increase borrowing costs, raise taxes and cut public spending. Unless they get it spot on, which they have conspicuously failed to do previously, the sucker's rally will be followed by sluggish growth or a double-dip recession.


The other simply shows that things must have got bad economically when mainstream economic pundits, such as HSBC Group's Chief Economist, have to admit that Karl Marx may have had more than a point:

As capitalism stares into the abyss, was Marx right all along?: We may avoid a 1930s Depression but the best we can hope for may be a 1990s Japan
Stephen King, The Independent, Monday, 2 March 2009



Karl Marx...in Lego!

"Modern bourgeois society ... a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells."

Those of you with revolutionary zeal will immediately recognise these words. Penned by Karl Marx in 1848, they form part of the Communist Manifesto. Marx, like Adam Smith before him, had a historical view of society's development. Capitalism, with its bourgeoisie, had replaced feudalism, but capitalism, according to Marx, would be replaced by communism. Capitalism was inherently unstable, as Marx noted later in the same paragraph:

".....the commercial crises... by their periodical return, put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity – the epidemic of over-production."

Whatever else one thinks of Marx, he certainly knew a thing or two about the business cycle. Were he alive now, he would surely claim his theories were being vindicated. We are, after all, witnessing the most remarkable collapse in economic activity around the world. Take Japan. In November, industrial production fell 8 per cent. That was bad enough. In December, production dropped another 9 per cent. That was even more remarkable. January's production figures, though, are simply eye-wateringly awful, showing a further 10 per cent decline. Production, then, is down almost 30 per cent in just three months, a pace of decline unprecedented in Japanese post-war economic history.

Or how about the US, where we discovered last week that national income contracted in the final quarter of last year at an annual rate of more than 6 per cent, the biggest drop since the early 1980s. Then there's Taiwan, where exports have been in freefall in recent months. Not to mention dear old Blighty, where the economy might end up shrinking by approaching 4 per cent this year.

The pace of decline in global economic output is extraordinary. On virtually any metric, we are seeing the worst global downturn in decades: worse than the aftermath of the first oil shock in the mid-1970s and worse than the early-1980s downswing, when the world economy had to cope with a doubling of the oil price, the tough love of monetarism and the onset of the Latin American debt crisis. Moreover, this time we cannot use the resurgence of inflation as an excuse for lost output: the credit crunch in all its many guises has seen to that. Instead, we have a world of collapsing output combined with falling prices: a world, then, of depression.

For many years, Marxist ideas appeared to be totally irrelevant. The collapse of the Berlin Wall in 1989 brought to an end the era of Marxist-Leninist Communism, while China's decision to join the modern world at the beginning of the 1980s drew a line under its earlier Maoist ideology. In western economies, Marxist ideas were at their most potent after the First Word War when the likes of Rosa Luxemburg could smell revol-ution in the air and as the Roaring Twenties gave way to the Great Depression of the 1930s. I'm not suggesting we're entering revolutionary times. However, it seems increasingly likely that the economic landscape in the years ahead will be fundamentally different from the landscape that has dominated the working lives of people like me who entered the workforce in the 1980s. We've lived through decades of plenty, where incomes have risen rapidly, where credit has been all too easily available and where recessions have been mostly modest affairs. Suddenly, we're facing a collapse in activity on a truly Marxist scale. It's difficult to imagine the world's love affair with free markets being sustained under this onslaught. The extreme nature of this downswing will change our lives for decades to come.

The first change relates to the allocation of capital. Increasingly, policymakers are accepting that market forces, left to their own devices, will lead to a race to the bottom. The dangers are becoming greater by the day. Interest rates are close to zero while prices and wages are in danger of declining. If deflation takes hold, real interest rates on cash will start to rise, creating perverse incentives in capital markets. Why bother to buy equities or corporate bonds if you are nicely rewarded for hanging on to an entirely risk-free piece of paper?

The efforts to stop this vicious circle are increasingly focused on bypassing the banking and financial system. As central banks widen the assets they are prepared to purchase to maintain the flow of credit to the economy at large, they are increasingly getting into the capital allocation game. They, and not the market, will at the margin decide whether companies and households are creditworthy. And as governments increase their spending plans to ward off a catastrophic loss of demand, they, rather than companies, will decide on how our savings should be allocated.

The second change relates to an increased national bias in the allocation of capital. As Nicolas Sarkozy, the French President, pushes to offer government funding to French car companies on condition they don't outsource French jobs abroad, as US Congress signs off a stimulus package with more than a hint of a "Buy American" policy, and as the UK Government pushes to encourage bailed-out banks to lend domestically as opposed to internationally, we appear to be turning our backs on the previous world of heightened cross-border trade and capital flows. While these flows have undoubtedly been volatile, they have nevertheless allowed emerging economies, in particular, to gain a foothold on the development ladder. Are we about to cast these countries asunder in our desperate attempt to fix our domestic problems?

The third change relates to interference in the price mechanism. When it comes to Sir Fred Goodwin's pension, this isn't so surprising, but the price mechanism extends far and wide. At the microeconomic level, we'll enter a world of subsidised loans with murky political undertones. At the macroeconomic level, countries may take the opportunity to manipulate their exchange rates in an attempt either to gain a competitive advantage or to "default" to foreign creditors.

Some of these changes may be absolutely necessary to prevent an outright collapse in global economic activity (although the rise in protectionist pressures is surely a retrograde step). They also suggest, though, that there will be no return to "business as usual" for market forces. The cost of avoiding depression is a heightened level of state intervention on a scale unimaginable for those who believe in the virtues of free markets. While such intervention may help prevent the worst ravages of economic collapse, it will ultimately do little to foster the entrepreneurial spirit and risk-taking behaviour which have, in the past, contributed so much to rising living standards. We may avoid a 1930s Depression but, increasingly, we may find the best we can hope for is a 1990s Japan. Not quite a Marxist revolution, then, but certainly a lasting sea-change in economic performance.

In short, Marx may have got the answers wrong, but he asked the right questions...

A Crisis of Legitimacy?

Just a thought...

To keep this blog ticking over I'll putting up a few a few pieces, loosely connected by a theme, which I've put up on Facebook in the last couple of months and should have really posted here.

Yesterday evening I was thinking of putting a couple of articles up connected to the theme of how the economic downturn (perhaps that's putting it mildly) has challenged, or might challenge the hegemony of the unholy alliance of Big Business, the Political Class & Mainstream Media which has dominated Britain and other Western countries in the last couple of decades. Then I saw this today:

Britain loses faith in economy: Global poll shows UK least likely to trust politicians, banks or markets
Julian Glover, The Guardian, Wednesday 14 January 2009

British economic confidence has been shattered by the financial crisis, according to a unique international poll published today. It shows that people here are now less likely to trust banks, the stockmarket or the government's economic management than people in comparable nations.

The research, carried out by WIN, an international network of pollsters including ICM in Britain, used professional polling techniques to assess public opinion in 17 countries, including the major G8 economies as well as China and India.

On most measures, British people emerged as among the most pessimistic of the 14,555 people questioned around the world.

Remarkably, confidence in the banking system appears lower in Britain - 4.2 out of 10 - than in bankrupt Iceland, which polled 4.6.

While around a third of citizens in developing economies such as India and China say the economic situation in their countries could improve in coming months, more than three-quarters of people in Britain expect it to worsen.

Pessimism here is slightly deeper than in competitors such as France, Spain and Germany, and equal to Japan.

British people are also less likely than average to think that their government can manage the situation, despite Gordon Brown's bank interventions and fiscal stimulus.

Asked to rate their trust in the government's management of the financial situation, British people award the government 4.5 out of 10, below the worldwide average of 5.2 and just ahead of Iceland on 4.4.

Only Germany and Japan are gloomier, scoring 4.0 and 3.0 respectively in the poll which was conducted before Christmas and published today.

These results may reflect the severity of the British position as much as any particular distrust of the British government, and the ICM data was collected before some more recent government initiatives were announced. But they do bring into question the prime minister's claim that Britain is particularly well placed to weather the economic storm.

Several of Britain's competitors are more optimistic about their government's capabilities. Americans award 6.3 out of 10 overall, possibly as a result of the changed mood in the weeks following the presidential election.

Asked about their personal financial situation, however, rather than prospects for the country as a whole, British people are more upbeat.

Not surprisingly, pessimism about personal finances is greatest in Iceland, and lowest in fast-growing economies such as India. Britain comes 10th out of 17 countries on personal finance: most people here say their incomes will either decrease (25%) or stay the same (48%) over the next 12 months.

The British are more likely than many to think that this could be a good time to buy a house: 28% say so, against 39% who say it is a bad time, which still leaves Britain towards the top end of the international table, seventh out of 17.

However, trust in financial institutions such as banks in Britain is particularly weak, probably as a consequence of the scale of government intervention in banks required since the collapse of Northern Rock.

Britain ranks 16th out of 17 countries for public trust in its banks, just ahead of Germany and well behind countries such as the Netherlands, Spain and France.

Overall, people around the world tend to have a greater level of faith in their government and even in banks than in the stability of the stockmarket, which on average scored 4.0 out 10 for trust after a terrible performance in 2008.

British people are now particularly cautious, giving the markets a score of 3.2, well below America on 4.3.

Overall, British attitudes to the financial crisis are closest to other old-world economies such as France and Germany, as well as Japan.

Canada, Italy and Spain lead a middle group of more optimistic nations, while developing economies such as India are the most trusting and optimistic.

The research draws upon a mix of face-to-face and online polling, and the variation in results may be affected by this, as well as by different sample sizes.

Long-term differences in national attitudes to subjects such as property ownership, which outlast economic cycles, may also have played a part in today's findings.

But the WIN crisis index, which will now be carried out every three months, does suggest that anxiety in this country is consistently greater in Britain than in its competitors.

• The research was carried out online in Britain by ICM in November, with a sample of 1,050. Worldwide data was collected between November and December 2008 by members of the WIN network. ICM is a member of the British Polling Council and abides by its rules.

We English, Scots, Welsh and Northern Irish (not 'Brits', please!) might be more pessimistic than other peoples about the current economic situation, and the ability of our betters to get us out the mess they largely created. However,there is little doubt that people everywhere are wondering whether this is as good as it gets. After years of being told that 'the market' (in fact a corporate bearpit from which Adam Smith and David Ricardo would have looked for exit doors to get out of) should be left alone and throwing taxpayers' money away to prop up those unable to 'stand on their own two feet' was wrong and expensive, the obscene amount of money which have been handed over to large financial institutions and other corporate behemoths in the last couple of years must have caused cognitive dissonance for at least some who acquiesced to the status quo- didn't it?

The ever readable Splintered Sunrise gives his view on the potential crisis of legitimacy from over the Irish Sea (picture as in original post!):



The crisis leaves our leaders without a convenient paradigm
December 4, 2008

Yes, yes, I should be doing more on the economic crisis. If I’ve been reticent, one very good reason is that I’m not an economist and, apart from generalities about the system, I don’t have any easy answers. It’s a little comforting, though, that nobody seems to have any easy answers. The political classes of the world appear to be navigating without a compass, having lost their framework but without acquiring an alternative one. You see this in the way that every government seems to have a completely different recipe for dealing with the crisis. The overwhelming impression is that they’re making it up as they go along.

The latest exemplar of this has been the big plan mooted by Barroso, at the behest of Brown and Sarko, for a massive EU-wide stimulus package. This lasted as long as it took Boss Merkel to say to Barroso, “No you don’t”, on the not unreasonable grounds that Brown and Sarko could come up with whatever plans they liked, but they needn’t expect the German taxpayer to foot the bill. Meanwhile, the Bush administration seems to be nationalising everything in sight, which will shock some leftist analysts but not those of us who always knew that the neoconservatives were never conservatives in the first place, least of all fiscal conservatives, but really big government liberals. Meanwhile again, the Chinese government has launched an enormous Keynesian stimulus plan, having obvious not got the memo about the death of Keynesianism. We’ll see in practice, I suppose, how this works out.

The cluelessness is evident across the spectrum. While Brown still claims to hove to Friedmanite orthodoxy, his big idea at the moment seems to be to encourage yet more consumer spending, while pump-priming the construction industry. I can’t see this working, for the very good reason that he’s recycling the essential elements of his voodoo economics over the last dozen years. And yet the Tories lack any credibility - a mere six months ago, Osborne was complaining about the onerous amount of regulation in the financial services industry, while Redwood argued that mortgage lenders shouldn’t be regulated at all. And to this day, Rankin’ Dave Cameron seems to believe that cutting interest rates alone will do the business. None of this is very convincing.

On the more prosaic level, we have Éamon Gilmore rowing back from his plan to thoroughly Blairise Irish Labour. Say what you like about the Sticks, they’re good at sniffing the wind.

It’s at times like this that I do enjoy going back to the Austrian economists, whose big beef - that most politicians are economic illiterates - is demonstrably true, and who do have an endearing tendency to say the unsayable. Their view is that the main cause of the crisis is cheap money, which is true, especially when you bear in mind that for the last few years the Fed has been printing dollars on an enormous scale - we don’t know how many, because Bernanke won’t say. These guys reckon the best thing for the economy would be a short, sharp recession, maybe lasting a year or so, where unsound businesses would be allowed to fail and a lot of the bad debt cleared out of the economy. Trouble is, a politician would need balls of steel to go down that road. The sharp and painful dislocations it would bring - especially in terms of unemployment - would look suicidal for anyone hoping to gain re-election.

On the other hand, the Austrians critique government attempts to provide a soft landing on the grounds that it will just prolong the downturn, especially as the underlying causes are not being addressed. There’s something to that, especially if you look at Gordon Brown’s attempt to reflate the housing bubble. I would actually argue the housing market is still grotesquely overvalued and needs to sink a lot further, but Gordon can’t say that. That would fall foul of the Brits’ attachment to the house price cargo cult, in lieu of an economy that makes stuff.

More and more I notice that the Old Right and the unreconstructed left do overlap, at least in terms of diagnosis. It’s when it comes to the cure, of course, that the divergence comes. I still believe that there is a serious role for intervention, and the main task should be to divert the economy away from the parasitic financial services sector and towards rebuilding a productive economy. That’s why the Germans have much stronger fundamentals.

This would be bad enough for the Brits. For an Irish economy that has close to zero industrial base, a massive overreliance on inward investment and a European Commission hellbent on destroying Irish agriculture… it doesn’t bear thinking about.

Not to mention Robbo and Marty on yet another tour of the States, trying to drum up investment for the North. Lord, they do pick their moment.

So what is to be done, to quote Vlad? I realise my own economic worldview is informed by a wide range of sources: Marxism, Keynesianism, Greenery, Libertarianism, Mutualism and Guild Socialism to name a few. I do not have all the answers (who does?) but I hope I sometimes ask and address the right questions and hope to meet and work with people who are prepared to think and just know that the current situation cannot go on and that we can all do better than this.



My concluding piece for this post comes from Larry Elliott, whose work with Dan Atkinson, The Gods that Failed, is a witty and damning critique of those who got us in this hole. This is a recent intellectual call to arms from him:

Wanted: the Keynes for our times. Marxists and greens have critiques of the crisis, but what about the centre-left?
Larry Elliott, The Guardian, Monday 22 December 2008


The financial and economic mayhem of the past 18 months has been a crisis for the right. Nationalising banks that have lent irresponsibly was not part of any laissez-faire script.

The prevailing economic model of the past 30 years has run out of road, just as the post-war social democratic model ran out of road after three (far more successful) decades in the mid-1970s. But it is a non-sequitur to assume, as some on the left do, that the world has changed for ever. This is lazy thinking. Without an intellectual critique of what has gone wrong and what needs to be done to put things right, matters will revert more or less to where they were before the flood.

When the post-war Golden Age ended in the mid-1970s, the right had just such a critique. It was ready because it had spent the past 30 years arguing that demand management would lead to inflation, that the strength of trade unions was eroding profits and that higher taxes to pay for bigger government was starving the private sector of investment. Most of the heavy lifting was done by the free-market thinktanks, which in the title of Richard Cockett's excellent book on the subject, were prepared to "think the unthinkable". These thinktanks were well funded by business and could draw on academics to shape the policies of the Reagan and Thatcher governments.

The contrast with today is striking. There has been no equivalent of a Chicago school for the left to provide the intellectual justification for more interventionist government. There has been scant evidence of the left-of-centre thinktanks tugging New Labour back as it moved steadily over the past 15 years towards the acceptance of market-based solutions to almost every problem. And with the exception of Jon Cruddas, Vince Cable and a handful of other members of the awkward squad, there has been no real interest in alternative thinking at Westminster.

That is why the government is ideologically bereft as it tries to manage the crisis. Labour has control of the banks but wants to give it up as quickly as possible. It wants the banks back on an even keel financially but it also wants them to slash their lending rates so borrowing returns to the levels of last year. The thinking, such as it is, amounts to the hope that with lower interest rates, tax cuts, and a few tweaks to financial supervision the clock can be turned back to July 2007.

This was not Thatcher's approach in 1979. Instead of exhorting the trade unions to behave better next time, she used the Winter of Discontent to impose statutory controls on their activities. Capital's Winter of Discontent has been much longer, much more widespread and much more damaging than the events of the winter of 1978-79, but the response has been far less robust. Indeed, this is shaping up as a missed opportunity of catastrophic proportions.

At this stage, it should be said that the non-mainstream left has been active since the Berlin Wall's collapse heralded the era of market fundamentalism, and both the Marxists and the greens have a critique of what has gone wrong and what needs to be done now. And these critiques deserve to be taken seriously. After all, it is easy to imagine Marx surveying the events of the past 18 months and concluding that the new global economic order created since 1990s was capitalism's last roll of the dice, and that the imbalances, the debt mountains and the eventual freezing up of the banking system were all symptoms of an irreparable system.

Growth fetish
The greens say this is where you get to if you make a fetish of growth. Living beyond our means not only results in higher levels of debt and balance of payments deficits, but is symptomatic of a reckless disregard for the carrying capacity of the planet. Attempting to re-invigorate an economic model built on ever higher levels of consumption is wrong.

So, the Marxists have an explanation and the greens have an explanation. Where, though, is what we might call the traditional left - the democratic socialists, the Keynesians, the non-revolutionary wing of the progressive movement. The answer is that during the 13 years of Tony Blair's leadership of the Labour party, it was pretty docile.

There could be a simple explanation: the arguments traditionally put forward by those who believed in managed capitalism, the mixed economy and regulated markets have been found wanting. By a process of social Darwinism, the ideas promulgated by the free-marketeers at one end of the spectrum, and the Marxists and the greens at the other have survived because they make more intellectual sense.

Alternatively, there may just have been a colossal loss of nerve on the left, which trickled down from a leadership demoralised by four election defeats and which saw embrace of the market as the way to political success. The control-freakery of Labour's high command meant they were not open to ideas from maverick MPs, academics or leftist thinktanks; access to ministers meant thinking not the unthinkable but the boringly predictable.

This has had unfortunate long-term consequences. The ability of mainstream progressives to develop a critique of the neo-liberal world order is illustrated by the development NGOs, which felt less obliged to cosy up to policymakers and, from the mid-1990s onwards, attacked the Washington consensus. All sorts of radical ideas were floated: that free trade might not always be good for vulnerable economies; that there was a role for an activist state in development; that privatising health and education would lead to more sick people and fewer children in school.

The crisis thus presents a golden opportunity and a threat to the left. The financial meltdown has morphed into an economic downturn of brutal severity; on the other hand, the window of opportunity will be brief, much time has been lost and there is not a lot of money around to fund blue-skies thinking. US academia at least has Joseph Stiglitz and Paul Krugman; there is, sadly, no sign of a British Keynes for the 21st century.

Scholars, politicians and thinktanks have little more than six months to come up with ideas to influence policy before and after the election. They should concentrate on a few areas.

One would be finance, where the argument should be moved on from the need for faux-Keynesian fiscal policy to what Keynes actually stood for: permanent and tough controls on the financial sector so policymakers could pursue goals of social welfare and full employment. That means nationalising the banks, credit controls and action against tax havens - as a bare minimum.

A second would be housing, where the notion that the private sector will build enough homes for almost two million families has been blown out of the water. The government should be buying up land from stricken construction firms and organising a house-building programme of its own.

Finally, there needs to be a vision of the good society, the world the left wants to create. The free-market right has one. The Marxists have one. The greens have one. Unless the social democratic left has one - and can articulate it fully - it is finished.

larry.elliott@guardian.co.uk