I was interviewed on LBC yesterday about reports from Morgan Stanley, the US bank, that a Corbyn government would be worse for the UK than hard Brexit.
The first thing I noted was that they thought hard Brexit would be a disaster, with which I agreed. Then I sought to disagree on just about everything else. To give this some context, according to the Telegraph report on the Morgan Stanley view:
Fund managers must plan for the serious possibility that a developed OECD country may nationalise power utilities, water companies, mail delivery, and rail transport in sweeping moves unseen in the trading life of most investors now alive.
And they added:
The new agenda includes a rise in corporation tax to 26pc, a surtax on financial entities, and a financial transactions tax or "Robin Hood" tax on derivatives and bonds, as well as some shares. “The direction of travel we have seen for the last 30 years is going to change by 180 degrees,” he said.
Other concerns were apparently that employees might be considered to be a priority, whilst there was outright fear of wealth taxation.
Let me put all this in context. As a matter of fact we know that big business is now sitting on enormous piles of cash for which it has no use. At the same time corporation tax rates are falling and real wages are stagnating. There is continuing concern about tax abuse. And the fact is that the UK's privatised utilities are reviled for delivering enormous financial returns and poor service with no market or apparent regulatory capacity to put this right.
Whilst all this is happening the IMF, World Bank and OECD are all calling for wealth taxation in various ways to tackle growing inequality, and no one can suggest that they are dens of the left.
And, in case we forget, whilst the world economy teeters on the brink of another recession stock markets are at record highs.
To put it another way, the rentier economy that has fuelled the growth of the wealth of the 1% has had an amazing thirty year run. It's crushed real business and entrepreneurship on the way. Government has been captured to service its goals. And bankers have aided and abetted every divide in society that has fuelled the gross inequality that characterises modern life. And Morgan Stamley want that situation to continue.
The claim that Corbyn threatens business is nonsense. He plans a government that will spend to invest. That is unambiguously good for business, and it pays for itself by delivering productivity growth, higher wages and so more taxes. Only a banker could fail to understand that. So what Morgan Stanley are proposing is not a pro-business agenda. They are actually opposing business interests.
Instead what they are proposing is the perpetuation of the pro-wealth agenda. Now don't get me wrong. I am not opposed to wealth. I am opposed to ill-gotten wealth for a very few gained at cost to everyone else, which is what we have. Wealth works when it is better shared, results from fair reward, and is much more accessible to all. And I accept in saying that that the reality is that there will still be disparity: I am a realist. More than that, I'm not suggesting anything else. Just as current wealth inequality is unambiguously harmful, enforced wealth equality (which has never happened) would be equally negative in its effects.
But reform is essential. And it should be welcome by all with open minds. And, I stress, there is no room for it to be suggested that Corbyn is being anti-business in this. The City and business are a long way from being the same thing. The City has a wealth agenda. Business has a focus in value creation for all involved. That is something very different indeed. It's time bankers, and The Telegraph, realised.
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Agreed with most of what was said. Adding some detailas as to why distribution networks need to be re-nationalised:
UK Distribution Network Operators are remunerated on their asset base. The modus operandi of the DNOs is, where possible, to get others to pay for new bits of network. Gettting others to pay for the new bits of network usually takes the form of “pay up for our reinforcement – cos your new generator will disrupt our network”. DNO’s most definitely favour “back of the fag packet” estimations (probably done after a very good Friday lunch ). I have evidence to support this assertion.
At that point the client wheels me or somebody similar to “have a discussion” with the DNO. Demands for millions usually ends up with (from the DNO) “oh all right then – you can do it – but only this once”. The Sicilian mafia would recognise the business methods of the DNOs immediately. Morgan Stanley seem to support this business method – which says a great deal about M-S. & for the sake of clarity, for the most part Ofgem (the “regulator” ha!) is nutless & gutless – & has always been so (a deliberate decision by politicians). UK DNOs, dishonest, lazy, corrupt, incompetent. A description of UK capitalism at its best?
Mike
I was talking to a fellow member of our sailing club (KWSC) who is an engineer at Northern Powergrid (formerly NEDL) which is a Warren Buffet subsidiary. He said that the parent company provided no input or expertise whatsoever but was essentially only interested in extracting £400m per year out of the profits. Parasite rentier capitalism at its worst!
I found NEDL useless. About a decade ago when I was installing my 3kW PV system. I contacted them and was given totally wrong advice and told me I couldn’t go ahead. Without going into technical detail (G83/1 etc.) my electrician who was also a former student of mine said to totally ignore this and predicted that the paperwork would fall into a black hole. We installed (DIY with a few friends, though I am a Chartered Electrical Engineer) and sent the paperwork in by the book. The system is still running beautifully nearly 10 years later and never a peek from NEDL.
erm… an NDA prevents me from giving details about Northern (Mafia?) Power & how it attempts to extort money from companies (& individuals). & when I say “money” I mean millions of pounds in some cases. However, I’m glad to hear your PV system is working well. If you installed around 6kWh of batteries you would have around 60% energy independence (wrt electricity). Just doing some G59 & G83 applications at the moment. Be interesting to see what excuses the DNO concerned cooks up, to extort money this time around. Most of my clients regard DNOs as crooks. We have arrived at a very sad situation.
Speaks volumes “Other concerns were apparently that employees might be considered to be a priority”.
Business earns money by selling to the public at a profit. the very nurses that put their money into pensions for the City Traders to invest and earn commissions on. We are all connected, including the 1% who think they are not. For the Nurse will help save their life in Hospital (NHS and Private)
Only in a Peaceful environment which respects fairness and access to all, does business make Profits.
This hits the nail on the head. Wealth inequality is what’s driving the UK economy and people down and a Labour government is the only one which can tackle it. LVT will help to stabilise once the heavy lifting is done but how to recover all that stolen wealth… Policies to address this are the priority and I know that this is how you see it.
https://www.ft.com/content/00eb2ad6-d446-11e7-8c9a-d9c0a5c8d5c9: We are already in Iron Heel territory.
There was also this delightful tidbit:
“Spending priorities… shift in favour of low-income households and the public sector and away from outsourcers and defence companies,”
Oh no! My heart bleeds for the outsourcers and defence companies.
But seriously , what kind of evil do you need to be, to express regret about that?
Hear Hear!
There are 2 ways to acquire wealth – create it or take it from those who do. Money isn’t wealth. Wealth is stuff people need (housing, food, transport, medicine) Money is just a way of moving wealth around. Adam Smith said (pretty much) that in 1776. The Rentier class (which Smith knew in his day) are back and are acquiring wealth by control of the money system and ownership of politicians. And in the process holding us all back.
Corbyn (or rather a rejuvenated Labour Party) is no threat to wealth creators, but is a threat to wealth extractors.
Michael Hudson puts it this way: ‘… industrial capital as well as labor has come under attack in an internecine war of finance capital against industrial capital, and even against the power of governments to retain control over national economies.’
So as much as, say, Owen Jones might see the new Labour Party Manifesto as an attempt to usher in Socialism, it’s not. It’s an attempt to restore Social Democracy. 1945-72 is regarded as both ‘the golden age of Social Democracy’ and ‘the golden age of Capitalism’.
Labour and (properly regulated) industrial capital are on the same side – whether they like it or not.
I agree: this is social democracy and not socialism
Although not all seem to realise
The debate here could be endless and full of going off at tangents to not get very far, but but I see the current direction as striving for an as yet never-happened democratic socialism, as distinct from striving for a return to social democracy-consensus.
We need to re-route the economy towards the pre-Thatcherite state it was ie. some Keynesian balance. But we need to go further and to overhaul more than the economy. Some new direction will be purely that, and some will be a stepping-stone process to a safeguarded open democracy that is essentially built on a socialist bedrock. But flexible to adjust how much entrepreneurism it does or doesn’t want. Keynesian consensus put the emphasis the other way round, probably due to the path of history, more than anything.
Some of us see a distinction between social democracy and democratic socialism, some do not. Sometimes advocates of one over the other deny the distinction for convenience.
My perception is that the future construct of production ownership will be key, with (alongside state provisions) emphasis on sole traders and small companies and a massive increase in co-ops.
The corporate contrivance that has brought us to insanity will have to implode, in order to preserve capitalism in a manageable and acceptable new version, or not at all. Essentially that would make for Consensus via safeguarded democracy under a framework that is clearly socialist.
Thanks for adding to debate
This is the wealth-earning narrative well articulated that wealth contrivers do no want us to perceive.
Keynes saved capitalism by inhibiting it. More than being restricted, It can only be workable if it actively strives not to flood everywhere.
We can either re-Keynes ourselves or decide the entrepreneurial spirit cannot be catered for because it gives the greedy mob a permanent vehicle to exploit to extreme. Which is what has happened, us happening.
Most of us can see that a mixed economy with safeguards and systems superior and more progressive to the post-war consensus is the way to go.
We also need to be more extensive in our approach. Because what constrained us before are ‘the other factors’ that Corbyn for instance realises are so connected. That mean world affairs, because the rest of the world being kept in contrived unfairness by the powerful countries meant Keynsian fairness inside UK shores could be undone. Whether by cheap Labour, divide and rule conflict, arms sales, mineral rights, whatever.
And this is where the real grind from the neoliberal contrivers stems from. Because they know the tie-up, and they know that while still owning that narrative they can still control the one of pure economic logic they are losing or at least starting to lose.
Am just keen to make a point that Corbyn is on the money on a wuder perspective – which is why he is feared by the system – and we need to develop our progressive battle on that front just as strongly or wealth contrivance has a safety net. Especially when we consider how influential (eg) US corporations and global agendas are entrenched in both our government and opposition.
Richard of course here has expressed the economic situation superbly, and in spreading economic commonsense so effectively on platforms such as LBC, he does a vital job of keeping us informed and inspiring us towards needed change.
Thanks
Carol the FT link is behind a Paywall, so can not read it.
Thanks
Harish
Try searching on line
And you can get some free articles each month as well
Richard
What I can’t get my head around is why these stupid big businesses are sitting on the big piles of cash. With interest rates being below inflation, holding wealth in cash just erodes the value of the pile of cash. I get it that they don’t want to declare a share buyback, or an extra dividend, since the people who own the business will have to pay a probably 40%+ tax bill on the income, but they must be reluctant to invest in the real economy too. Apprehensive about a Corbyn victory is my guess! Or worry about the minimum wage. Or Brexit, or if not Brexit, then intrusive EU regulations. Something one or other government does, anyway.
There always seems to be some reason these people who should be enterprising, and starting businesses and creating jobs for us, can find to not invest in our economy!
Total security fir the directors to pay themselves whatever they like
I’d see it as a complete inability of many of today’s directors to conceive of the kind of investment that would involve R&D, building skills in staff and management, spending money on plant or equipment for a return that might take a number of years to materialise. That and the demand of fund managers for completely predictable returns, regardless of market conditions with not a lot of interest in the longer term.
So they sit on their cash piles, possibly held off shore, possibly being deployed in more speculative trading activities. Not sure they’d be sitting in a low interest deposit account
I’m reminded of an excellent study that tried to understand why key Asian economies had succeeded compared to similar African economies that had started from similar positions. (I’ve worked in and studied development over tbe last 10-15 years)
Comparing Nigeria and and Indonesia, they noted that whilst both had suffered from a succession of military dictatorships and severe corruption, in Indonesia, the looted funds tended to stay in and be invested in Indonesia. In contrast, most of the looted wealth in Nigeria left the country. Whilst much of Indonesian industry and land might be in the wrong hands, it has developed much more succcessfully than Nigeria. (There is of course more to the story but this was a key point)
I can’t help thinking that the UK has more in common with Nigeria than it realises. I can accept wealth differentials up to a point but not today’s obscene levels and not when that wealth is merely used for speculation or secreted off-shore. An Elon Musk say, who is investing his wealth in radical new technology, with big impacts on sustainability, and creating new jobs, as opposed to the bulk of rentiers who we see today. And no, I’m not suggesting Indonesia as a model to follow, Just that it neatly illustrates one of the UKs big problems
Robin Stafford please post a link to that study. My relatives in Indonesia would be very interested to read it. As would I; a similarity between Nigeria and the UK sounds very likely.
Will do – if I can’t find it online, will perhaps send it to you directly via Richard
Found it – https://openaccess.leidenuniv.nl/handle/1887/20579
For anyone else interested in economic development, worth a read. About the only paper Ive found that provides comparisons across Africa and Asia with lessons that Ive not seen drawn anywhere else. And Ive looked hard
Labour propose to tax the 1% to the benefit of the 99%..sounds good on paper. However the rhetoric of John McDonnell saying he would be happy to tax them a “one off” charge of 20% or an annual wealth tax of 2.5% we all assume the tax base remains unchanged. Realistically it won’t. London drives over 30% of the UKs tax take and obviously much of that is financial services. We employ French, American, Swiss etc and they won’t stay and pay those taxes. As trained labour moves so will lines of business..if Labour get overly hostile to financial services then large swathes of investment banking revenues will move also…The fact that Macron is eradicating wealth taxes and trying to attract the 60,000 millionaires who left France when Mitterrand introduced wealth taxes. Labours tax proposals could actually REDUCE TAX RECEIPTS..you can only bleed the rich if they stick around!
I have issues with one off charges – I cannot see any merit to it at all. It misses what 4ax is all about which worries me, a lot
But wealth taxes make a lot of sense
Why do wealth taxes make sense? Tax on property is relatively easy to implement
but will kill house prices. And is it fair? Someone who lives in a london family house for 30yrs and sees house inflation but doesnt have a lot of income – where are they going to find the money? Those will a lot of investible assets (the 1% corbyn is after) won’t stay in the UK. A wealth tax will end up squeezing the middle classes not the 1%. Maybe that is what Corbyn is after?
Just search wealth taxation on this blog for the answer
Or read The Joy of Tax