I thought I would share this tweet here as I am aware many readers of this blog do not use Twitter:
In discussion with a journalist this morning I suggested that the whole of the UK, government included, now feels as if it's being run to provide money to a failing financial services sector and those who enjoy the returns it pays. For how long can we keep going like this?
— Richard Murphy (@RichardJMurphy) January 26, 2023
Discuss, as the question paper normally asks the student to do.
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For how long can we keep going like this?
Not long judging by all the news on the real economy that is now coming through.
Today, the BBC reports.
UK car production collapses to lowest for 66 years
And here is the big fact in the collapse – the unmentionable one.
In total, the UK produced 775,014 cars last year, down from 1.3 million before the pandemic, with production having fallen every year since the UK voted to leave the European Union in 2016.
Are we allowed to mention Brexit?
As you say, just saying.
https://www.bbc.co.uk/news/business-64399748
Quite so
Don’t mention Brexit
Provocative for sure, Richard, but I am not sure I agree. Unorthodox macro policies in the U.K. (and elsewhere) have represented an unprecedented shift in power away from lenders (and savers) towards borrowers.
So while debtors benefit, banks have not. They continue to destroy shareholder value year after year (not that this affects their remuneration, but that’s another matter).
Absolute utter drivel
Like all your other proffered comments
And this one most especially is sp absurd it is ridiculous
Some people will say it’s only PSR and Richard is always pushing at an open door as far as PSR is concerned but I agree with the first premise. Always have.
But the question as to how long this can go on is much more complicated and where the real debate is and has been for some time. I think it very dark.
I think that there is a real danger that this situation can go on in perpetuity.
All alternatives to what is TINA have been effectively closed down and a new normal has emerged after 12- 13 years being about what we can’t do anymore – not about what we can do.
We live in a world of ‘WON’T’ dressed up as ‘CAN’T’, where a privately created bust in 2008 was turned into a public sector problem to justify why we ‘can’t’ any more.
This CAN’T/WON’T environment will continue to exist at scale as long as the MSM unquestioningly supports its presentation as such, and where political opposition sups from the same cup as those currently in power. And of course whilst the vested interests of political funding continue to stoke the big lie that is ‘CAN’T’.
All this trains society to accept less – which it is doing. And once you have killed off effective demand for something better, then you’ve achieved your objective.
We are well on the way to that in this country.
All I can say is leave if you can.
It goes beyond just financial services. Look at all the recent incidences of contracts being awarded to companies unable to fulfil them.
Unfortunately I think we can and will keep going like this for quite a while yet. I think this because this has been going on for a long time. Even after the 2008 crash where the government bailed out banks instead of looking for alternative ways to manage the economy showed a desire to prop up the London centred finance model that was in large part responsible for the mess.
I had hoped that one of the silver linings of the recent shocks like the covid pandemic and the war in Ukraine would have given us some incentive to re-evaluate how we live our lives, but all we’ve had are governments that want to get people back into London and other city offices as fast as possible and governments that seem unwilling to materially divest from our dependence on existing energy supplies.
So if neither a large sudden shock nor a slow boiling of the pot is going to change things, I’m not sure what will. Living like this is normal, even though it also feels very wrong at the same time.
It goes back a hundred years at least. Churchill put the pound back onto the gold standard at 1914 rates. It made exports more expensive to foreign buyers so the plan was to reduce costs by bringing down wages. In the coal industry this was resisted with the cry. ‘not a penny off the pay, not a minute on the day.’ The General Strike followed. They lost.
The gold standard was abandoned in 1931 but the May Report saw cuts to public spending.
The post war austerity was driven by the need to switch scarce resources to reconstruction. But it paid off and the two main parties followed similar polices -known as ‘Butskellism ‘ after R A Butler, the Conservative and Hugh Gaitskell , the Labour leader. This was the time of Keynesian economics but I recall the adults moaning about the bank rate going up again. As I left school I read that the idea was to keep foreign money in London banks by paying higher interest. It was also to preserve the exchange value of the pound. In my first year at College Wilson put a 15% extra tariff on EFTA goods and there were other cuts-all to the same en. It failed and we had to devalue-should have been done before IMHO.
This affected industries which made things who needed to invest. We fell behind parts of Western Europe in productivity. We are still behind.
The seventies saw the beginning of another ideology. The Competition and Credit Control Act -as I understand it-set up alternative sources of finance -shadow banks. The Act was repealed after a few years but not before we saw a lot of inflation.
The late 70s and early 80s was the rise of Milton Friedman et. al. and monetarism which Thatcher treated like Holy Writ.
That policy was also abandoned. We had the BIg Bang in the City in 1986. Increasing numbers of British firms sold off. So today we don’t have a volume car producer which is British owned.
In 1992 the ERM fiasco was followed by a time where the Govt praised the City and let them get on with making profits and paying taxes. It fell apart, as we know, in 2008 and shortly after had another ideology imposed on us -austerity, again about hitting financial targets and investment slumped.
I see a pattern where making things -where we led the world in the Industrial Revolution -was subordinated to the demands of the City people many of whom had little idea about science or technology.
The former class subsidised the Conservative Party to further their interests. It just wasn’t the interests of the nation as a whole.
An economic history of the UK with such a wide sweep back to or before the Industrial Revolution needs to take account of the UK’s favourable position with ready access to important resources such as coal and other mineral resources; the cataract of money coming to the UK from the triangular trade, and then the reinvestment of the money created to end slavery; and the flow of resources back to the UK from India and Africa and the rest of the Empire. And a political system which was an oligopoly until the last third of the 19th century (and arguably until 1918): when working and living conditions were terrible for many workers, there was very patchy provision of education, healthcare or social support for most people, and poverty was rampant.
To quote Nye Bevan: “How can wealth persuade poverty to use its political freedom to keep wealth in power? Here lies the whole art of Conservative politics in the 20th century.”
Before the series of Reform Acts, there was less need for “wealth” to persuade “poverty”, because the poor did not have the vote.
And now, the question for our time is how can the majority of the people be convinced that millionaires and billionaires – and their hangers-on and fellow-travellers – do not have the people’s interests at heart?
I wish I knew the answer to that
“how can the majority of the people be convinced that millionaires and billionaires – and their hangers-on and fellow-travellers – do not have the people’s interests at heart?”
I think that if you ask the question the other way around, “why do people accept millionaires so readily”, it gives an insight. Loosely, it is the neoclassical paradigm: that’s how it is taught, that is how it is portrayed in the media, there is no alternative (TINA).
People believe that they could also join the elite few, that trickle-down economics works, that paying taxes to fund spending is how it works and is fair. Of course the Bank of England has to raise interest rates, so of course my bank has to increase my mortgage, all unfortunately, but there is no other way — not!
The solution is education. My mindset has completely changed since the summer when I first learned about Modern Money Theory, then neoliberalism, and how it has so thoroughly pervaded society. It is only when I was given a preponderance of evidence of deliberate cause (such as the theft of the NHS), that everything fell into place.
“How can the majority of the people be convinced that millionaires and billionaires – and their hangers-on and fellow-travellers – do not have the people’s interests at heart?”
“I wish I knew the answer to that”.
Let’s think it through shall we?
It’s about presentation, branding and celebrity culture. You can see it everywhere. In our institutions and media. Programmes like ‘Through the Keyhole’, ‘The Kardashians’ and ‘The Osbournes’ all fetishize wealth – make it more important than it is, turning it into a goal for us lesser mortals.
It’s fetishistic – that’s why. I’m often amazed also how people conflate wealth with intelligence or should I be more accurate – ‘learning’ or being ‘learned’. Most wealthy are some of the most focused but also narrow minded people I’ve ever met. It’s not the breadth of their focus that gets them to be where they are in most cases I would say.
In Derbyshire there is a magazine called ‘Reflections’ that acts like some sort of regional networking mag, and in there are frequent articles of the great and good getting together in their finery, weddings between wealthy families etc., and lots of advertising. It’s another world I tell you.
I also think the rich show us themselves in order to get more of us to be like them because they hope there will be fewer people who need their taxes ! They think that they are doing us a favour! So they brand themselves and their success (paying to have brand specialists tell them who they are) and share their ‘knowledge’ sometimes at cost. And of course it will contain so little self-awareness because in their focus to make or keep their money, they have never questioned themselves at all – even their luck or advantage.
My wealthy brother in law gets taken far more seriously than me because he is wealthy therefore he must be wise and be worth listening to. I OTOH with my old banger parked outside and in my ex-council house have an inferior opinion if I offer it. I’ve too often come into conflict with that over the years.
If I had to ascribe one quality to a rich person is would be ‘cunning’ and the other would be ‘a capacity for risk’. Many will never know how close they came to losing the whole ranch. So they take part in making us all believe that we can do it too.
It’s an industry Ian and Richard – an industry in itself.
In my professional world of social housing – we see the consequences of that industry – people on the homeless register whose businesses have gone up the chimney or where ill-health has ended with the high risk escapades in the property market resulting in nothing to show for it at all except a suitcase or three and a couple of quid in their pocket.
And this is what is called an ‘aspirational society’? I don’t even think ‘aspirational’ is a real word, but there you have it.
But there is one truth that is fundamental to the wealth industry’s survival and we talk about it here so let’s not ignore it.
People believe that money solves a lot of their problems. And in a society such as ours where this utility (money) is so badly and unfairly allocated, that is true because especially since 2010 that mis-allocation (and un-allocation – considering money’s velocity or not) has and is causing huge problems.
Maybe our interest in the wealthy is actually a symptom that the rest of us just don’t have enough money? And if so, it makes the wealth industry (the magazines, the programmes, the rich lists) go beyond fetishization and into the realm of pure exploitation?
Just a meditation – that’s all.
Thanks
You should see what the Tories are doing with the NHS (and Labour to a lesser extent). They have literally taken billions from public services, and siphoned the money into private companies. I can not urge people enough to read:
How to Dismantle the NHS in 10 Easy Steps (second edition)
https://www.amazon.co.uk/How-Dismantle-Easy-Steps-second/dp/1789041783/
And watch: The Great NHS Heist Documentary
https://vimeo.com/ondemand/thegreatnhsheist
Richard has had his response to this., last weekend.
https://www.taxresearch.org.uk/Blog/2023/01/21/solving-the-nhs-funding-crisis-the-video-version/
This link was posted onto weownit today and to KONP.
Perhaps 10 to 15 years… or less…
Much of this has been down to the inability of mainstream economists (and advisors to politicians) with their ideological neoliberal/neoclassical/libertarian paradigm to understand the real economy as heterodox economists such as Michael Hudson, Steve Keen, Richard Werner, Richard Vague, Michael Graeber, yourself, etc. have pointed out.
Richard Werner is particularly scathing of big finance (self interest) and central banks (control) that are perpetuating the situation, see https://youtu.be/dSB2CHKtdwM?t=977 . He puts much of the latest bout of inflation down to excessive credit creation by the central and private banks that with supply chain/production/war energy cost hiccups (resource/energy limits) exacerbating things. His suggestions of the creation of local banks for SME Small and Medium Enterprise lending, mimicking the German Mittelstand financing has merit as this creates wealth in the real economy, not money chasing money of the parasites in the city of London. The City needs to be put back into a box.
But we are now facing an existential climate crisis that sooner or later will demand a massive reduction in CO2 and thus economic output … read rationing for non-essential items, that if not done on an equitable basis will lead to societal breakdown, viz carbon rationing . As Kevin Anderson says the rich will have to have much less of the pie. The increasing concentration of wealth has been eloquently pointed out by Pickety. The role of government created money when growth (and profits) in the private sector is limited is essential, viz Universal Basic Income of some sort, see Steve Keen https://www.podbean.com/ew/dir-ex5nq-166b15f7 .
Thanks
Well done Richard.
That is the most succinct description of what has been going on in this country for the last forty years that I have seen so far.
On an historical note I have often wondered if this was always the dishonest Thatcherite intention or whether Margaret Thatcher and her enablers were in anyway sincere when they talked about revitalising British Industry and the rest of the productive economy.
Mostly I tend to the the first view, but there is also a third view that has grown stronger with every passing year. That ever since 1979 the Tories have lived in a reality denying fantasy world and the chaos and lying that has resulted has been driven entirely by their greed and the need to clutch at increasingly desperate wheezes to keep the whole rotten show on the road.
I agree with your last para
Mr Langston,
I listened to the fantasy world description of Britain today in Jeremy Hunt’s (self-congratulatory) speech today. He described the productivity “puzzle” that remains. This is a productivity “puzzle” Thatcher and Tebbitt coundn’t explain in the 1980s. Even the journalists are beginning to notice that the economic policies of neoliberal Conservatism is ablaze with contradictions; high employment, scarce labour and poverty rates of pay. A need for “levelling up”, because the economy has failed most of the country. Huge infrastructure spend (on HS2) that goes nowhere outside London, and doesn’t even go into London. Phoney “markets” created in vital services that fail spectacularly, don’t function (from railways, through energy to NHS), require costly and wasteful spend, destroy both the economy and people’s lives and should be in the public sector, but aren’t. An obsession with high stakes value added, but with no labour to do absolutely crucial ‘care’ work; that has major, advers, indirect impacts on the NHS, and the well-being of the economy.
A disastrous failure of the Conservative (or old ‘Tory’) Party and its Government, ever to understand that you cannot privatise the national debt; and a proven failure to manage it. Their incompetence led to the national debt to move from <£1Trn in 2010, to £2.5Trn in 2023, without ever achieving their aim to eliminate the deficit (failed), reduce the National Debt (failed – now 2.5 times the size); and without generating any economic benefit for their wasteful incompetence; a cost of living crisis, with old people dyding of hypethermia, people frightened to switch the lights on, and mortgage costs exploding in their faces (and don't mention Brexit – the ruination of our economy, a ruination the conservatives know the can't fix, but just fudge – ever).
“the whole of the UK, government included, now feels as if it’s being run to provide money to a failing financial services sector and those who enjoy the returns it pays. For how long can we keep going like this?”
I’d suggest “dying slowly with a whimper not with a bang”. A few illustrative stories & an observation.
Over a couple of years I made a number of reasonably significant private investments in a Uk bio-tech company/start-up (these were used to fund the company btw). Interesting product and in some respects a world leader. The company raised various loans from regional development banks. Crunch time came last year, when a key loan, which would have allowed substantive manufacturing, from a gov regional dev bank, did not go through – for a range of reasons – none related to the risk. This led to a promising UK company being taken over by a US corporation for a knock-down price. I am confident that the tech will get transferred in short order to the USA. (sour grapes? I got my money back – but the company could have been a big UK success story – not anymore).
I am also fairly confident that the above small story is repeated quite often in the UK, a country that appears to be focused on economic suicide. 2010, helping Hitachi hire an electrical engineer, one person we interviewed said of his late 1980s cohort “I was the only one that went into engineering, the rest went into finance”.
The point when the Uk could have “balanced” itself was the mid-19th century. The sons of Uk industrialists could have been educated at schools and colleges focused on engineering. Instead the rise of the UK public school and its focus on classics meant that an initial industrial lead was lost to Germany and over time, the inventiveness and drive was dissipated via the public school system. The end point of the process being individuals such as Cam-moron, Mendacious Fatberg and a long list of imbecilic uneducated deadweights.
That’s my experience too
I know someone who got a degree in electro-mechanical engineering in the late 80s. He applied for every job going . The only interview he had was at a company making jet fighters. Eventually after much disillusionment, he went back into local authority work, having taken the degree in his late 20s as he didn’t want to do that for the rest of his working life. His job will probably be one of the casualties of Brexit.
“Discuss, as the question paper normally asks the student to do.”
I’d suggest a picture is worth a thousand words. Mr Rowson sums up perfectly all that is rotten in the UK &, without reform its trajectory:
https://www.theguardian.com/commentisfree/picture/2023/jan/24/martin-rowson-on-rishi-sunak-and-ethics-cartoon
Indeed
Tom Brown in his 2017 book ‘Tragedy & Challenge: An Inside View of UK Engineering’s Decline and the Challenge of the BREXIT Economy’ lays it all out comprehensively.
Essentially, our industry suffers from the American disease of ‘over-financialization’ – its now just another get rich quick route for unscrupulous banks and so-called ‘investors’. It’s the short-termism of invasive and exploitive finance that has laid wreck to manufacturing in this country and he calls for policies that essentially reverse that culture. It’s a good read and it is said that this book did not go down well with DTI when it was launched.
Over financialisation is a massive cause of our decline