“Where have all the good times gone?” That old song by The Kinks often comes back to my ears when I am in Britain –quite regularly, that is. The economy is not only going down, it is just not up to what it used to be.
The Cadbury flop
The takeover of Cadbury by Kraft Foods is just the latest in a long series. In less than three decades Britain has lost many of the jewels in its industrial crown.
One of the most spectacular examples is of course the car industry. When The Times writes about Jaguar Land Rover as “the UK’s largest carmaker”, it’s an optical illusion. Some of the plants are still there -for how long?- but the seeds have moved to America, Germany, Japan, China, India…
Once a champion in automotive and mechanical engineering, the UK is now just a smaller part of the global assembly line. The brand on the radiator grille might still be British but the rest -almost the whole- is made elsewhere.
A Vauxhall is (was?) just an Opel with another logo. Aston Martin might still be hot but the financial steam now mainly comes from Kuwait. To add fuel, who knows that the English component in Rolls-Royce is in the air only and not on the roads any more. And that a Bentley has just (well, almost) been a Volkswagen for years?
Who has cared -and done something- about Britain turning into a chocolate-box country? And if it was only about cars. BOC for gases, Pilkington for glass, Corus for steel, ICI for chemicals, BAA for airport management, Scottish Power (not so much Scottish now), Body Shop (a trailblazer in natural cosmetics) and so on.
Want another round? Fewer English beers (Heineken has become UK’s largest beer and cider brewer), fewer Scotch whiskies (Pernod Ricard and others have swallowed many). Oh, there are still some real Welsh ciders to comfort, yet not all drinkers.
UK’s manufacturing output went down from over 30% of total gross value added in the 1970s to less than 15% in the first years of the twenty-first century. Behind the numbers, which show an increase of the service sector at the expense of manufacturing in all “old” industrialised nations, there is no equivalent to the UK loss of industrial substance in any of the major countries, such as Germany, Japan, France, the US, and even Italy.
Some smaller developed economies like Sweden and Switzerland have demonstrated a better ability to keep top companies at home, i.e. to save decision centres, value added and significant employment volume. When Frau Merkel declares that Germany will switch to electric cars, at least she knows that the steering wheels are still around the corner. Gordon Brown or David Cameron could hardly promise the same as Britain is no longer in the driving seat.
Enter Nick Clegg, the leader of the Liberal Democrats, who declared on 11th February in Newcastle that shipyards should be converted and upgraded to produce wind turbines. This is of course not the only solution to the crisis and recession, but can certainly bring Britain a step forward towards a “green economy”. This goes through a real reinvention of the manufacturing sector, once the greatest strength of the UK economy.
Mind the gap
Before the latest financial turmoil the City’s financial revenues accounted for 30% of UK’s GDP. This proportion is much higher than any financial centres in any developed economy, including Zurich. As Vince Cable put it earlier this year, “The British economy had a massive heart attack when the arteries of the banking system seized up.”
To make things better -or worse when the crisis comes- one third of London’s listed companies’ equity is in the hands of foreigners. That explains the heavier toll taken on Britain in the recession.
Britain depends too much on London and London relies too much on the City. Stating that London’s role as financial centre is “set for a new boom” could lead to the same troubles when the next bubble bursts.
This is not to say that the City’s role is bad as such. Having one of the biggest financial hubs in the global economy is a big advantage that should be sustained. But not at any cost and not to the detriment of other parts of the economy and the society. The whole must be rebalanced, and building new with old is a way to do it.
The gap between virtual finance and the real economy is bigger in “Anglo-Saxon” economies than in others, but it is certainly made worse in the UK, and outside London, due to the weakening of the rest of the economy, from manufacturing to business and social services. Reinforcing these should come as an absolute priority.
Bet on BETS
Economic reinvention should top the agenda. Instead on betting on the invisible hand of the market with a little help from the City or the heavy hand of the State, an inspired choice would be to bet on BETS.
BETS stands for business, environmental, technology and social enterprises and economy.
A few policy ideas:
– A reinvention of venture capital (e.g. through local enterprise funds) and midcap markets.
– Fostering medium-sized enterprises and make them able to grow international. UK companies lag far behind their US, German, French or Italian peers here. Local enterprise training programmes could be set up, also on foreign languages and export capabilities.
– Embarking full steam ahead on “green” energy and economy. Britain is not a champion yet, far from it. It’s high time to roll up the sleeves to avoid being overtaken by competitors.
– Not leaving “Made in Britain” or “Buy British” to the rightists and never mind the accusations of protectionism coming from free-trade zealots. Give incentives for more national and regional value added.
– Keeping as many decision centres as possible in the UK.
– Putting a priority on highly labour-intensive renovation and less on new construction, e.g. through energy savings incentives.
– Sustaining technology spinoffs from laboratories and universities.
– Developing local employment initiatives and social enterprises. Britain is here behind a country like Denmark. This could help (re)weave the social fabric, integrate unemployed people and minorities and better meet the needs of some categories of people.
Mike Guillaume is an economist and financial analyst, “as familiar with the financial sector as with renewable energies.” He is the author of “The Seven Deadly Sins of Capitalism”. His main office is in London and he shares his time and work between other international cities. He is a partisan of the Lib Dems.
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56 Comments
Whatever else Mike Guillaume may be familiar with, is he familiar with EU competition regulations about ideas like “buy British”?
Decision-making centres would be great. But there’s a reason why other European countries seem to do better on this front. Hardly anyone speaks German or Italian. Hardly anyone wealthy speaks Spanish or French. Precisely where are those businesses going to put their headquarters, apart from their own countries? The UK has no such “advantage” when faced with the more pro-business environment in the USA.
In general, it’s hard to see when exactly the “good times” for manufacturing prevailed. British industry has been in relative decline since the unification of Germany; inevitable, because Britain led the Industrial Revolution.
“Not leaving “Made in Britain” or “Buy British” to the rightists and never mind the accusations of protectionism coming from free-trade zealots. Give incentives for more national and regional value added.”
There used to be a time when free-trade zealots were called “liberals”. Winston Churchill defected from the Conservatives and became a great Liberal Home Secretary and Chancellor because we were the party of free trade. It was free trade that made Britain the richest country in the world in the C19th.
Protectionism can only make us poorer. This is not just because it causes tit-for-tat responses from our trading partners. It is primarily becasue it prevents us from buying goods and investing resources where they are most efficiently manufactured. This is not just a reference to cost: agricultural yields in some countries are so much higher than ours that it is more environmentally friendly to grow abroad and fly produce here than it is to grow it (inefficiently) in the UK.
It is so sad to see a policy that used to be fundamental to liberal belief denigrated by members of the Liberal Democrats.
These nationalistic views of industry are rather dated.
As the following paper explains, the days of “national” companies are long gone. The nuances of comparative advantage mean that various tasks and services occur in many different parts of the world, spreading wealth and the availabilty of affordable products:
No Longer Us v Them [opens PDF]
It’s rather disappointing to see a Lib Dem Councillor proposing that we steal the Right’s pro-British industrial protectionist policies.
And if a paper’s too much, there’s a condensed version in this op-ed article.
Third time lucky – LINK.
Or if not:
http://www.smh.com.au/opinion/politics/g20-leaders-need-crash-course-on-global-economy-20090923-g27o.html
To Edward:
I’m certainly very familiar with EU competition rules. Does this mean I find them fair? Besides Thatcher’s policies, these rules authorized a number of cross-country takeovers that have hardly proved beneficial. Just consider the liberalization of the energy sector, which is not far from disastrous, e.g. for British private and industrial users.
The good times? Apparently, the list of lost companies, comparatively longer than in any big OECD economy, is not long enough to convince you. Was it inevitable? The answer is a partial yes -and thus no.
To Tom:
Everybody knowing me (and the ones who’ve read my book) can hardly name me a protectionist. Adam Smith, David Ricardo and… J.M. Keynes stand among my masters. My criticism (too short to be elaborated in a few lines) is not against free trade, which made “Britain the richest country in the world” (also thanks to the power it wielded and its empire, lest you forget). But against the zealots. Free trade is based on mechanisms and rules, not on religion. If everything is free, comes a day when the emperor has no clothes. That’s what has happened to the UK. Can economies like Denmark or Sweden be named “protectionist”? I don’t think so. Why have they lost less of their industrial substance? Among other reasons, because of a much stronger national shareholder base, and by refusing to sell off some major assets to anyone. Adam Smith already feared the increasing distance between share owners and “their” companies.
If free trade means putting economic, financial and…. football decisions in the hands of NY investment banks, Australian media moguls or feudal emirates, and thus losing your independence, the most enthusiastic liberals must ask themselves a few questions…
I was going to write a long comment on this, but it boils down to you mixing some good ideas (A reinvention of venture capital; embarking full steam ahead on “green” energy and economy; local enterprise training programmes ) with some ones that aren’t so much bad as contradictory. You can’t foster medium-sized companies with state support at home and expect them to be able to compete internationally. Similarly, adding incentives for value-adding activities at the regional level is equivalent to taking money from actually profitable UK activities to make the regions not feel like they’re economically useless. It’s the economic equivalent of steroids; sure there’ll be some short-term gain, but in the long run you sure won’t be manufacturing anything.
By the way, excuse me if I’ve missed an explanation for this, but it doesn’t seem clear who the author of this piece is. Is is Iain Roberts or Mike Guillaume. Or is it co-authored?
To Adam:
You might be rignht in your last lines, Adam. For the rest, it would take many more pages to elaborate… and avoid a few contradictions. We’re all human, aren’t we?
To Julian H.:
Nationalistic? Me?
And beware who is stealing from the right! Though not at all nonsensical, the publication you are referring to is a typical example of free trade turned into an ideology. Adam Smith was an economist and moral philosopher, but he can hardly be named an ideologue. The paper is typical Cato ideology.
The paper certainly gets it right when it points to interdemendent and intertwined economies (e.g. in the car sector). But besides, what is it all about? Pure laissez-faire, which belongs to… conservative liberalism.
Ironically, I agree with its conclusion: “economic crises are not the time to unlearn”… just because I…. disagree with its final words: “What is good for the economy during normal circumstances is good during tough times too.”
You really think it was GOOD?
When I read some comments, I really get the impression to read some Tory views here. Quite unexpected.
“Fostering medium-sized enterprises and make them able to grow international”
“Give incentives for more national and regional value added”
I am confused. If you claim not to be advocating protectionism than what are you advocating? Fostering and incentivising national business interests over foreign business interests IS protectionist.
Two questions;
1) In your utopia of incentives and fostering how do you expect low wage developing countries to compete? By artificially supporting less efficient producers in the UK, developing countries will lose their (already fragile) export markets and their historically only proven route out of poverty- trade.
2) Seeing as you are so keen on the provincial angle, why do you think we should stop at protecting industry within national boundaries? Surely counties/ridings/hamlets even should be afforded the same protection. After all, discrepancies in the regional cost of living mean that it is more expensive to grow turkeys in Norfolk than it is in Lancashire. But many residents of East Anglia would be aghast if their jobs at Bernard Mathews were relocated, due to the lower costs. Are you as supportive of “made in Norfick” as you are of “made in Britain?”
Mike, thanks, so you’re saying that
– There WERE good times when we had those companies before some bad thing happened
– Margaret Thatcher was the only bad thing worth mentioning
It’s reasonable to conclude that
– Before Margaret Thatcher, British industry was great
Sorry if this sounds like a “Tory view”, but you’re really romanticising the 1970s glory age of industrial planning, which was a disaster.
Sorry that the story originally got posted under my name – now with correct author. I don’t understand all this economics stuff (or, apparently, how to use WordPress).
It is always important to remember that as a true liberal you should not be looking to preserve ‘British’ freedoms but instead the freedoms of every individual in the world. I agree with Timothy Cox that protectionist policies may give a short term (and fragile) boost to our economy but to the detriment of those much less well off than ourselves. It seems much better to aim for true free trade around the world rather than hide behind our own protectionist policies just because ”everyone else is doing it’ (I realise you have not quite said words to that effect in the article and I am just making a general point not concocting a straw man against you).
To Timothy Cox:
Sorry, but I don’t see any contradiction between the support to companies to be more international (a terrible handicap in Britain compared to German, Swedish, Dutch and, tant pis, French) and getting more national value added (in Norfolk or Lancashire). On the contrary, the latter would derive from the former with a stronger industrial fabric and processes “Made in Britain”. Why does this should be a dirty word? Saying that fostering your own interests over foreign ones is protectionist sounds to be much stretched definition of free trade! Have you ever thought that British companies in Imperial times or American companies in “Pax Americana” times were the noble promoters of free trade. They were the defenders of their self-interest.
It would be too long to ague, but, yes, I think that regional development (“Made in Norfick”) is perfectly compatible with free trade, not least through the raise of technology-based clusters (for which Ii do not necessarily advocate for public support). But I agree with you we should get back to David Ricardo’s comparative advantage to (re)make progress…
To Joe Donnelly.:
I couldn’t agree more with your words.
If you genuinely think “we should get back David Ricardo’s comparative advantage” then you’d retract virtually everything from the above. Btw, is the “Seven Deadly Sins of Capitalism” available for sale?
To Edward (again):
The reference to the good times means more about days when there were more (really) British companies and less dependence from abroad I’m far from saying that all was bad in Thacher’s reforms (yet the side effects prove that she didn’t fully got it, pardon the pun, right….). Before, Britain industry was more, how to put it, present. Which doesn’t at all mean “effective” and well-performing”. Having started the study of the British 70s manufacturing diseases (the E-Type was hot but Jaguar’s overall quality was very poor), I totally agree with you in using the word “disaster”.
To Alec:
I’m not sure at all I’d retract. But, like Keynes put it, when the facts change, I (can) change my mind.
May I return the question: According to a modern Ricardo, would the City remain as (almost) the only UK comparative advantage?
It would be a pleasure to send you a free copy of my book (self-published). Feel free to leave your contact details in an e-mail posted to http://www.mikeconomics.net website.
An excellent and timely post.
British industry has been in relative decline since around the 1850s, propped up for many years by the relatively protected markets of Empire which provided soft outlets for products that were too often (but with honourable exceptions) far from world-class. Once continental industry was rebuild after WW2 the deficiencies were cruelly exposed – hence the massive decline that’s now lasted many decades. Successive governments have never found a proper answer but have instead relied first on North Sea oil, then on selling the family silver and increasing debt to keep the economy going. The cupboard is now all but bare and these conventional ‘strategies’ are out of road.
Traditionally, the excuse has been that of course we can’t compete with low wage countries but this is dishonest and a very partial truth at best. It doesn’t explain how for instance Germany has been the world’s largest exporter until China finally overtook it just in the last few months or how Swedish value added in manufacturing has increased as ours has declined. There is clearly something the ideologues have missed about how the world actually works.
If we do not find a better and more productive way to run our economy pretty soon we will all be poorer, probably very much poorer. The solutions are no doubt difficult but I don’t suppose they are beyond human ingenuity. Sadly, they seem to be beyond political will (or perhaps the ability to think outside the box) for the moment.
MG is also dead right to remind us that, “Free trade is based on mechanisms and rules, not on religion”. Free trade is indeed wonderful – but it’s also very difficult to achieve in the real world and thus rarely encountered. The neo-liberal (i.e. Conservative) interpretation glosses over these difficulties and uses free trade rhetoric to promote a ‘winner takes all’ view which is utterly self-serving. Far from providing a level playing field, it actually creates one where ‘big is beautiful’ and which protects the establishment and its rent-seeking behaviour. What else is the debt-bondage that so many people have fallen into? What sort of crazy logic is it that bases economic policy on making housing unaffordable to ordinary people? It is no surprise that society has become increasingly unequal over the last 30 years, nor that New Labour has failed to reverse this – once they broadly adopted the neo-liberal interpretation their project was doomed.
But, if a big part of the problem is that Conservatives have used neo-liberal arguments to defend their bankrupt establishment (now literally as well as metaphorically true) then it follows that a great many establishment sacred cows will have to be slain to achieve real change. After 30 years of neo-liberal hegemony these sacred cows are to be found in institutions of all sorts and at all levels but most of all in peoples’ habit of mind.
Not easy, but perfectly doable.
A well thought out post. On commenter notes Britain grew great on free trade but that needs a bit of perspective. Britain could chanpion free trade in the 19th and early 20th centuries for the same reason the USA has been able to pose as the champion of free trade while in reality being the most protectionist of all nations for the past fifty years. Both nations enjoyed the benefit of having the world’s major reserve currency and thus could manipulate the markets to their own advantage.
Without a reserve currency to protect us Britain has felt the full force of financially incompetent government by both Labour and the Conservatives.
Globalisation is dead – unless nations are all willing to become client states of China. It’s time we British stopped playing the game and started looking out for Number One.
Nick Clegg’s words on Turbines manufacture were politically expedient but wind turbines are a non starter. Since Denmark committed to wind power energy prices have soared, supplies are unreliable and the country has to import most of it’s electricity from Germany. We ned nukes as a stop gap until we can develop the wave, tide and marine current technologies and run of river schemes we should have been working on 30 years ago.
I buy British& local whenever possible, in my view it is one of many things consumers can do.
Visit your local farmers’ market.
Buy meat, dairy, eggs etc from animals with a high standard of welfare, preferably sourced somewhere near you.
Buy from sustainable sources such as MSC crtified fish, & others.
Bank with a mutual rather than a bailed out casino.
We consumers do not understand the reach of our own power. There is a place for regulation but we have to do a lot of work ourself if we want businesses to do what we want. They make money, & this is the basis of such prosperity as they have, but we are the ones they make money from & we can make our voice heard. It is onl by having an educated, active citizenry that people can be free in the first place.
I am of course opposed to protectionism. I will buy a mango or some chocolate wthout fear of giving offence. But I choose where to spend my money because I am a citizen, not some moron that the state an do whatever it wants to.
Tom Papworth
It was free trade that made Britain the richest country in the world in the C19th.
Yes, Britain did pretty well in the 18th century out of slavery in the Caribbean as well.
It may have escaped your attention, but we are no longer living in the19th century. Assumptions which may have been valid then no longer apply.
I am fed up of the lazy repetition of this mantra from people like yourself instead of deep thought on the issue. Are you capable of thought that actually addresses the world we live in now, or do you prefer to escape into the certainties of the 19th century?
I write this not to say that free trade is all wrong, it certainly isn’t. But our economy is vastly different from the one those who write about free trade in the 19th century knew. That was a world where food suppliers, for example, were still largely the local butcher, baker etc. The idea of a few huge nationwide suppliers did not exist. The idea of a huge reliance on a finance industry which could just up sticks and go to Switzerland did not exist. The internet and all that implies did not exist. The world looked a lot more infinite than it does now. In those days it could still be assumed that the people who ran the businesses around us which we relied on had some loyalty to this country, did not regard it simply as a place to make profit, would not shift production away to other lands when it suited them. That no longer applies. We are now dangerously reliant on a very small number of people who care nothing for us.
Part of the reason Free Trade was popular in the 19th century was that it broke reliance on aristocrat landowners for food supplies. But it was backed up by the assurance we had local energy supplies in coal, and iron works and potteries and the like, all using local raw materials. There was no shortage of occupations for the people of this country to produce objects which could be traded with others for food. The finance industry, on which we are told we must now rely to produce the wealth we trade with, is not like that. It doesn’t need vast numbers of people. Those who run it have made quite clear by their refusal to give to this country in its time of need what they could clearly afford, and their threat to run abroad instead, that they care nothing for it and its people. For them, this country exists simply as a play space, and its people simply as fodder to provide low grade service jobs. They are like the worst of the old aristocrats our political ancestors fought against.
I don’t see many people in Sunderland wishing Nissan were run as well as BL…
Unfortunately, Mr Thorpe, yours was not a very well thought out post and betrays a complete misunderstanding of the nature of global trade.
“Globalisation is dead – unless nations are all willing to become client states of China. It’s time we British stopped playing the game and started looking out for Number One.”
China recently overtook Germany as the largest exporter, but the most recent figures show that Beijing’s trade surplus has narrowed to $173 bn for the last 12 months- that’s considerably less than Germany and Saudi Arabia. Why? Because Chinese imports have rebounded faster than their exports. To produce goods China must import from the rest of the world, including “Number One” (I assume you only refer to U.K. businesses, wholly owned by British nationals?!)
The reality of modern trading is that, whether it’s an iPod, a designer handbag, or a top end stereo from a “good British company like Cambridge Audio,” the final nodes of production often take place in China. Designs are drawn in London, promotions are launched from Manchester, inputs sourced from around the world, assembled in many different countries, and often finished in China.
Recent estimates suggest only 50 per cent of the value of “made in China” is actually added in China. But trade accounting practices attribute the total value. In reality, “made in China means “made with the rest of the world.” Your mercantilist nonsense fails to account for the harm restricting Chinese trade will cause to those you seek to “protect.”
Careful there. This point stands on the idea that “cross-country takeovers” are significantly worse than “in-country takeovers”. I don’t think that’s well-established. Being bought out by a local conglomerate doesn’t mean they won’t dramatically downsize and offshore the business.
The problem lies not with the nationality of the purchasing company, but rather with its attitude.
To Liberal Eye (what’s in a name?), Ian R Thorpe and Asquith:
Thank you for your comments that go even further and do it better than I could have done it in a few lines. By the way, my (small) contribution was excerpted from a longer article that was deemed too long for a blog by the editors -and rightly so. Being longer naturally allow you to elaborate. It might be posted on http://www.mikeconomics.net in the near future.
To Matthew Huntbach:
Liked very much your comparison of modern financiers with old aristocrats… This bluntly reminds us that in too many situations, not only in Britain but very loudly in the City, industry (remains) is now serving the interests of finance, while in the “normal” working conditions of free-market democracy it should be the opposite.
To Tim Leunig:
You’re absolutely right! My point is: why was BL not capable of doing what Nissan (and others) has done.
Interesting discussion here.
Mike, I think you will find that on the internet there are lots of libertarians. Many argue that the words liberal and libertarian amount to the same thing.
In real life I very rarely meet any. Recently the Lib Dem history group had a meeting on Gladstone and the speakers made the case that Gladstone was actually more left-of-centre than libertarian. Not one person objected.
Likewise the Lib Dem motion on “Real Women” which proposed laws on restricting airbrushing made Libertarians furious on the internet. But in the debate the libertarian amendment to remove this was only supported by a handful of delegates, and only one person spoke in favour of this amendment.
So I get the impression that either the Libertarian Liberal Democrats are small in number (and there have been some notable defections away from the Lib Dems recently) or they just spend their time on the internet and otherwise don’t get involved in the party, generally speaking.
As far as this debate is concerned, I broadly favour free trade, but not out of religious conviction. I think the debate about how to lok after Britain’s interests, but not to the detriment of the rest of the world is an interesting and nuanced one.
I won’t add to that for now as I am to busy.
Mike/Geoffrey,
I don’t think anybody supports free trade out of “religious conviction”. They do it for a number of reasons to do with knowledge, evidence and ideology. Knowledge of economic theory demonstrates that free trade maximises the wealth-creating effects of the division of labour. Evidence of the correlation between open economies and wealth creation (including enriching the poorest income-deciles) is overwhelming. The ideology tends to relate to the liberal belief in a global community and the freedom of individuals to interact with one another without constraint.
Hallelujah!
To the readers and commentators (for, against or in between):
An extended version of my article titled: Needed: Britain’s economic reinvention is available on http://www.mikeconomics.net/home/mindreading/
As a liberal, I don’t ask you to sing “Hallelujah”…
I’m quite sorry I came in at the end of this debate, since the whole doctrine of non-intervention is one that has long been due to an overhaul and I am surprised at how many fervent adherents it has among the Lib Dems. The idea that the government can simply withdraw from the market and then it will operate in some free-market nirvana is about as realistic in terms of industry as it is to say that free market economies do not suffer booms and busts – and we all know what happened to that supposition. The fact is that no other nation in the world avoids intervening in the market and some commentators here seem to be ignoring this as a result of doctrinally-induced fact blindness.
People who say it does not matter where a company’s headquarters is are burying their heads in the sand. Of course it matters. Once acquired, these companies pay very little UK tax, remove the key decision-making and research functions from the UK and generally we are relegated to a bit part at the end of the value chain. This has disastrous consequences for the regional balance of our economy as well in terms of income and social inequality. Wealth and income become more narrowly spread and “lumpier” and the costs to the state in terms of benefit payments and regional support become heavier and heavier just as the tax base is rapidly leaching away overseas.
Very rarely do mergers add value. Mostly they destroy it, and being more open than other countries to foreign acquisitions, we are therefore more open to destruction of value. QED. In fact, in our overweight financial sector is actually feeding on the corpse of what remains of the rest of the productive economy: witness the funding of the Cadburys deal by RBS. At very minimum we need to make these takeovers more difficult and if we do allow them, we have to ask, what is the value to the UK as a whole. Do we still have a “national interest”? Heck, we do!
Oh what fun, protection and free trade again! I like the comment from someone about “pure laissez-faire advocates having been conservative liberals” or something. Was that meant to be ironic? The greatest advocates of laissez-faire were of course the labour value theory left-wing individualist anarchist types – as far from a Tory as anyone could possibly imagine.
Then this inane claim that somehow libertarianism/free-trade/laissez-faire is as dead as the nineteenth century. And the comparison between nineteenth century landed aristocrats and the contemporary banking oligarchy. It is a very good comparison. But not for the reasons given so far in this discussion. It is a very good comparison precisely because they are both the creations of state granted privilege and existing protectionism towards one group over another. The bankers *are* the landed aristocrats of the nineteenth century, and the remedies today are just as valid as they were then.
Let us not forget either that landed monopoly has not been eradicated one iota in the intervening time. It has been more widely distributed, yes, and therefore more concealed, but it exerts as big a dead loss on the rest of our economy as it ever did. Just as now some are at last realising that the banking oligopoly needs fundamental reform, taking out of state protection, removing its monopoly of credit. Eradicating the land monopoly would give us a lift of 30-40% competitiveness in relation to other countries who maintain a tariff on labour, would solve your regional imbalance problem by attracting enterprise to those regions where they would pay the least, and make our use of this planet’s scarce resources much more efficient. The money monopoly a similar amount. If those who say it is impossible now have any reason to say so, it would be that everyone else on the planet would suddenly see the benefits of it and either rush to come here or try and destroy us jealous of our success.
The land monopoly, the money monopoly, the tariff system and the intellectual property monopoly were the four planks of the manifesto of the C19th individualist anarchists of the left, and they remain as potent barriers today as they were then.
Contrary to the assertion that somehow “free trade” was easier then and cannot be achieved now, it is the very mechanisms cited against the ease of contemporary free trade that open up the greatest possibilities. 150 years ago we still largely had to deal through intermediary organisations. Even if these were “free trading” organisations (unlikely as they were all largely pressing for more and more protection for their industries) their effectiveness was tempered by the range of intermediaries, including governments through which trade still had to be conducted between consumer a and producer b.
Nowadays we are on the verge of being able to make personal contact with producer b, even if it is a one person workshop in Western Samoa, the opportunities for truly free trade, disintermediated now avoiding grasping organisations in between are truly awesome.
And finally, for now, To Geoff Payne. Yes, I was at that Gladstone event, as were a few others of my acquaintance. It had become clear from one of Chris Huhne’s first sentences that this was not going to be the event at which to debate from our perspective. Besides, I don’t hold Mr Gladstone to be a “classical liberal” and nor did Mr Spencer at the time. It was of Gladstone’s government that he penned the critique of the emerging new liberalism under the title “The New Toryism”. But I was pleased to note that almost the very last thing the Cambridge academic did say was to point out that laissez-faire was not a right wing or Tory cry; that the more left-wing and the more radical the activist the more laissez-faire they were in that era. It remains so today.
On that last point Jock; What I recall him saying was that supporting laissez faire in the nineteenth century was a left wing cause to support because in those days when Conservatives supported government intervention it was to spend money on the military and on conscription. This was a time before social liberalism and socialism were serious forces in British politics.
It was a shame I did not recognise you at this event. A face to face conversation is more congenial than the internet exchanges we have and which you seem paranoid about, at least as far as I am concerned.
Geoffrey, I raced down from Oxford after work and only just got into the club as the speakers were starting so I was at the back. Nonetheless in previous events in the L-G room I have been able to hear from the back. It’s amazing I missed all of that about the Tories.
Actually the laissez-faire left burgeoned as a response to the fact that the liberal reforms of the French revolution, the “Justice, Equity, Liberty” stuff was not working because they were not pulling the state back far enough. Anarchism *is* socialism properly speaking. As Benjamin Tucker wrote, there are two socialisms – the state one and the individualist one. The state one is a dead end, ultimately inevitably destructive of itself. What is sad is that liberalism decided to hitch itself to this wagon and not to the individualist one much more naturally suited to its own genesis in individual power over state power.
Jock: “now, To Geoff Payne”
I think within Lib Dem circles Geoff Payne refers to the Vice Chair of the Federal Conference Committee, whereas Geoffrey Payne refers to the secretary of Hackney Liberal Democrats. I may be mistaken but I think that Geoffrey has said before that he is not Geoff. Okay, they were probably both Christened Geoffrey and may both be Geoff to their mates, but it’s important to distinguish between them. Unless I’ve got the totally wrong end of the stick, of course.
Geoffrey: “the internet exchanges we have and which you seem paranoid about”
Is Jock paranoid about internet exchanges. He always seems willing to engage. Remember the new don’t-get-personal policy!!
Robert C: “The fact is that no other nation in the world avoids intervening in the market and some commentators here seem to be ignoring this as a result of doctrinally-induced fact blindness.” Are you saying that non-intervention is clearly flawed because it is not practiced anywhere, Robert? I’m glad you were not involved in the arguments about female suffrage or parliamentary democracy! Change has to begin somewhere.
Indeed, your dismissal of the suggestion that “free market economies do not suffer booms and busts” is belied by your statement that “no other nation in the world avoids intervening in the market”. We don’t have free market economics; we have a government monopoly provision of the medium of exchange (money) which is continually manipulated by politicians (keeping interest rates low) to create booms during which they can spend like drunks and convince us all they are geniuses whom we should thank, and then disclaim all responsibility when the boom they made turns to bust. As Jock notes, the “banking oligopoly” are their willing accomplices in this, but it is the government that makes it possible.
However, most of this was about free trade rather than intervention in the domestic economy. You suggest that foreign direct investment leaves the UK “relegated to a bit part at the end of the value chain”, but the bit that the UK plays is in the high-value-added end. We make the engines on aircraft! You may wish to look at reports by EDF, the manufacturers association, on this issue. Global supply chains are extremely valuable to the UK, which is why (at least until the recession) UK manufacturing had been producing more year on year for a decade despite (actually, because of) this investment.
“being more open than other countries to foreign acquisitions, we are therefore more open to destruction of value”. We are second in FDI to the United States, still the world’s largest economy. We are also a big exporter of investment – we buy companies across the world. I cannot understand the logic behind the suggestion that it is okay for a company based in Edinburgh to buy up one based in Manchester, but it is not okay if the company is based in Sao Paolo.
If we do “still have a “national interest”” it is best served by keeping our economy as open as possible.
To Tom Papworth:
“We don’t have free market economics; we have a government monopoly provision of the medium of exchange (money)”. Do you live in the 19th century or what? Haven’t you learned from the latest crisis that bankers -and in this case not governments- could put the whole world upside down? And, by the way, those bankers were pleased to call public money to the rescue for their irresponsibility! Is that naivety or ideology? In both cases it’s a strange statement.
As to the global value chain, good to see you can conole with what is the air in place of what was on the roads. It is precisely because the UK is not well placed in global supply chains and relies too much on financials that it is suffering more than others now. But I won’t rewrite my op-ed.
Nevertheless, I agree that “national interest”” it is best served by keeping our economy as open as possible.
“Haven’t you learned from the latest crisis that bankers -and in this case not governments- could put the whole world upside down? And, by the way, those bankers were pleased to call public money to the rescue for their irresponsibility! Is that naivety or ideology? In both cases it’s a strange statement.”
That’s exactly the point, Mike. The bankers can only turn the whole world upside down because they are enabled – by government – to create credit bubbles. And it is the fact that the state supports the oligopoly that enables them to call on state support. The fac that “those bankers were pleased to call public money to the rescue” and that is it was duly handed over proves that the so-called “free market” is in fact still marred by government intervention. As you will undoubtedy recall, Adam Smith (who didn’t live in the 19th Century either) was mainly concerned with the abiligy of companies to extract favours from government at the expense of the general public. Plus ca change!
I don’t see how your earlier suggestion that the UK should “Not leav[e] “Made in Britain” or “Buy British” to the rightists and never mind the accusations of protectionism coming from free-trade zealots” and that we should “Give incentives for more national and regional value added… [and] Keep… as many decision centres as possible in the UK” is compatible with your statement that you “agree that “national interest”” it is best served by keeping our economy as open as possible.”
Actually if you looked at the C19th anarchist-left critique of the monopoly of credit you would find it is just as apposite today.
If people are only just realising that bankers can “turn the world upside down” vindicating what monetary reformers for two centuries have been saying – from Jefferson’s objections to a central bank, M A Rothschild’s claim that if he can create a nation’s credit he cares not who makes its laws, or our own, liberal Josiah Stamp’s 1930s warning that bankers have this power, then they are, literally, only just waking up to this C19th anarchist-left critique.
Just at the very moment where what true free traders have been saying for two centuries becomes blindingly obvious to all you all want to dismiss then as anachronistic. They could hardly be more relevant today.
The state maintains the money system through a set of commercial interests to whose ranks it maintains the barriers, creating huge economic rent in the banking sector, guaranteeing their tinkering around the money that appears to have the state’s backing on it, and therefore having to bail them out when it comes down to it.
More proximately, the current problem has been caused by loose monetary policy in 2001-2 at the end of the dot.com boom on both sides of the Atlantic.
You don’t have to believe me. The late Eddie George said so, to the Treasury Select Committee, in February 2007, who went on completely to ignore the importance of what he had said. That monetary policy is effected by private interests is the way it was set up – to benefit those private interests. Who initiated the start up of the Federal Reserve system? Cui bono?
That people think this supreme example of crony capitalism – one may even suggest Fascism in the sense that an ostensibly state function is sub-contracted to private interests but guaranteed by the public – equates to “free markets” is astonishing.
The Austrians have been predicting exactly this sort of crash for years.
To Tom Papworth:
Frankly, when I wrote this op-ed, I was not expecting to see the ghost of Milton Friedman coming back on a Lib Dem forum! Putting the blame of the biggest financial disaster in almost a century on the goverments is probably one of the best jokes I’ve read since the outburst of the crisis! This is about believing is seeing, and not the other way around…
Your watch is going slow. In this world, big finance is playing with governments to a much larger extent than vice versa. And speculation is not exactly a minister job!
Being open shouldn’t mean being naive! You want some good examples? Go and see Sweden, Denmark, The Netherlands, and even the US, which wields “Buy American” and self-beneficial free trade with great cynicism.
Friedman! Compared to some of us, he was a Bolshevik!
Would Eddie George have called himself a Friedman monetarist?
Yes, the commercial banking interests lent with gusto – and why not, that is how they make their money, but to whom did they look for a signal to continue lending even when asset prices were falling? The central banks. And in the case of the UK, notwithstanding the supposedly independent Monetary Policy Committee, that signal, according to Lord George, came from the underlings of the great clunking fist himself in Whitehall.
I was writing about this three and four years ago now, this is not a post hoc analysis.
To Jock:
Friedman behaved indeed as a bolshevik. A right-wing one whose ideology contributed to putting the system where it is now. Not on best form, isn’t it? I could agree on the central banks playing with fire, but this calls for more subtle analysis (i.e. sustaining a consumerist society, endorsing monetarist policies…).
Let’s face it, Friedman’s monetarist policies had been all but abandoned in the UK by the time Nigel Lawson started farting about every other months changing which aggregate they were going to try and “control”. Personally I’m with Hayek in denying that states *can* control *themselves* enough to be able to control a monetary aggregate especially of debt-based fiat money.
Nonetheless, there are one or two critics who hold that Friedman may have been a “monetarist-Keynsian” – i.e. that all he had abandoned of Keynesianism was that it should be fiscal mechanisms that injected demand and instead held that it was better that monetary mechanisms that should do so.
But assuming you don’t accept the idea of a “Keynsian-monetarist” surely the main point about monetarism was tight *control* of money supply, whereas the events leading up to and around 2001-2 were anything but tight control of the money supply. Indeed we were barely even conscious of monetary aggregates, and the NuLab policy of targeting inflation instead of money supply (based on a fundamentally flawed belief that they are not, in fact, one and the same) had actually killed it off anyway.
So how one can possibly say that the loose stool money policy of 2001-2, which in this country at least was at least as much about securing re-election for a political party rather than whether it was good for us, was based on any policy promoted by Friedman is beyond me.
Nonetheless, I am not a Friedmanite, so I don’t owe him anything by way of defence.
But even if central banks and politicians were entirely blameless for the growth in credit (which they were not), then a failure to react to that growth in credit was most definitely their fault. M4 has been rising more or less exponentially compared with other economic indicators for a decade. If *I* was aware of that, unschooled, uninfluential and not in touch with the great and the good, then so too should have been the banking and treasury authorities. Indeed of course the figures continue to be produced by those authorities, so one can only conclude that they don’t read their own output, or they didn’t care, or they couldn’t do anything.
Which was it I wonder? Since it assisted them politically at the time, and all the while sensible economics pundits (and yes I definitely do include the Austrians in that) were calling time on the inflationary profligacy, one can only assume the second – they didn’t care.
Besides, if one is going to join the baying crowds yelling at the bankers and “free markets” and say that government action can put it right, and then suggest that well, with a more subtle analysis we might show some government complicity in the original problem, thereby surely undermining the cry that it was purely a failure of markets, hadn’t we actually do that more subtle analysis lest we do, in fact, invest the real culprit with the mystical ability now to put it right!
Mike,
I fail to see where I mention Friedman in any of my analysis. Nor can I understand why you are raising the spectre of the American boogieman in this forum. (Oh no. Wait. I can!).
Friedman was quite comfortable with the manipulation of the money supply, which hardly puts him on the side of the angels when one notes the correlation between broad money expansion and asset prices. The money supply was increasing by double digits in the UK and the US during the last decade, as were house prices. If Mikeconomics can explain that away as coincidence do please crack on.
As for your reference to ” the US, which wields “Buy American” and self-beneficial free trade with great cynicism”, I hardly see how pointing the finger at bad practice across the pond justifies bad practice at home. If Obama wants to flirt with protectionism then that’s for the Americans to worry about; Roosevelt showed how effective that was with his decade-long failure to lift the US out of recession. I’d rather the UK remained open and prosperous, and that politicians didn’t interfere with citizens choices about whom they cooperate with and how they dispose of their property.
The op-ed could be republished this week, with Abbey Road and an Abu Dhabi stake in Gatwick as additions, among others. More additions (read subtractions) in the coming weeks.
No use crying over spilt milk. It’s free trade, after all…
Of course Ferrovial was hardly the “best of British”, so haven’t we actually regained a little bit of our “national infrastructure”?
However, this was a case of a sale that need not have been made. The competition commission were targeting the wrong monopoly. There was no need for the break-up of BAA/Ferrovial, just that we should have collected the publicly created economic rent embodied in landing slots.
I’m dead chuffed that Nick Clegg is constantly reiterating the phrase “new politics” as it indicates that he does recognise that there’s an urgent need for a new approach to governing the nation and administering the economy.
Less impressive is his inability to spot the fundamental flaw in the LibDems attempts to be the “new politics” specifically the lack of newness – you are an organisation that is at least 200 years old. Just because you have not been in government (apart from some brief and minor supporting roles) for about 100 years does not give you some DIVINE RIGHT to be “next”. By the way, the manifesto you recently produced is laughable.
Correct, we do need “new politics”, BUT IT ISN’T YOU. If you want something new check out http://www.v4y.org.uk
Don’t vote for me, don’t vote for them, VOTE FOR YOURSELF!
Right so instead of having two representative wolves and a sheep deciding what’s for dinner you’d like all the wolves and sheep to agree on dinner every day.
Direct democracy is even more pie-in-the-sky than my Individualist Anarchism appears to most on here. Thanks, but no thanks.
“Vote for Yourself” is a nice strapline, but what it means to me, and what it should mean, is that I am stating that I am a sovereign individual and do not need to be ruled, either by 646 representatives or by 50,000,000 in a direct democracy, and nor do I have any right to rule over anyone else, as part of a tyranny of the majority.
Why do *you* think you have a right to rule over your neighbour, David?
Hi Jock
I don’t know if you actually looked at the http://www.VOTEFORYOURSELF.org.uk website, but if you had then you would have found that the campaign is on one issue only – to introduce new legislation to empower the public to engage directly in decision making. The precedent for this is basically beyond the need for provenance – the British people like to vote on things that interest them and the technology is also proven.
Where you get the idea that being 1/50 millionth of the decision making collective means that I, or anyone else, can “rule” over another person, neighbour or not, is quite a stretch. Still, as you’re capable of proposing Individualist Anarchism and claim that it’s not as pie-in-the-sky as V4Y, yo seem to be a person who likes to think after the debate.
Have the last word if you like, but in your case please DON’T VOTE FOR YOURSELF.
Indeed, I did look at it, which is how I knew it was a call for direct democracy strangely enough.
For example this – “The main idea is that we’re all entitled to have our own opinion on everything – it’s a fundamental freedom to be able to agree to disagree.” sounds lovely, but in actual fact direct democracy does not do that does it, it binds the minority disagreers to the decision of the majority agreers.
It is another form of one group ruling over the rest. The only difference being it will be a slightly different group doing so on each issue. It is certainly not a route to freedom. Of course, your taunt that the Lib Dems are not a new idea since they’ve been around for 200 years could be countered that direct democracy has been around since Aristotle!
Ideas need not be new to be “change” centuries after they were first being touted. They just might have been missed or dissed the first time around.
Okay Jock, I was going to leave it there, but you’ve made a few good points. Let’s take an entertaining scenario where a minority want to bring back hanging, but are prevented from seeing their view put into practice because the majority decide that it’s inhumane. I don’t get it, what’s the problem with that? I’d much rather see 25 million people vote to keep hanging banned against 20 million who want to reintroduce it. Currently you get about 400 people saying NAY. If the votes went the other way, I could live with that as well – we’ve been allied to our mates in the States for some time and last time I looked we were not slagging them off for their death sentencing policy.
I apologise for my taunt about the LibDems not being the new kids on the block. You’re right that good ideas don’t have to be brand new. Thing is, there’s never been ANYTHING remotely like the Internet so suggesting that the Ancient Greeks with their men-only voting system (not the slaves of course) is relevant is ludicrous – it’s nice to be educated, but most people in this country don’t have a clue who Aristotle is and would erroneously guess that he was the guy who said You Reeker.
if you want to go all archaic on me, I’ll slap you back with Cincinnatus – now there was a guy who knew what dignity, integrity and public service were all about.
Whilst it is a wonderful thing, the internet is next to irrelevant. The only real difference between the demos (or even the mob since you mention Cincinnatus) is that they could meet in the town square. Now our state has grown so large that 50 million people would need to be connected, you need the internet. But you are achieving the same thing!
But the point is, if you think everyone should be involved in their own governance, that’s fine. But you don’t, you want a majoritarian system in which the will of that majority trumps any other opinion however sincerely held or badly it affects their lives. If you think everyone should have “self-governance” and freedom, then promote it:
An anarchist is an uncomprimising liberal. • Emile Faguet (1847-1916)
Okay Jock, hopefully I’ll make some dent in your armour with this. To say that the Internet is great, but not relevant is surprising. It’s a technology still in its infancy, but is already the most powerful communication tool ever. It can be used so that millions of people can achieve consensus on issues. The idea that in some way this deprives someone who doesn’t agree with every aspect of a decision seems bizarre. People will never agree with everything ever.
You can’t even get 2 fanatical Man U supporters to agree on who is their greatest player, Cantona, Bestie, Giggs etc. That doesn’t stop them from agreeing that Man U are the greatest football club on the planet. V4Y looks for common ground and doesn’t attempt to achieve the impossible. I’ve merely pointed out that the governments we’ve had and the one we might get aren’t capable of dealing with the social and economic issues that need to be addressed.
Cincinnatus may have been a citizen of a city state that had militant plebians, but he didn’t let that stop him from doing the right thing. It would be great if his example was regularly used as a yardstick to raise current standards in public life. His incredibly decent life may have ended over 2,000 years ago, but you’ve already allowed that the era of an idealist should not be a barrier to its current relevance.
I honestly don’t know which of us is being the more obtuse, David (probably me for even bothering to respond to the resurrection of a long dead thread!). I know all about the internet. I have written countless times about its potential, that it is an epoch changing technology the likes of the printing press and the steam engine.
That is not the point. The point is, whether it is facilitated by a town square meeting or 50 million internet connections, what you are suggesting is not a great deal different from the direct democracy of the Greek city states. And that it remains a tyranny.
The internet is a great liberator. Handled correctly it will break down national borders, render governments impotent and ultimately unnecessary. If I thought it was to be used to create the ultimate form of a populist tyranny I’d get that time machine and go back and try and ensure that Mr & Mrs Berners-Lee senior never met and produced young Timmy.