Friday 20 December 2013

The big question nobody is asking

I always read Anthony Hilton's finance column in the Evening Standard, and I always learn something from it.  He doesn't regard the duty of a financial columnist, as some do, to cheerlead for the financial sector.

So I was especially pleased to see his column earlier this week, writing about the Institute of Fiscal Studies (IFS) and their report suggesting that people born in the 1960s and 1970s would be less well off than those born in the 1940s and 1950s.

I was born on the glorious cusp: 1958, which makes me sitting marginally pretty - though not as pretty as my friends who went into financial services or IT or who took out risky mortgages.

But the reason I read the column with some relief was that he was asking the right question, and pretty much the same question that I put in my book Broke: Who Killed the Middle Classes? earlier this year:

"What no one has done is question how this can have come about. The older half of this disadvantaged cohort born in the 1960s would have entered the workforce in the Thatcher years of the 1980s. This was the time when the North Sea turned the UK into the world’s fourth-largest oil producer. It was also the time when Thatcher was allegedly transforming the British economy from being the sick man of Europe to being the envy of its rivals... So where did all the money go? If Thatcher really did change the British economy for the better, how come the generation that spent most time working in it is worse off than the generation earlier, which had to make its way in the 1960s and 1970s? That was when taxation was much higher with the top rate of income tax at 83p in the pound, the debt-to-gross domestic product ratio was much higher, inflation ran at up to 26 per cent, and the nation was saddled with all those lame-duck industries which, according to the Thatcher mantra, could no longer pay their way in the world..."

That is such an important question, in fact, that you can see why it isn't being asked in establishment circles - because it would require such serious self-examination that it might be painful.

Asking us to question the Thatcher-to-Brown legacy certainly doesn't mean anyone wants to embrace the 1970s again (though we do seem to be doing so in some ways).  But it does mean that we have to look fearlessly at the legacy of the so-called trickle down effect, because - although so much of our national policy is still based on this idea - it has manifestly failed to trickle.

Broke is coming out in a new, cheaper edition in mid-January, with a new subtitle (How to Survive the Middle Class Crisis), a new chapter and a new cover.  It gives me the chance again to ask that same question in as many ways as I can think of - and to do so, I hope, in such a way that I don't get pigeon-holed as a socialist nostalgic for the Spirit of '45 (I am absolutely, definitely not).

The truth is that this is the very beginning of a shift in public policy that will be painful and exhausting, but is nonetheless overdue - a re-setting of the controls that happens every three or four decades or so (1940 and 1979 were the last ones).

The reason it will happen is that it is becoming increasingly clear that the existing system is not delivering - except under the self-referential measures of success that we cling to so blindly.  

This isn't about the success or failure of austerity.  It isn't about growth figures or leaping free of the recession, or the jobs figures - all of which are pointing in the right  direction.  It is the basic underlying theory behind it.  It isn't working.


neil craig said...

Technology is increasing human potential faster than at any time in history. That means we should be getting richer faster than at any time in history. The reason we are not is entirely due to the regulatory parasitism of our political classes.

Thank you, in advance, for not censoring this post as almost all "Liberal" democrat bloggers normally do.

David Boyle said...

Wouldn't dream of censoring you. I agree there are aspects of regulation which are making us poor, but my candidate for the culprit is monopoly and the tendency towards it. Especially protectionism dressed up as competition.