Monday 18 July 2016

Three signs that we are in the economic endtime

I have been feeling guilty about my part in driving the rail minister Claire Perry out of her job at the Department of Transport. I did so with a series of blogs about the collapse of the Southern rail franchise, read by so many people that it began to terrify me. I even wrote a book about it.

Claire Perry was the person most accountable, but least responsible for the situation with Southern Railways and it seems unfair that she (salary: barely £100,000) sacrifices her job while those most responsible for the situation keep theirs.

Let’s just list who they are: the government’s head of rail franchising Peter Wilkinson (salary: £200,000), GTR chief executive Charles Horton (salary reported as £2m) and Go Ahead group chief executive David Brown (salary: £2.2m). Again, they may not be personally responsible, but Horton and Brown are part of the absentee landlord system of public service commissioning, extracting their salaries from customers and taxpayers, but not doing the repairs, providing the staff or running the trains on time. It may not just be their fault – it is a faulty style of contracting – but they ought to be accountable.

And, like absentee landlords, they let Claire Perry carry the can for defending them.

But this blog isn’t really about Southern except as far as the whole affair has a significance beyond itself.

Because I have been writing for some time that the new age of political and economic thinking is upon us, in time for the regular 40-year shift (1979, 1940, 1909, 1868, 1831 in the UK, and so on). What makes this time different from the others is that there has been remarkably little mainstream debate about what this new age will mean.

If you manage to engage mainstream policy-makers in debate (I don’t mean economists who are much more flexible) they tend to be wedged so much into the old thinking that they can’t extract themselves without more intellectual effort than they are prepared to put in, So how do we know the shift is coming?

My answer is that there is more than a whiff of the 1970s about economic policy now, driven by the feeling that the establishment is clinging to the old truisms beyond the point when they are useful.

Here are three examples. You know we are in the endtime of the old economics...

1.    When the middle classes can’t buy their own homes without government subsidy.

This is true mainly in London and the south east, but it is still true. One of the original purpose of Nigel Lawson and his economic reformers in the 1980s was getting rid of mortgage interest tax relief, and similar subsidies for the middle classes. Now, even with the so-called Bank of Mum and Dad, housing is unaffordable in our capital city unless you work in financial services. The fact that subsidies are back is a sign that the housing market no longer works – something else is going to be required.

2.    When public services can no longer be run without mass immigration.

This is not to criticise immigration, but the fact that the NHS is now quite impossible without major foreign labour inputs – because we can no longer afford to pay or train our own people – is another sign of the economic endtime. This will become horribly apparent unless Theresa May gets off the fence and guarantees the right of EU nationals to stay in this country, because – if she doesn’t – they are liable to get up and go.

3.    When ministers defend indefensibly bad contracted out services, you know the 1970s have returned.

This is why I began by talking about the former rail minister, who was so constrained that – when Southern Rail services unravelled thanks to indefensible incompetence – her only option was to defend GTR and their managers. Again, it reminded me of the 1970s when ministers found themselves defending bad services purely because no other option seemed available.

Taken together, all three are signs that the present assumptions about economic policy are exhausted. The establishment will continue to cling to the old dispensation, but they will increasingly be looking for something, anything, that has some chance of making sure that civilisation continues.

There is no doubt that 2016 will go down in history also as one of those watershed events which will change our economic certainties forever. Perhaps the Wall Street Crash of the new age. But it all takes time to shift.

What the Americans did in response to the first crescendo of the Great Depression was to elect the very wealthy and well-connected Herbert Hoover, who tried tentatively to adapt to the new dispensation, but was unable to think boldly enough.

It took the arrival of what was then known as the ‘new economics’, under a president who understood the right questions to ask, to see a real shift. Franklin Roosevelt also brought in people like Harry Hopkins to run his programmes, who were prepared to cut through the red tape to keep people alive through the winter.

The next new economics will be different. But there will be some parallels, and among them will be that innovative people like Hopkins will rise to the top to make things happen.

You heard it here first. In the meantime, I wanted to say: Sorry, Claire...

See my book Cancelled! on the Southern Railways disaster, now on sale for £1.99 (10p goes to Railway Benefit Fund). One of my correspondents suggests that we all buy the paperback version and leave copies on the trains...

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Unknown said...

Is May a Conservative pro. or anti NHS? With Brexit and a possible economic downturn will migrants want to come here for their will not be the income for them.The NHS could become two tier andprices could go up.

Oh, la la said...

Anytime " endtime " gets mentioned, I get the heebie jeebies. Too Biblical & dramatic for me and I am French.
Plus I am woman so I figure I will get blamed as I don't like clearing big boy's crap. Claire Perry might be relieved to quit her job.
Waiting for a saviour is tiring. Man = saviour. Woman = cleaner.

The sound you hearing is not God's but foreign money whooshing out.

Make the UK plc, less of a tax evasion paradise, where shady people park their money for a while until it reaches Panama while you " manage decline".

Corp Tax at 15% will make matter worse, even if the wealth of the many is tied up to their roof (s).

Boris is doing well.

Blissex said...

zgets off the fence and guarantees the right of EU nationals to stay in this country, because – if she doesn’t – they are liable to get up and go.»

It is a complicated story in which the EU holds the winning cards:

* Most low paid EU immigrants to the UK are employed by tory property and business owners who make a lot of money from them, and would be very angry at the Conservatives if they expelled them. The EU knows this very well.

* Most UK immigrants to the EU are instead pensioners who cost EU countries (Spain and France in particular) a lot of money because they use a lot of "free" health and care services but they paid their contributions in the UK. The UK government has been encouraging pensioners to emigrate to the EU to save a lot of money on NHS and care costs (plus UK pensions abroad are not updated with inflation). If those pensioners had to pay full price for them to continue living in the EU they would be very angry and they are all Conservative voters.

So the EU27 governments know very well that both EU=>UK and UK=>EU migration benefit principally the UK government and tory voters, and this was partially compensated by the net UK payment to the EU.

So the current government's posturing about the rights of EU immigrants is empty.

PS Of course the Brexit dream is to replace expensive polish, romanian, bulgarian immigrants who have civil rights with much cheaper "guest workers" with no civil rights from third world countries: the Brexit model is Dubai. But that would take years, and would live the problem of the tory emigrants to the EU unchanged.

Blissex said...

«housing is unaffordable in our capital»

That's a big misunderstanding. Housing is certainly "affordable": lots of very low paid immigrants can afford to live in London; they just rent and share rooms, 2-4 to a room. That has been the case in London for centuries.

Moreover most people don't care very much about house ownership, which is expensive and makes people less mobile and able to pursue job opportunities.

What people want is not affordable housing: they had affordable housing pre-Thatcher/Blair, and voted against it for decades.

What people want, especially the middle class, is to be able to afford to speculate on an asset class that doubles in price every ten years or faster, and can be purchased with 1-20 or 1-50 leverage, government guaranteed, and where the returns are tax-free and effort-free, and amount to more than 100% per year on cash invested.

What middle class (and not just) people really want is to own huge tax-free effort-free capital gains, not houses, and therefore want subsidies to speculation, not housing; before Thatcher/Blair housing was subsidized and the result was plenty of low rent council houses and low private house prices.

«The fact that subsidies are back is a sign that the housing market no longer works – something else is going to be required.»

The housing market is irrelevant: the subsidies are not to housing, but to mortgages, which are the legal document that gives title to speculation and the resulting capital gains. The various subsidies apply in general to the deposit, that is they increase the government-guaranteed leverage, making capital gains, not housing, more affordable. They actually make housing *less* affordable, by boosting house prices.

Oh, la la said...


Interesting points.

Many in the " Middle Class" treat their house as pension, logical as their roof earns more than their pension. Plus the bank of mum & dad has helped the bubble further by recycling their housing profit into overpriced brick and mortar for their cherubs.

A friend''s father, working class tory, Farage without the charm, tells me he loathes the EU, foreigners, feminists, gays and Obama. 24/06/16 was independence day. He does not believe in being part of a federal state.
Retired, he lives 1/2 year in Spain in an expat compound, and life being funny, his only daughter is gay and living with a black woman.
I have told him I am fine about being kicked out as long as I get the taxes I paid so far, I have the receipts. I was already thinking of moving on anyway before the Referendum. London is crazy and I don't save anything. My friend's mother, who voted Leave as a protest vote, not believing it would win has been funny of late, telling it was nothing personal and nothing will change. She is a lovely woman, but she only read DM, loves Piers Morgan, because he says what he likes without thinking, like it's a good thing.

Brexit will have plenty of unintended consequences. The people who see them coming will win, but wishful thinking is so very Gove.

Blissex said...

«A friend''s father, working class tory, [ ... ] Retired, he lives 1/2 year in Spain in an expat compound,»

Maybe he was long ago working class, but he is now an affluent tory rentier. My income is over twice median and I surely can't afford to keep two houses and leave both empty half of the year, and not working.

«and life being funny, his only daughter is gay and living with a black woman»

That could be very sad if the daughter went that way to declare her opposition to him, or even worse, her adoration by not betraying him with another man. I have seen both kinds of thing happen more than I wish to both genders (mostly men though).

Oh la la said...


My friend's father:

In Spain on a final salary pension and a golden parachute-redundancy, for the sun and the cheap life, he hates the locals for being too excitable lol. What amuses me is that he hangs on to his identity of his working class roots, brought up poor in the East-End of London. He has deliberately not lost the accent or the habit of using the F word as punctuation or exclamation. The East-End was a great place to live ( why did you leave then? Foreigners) and the Krays were the “men” (not psychos?). He was brought up in a council flat – parents and 3 children, that his sister - eventually purchased - and his parents were labour. But for him and his sister now , Labour takes your hard earned money – now that they have some. The irony is that their housing stock made the most money in the Blair / Brown years. Elocution lessons would be a class betrayal, but voting Tory is not. I am at time confused, but dissonance is what makes people interesting. They are the last 30 years success story. Another chapter is starting.

About the gay thing. Oedipal explanation for the preference of your nether regions seems like – last century, no? But mess up your love life, yes.

About his daughter adoration, I don’t think so. Her father seems to hate women. His wife has the vacant look in her eyes of the 24/7 put-upon, as he likes his women malleable to his wishes, like Trump.

Blissex said...

«But for him and his sister now , Labour takes your hard earned money – now that they have some. The irony is that their housing stock made the most money in the Blair / Brown years. Elocution lessons would be a class betrayal, but voting Tory is not.»

That's almost a clichè! Here is Tony Blair with another example:
«I was canvassing in the Midlands on an ordinary suburban estate. I met a man polishing his Ford Sierra, self-employed electrician, Dad always voted Labour. He used to vote Labour, he said, but he bought his own home, he had set up his own business, he was doing quite nicely, so he said I’ve become a Tory. He was not rich but he was doing better than he did, and as far as he was concerned, being better off meant being Tory too.»
«In that moment the basis of our failure - the reason why a whole generation has grown up under the Tories - became plain to me.
You see, people judge us on their instincts about what they believe our instincts to be.
And that man polishing his car was clear: his instincts were to get on in life, and he thought our instincts were to stop him.»

Please read the whole speech and this article by Tony Blair in 1987:

as whether one agrees or not with his later misbehaviour, they are very illuminating as to english politics of the past 30 years.

Oh, la la said...


Thanks for the reading material , sorry for the delay in responding, I have been away.

My dad escaped a difficult family and a small-minded rural village via the Navy at 18. Recalled there to take care of the family business, he had to work in the city to pay the debts incurred by his mother, setting his French-cultural misogyny in concrete. Travelling the world and working crappy jobs opened a social conscience. He ended up in a management in German owned factory and as a member of the middle class with money in the bank. Voting French - Tory would have been impossible.

Yet for him, the definition of working class was having to work for a living, no matter the colour of your skin or your culture. There are a lot of us.
You may tell yourself that you are middle-class and feel morally superior to the group you have supposedly escaped from, yet the group above yours, with capital, connections, privilege and power is small and knows how to look after itself by excluding all others. Being able to buy more stuff, should not distract you from that truth. He believed in life-long education and continuous job training. Having inherited his “movimiento es vida“ gene, and too lazy to keep up with the Jones, I tend to agree.

Reading Blair diary’s entry was interesting. Blair is an sad figure these days, with too much suntan and the fear in his eyes that, one day, La Hague might be his home. Labour is in a mess.

I find that the extremes – left or right are as messed up and the messages can be flipped. In France, the FN sounds now almost Marxist, telling people it will take care of them by taking them back into the past. France is very hierarchical with a top-down way of governing that is crazy. If the factory jobs come back, they will require more education, cognitive abilities, creative thinking and imagination because IA and automation will demand it. Is education preparing you for that?

He would have made an interesting leader but Mitterand was too cunning.