While flicking through the Sunday papers yesterday, this headline caught my eye:
Cameron has the makings of a truly great prime minister
and I wondered how anyone could be seriously making such a claim at this time.
The author of the think-piece was Peter Oborne, sometime editor of the Spectator and now a columnist on the Daily Mail, so there could be little doubt about where the author was coming from politically. But in the preamble to his contention, there was an interesting canter through post-war political history.
There have only been two great prime ministers since the Second World War: Attlee and Thatcher. Attlee achieved greatness because in barely five years he established the basis of postwar Britain: the National Health Service, a universal welfare state and a managed economy – all funded by massive personal and corporate taxation.
Attlee’s vision was so powerful that for three decades all prime ministers, whether Conservative or Labour, accepted his fundamental insights about social and financial management. By the mid-1970s, however, it had failed. Not until 1979, and the emergence of Margaret Thatcher, did Britain discover a leader capable of challenging the vicious cycle of decline.
Like Clem Attlee, Thatcher redefined the British state. By cutting taxes, taming the trade unions, and encouraging the market, she unleashed tremendous productive forces. Like Clem Attlee, her vision was so powerful that all prime ministers since have found it hard to escape from her shadow. But the Thatcher settlement could not last forever: by the time Gordon Brown was evicted from office exactly one year ago, the British state was facing a crisis of comparable’ magnitude to the 1970s.
I couldn’t find much to quarrel with there, except that one very important word seemed to be missing: nationalisation.
This was an essential ingredient of the ‘managed economy’ that Atlee created, and Oborne refers to, which some might recognise as a step towards a planned economy on the soviet model. Henceforth, ‘the people’ were to own at least some of the means of production: the energy industry and other essential public services. And there was a an inevitable spin off from this which also had far reaching consequences. A significant part of the working population became state employees overnight, and the trades unions, whose activities until the war had been confined to moderating the rapacity of private employers, could now claim a seat at the top table, with not only a brief to protect their members interests, but also the power to influence, and even dictate, government policy. At the same time they had control of productivity, or lack of it, over a vast swathe of the UK’s industrial base.
Atlee’s achievement in setting up the National Health Service and the welfare state are undeniable but, with the wisdom of hindsight, it is also clear that the policy of state interference with market economics that he initiated was a disaster. Until Margaret Thatcher dismantled the nationalised industries three decades later, and ‘tamed the trade unions’ in the process, the UK economy was hobbled by the high prices and high taxation required to keep hopelessly inefficient and uncompetitive nationalised industries afloat.
So what has all this to do with David Cameron joining Atlee and Thatcher in the tiny pantheon of ‘truly great’ post-war prime ministers? According to Oborne, it is possible that our present prime minister’s willingness to meet the challenge of mending an economy wrecked by thirteen years of mismanagement by Gordon Brown head on, allow Ian Duncan Smith to rebuild Beveridge’s outdated model for the welfare state, and encourage Michael Gove to insist on high standards in state education, Cameron may be able to implement an economic, social, and political framework that will last for a generation. If he succeeds on all these fronts, then Cameron will indeed deserve to be ranked with Atlee and Thatcher.
This blog is not the place to discuss welfare reform or the failings of state education, with the very obvious exception of JunkkMale’s fascinating thread here. However for the last year and more I have been drawing attention to the parallels between the problems posed by the old nationalised industries and the Conservatives aspiration to launch a green industrial revolution using the slogan, ‘the greenest government ever’. There is ample and growing evidence that these policies may be as misguided – and could be as long lived – as the UK’s post-war excursion into nationalisation and a managed economy.
Of course if one considers nationalisation in the context of how the world looked in the late 1940’s, it is easy enough to see why such a policy seemed attractive and feasible. In the aftermath of the great depression, the hungry thirties, and the vastly increased control that government had on people’s everyday lives during six years of war, the idea of sate ownership of energy production, transport and much more must have seemed pretty sensible. Also, at the end of the war, it was still possible to foster the illusion that in the Soviet Union a planned economy was promoting an economic miracle, whatever the human cost might be. But the fact that something looked like a good idea at the time doesn’t mean that it really was a good idea.
We are living through a period when the illusion that there is convincing – even conclusive – evidence that fossil fuel use has already altered the climate is in vogue, for politicians, broadcasters and other media types, for industrialists of course, who see no harm, and ignore the danger, of cashing in on government subsidies. It is no more difficult for Cameron to persuade people that the nation needs a green industrial revolution than it was for Atlee to win support for nationalisation. The question is whether the consequences will be as long-lasting and devastating.
It would seem that the operation of the UK energy industry in future, as conceived by the coalition, will be controlled not by market forces – supply and demand – but by government regulation, just like the old nationalised industries. In an attempt to compensate for the handicap of making the means of energy production totally uneconomic, the government will provided vast subsidies – and also rig the market by regulation, and even legislation – in order to attract investment. Which brings us to taxation.
By the late 1970s, it was the tax burden, massive level of national debt, and the cost of underwriting the inevitable losses of hopelessly inefficient nationalised industries that made the Thatcher phenomenon possible, and very, very necessary. Yet the crippling effect of successive government’s attempts to run major parts of the economy had been recognised for many years before. There is a terrible irony in our present government contemplating a policy that could probably be safely described as the most inflationary since the war while it is also facing the worst dept crisis since the war . Energy costs will inevitably rocket, and the increased subsidies that will be needed to minimise the effect will do nothing to reduce borrowing and help build a viable economy once again.
In the post-war era, the enormous tax bill for keeping the nationalised industries afloat could be passed off by governments, to some extent at least, as part of the cost of maintaining the welfare state in the aftermath of Atlee’s relatively short lived administration. Now Cameron seems content to embark on policies that will require increased taxation or borrowing in order to find the the subsidies that will entice investors into the strange, strange, world of ‘renewables’, where demand is created by political subterfuge, and profit is acquired, rather than earned, either by tapping into government subsidy, or by greatly inflating market prices with the connivance of government.
And although the trades unions may not be at the top table calling the shots these days, there can be little doubt that that the green eNGOs are rapidly replacing them, and that their single-issue campaigning is capable of being every bit as corrosive of good governance as that of the unions. What political party would have the nerve to fight a general election with Friends of the Earth, Greenpeace, WWF and a dozen other immensely wealthy operators on the political scene using their vast resources to persuade the public to vote for another party of their choosing.
Peter Oborne has chosen as his two ‘truly great prime ministers’ both the author of the ‘managed economy’ and the author of its destruction. It will be interesting to see if Cameron’s ‘green industrial revolution’ and proposals for the decarbonisation of the UK economy will continue to enjoy public acquiescence, and if he manages to turn his vision into reality, it take a generation before a new ‘truly great prime minister’ comes along to put the economy back together again.
PeterM
“””PeterG,
You’re just as bad as TonyN. Maybe it is my scientific background but it always strikes me that comments along the lines of:
” In the UK once the production of energy had been sold off and a degree of completion introduced amongst the producers we had continuously falling energy prices. The last administration destroyed this,”
Should really be backed up external references. Facts, figures and graphs etc.”””
I feel privileged to be compared to TonyN
As some who has been on the receiving end of energy bills over the period of my quote above I don’t feel the need to dig out all the figures. I could add though if this would help the words “in real terms”
PeterM #21
Which United Kingdom did you visit? Did you meet any real people? you know those working in the private sector. Everyone is now talking about the economy and how bad it is. you want figures then watch this. And Peter actually watch it through and digest the 4.8 trillion of our debt.
http://www.channel4.com/programmes/britains-trillion-pound-horror-story/4od#3153186
Matt Ridley (The Rational Optimist) also has a devastating incitement of current UK energy policy, and a call to arms, here:
Quintuple Whammy
It’s a must read by any standard.
Peter Geany,
That’s just a TV program produced by Martin Durkin – of all people.
What is it with you climate denier types? You’re the first to raise the “Chicken Licken- Sky is going to fall in ” argument when there is clear scientific evidence that GH gases are causing climate problems, and are about to cause even greater ones, but that’s exactly what you do yourselves when faced with a minor to medium financial problem.
Yes I know that in the UK the so called debt crisis is a common talking point . However I was just amazed at the level of ignorance on the topic. They didn’t know what it was either in $ terms or as a % of GDP. Most people had no idea that countries like Germany and France had bigger debts. They had no idea that Japan;s debt ratio was about three times the UK’s. They had no idea that it was much higher in the UK in the thirties or the 19th century for example. They had no idea that some of the world’s poorest countries had no debts at all!
They had no idea who the government actually owed the money to or when or if it had ever to be repaid or at what terms.
I did make a point of asking these questions whenever I was lectured on just how bad things were in the UK! And I did always have to supply the answers too. I was just left wondering how such strong opinions had been formed on the basis of so little factual information.
Do you think it was just something they might have read in the Daily Mail?
PeterM
Do you EVER read any of the links people give you?
You are persistenly using a measure of debt which is no longer considered relevant by the Treasury and fail to understand the nature of the annual ‘current account’ debt or the way this is impacting on the rapid increase in overall debt which will double in the next few years.
You fail to realise there are a variety of different types of debt ranging from govt-who have hid pfi and public penions liabilties, personal debt coupled with lack of savings, corporate debt and banking debt. These were all outlined in the links that a variety of people have posted, but you persist in using an outdated and irrelevant chart and trying to compare on a non like for like basis with other countries who calculate things in different ways.
Please do people the courtesy of READING what they post.
Tonyb
TonyB,
so I’ve failed ” to understand the nature of the annual ‘current account’ debt”? Have I ?
Well just to show that you know what you are talking about, why don’t you explain exactly what it is, why its too high, and how it relates to National debt, current account deficit, and other terms that have been bandied about by others on this blog like “war debt” and the like.
Pardon me for thinking this, but I do have the suspicion they don’t have the foggiest idea of what these terms mean either, so you might be contributing to their education too!
PeterM
In your reply at 3.36 yu have just demionstrated that you don’t know what you are talking about and are trying to get others ti explain. You have taken a political position into your head and have tried to fit the facts around what you want to believe. My various links explained the terms and the size of these debts in great detail. Pete Geany and TonyN have also posted links that explain the size and scale.The narrow definition you use of debt is not one used by the treasury these days as it doesn’t cover all the types that have been invented.
Is it manageable? I tend to be an optimist so yes it is provided action is taken to prevrent the debt spiralling out of control. A doubling of debt by 2014 is worrying as the interest we are paying amounts to what we spend on many essential services.
I never used the term ‘war debt’ so I suggest you ask those that did for the background.
tonyb
tonyb #32 I agree with you there 100%
But I have one caveat. Our debt is manageable, but we will only be successful in reducing it if there is honesty in Politics and we dispense with all the frivolous spending that is occurring that is diverting essential money away from front-line services to people that don’t need it. The renewable obligation would be the worst of these but by no means an exception. Currently the government is fight battles it does not need to fight, and ignoring the obvious.
PeterM
Words fail me at times when it comes to your replies. For someone who purports to be a scientist, you must live a very isolate life.
PeterM
You might find this from the Institute of Economic affairs interesting
http://www.iea.org.uk/blog/the-true-scale-of-uk-government-debt
The true scale of the debt varies according to who is doing the calculating, their political stance and what they include. By any criteria it is much larger than many headline figures suggest, although we can all argue as to what should or shouldn’t be included.
The scale is much greater than you infer and the Govt at present is only tackling the rate of increase in our annual spending (the Mr Micawber principle) and havent got to grips with the core debt which inceases the longer the annual deficit remains.
tonyb .
TonyB,
The only link you’ve posted up is about private debt. I think TonyN’s concern is actually about public debt. You may think that private individuals shouldn’t have taken it upon themselves to take on high levels of debt but isn’t that between them and their lenders? Should governments intervene and tell them that they can’t do it? I don’t think I would agree with government interference on that scale.
The current account deficit , or it could possibly be a surplus, you mention is actually the terms of trade. The difference between imports and exports. Again, governments could interfere and impose tarriffs (except that its probaly against GATT rules) to prevent, or discourage, the purchase of imported goods, but should they? I would say no even if they could.. Effectively governments have a limited ability to control that.
I’m not the only one to make the argument that the UK shouldn’t get too fixated on levels of debt. Johann Hari makes the point that “As a proportion of GDP, Britain’s national debt has been higher than it is now for 200 of the past 250 years.”
http://johannhari.com/2011/03/29/the-biggest-lie-in-british-politics
If you want an easy to understand primer on basic economics, covering the concepts that you need to understand a little better, I would recommend:
http://www.economicshelp.org
I wouldn’t say they totally agree with either Johann Hari or myself but they do make much more sense than the garbage right wing UK press on economic issues.
PeterM
Amply proving my point yet again that you don’t read links you say
“The only link you’ve posted up is about private debt.”
This is simply not so is it? I would point you to the extensive information posted in a variety of links;
“TonyB Says:
May 19th, 2011 at 11:12 pm
PeterM
I don’t think you quite got to grips with the UK debt-just like heinz there seem to be 99 varieties
http://www.debtbombshell.com/
———–
I also posted this;
“34
tonyb Says:
May 21st, 2011 at 10:17 am
PeterM
You might find this from the Institute of Economic affairs interesting
http://www.iea.org.uk/blog/the-true-scale-of-uk-government-debt
——– ——
With specific reference to piublic debt I pointed out that the graph you used is not considered relevant these days by the UK treasury itself.
“This graph (your one) shows the history of public debt as a percentage of GDP using the traditional National Loans Fund measure. This statistic was discontinued by the Treasury in 2004 as it no longer accurately reflected the true liabilities of the modern state.”
We have explored all of the myriad types of debts that there are and put in context that the graphs you used are not considered relevant these days. Please read links before you comment further as you are way out on a limb here with the stiuff you are spouting, which does not reflect the real situation.
tonyb
Well Peter, I actually bother to read your links. Krugman (who you cite via the article) is a nobel winning economist and Gore a nobel winning ‘scientist.’ Shows how much the term has been devalued and how politics has taken over reality.
Heres why you like that extraordinary and unsophisticated piece of Johann Hari you linked to. It quotes Krugman who commented thus;
“The collapse of the American banking system allowed Krugman to say that advocates of laissez-faire capitalism had got it wrong. “We’re all socialists now,” he said, calling for the government to “seize the commanding heights of the economy”
There you have it-you are a political animal who just won’t look at other peoples evidence. Re-read the links we have collectively posted-do you think we actually want to live in a cash strapped world and suffer cuts? I’d much rather everything continue merrily on its way with unlimited Govt funds for whatever takes my fancy. Sometimes we have to grow up though and realise that we don’t have a fairy god mother.
This is your chance to be a true sceptic and actually find out for yourself the scope and scale of the UK debt position in all its many and varied forms. These figurrs aren’t invented you know, but if you insist on thinking thsat everything can be packaged up as a ‘national debt’ which historically doesn’t look too bad you are as deluded as Hari and Krugman. Perhaps it is time you re read the words of Mr Micawber who seems to have a much better understanding of economics than you and your friends who seem to believe that money grows on trees..
tonyb.
Peter
I note with no surprise at all that you cited the economicshelp.org web site with approval. Was it because it cross referenced the silly piece by Johann Hari?
Here is a proper grown up version of what constitutes debt. I repeat once again that the term ‘National debt’ is considered by the UK treasury themselves as being far to narrow a definition and they dropped it over 6 years ago.
http://www.hm-treasury.gov.uk/d/55(1).pdf
By continually referring to this term you are merely spouting the mistakes of others and are not comparing like for like. Please look at the broader pictrure which includes a myriad of different types of debt.
tonyb
TonyB,
When I ask you to post up links I do mean links which do show factual information.
Yes, sure, you can find lots of misinformed op-ed pieces in newspapers, and websites set up by concerned citizens who set up “ticking debt timebomb” type websites and who obviously don’t have a clue on the way capitalism actually works! And so I’m not counting these at all.
PeterM What are you smoking? The article you suggesting I read had no figures in it at all and was nothing more than the same drivel we continually get from our Ex Government. Your credibility on this is zero.
Are you suggesting that Institute of Economic affairs or HM Treasury are not producing numbers.
TonyB,
Its interesting that you think a link to the a right wing think the IEA actually constitutes some sort of academic reference.
Look, if you want to understand how capitalism works to need to have a good grounding in general economic theory. Dickens and Mr Micawber may have been fine for kitchen sink economics in the 19th century but modern economies don’t work that way. But you are not alone – the misconception is widely shared.
The way the Great Depression was only ended by the massive spending required to conduct WW2 finally drove home this message to just about everyone 70 years ago.
PS Just thought I’d look up what the IEA say about climate change!
http://www.iea.org.uk/publications/research/climate-change-policy-challenging-the-activists
Surprise , Surprise !
PeterM Your 10.22
As well as smoking something-as Peter Geany suggests- are you also drinking something at the same time?
Within the ticking time bomb link there are some 30 pages of figures including this from HM treasury
http://www.hm-treasury.gov.uk/d/psf.pdf
Just try to put aside politics for one minute and look at the basic facts. These are clearly spelt out in a variety of papers that you just don’t seem to want to read. I repeat once again that taking notice of a national debt graph that is an outmoded tool and talking down to other people doesn’t disguise the obvious fact that you have no idea whatsoever what you are taklking about.
Thats hardly surprising as you don’t live here and only seem to want to take your information from politically motivated sources. I wouldn’t get into a discussion about Australian finances as I know nothing about it and you have merely demonstrated that perhaps you ought to take the hint and not comment on things you know nothing about.
If you want to comment on something, TonyN’s last para is interesting
“It will be interesting to see if Cameron’s ‘green industrial revolution’ and proposals for the decarbonisation of the UK economy will continue to enjoy public acquiescence, and if he manages to turn his vision into reality, it take a generation before a new ‘truly great prime minister’ comes along to put the economy back together again.”
This is especially relevant as Tata has annnounced to day the closure of one of its steel mills in the UK citing as a major reasons the carbon tax and uncertainty as to how much higher it will go.
We stand to lose a lot of businesses to this madness whilst spending over £30 billion a year we haven’t got to wreck our future power supplies whilst striving for a temperature reduction of two thousands of a degree.
Does that course of action make any sense to you because it doesn’t to me.
Tonyb
Peter Geany,
You say the article I suggested doesn’t contain any figures?
You must have missed these two:
“As a proportion of GDP, Britain’s national debt has been higher than it is now for 200 of the past 250 years.”
Are you disputing the factual accuracy of this statement?
TonyB,
Australian economics and polititics are pretty boring by comparison. There is full employment but on the back of a mining boom. Manufacturing industry is having a hard time.
I’m concentrating on the UK for the two reasons that this blog is mainly about the UK scene, and secondly I’ve just been there and just about every social conversation I had ended up with me having to listen to tedious tales of how the UK has never been so much in debt, how the last Labour government squandered what Maggie had built up, how they need a new Maggie to cut taxes etc etc. I’m not averse to an intelligent conversation with someone who may have right wing views but, as I said previously, the level of factual knowledge was pretty close to zero. Instead there was a heavy reliance on a so called “conventional wisdom”. Everyone know that this must be true etc etc
Of course when you look at the realities, it not hard to find out that this so called conventional wisdom is just myth built upon myth. There is little, if any, justification for any of it. So, as a form of defence I used to ask a series of awkward questions which hardly anyone got right!
I felt a bit like a guy going into a isolated community which had been so brainwashed that the truth did seem so amazing that it was just too much for anyone to take in. Yes, they must have thought I was smoking weed, drinking spirits, and shooting up all at the same time – just as you do now!
But the truth is there if you care to look. Its not hard to find.
PeterM as tonyb suggests you don’t live here and have no idea what so ever about what is going on. Nor do you understand how economies have been run in the past or who is responsible for the mess that our economies are in.
Listen to this lecture by John Allison. Each and every one of the 80 odd minutes of this lecture contains more information than the collective knowledge you have been able to demonstrate here on this subject.
http://www.aynrand.org/site/PageServer?pagename=reg_ls_financial_crisis
And just as an aside Peter during the 30’s the UK applied proper thought to its economy, it didn’t over spend to bring itself out of the depression but rather created the conditions that allowed the market to do the work. Roosevelt in the US spent millions on government projects just as Obama is now and it didn’t work. The UK was far more successful at invigorating its economy despite popular misconceptions that Roosevelt’s New Deal was a roaring success.
PeterG,
Again this is just an op-ed piece from a Right wing think tank. (if that is the right word for them)
You’re supposed to be sceptics and when a combination of the the scientific community and governments everywhere tell you that there is a problem with CO2 emissions you don’t believe them.
And yet when just one government , your own, and against the advice of the Nobel winning economists who tell you that it is counterproductive to try to balance the books during a recession, and its necessary to close the country’s libraries etc etc you swallow it all hook line and sinker !
Incidentally, levels of debt were much greater in the 30’s in the Uk than they are now.
PeterM
We have directly cited the UK Treasury document which says that the method of calculating debt- exemplified in your national debt graph- is no longer relevant as it doesn’t begin to cover all the types of modern debt.
We have pointed out that this change was made six years ago under a Labour Govt.
We have posted the actual Treasury figures which breaks the types of debt down which support the other links we have given you..
We have pointed out that your award wiinning economist believes in the wholseale nationalisation of the economy and therefore takes a highly political stance-as if the black art of economics has any credibility left after failing to predict the downturn that many ordinary people saw coming several years ago.
Despite that you want to accept the very figures the Treasury say are no longer relevant and continue to cite them to try to prove your threadbare case .
You are right Peter, the truth is out there for those that seek it- which is that the mists of politics has once again so clouded your vision that you are unable to see what is right in front of your eyes.
Tonyb
PeterM #47 John Allison presided over a bank (financial institution) that didn’t do what many others did and didn’t go bust or be swallowed up by a super bank or lose its investors or customers a shed load of money. If for no other reason he makes for compelling listening, its hard to say he was wrong.
He explains how some banks operated as direct agents of the government and its policies, how others were forced to follow or lose their traditional market, how others who tried to resists were swallowed up. If for no other reason than to improve your understanding of “WHAT HAPPENED” as opposed to your thinking what should happen you should listen and learn.
He talks about Capital ratios, and how this has caught up on Europe, who up until recently try to foist all the blame on the US. He explains the process of printing money. I could go on and on. He was directly accountable for his actions and if he had been wrong faced sanctions. Unlike for argument sake a UEA scientist who only has to face a few sceptics when they are wrong, or our current crop of politicians who seem to invent ever greater excuses for their failures.
We should have let the banks go bust, taken the hit, and we would all be back on the road to recovery. But no it will be dragged out and eventually made worse.
TonyB,
You claim “We have directly cited the UK Treasury document which says that the method of calculating debt- exemplified in your national debt graph- is no longer relevant as it doesn’t begin to cover all the types of modern debt.”
I’ve done word searches of key phrases and nothing shows up.
Have I got the right link here? http://www.hm-treasury.gov.uk/d/psf.pdf
Or are you just making it up?
Incidentally this document only shows what has happened in the last decade. You need to go back to compare this recession with previous ones to get a better picture.