04 October 2011

€-zone - the end of the beginning...

Well it's now around 18 months since the Eurozone crisis first erupted with the initial Greek bailout, and the can has been kicked down the road so many times that I've lost count. Ireland, Portugal, Spain and Italy have all been dragged into the widening vortex, the politicians and central bankers wrangle interminably, and now the private banking sector begins to unravel with the news that the Belgian/French bank Dexia needs recapitalisation.

It is difficult to avoid the feeling that this whole slow-motion car crash is coming to a close. In the words of the late William Burroughs, we may now be reaching "a frozen moment when everyone sees what is on the end of every fork."

It is hard to predict exactly when total economic collapse will occur. There were 14 months between the freezing of the interbank credit market in July 2007 (the first hard evidence that something was dreadfully, terribly wrong in the financial system) and the collapse of Lehmans in September 2008. The European sovereign debt crisis has been going on for longer than that now.

Things are a little scary. In the initial wave of the collapse the initiative was taken by Gordon Brown and Alastair Darling. Although Mr Brown's reputation has suffered a bit under a wave of Tory propaganda, and he failed in any way to capitalise or build on the momentum from the initial banking bailout, that you are reading this at all, rather than scrabbling for food in a looted shopping centre in a real life version of Mad Max, is probably down to him, and if there were any justice, he would be remembered as perhaps the greatest prime minister of the last fifty years, despite all his (many and deep) failings.

Do not expect any salvation from the UK this time round - the morons have taken over the pitch. Messrs Cameron, Osborne and Clegg have not an iota of economic capacity between them. More worryingly, there appear to be no other world leaders with much of a clue either.

It is impossible to predict where we will end up if the global economic system does collapse (and I still sincerely hope a way through can be found) - my only advice is as follows:

  1. stockpile tinned food.
  2. get down the allotment.
  3. If you join a militia group make sure it is the left wingers, not the EDL, and use violence only as a last-ditch self-defence measure.
  4. It will not be wise to identify yourself as a Liberal Democrat even after the political system has collapsed. Folks have long memories
  5. 12-string guitar may have added poser value for buskers.
That is all for today. Good luck.

6 comments:

Van Patten said...

I assume by feelings you mean 'failings' , and the depiction of Brown is so romanticised as to be vaguely ludicrous - history will record him as the man who left the UK in the condition it is now. I think if anything, it will almopst be kinder to Blair because I don't think he even pretended to have any economic clue. Brown and his aide Balls have left us up the proverbial creek with paddles nowhere to be found. The only thing that can be said in his defence is he kept us out of the Euro - for that, I think he does deserve recognition. On any other measure, I've raided the history books back to the Norman conquest and can find noone worse.

Hal Berstram said...

You're quite right on 'failings' - corrected now. Don't get me wrong - I'm not blind to Brown's faults in any way. He was far too ready to accept the neoliberal bullshit that passed for economic policy advice in the 1994-2008 period. Most of us were. He was also indecisive and a bully.

And yet... it's hard to say exactly how him and Balls left us "up the creek". Record investment in public services not to your taste then? It would be great to pay the debt caused by the bankers off, to be sure... that would be a relatively easy task if the Tories hadn't decided to wreck the economy instead!

I'd be interested to hear you name a better PM than Brown... really since Attlee. OK, maybe Wilson was better - that's debatable. Of the Tories, probably about the best was Heath, and even he wasn't that great. A decent guy trying his best in bad circumstances - a bit like Brown in that regard, you could say.

Van Patten said...

You've fallen into the classic trap of equating Spending more with doing better - something noone who has ever managed a budget in the Private Sector would do (Did the IFS/IPPR see all spending on everything as 'investment'? What needs analysis is what the money was spent on, and whilst it is incontrovertible that there was a massive increase in Public expenditure, much was frittered away on bureaucracy in almost every area. The level of tax complexity is revealed by the fact that the Tolleys guide is now three times the size it was in 1997! Massive evidence of the level of waste in areas like the Fire Service, NHS IT procurement and suchlike is released almost weekly. Your implication that the debt is all the fault of the banks ranks as one of the most ludicrous statements in history, even by the standards of this blog.

Barely an issue of the Mail or Telegraph go past without some fresh outrage coming to light. and lest we dismiss such stories as 'right wing scaremongering', the 'Rotten Boroughs' section of Private eye makes a very smiliar point most fortnights!

In terms of Browns rating as a PM, putting aside hyperbole, I'd struggle to think of a weaker PM post War - possibly Major? Certainly, Attlee (as you point out), Mcmillan, Wilson and Thatcher were miles ahead on any measure. I'd definitely also tend towards Churchill, Callaghan and even the Grocer as well.(Please, no rubbish about Thatcher's legacy, I think that's been debated ad nauseam here and elsewhere!)

Hal Berstram said...

The Labour government, in 1997, inherited public services that were falling apart due to 20 years of chronic underinvestment. They then compounded the problem by sticking to Tory spending plans for the first two years of Blair.

However, by 2010 they had secured record levels of NHS satisfaction and also record achievement levels in schools. And this even despite such lunacies as PFI. I'll agree with you that IT procurement was a disaster, and I think if New Labour hadn't been obsessed with private finance and contracting out, the money would have been better spent. Nonetheless, it was an astonishing record of achievement which the ConDems are now doing their best to destroy.

Tax complexity is largely caused by complex avoidance schemes from the same kinds of people that bought you CDOs and the banking crisis. If people weren't trying so hard to break the law and evade tax then the code would be about a tenth the size it is. The right's solution to this is to load the tax burden onto those who can't afford to evade it (witness the 20% VAT hike by George Osborne) while creating more loopholes at the top (e.g. 5.75% corporation tax rate for offshore subsidiaries of UK companies). Some "solution".

On Brown... it's simply laughable that you can claim that our worst ever PM, Margaret Thatcher, is one of the greats. This is someone who divided and destroyed society and destroyed huge swathes of British industry, while trying (and to a certain extent succeeding) to turn Britain into a clone of America. Following a truly reactionary agenda. Truly dreadful stuff... worse even than Major and Blair.

MacMillan I don't know much about to be honest so feel unqualified to make a judgement. Likewise Douglas-Hume (who was only in the post for a year anyway). Callaghan: a decent guy in many ways but achieved little, to be honest.

Looking at the figures it's hard to see how the banks didn't cause the crisis. We had a small structural deficit of about 2% before the crash of 2008; after the crash it was about 8%. QED. The banks have used their allies in the media to paint this as a crisis of public spending whereas in fact public spending has been the only thing that's kept us afloat. The fact is that the current economic model simply doesn't work anymore and we're fools if we believe it does. But of course the ConDems want to take us back to more of the same.

Van Patten said...

You've failed to answer the point, not unusually - the Public Services had been brought to the point of ruin by the TUC and its various fellow travellers due to ruinous levels of stagflation in the 1970's. Whilst there is an element of management culpability, we saw actual tax rates of 83% and with imposts on Share dividends and Supertaxes , actually Tax at the highest rate was near total (98%) It was an unmitigated disaster, and left the country on the verge of massive social disorder and significant disruption.

In terms of services being 'run down' over the next 18 years - i'm not sure what you mean, but can only posit nationalised industries (privatised) and Health, Education, Defence and Transport. In terms of Health expenditure, it increased in real terms almost every year between 1979 and 1997 - as you rightly posit, Health cost inflation is higher than General Price inflation, so funding did start to dry up. The problem with that argument is that, even assuming Miliband gets in, your policy seems to be to keep superinflationary increases going until what - the NHS bankrupts the entire country.

In terms of NHS expenditure under Brown (and this was a problem under Major and even Thatcher as well) you completely ignore (or choose to ignore) the massive increase in bureaucracy that successive reorganisations have introduced.(and the Condems plan another!!) Furthermore, as I have repeatedly told you, in the London borough of which I wasformerly a resident, there were a potential population of 2 billion(combined population of India, Sri Lanka, Pakistan and Bangladesh) drawing care - in effect an international Health service. Similar stories abound in Burnley, Bradford, Blackburn and Birmingham. If I was paying absolutely nothing into the system and getting free health care, odds are I'd be pretty satisfied. Lest we be unfair, I'd expect my family who were resident or in many cases born here to be pretty pleased too..

Regarding education - I think you don't have to be a curmudgeon to find stories of 'dumbing down' completely credible. To say that because 'results have increased' children are getting cleverer is a sleight of hand that is, and will continue to cause us real problems when competing in a global economy, and before you say it, the Conservatives are absolutely complicit in this fraud as well.

In terms of 'tax avoidance' - you seem to be making the classic 'Ritchie' (a reference to eminence grise Richard Murphy)mistake of equating avoidance (legal) with evasion (illegal)I've already said the VAT raise was an error - the solution is to lower tax rates across the board, as Danny Alexander is trying to do, to howls of protest from the Left who want to 'lock' people into the tangled web of state entitlements for primarily political reasons.

The stuff on Thatcher is so tired, I get fatigued just reading it. The echoes of such luminaries as Hatton, Livingstone and Scargill are ringing around the room. Your repetition of such tired cliches would suggest that you, like them, were working for someone with a vested interest in subverting the country. I pray that isn't true.

Hal Berstram said...

I would say my take on Thatcher is reasonably uncontroversial with anyone not on the hard right.

How is Danny Alexander "lowering tax rates across the board" when the ConDem plans include tax rises of approx £25bn per year over 5 years and the marginal rate of withdrawal on tax credits rose from 39 to 41 percent?