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A Plague on Both Your Houses

I was torn on whether to use Shakespeare (as above) or to use something equally sharp as I started to write this. The classics won. I should warn you that this is a rant, so you may want to change channels now.

I’m getting increasingly fed up with the whole economic situation here in the UK – particularly as I watch companies which are fundamentally sound collapse as their markets collapse and funds to transition don’t exist (*) – and the finger pointing about who is most ‘sorry’ for the situation. That misses the whole point; rather than being ‘sorry’, why not put some substantive plans together on how you’d resolve it?

(*)unless you’re a failing bank, in which case the approach seems to be ‘have a blank cheque’ and ‘fill in number of billions that you want’.

Let’s be honest, the issue with the economy sits squarely in both the Tory and Labour houses for different reasons.

Labour cosied up with the big finance institutions as they were an excellent revenue stream (and avoided the need to try and fix manufacturing by actually, god forbid, encouraging it) and fell asleep on the job of regulation and oversight. Well, I suspect that ‘light touch’ regulation is gone for a generation at least (as it has related to safety since Buncefield), which is probably no bad thing.

Labour’s record with things financial isn’t that good, in reality. Anyone with an ounce of sense – or project management experience – could point out that just pumping billions into the NHS, education and public sectors was not going to be efficient, as the institutions had been cut to the bone and lacked the people and systems to manage the massive flow of cash. Inefficiency and waste was an inevitable sacrifice on the altar of improving public services quickly. That’s not to say that things haven’t improved, it’s just that things could have been done so much more effectively. I suspect that a lot of the systems are there now, but the horse has left the stable.

Were the years of growth real, or has it been one big financial bubble? If we find ourself in a depression like the 1930s then the latter is probably the case.

The Tories don’t get away with this blame free either; I can still remember the economics wunderkind I spent an hour arguing with on the train back from my interview at Cambridge. He was espousing the arch-Thatcherite stance that ‘manufacturing doesn’t matter, it’s financial services where the money is made’. He could never answer the question of where it came from in the first place; if I was being trite I’d say that we all know that now, as the Bank of England just prints some more.

He missed the point that even if money is an abstract concept, somewhere it needs to relate to the real economy. By ‘real economy’ I mean the economy where something is made, or extracted, that is physical and tangible. There may not be a direct link, but manufacturing underpins all this and the whole house of cards links back to it somewhere. That argument on the then-British Rail train was nearly two decades ago, and as a nation we’ve been tied to that view at high levels ever since. I suspect that people like that guy on the train, now in his mid-late thirties, are part of the reason we’re where we are.

Getting back to the Tories; they haven’t been consistent, have they? Their position started to change as Northern Rock happened to just find anything that opposed the government. Hypocrisy, position changes back and forth, none of this mattered so long as dirt could be thrown at Labour. Criticism, rather than ideas or solutions, is the order of the day. There’s not even the ideological approach of the Thatcherites; no vision, no solution.

I get really angry when I see politicians implying that manufacturing companies need to sort their own houses out, as Mandleson seems to think that the problem lies with inefficiencies and is the companies own fault? But how many companies can handle a 50, 60, 70% fall in demand overnight? How many places have dropped from a 7 day operational week to 5, 4, 3 and in some cases no-day week? The collapse in confidence of the banks has sent consumer confidence over the cliff edge, and sent a shock-wave through the real economy.

If you operate globally, can you also handle the exchange rate with the €uro and Dollar$ collapsing by 25 to 30%? You probably source from overseas somewhere, which means that you’ll be stung when getting raw materials. The devaluation of the pound is great for exports, but did I forget to mention that all the other major economies are in the same boat so the markets aren’t there? Even places like Germany, the European watchword for prudence and caution in finance, have been sucked into this situation. The vast financial house profits in the USA and London meant that the German banks wanted a piece of the action, and used their subsidiaries to bypass the regulations at home. Money moved to the Anglo-Saxon markets, and has gone with them. Talking to German friends and colleagues, many of them are furious about the situation.

I’m not recommending that subsidies are the way forward, but there have to be some clever options. Things like the German government’s payments for scrapping old, inefficient cars which are promoting demand. Things about finding finance to restructure, or some kind of support when short time working is needed over a period. If we don’t find something soon, then we’ll all be working in call centres which will then be outsourced to India or Eastern Europe because there will be nothing left.

I also think that in many ways, we’re to blame as well. The Great British public. The Lib-Dems and others warning on the credit levels, but as a nation, we ignored it, blindly believing the spin that everything was hunky-dory and the good times would roll. We should have spent a little less and saved a little more, and questioned more about what was going on, especially the rumours that used to go around about mortgage operators dubious actions. We all counted our paper gains on mortgages and felt good, rather than wondering why the prices were exploding upwards so quickly. The growth in the economy – or even in the population – couldn’t be the core driver but we ignored that because it was an inconvenient truth. The government bottled a reorganisation of the housing markets towards the more robust Scottish model, probably because of lobbying, and we all laughed all the way to our paper thousands while our youth couldn’t afford to buy a house.

We need to step up and take that responsibility. To manage our own houses, and pray that the political classes get their act together and stop a recession becoming a long term slump. We need to carefully consider who we vote for, because that will have the biggest impact on where things go longer term. I’m not convinced that we presently have a good option, so it may be the ‘least worst’ choice. But voting is important, as it our way to express our choice and authority. Robert Heinlein had it right in Starship Troopers (the book, not the near spoof neo-fascist movie) in that we have to take responsibility and do our part.

Normal service may be resumed. Thank you for listening.