Tag Archives: Brexit

There are none so blind as those who choose to be blind. A comment on contemporary journalism

This essay was prompted by an article in the left of centre daily newspaper that I read. In it the journalist (who is an economist) claimed that Brexit would be a non event similar to the millennium bug. It was an article I thought so typical of contemporary journalism, a well written article with a simple story line that ignored inconvenient realities. He dismissed those experts such as the Governor of the Bank of England, stating that they had constantly misread the economic runes and their predictions were always proved to be wrong, so why should we take their warnings of a bad Brexit deal seriously. Instead he preferred to trust the politicians, the realists who would deliver a good Brexit deal. In colossal misreading of history he said that the good guys, the politicians would deliver the best possible of Brexit deals. One can only believe he is ignorant of history, a history in which ill informed and incompetent political leaders led their country into disaster. 

There is one disturbing feature of this article which in so characteristic of contemporary journalism. That is the disparaging of experts and expert knowledge. What he is suggesting is those who know a something about their subject are to be distrusted and instead we should listen to the politicians who know little or nothing about the subject. He trashes the idea that there is something that can be called  human knowledge. As Mark Carney and the British Treasury have so often got things wrong, he claims that this proves that there is nobody who knows what is really going to happen in the economy, least of all the experts. Therefore it is just as well to trust the ‘know little’ and ‘know nothings’, as their sense of realism will prevail and they will deliver a good deal on Brexit.

Just as with so many who have studied economics, he can see no role for human folly in history. Unlike him I cannot consider the current generation of political leaders who have demonstrated serial incompetence in their roles, as the best people to be in charge when the country faces the existential threat that is Brexit. Can anybody really claim that any of our leading politicians have actually improved the performance of the departments in which they ran. The list of there failures is endless, transport, prisons, schools etc. This is why one minister has the unkind nickname of ‘failing Grayling’.In this government the good minister is the one that fails to made the department of which they are in charge worse.

However fairness demands that this journalist be judged as an economist. He bases his article on the claim that Mark Carney and the other expert economists got it wrong, when they said that Brexit would be bad for the economy. In his article he writes of several examples that demonstrate that the economy is sound and prospering, in spite of the referendum vote. Yet as an economist he should know that Mark Carney once the Brexit referendum was announced immediately pumped money into the economy to prevent the crash he warned against. This created cheap money and as interest rates were so low people borrowed to supplement their low incomes. Economic growth or what he terms prosperity has been founded on a rapid and unsound expansion of consumer borrowing. Such borrowing cannot continue for ever and the economy is rapidly coming to resemble that of 2008, when an over indebted economy crashed, with dire consequences for us all.

What this left wing journalist also fails to mention is inequality. The prosperity that he sees demonstrated in his local supermarket, excludes the millions on low pay. Those millions in the gig economy suffering the twin evils of low pay and insecure employment would have a very different view of the economy to his.

Possibility John Ford in his film ‘The Man Who Shot Liberty Valance’ had it correct, when his newspaper man confronted with an awkward truth, says it is better to print the myth than the truth. Similarly too many journalists prefer as does John Ford’s newspaperman to print the myth. In this case it is the myth of British exceptionalism.

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What Erasmus can teach us about our political leaders.

Recently a visitor to my house, scoffed when he saw that I had been reading a book on stoicism. Stoicism was to him a philosophy of a dead past, which was of no relevance today. Actually the books of the past can have a lot to teach us about contemporary society. Human behaviour and motivations amongst the great and powerful change little.

Erasmus despaired about the behaviour of the petty princelings that ruled the various cities of renaissance Italy. What particularly angered him was the damage wrought on their cities by these vainglorious princes and dukes seeking to achieve fame through war. Inevitably these wars turned out badly for their cities, even if they won there was the huge cost in wealth squandered and lives lost. He correctly identified this lust for fame in the ‘great men’ of his time, as the main cause of suffering amongst the peoples of renaissance Italy. This lust for fame is still a powerful motivator amongst our politicians. Although it is not a recent example Theodore Roosevelt*, regretted that he was unable to lead the USA in some Great War. War for him was the supreme test of a statesman’s leadership skills.

War gives politicians the chance to demonstrate their virility, it shows them to be one of that elite band, those who change the destiny of nations. This lust for war was so evident in the Presidency of George Bush. Even before the Iraq war his advisors were writing articles or giving interviews in which they stated that they were eager to demonstrate the superiority of the new American military technology. While Saddam Hussein’s Iraq provided just such an opportunity, it also provided an illustration of that old proverb that nobody wins a war. Iraq and the Middle East ever since has been involved in the turmoil of constant warfare, costing the US more men and resources than did the initial invasion.

Living in a country much diminished through historical mishaps our leading politicians have little opportunity to express their masculinity through war. Our military is so reduced in strength that our prospects of waging war without the help of a powerful ally are almost impossible. In the age of globalisation there is no longer the prospect of invading some weak and easy to beat enemy. They all have powerful friends who would intervene to protect their trading interests in that country. Although it was never acknowledged Britain could only wage war in the Falklands against Argentina with the permission of the USA.

Consequently our glory seeking politicians have to find a new enemy to beat. These enemies must fulfil two requirements, they must be internal so having no powerful foreign allies who could intervene on their behalf and offer the prospect of easy victories. One such internal enemy is provided by the state education system. Decades of vilification by the right wing press have convinced many that state schooling is nothing but a system of institutionalised failure. Any reform announced by an education minister will garner instant applause, as an overdue reform of a system that is failing our children. More importantly teachers and children can offer little effective opposition. Teachers organisations are too weak to resist any changes imposed by the minister. Children of course, do as they are told. Through portraying themselves as takers on of the enemy within, these politicians can achieve the fleeting glory of being tomorrow’s newspaper headline.

What these politicians really want is a foreign enemy to beat. Such an enemy can rouse the xenophobic instincts of that part of the population that distrusts anything foreign. These are the people for whom Europe is holiday destination offering sun and beaches, but nothing more. Our lusting for glory politicians have for decades waged a war of words against that enemy of Britishness, the European Union. Now they have succeeded and Britain is no leaving the European Union. They have won their easy victory. However even this war of words and policies proves the truth of the saying that all are losers hen it comes to war. They like the Italian Renaissance Princes have through their victory cost their country much. Slowly it is being recognised what damage this brutal rupture with our greatest trading partner will cause to the economy and wealth of the British peoples. Already the government is stockpiling medicines and asking food companies to do the same with food in preparation for a disastrous exit from the EU. Such is there lust for glory and a place in the history books, they ignore any evidence contrary to there beliefs. It does not matter how often businesses tell government that they don’t have the facilities to stockpile food, the government’s response is that because they have told business to stockpile food they have done all that’s needed to offset a bad Brexit. As one despairing businessman said, this lot could not run a fish and chip shop.

One myth to which these politicians refer is Britain’s glorious history, it’s standing alone against the Nazi enemy and its saving Europe from itself. However these politicians don’t realise that the war exposed the incompetencies of the governing upper middle classes. The discredit they incurred from the disasters of Dunkirk and Singapore* led to there loss of power in the post war election and the election of a majority socialist government. Now these same people are in words of a former leading politician leading the country into ‘an act of self harm’.

What Erasmus teaches us through his writings that all to often the wrong people achieve supreme power. Glory seekers who to achieve there place in the sun and doing so wreak immense harm on society in an attempt to fulfil there ambitions. His book ‘The Adages’ is full of warnings against letting such people achieve supreme power. Once this book was regarded as an indispensable read for statesmen, now it is largely neglected. Perhaps if it was still widely read our political classes would realise the dangers of having leaders who possess little more than a narcissistic sense of self belief. The political education of our leaders seem sadly lacking, as in both Anglo Saxon democracies the political classes are in thrall to narcissistic politicians.

*US President 1901-1909

*Media producers collaborate in the perpetuation of this myth. There are endless films about the miracle of Dunkirk, but none about the ignominy that was Singapore. The British commander General Percival managed the defence so incompetently that his army of 85,000 men was rapidly overwhelmed by a smaller Japanese force of 30,000 men. After this disaster many said that never again should such men (public school educated and of the upper middle classes) run the country. Now such men are again in charge and leading the country and demonstrating that as a class they have learnt nothing since 1942.

Unashamedly a ‘Citizen of Nowhere’

Although it was intended as an insult, directed by the Prime Minister at such as people such as myself that wished to remain a European citizen, it is a title I am proud to claim. Perhaps an example from my life explains what I mean. At the age of eighteen I left my country home to study at a University in London. I left behind what many would regard as an idyllic life. Our family’s life moved to a rhythm dictated by the seasons. Winter meant a slowing down, the time when nature itself entered a dormant stage. Although his work never became dormant it was by January reduced to what were a series of maintenance tasks. Then with the coming of spring when nature began to revive, he became more active in his working life. This was the breeding season, when hatched pheasant chicks from eggs in the incubator, to be followed by transferring the thousands of young chicks to small secure nurturing pens. Then when summer reached its peak he worked from dawn to dusk, transferring and settling colonies of pheasant chicks in the surrounding woodland. Although it was a hard life working as a gamekeeper he loved it. Having rejected the alternative of an easier life in the city. When asked why he did not want an easier life in the city, he said that he could tolerate the noise of the city. This digression is necessary to explain why it was a wrench for me to leave country life behind. I should add that all my childhood friends remained attached to the countryside. Consequently I became distant and estranged from them to such an extent that I now find it difficult to recall there names and facial features.

When surrounded by and living amongst people who loved the country life, why did I leave? The reason for me was it was a matter of growing into maturity, I felt that to remain I would be trapped in an eternal adolescence, a sense of ‘not-grown-upness’. I had grown out of the country life. Today when my wife suggests how nice it would be to retire to a country cottage, my reaction is panic. What country life represents for me is a closing in of the intellectual horizon. A panic akin to claustrophobia, a fear of losing that sense of freedom which I treasure.

Perhaps my schooling accounted to my sense of an intellectual claustrophobia. I studied at a country secondary modern. A school in which the boys were expected to become farm labourers, factory hands or members of the armed forces . The girls typists or clerical assistants. Our education virtually ceased at fourteen, as at that age we had learn all that was needed to perform our expected future roles. What I developed was a sense of frustration, I knew that there was much more to learn, which I was being denied. Some of our teachers recognised our frustration, and by the time we reached the age of fifteen they offered us a chance to sit a new exam designed for secondary modern students. However even this was a source of frustration. The science textbook we used was the science of the 1930s. Obviously it was a reprint, but it ignored all the scientific developments that had taken place since 1945. What I can remember is that it state the space that made up most of the universe was the ether. I term I think that dated back to Isaac Newton’s time.

Although I loved the country life, I wanted more the escape from its narrow confining intellectual horizons. A rooted life, a sense of belonging for me was the surrender of my individuality. Going trout fishing at first light was an experience I will always treasure. However even when fishing alone in the early morning in the most idyllic of surroundings could not dispel my uneasy sense of being trapped. I could not see myself endlessly repeating this experience. I needed something more.

Unlike Theresa May I value that sense of rootlessness that she abhors. It gives you a chance to remake your self. There is nothing that forces or pushes you into a particular role. Now although everybody knew that I was a gamekeepers son, it was only for them a matter of some interest or curiosity, it was not my defining characteristic. In the country being a gamekeepers son circumscribed your opportunities. You were expected to fulfil one of two roles, either follow in your fathers footsteps or become a farm labourer. The only escape was to become a factory hand in the nearby town.

The young people I met in London, were cut adrift from there roots. All were seizing the opportunity to remake there lives. Revelling in the freedom that being an unknown gave you. None wanted to go back. Patriotism of the form that Mrs May is advocating was something we scorned, it was old a drawing back to our childhoods. How could you be a British patriot of this sort and enjoy the music of Jimmi Hendricks or all the other American stars. We wanted to be citizens of nowhere adopting whatever identity suited us at that moment. Our clothes, our appearance and behaviours represented a rejection of the past. London for the young then was at the centre of the youth fashion industry. Clothes were not patriotic they were international.

Within the youth culture there was an ironic attitude towards the symbols of patriotism. A clothes shop was named Lord Kitchener’s Valet. The historical Lord Kitchener was an austere unliveable, although competent general of the early 20th century and Empire. A man who stopped his men from shooting the mortally wounded enemy after battle, on the grounds that bullets cost money, he advocated the cheaper option of killing them with the bayonet. Now the shop that bore his name mocked all that he stood for, it celebrated frivolity.

With rootless goes a sense of openness, you are open to and welcome new experiences. Michael Oakshott said that education was the initiation into new experiences. This initiation he imagined would be achieved through an intermediary, the teacher. However the citizen of nowhere is a self education, always seeking to initiate themselves into new experiences. With this freedom goes a sense of emptiness. There are times when you reach barriers or limits to your intellectual explorations. I can look back and recall reading Baudelaire’s prose poems. He like me could suffer a sense of ennui. One such poem that expressed my discontent was the one in which he describes the bleak view from his window of the rainswept Parisian rooftops.

Now there is a closing in of the horizons. New patriots that is our Brexit seeking politicians see us ‘citizens of nowhere’ as a threat to them. I think because we pose a threat to the easy certainties they cling too. Europe is a threat to them as it threatens there certainties. The cordon sanitaire

that protected there world of childish certainties has gone. Europe is now longer across the channel its here, its there neighbour. These new patriots don’t want change, they want it kept away from them. Rejecting Europe is an anguished cry of pain. Not only do they want to expel Europe from their country but they also want to suppress the fifth columnists such as myself that are a viper’s nest of ‘foreigness’ and strange ideas. I am abused as a member of the elite, my education they say has rendered me unfit to be a man of the people. I have lost what they see as my sense of Britishness. Strangely enough politicians who are Oxbridge graduates and members of the upper middle class, don’t suffer from this curse of ‘eliteness’.

Theresa the many of us ‘citizens of nowhere’ will continue to reject your notion of Britishness. We don’t want to retreat back into your comforting world of childish patriotic certainties. Unlike you we want to embrace the world out there. Fortress Britain is a chilling idea, a denial of that step forward that means embracing the uncertainty that is out there. The patriotism of yourself and your colleagues represents nothing more than the suffocating dullness of a familiar comfort blanket.

The ‘sky cannot fall in’ school of economics.

There is an economic school of thought commonly held by politicians and journalists, which can be best described ‘as the sky won’t fall in’ economics’. What the practitioners of this economics believe is that the economy is a thing that just goes on delivering whatever politicians might do. There foolish decisions have some negative impact on the margins, but come what may the economy will still working as well as ever tomorrow. Such people described the financial crisis of 2008/9 as a ‘once in a lifetime affair’, it was what insurers call the unexpected, an ‘act of God’. What it was not was a crisis brought about by the foolish behaviour of bankers and politicians. The cause of the crisis was not the foolish speculative behaviours of the banking community or in the naivety of politicians in believing that the financial market could regulate itself, no the causes lay elsewhere.

Similarly in the U.K. we are suffering from a surfeit of ‘the sky won’t fall in’ economics from the Brexiteers in the politics and the media. Warnings of the dire impact that a hard Brexit will have on the economy are dismissed as ‘Project Fear’. One leading politician when warned of the damaging impact of a premature exit from the European Union (EU) on manufacturing industry, said that it won’t matter, as manufacturing only accounts for 10% of U.K. output. Only a person completely ignorant of economics could make such a foolish statement.

Yesterday a journalist who normally displays the utmost scepticism about politicians and politics revealed themselves as a member of this school of thought. He in his articles has on numerous occasions exposed the follies of politicians; yet he takes the word of these self same politicians that a premature rupture in trading relations with our biggest trading partner will have minimal impact on the economy. He writes that the day after Brexit the economy will be functioning as normal, planes will still be flying and there will be food in the supermarkets.

Yes the economy will still be there and it will be functioning, but the question he fails to ask is how well will it be functioning. To take his first example, yes the planes are likely to be flying, as it’s inconceivable that the British and European politicians can’t come to some agreement on airlines flying rights. (One must mention a proviso, politicians are just as likely to come to an agreement which is detrimental to the interests of our airlines, as beneficial. He assumes a competence which our politicians in the Brexit negotiations, have been singularly lacking.) What he fails to understand is that whatever results, the British government is exchanging an agreement about rights to fly over Europe that is highly beneficial for our airlines for one that is much less beneficial. What we do not as yet know is how much more difficult will it be for Britons to fly in and out of Europe. Obviously the uncertainty generated by Brexit will the day after Brexit lead to some cancelled or delayed flights. All that can be said is that British airlines won’t enjoy the same access to flight space over Europe than they had before. However what will obvious is that flying from Britain to Europe will become more difficult.

Journalists and politicians of the Brexit persuasion hide behind this uncertainty. I as an economist know that Brexit will be damaging to the British economy and society. Just because people such as myself cannot spell out in accurate statistical format the exact damage that Brexit will inflict on the economy, Brexiteers claim that we should not be believed as we really just don’t know. However to put it in its simplest terms believing the Brexiteers is asking the people to accept that there uninformed guesses are as good as my informed guess of myself and other economists.

John Maynard Keynes was once the doyen of British economists, but he is now so out of favour that his economics has been banished from the Treasury and political circles. As a consequence politicians lack an understanding and knowledge of his great insights to the workings of the economy. What all in politics and most in journalism have forgotten is his insight that the capitalist economy is inherently unstable. In his books such as ‘What is to be Done’ he demonstrated how the misguided decision making of the politicians had brought about the worst of all possible economic circumstances. The Peace Treaty of Versailles might have delivered peace but it also delivered a Europe wide economic recession. Imposing punitive sanctions on Germany wrecked the economy of what before 1914 had been Europe’s largest and most prosperous economy. The knock on effect was Germany no longer bought the goods it had previously, so spreading the misery of slow growth and high unemployment throughout Europe. Added to this British politicians made a series of decisions which worsened the impact of this depression on the U.K. The 1920s in terms of economic growth was a lost decade.

What cannot be stated often enough is that the economy is not a thing that will constantly deliver, regardless of the poor decision making of our political and business leaders. Just as with any human construct it has flaws and one flaw is its propensity towards instability. This unstable economy can be as easily pushed into recession, through the follies of our leaders as it can be thrust into exuberant growth through the ingenuity and good decision taking of the same people.

Bill Gates, Steve Jobs and all the other entrepreneurs of Silicon Valley kickstarted the information technology revolution, which led to a sustained period of economic growth. One only temporarily halted by the bursting of the dot.com bubble. A bubble caused by foolish speculators bidding to much for dot.com businesses. When it became obvious that these companies would never earn the expected profits, it became obvious that these companies had been overvalued, so there share prices collapsed, causing a loss of business confidence and a recession.

To this economist one the main causes of sudden changes in the business cycle are human folly and ingenuity. The economy is not a perfect construct it has weaknesses and foolish decisions made by politicians and businessmen can expose those flaws which leads to economic collapse. Similarly it has strengths which men and women of ingenuity can exploit to create immense wealth, which benefits all.

In answer to Michael Gove and Simon Jenkins, despite what you think, the ‘economic sky can fall in’. It’s the actions of men such as you that make this more likely to happen than not. Unfortunately the leading politicians in Britain at present seem to lack amongst them, people of realism and ingenuity that could prevent ‘the sky from falling in’.

An Irreverent Explanation of the Politician’s Ways of Managing the Economy

There are many ways to explain the politicians peculiar grasp of economics. One of the best ways of doing so is through metaphor. A great many of our politicians are lovers of Opera, particularly those in the Conservative government. Imagine their horror and anger if a football manager were appointed Director of the Royal Opera House Covent Garden. They would want to know why this uneducated person, who lacking any knowledge of the culture of Opera had been appointed to the post. There reaction would be similar to that of economists, when they hear the name of the person appointed to the post of Chancellor of the Exchequer. Taking the analogy further a football manager might know a little about Opera, it is quite likely that they could be familiar the popular opera Carmen. However their lack of knowledge of Opera would make them totally unsuitable for the post. Again with politicians they might well know a little economics, but not enough to qualify them for the post of the nation’s director of economic affairs.

Metaphorical football managers have always been appointed to the post of Chancellor. Never is a knowledge of economics required as a prerequisite for the post. What is required is that the person appointed is a master of the political game. In the past it mattered less that metaphorical football managers were appointed Chancellor, as they would seek advice from those who understood economics and economic management. Advice would come from Treasury economists or from academics recruited as advisors. Unfortunately now these football managers no longer believe that they need the advice of experts. It as if the uninformed Director of the Opera House decided that as he knew something of the opera Carmen, this was sufficient to qualify him for choosing the forthcoming season’s programme. Now exactly the same happens in the management of the economy.

However I should not be too dismissive of all these metaphorical football managers. They can make surprisingly good decisions. Gordon Brown instinctively knew that British membership of the European Monetary Union was wrong. He asked for evidence from economists to confirm whether or not his gut feeling was correct. They duly delivered. Britain was spared the austerity programme which membership of the Euro required and until the crash of 2008, Britain’s economic growth was greater than that if its European rivals. Only in 2010 when a politician who was an eschatological economist became Chancellor did Britain’s economic performance dip below that of its European rivals.

Eschatological economists are those politicians that believe rather than preparing for the coming of the Kingdom of Heaven, they should be preparing for the coming of the free market. Much as with those Christians who believe the coming of the Kingdom of Heaven will remove all ills and evil from the world, they believe that the free market economy will remove all the evils of the socialised economy from the world and deliver the greatest possible benefits to mankind. Just as with the Christians they know that there Kingdom is at hand. However their Kingdom is not the gift of some supernatural deity, but one that can be created by men themselves. When they faced with the criticism that all the deregulation of the past twenty years has failed to deliver the promised world, they explain that the changes have not gone far enough. What they argue is that we at present are experiencing the painful birth pangs of a new society, all we need to do is be patient and wait for the reforms to bear fruit.

While it may seem odd to describe the dull and rather grey people who dominate politics as being in the grip of some earthly charismatic religion, it is the only way to describe their behaviour. They as with all true believers are impervious to reality. They know the truth and they won’t be deflected from the true path. Perhaps the best way of illustrating this truth is by referencing the last two Chancellors of the Exchequer, both of whom are eschatological economists. They both believe the best society is one run on free market principles. One characteristic of a free market is small government, that is a government that is restricted largely to a few basic roles necessary for the survival of human society. Roles such as the maintenance of law and order and national defence. In there perfect society the government is but a bit player in the economy. All the real decisions of significance are undertaken by businesses and consumers.

What is most significant is that these people disregard the negative impact their shrinking of government programme. One of the main methods of doing this is to reduce government spending. As a government with a small budget is but a bit player in the economy. This is achieved bu cutting the funding available to public services. Anguish expressed about longer hospital waiting lists, the shortage of medical staff and hospital beds don’t resonate with them. What matters most is that they reducing the government budget. These problems they believe are but a small price to the benefit of creating small government. They know that we will all benefit in the long run, once they have achieved their aim of introducing the truly free market economy. Us foolish people don’t understand the benefits that will accrue from the changes that they are introducing.

There is one instructive example from history that can be used to explain the behaviours of our current generation of eschatological economists/politicians. The early Jewish followers of Christ in Jerusalem were the Ebionites. These people believed in the imminent coming of the Kingdom of Heaven and the return of Christ. They gave away most of their wealth to help provide for the poor. Since they expected Messiah to return soon, there was no need to take the practical measures necessary to feed and support themselves. Unfortunately the inevitable happened and these distressed and newly poor began to suffer hunger and all the problems of poverty. They had to beg for help from Christian groups in other cities. Unfortunately the Roman destruction of Jerusalem and the enslavement of its peoples led to the disappearance of the Ebionites from history. All that can assumed is that they adopted a more practical lifestyle, as a means to ensure their survival. The behaviour of these Ebionites has similarities with the behaviour of contemporary Brexiteers, who are equally impracticable.

This weekend a series of studies were published demonstrating what would be the effect of Britain being a third country outside the EU. Customs barriers would immediately be put in place, as goods going between Britain and the EU would have to submit to customs checks. These will mean delays in the handling of goods, particularly as the British government has not put into place the necessary infra structure to handle the import and export of goods. The result will be food shortages in our supermarkets, as 50% of our food comes from abroad and mainly from the EU. Other problems will result such as shortages of medical supplies. Our Brexiteer politicians deny the reality of this scenario, as just as the early Christians believe that could neglect the practicalities of every day life and just prepare for the return of Christ, so the Brexiteers refuse to engage with the practicalities of leaving Europe. All the practical problems highlighted in various government reports or those from industry are dismissed as imaginary. All we have to do is wait for that blissful day when we exit regulation bound Europe and again become free. As with Ebonites all that it is necessary to do, is to wait for the blissful day to arrive, no practical measures are necessary.

What is required today is a return to the economics practised in 1968

The storm clouds are gathering over the economy, yet our political leaders seem oblivious to the approaching storm. These are some of the gathering clouds, inward investment has fallen 80% since 2016, the investment in national infra structure is at levels similar to Greece and in consequence economic growth fell to 0.1% in the last quarter. As a nation our trade deficit is the highest, as a proportion of GDP in the developed world. A trade deficit of 5.9% of GDP is only reduced to 2.2% through the contribution of financial services. A situation in which the U.K. is over dependent on recycling foreign cash invested in the U.K. to pay for imports. This gives an incentive to government to ensure that the City of London remains the largest money laundering financial centre in the world. Dirty money is as acceptable as clean money for paying our debts. This situation cannot continue indefinitely, if politicians cannot take action to resolve some of these problems, they will resolve themselves. This resolution will come in the form of an economic crash which will make us all much poorer.

A useful comparison can be made with the 1960s and 1970s a period of frequent balance of payment crises. In the 1960s the trade deficit never exceeded 0.6% of GDP and in the crisis year of 1976 it rose to 1% of GDP. These deficits always called for remedial action such as devaluation and economic policy measures to reduce the demand for imports. Now this ever rising import bill is never considered a problem for the U.K. Its role as one of the world’s financial centres ensures that it always has ample reserves of foreign currency to finance its debts. What never troubles the world’s governments is that one of the world’s largest financial centres lacks the strong economy to sustain it in that role. In the 19th century Britain’s strong economy enabled it to fulfil its role as the world’s banker. Now with a significantly diminished role in the world’s economy it still tries to be the world’s banker. This mismatch cannot continue, we as a country are unfortunately heading for a crash that could wreak havoc with the world’s financial system. The catalyst could well be Brexit when Britain begins to lose its role as the EU’s banker and uncertainty develops about the UK’s future this could precipitate a flight from sterling similar to that which happened on Black Wednesday. This time there will be no easy strategy for quickly resolving the situation. There is no ERM to leave and no easy currency devaluation to make. The pound will crash and the only remedy will be a large IMF loan and the imposition of a Greek like austerity programme.

Whatever criticisms the politicians of the 60s and 70s deserved, they were at least pragmatists. Unlike today’s ideologues they can recognise that there was a reality that existed beyond the world as seen from Westminster. The Labour government of 1976 could embark on an incomes policy that would alienate its supporters, knowing that this was necessary to restore the economy to health. This programme of income cuts was the only way that the government could reduce the high level of inflation and reduce the trade deficit. This programme was so successful that by 1979 the trade deficit had been converted into a surplus. These politicians were pragmatists who listened to the advice of outsiders and adopted an economic programme that was contrary to their political instincts.

Unfortunately this government of pragmatists lost the election to a party led by radical minded ideologues. They advocated a policy of Neo-Liberalism, which included as part of its policy manifesto the recommendation to adopt supply side economics. This meant freeing up resources from the less productive parts of the economy by closing them down. Capital and labour would them be freed from being shackled to old inefficient industries and be freed to be used by the new dynamic industries that would replace them. This it was they claimed would boost economic growth. What was talked about was the so called ‘weightless economy’ an economy largely devoid of manufacturing industry instead one based on the finance and industries such as the entertainment industry. These new industries would replace the jobs lost caused by the closure of the old manufacturing industries. The economy never developed in a way that these new economic prophets claimed.

At the beginning of their period in government these Neo-Liberals were warned by economists that there policies would lead to depression and the damage British manufacturing industry. Yet they were ignored by the new radicals, who knew this was outmoded thinking. The British manufacturing sector lost 20% of its capacity, with the consequent widening of the trade deficit. A deficit temporarily covered up by the wealth generated from the exploitation of North Sea oil. The old manufacturing centres declined, there was no rush of new money to so called new industries to compensate for the lost output from the old manufacturing industry.

What was damaging to the country’s economic prospects was new understanding in politics that the economy no longer mattered. Free marketers in government believed that economy was a largely self regulating mechanism that could be largely left to itself. All that was required was the occasional light touch on the tiller in the form of interest rate changes. What was once a major department in government, that of Trade and Industry now became a mere sideshow. Now industry could be left to run itself, no longer would government try to pick winners.

What these politicians had forgotten was the words of Maynard Keynes, there would be times when the government would be needed to save capitalism from itself. That happened in 2008/9 when the world financial system was only saved from the consequences of the financial crash by timely action of governments. Politicians learnt little from this crisis and continued the policy of non intervention. When I was a child one popular ornament was the China or brass three monkeys who epitomised the motto ‘hear no evil, see no evil, speak no evil’. This is the government’s current approach to all matters economic. No matter what wrong doing is practised by managers and directors, as in the example of Carillon, they do nothing. Even if individuals can do wrong, the belief is that the market as a whole can do no wrong.

In the now much discredited 60s and 70s there was a belief amongst politicians that the welfare of the nation was dependent on the well being of the economy. Whatever the political conviction of the politicians, they believed an interventionist economic policy was necessary to maintain the well being of the economy. When the economy was in danger of over heating it for example imposed restrictions on demand to prevent that happening. Perhaps the most famous is Selwyn Lloyd’s 1961 credit squeeze. Unlike today’s politicians they did not see inflation in the housing market as a good thing. This contrasts markedly with all governments of the past twenty years who regarded house price inflation as a good.

One consequence of this is the unfortunate lending programme of the banks. Today only about 6% of bank lending goes to manufacturing industry. In 2008 almost 80% of bank lending went to the property market, a figure which it is approaching today. The U.K. remains an economy in which the main driver of economic growth remains property speculation, while manufacturing industry the real creator of the wealth that matters is neglected.

Whatever experts might say or write contemporary politicians remain impervious to economic realities. Nothing of what I have written impinges on their consciousness. They now seem to inhabit a hermetically sealed world into which no outside thought intrudes. The leadership of the main parties are locked into an increasingly complex debate in which each of them strives to deliver the most authentic Brexit. That the Brexit promised by each of the leaderships is a fantasy, that fails to acknowledge any economic reality is of no concern to these politicians. In the words of one leading Brexiteer, the people are tired of experts and don’t what to hear what economists such as myself say. All that matters is the authentic voice of the people as interpreted by the Brexit politicians no matter how fantastic that interpretation.

The Dead Economist’s Society*

Politicians have constantly complaining about economists, usually for not giving them the answers they want. Only recently Michael Gove a leading Brexit campaigner complained that the people were fed up with experts. What he was complaining about was the fact that economists who had previously supported the government weren’t making the upbeat predictions about Brexit that he expected. The loss of these expert cheer leaders must have been galling.

Michael Gove is typical of many politicians in their misunderstanding of economics. While throughout the course of his political career economists tended to speak with one voice, that of the Neo-Liberal free marketers. Free market economists of the Chicago school dominated the universities and the professions and maverick economists were marginalised or silenced. Economics Journals now refused to print articles that did not fit in with the mainstream view. Only by exposing free market economics could academics hope for preferment in their profession. However that did not mean that economics had completely lost their integrity, all economists still believe that their subject is an evidenced based one. Surprising to the Brexiteers these economists could not agree that leaving the largest and most prosperous free market in the world was a good idea. Only the most ideological and extreme of economists could believe in the Brexit fantasy.

What economics has lost is it’s robustness. Although economists have as a profession tended to be of the right and free marketers, they have in the past accepted that there is a space in their subject for alternative voices. Unfortunately in the 1980s these alternative voices were suppressed. Their books disappeared from the university curriculum. Now these alternative voices are needed as the government seems to have emptied the basket of free market policy measures and needs an alternative approach to policy making. If only government ministers and their civil servants were familiar with the writings of the non free market minority of economists of the past they would not be short of policy alternatives.

One such past economist is Michael Polanyi. Michael Polanyi argued that the unregulated free market was the worst possible of economic systems. What he suggested was that the state could be better at second guessing what people wanted, than did the market. In a free market the rich and powerful have undue influence over how the goods and services that the economy produces are distributed amongst the people. Not only could they claim the lions share of the wealth, but they could also deny the majority a fair share of the nations wealth. The health care system in the USA provides an example of his thinking. There the well off can have access to the best health care in the world, but also deny access to adequate health care for the less well off majority. Health care in the USA is run by for profit health care providers. The poor have the most health problems but they are the least able to pay for treatment. Since the provision of health care to the less well off is a loss making service, it is not provided. The poor and less well off instead have to rely upon the health care provided by those hospitals run by charitable institutions. These institutions are poorly funded and cannot provide the best of care. Michael Polanyi would argue that health care is a universal good, as all have a right to good health care only a state run health care service can provide health care for all.

When only one voice is heard the result is bad policy making. Michael Polanyi has long since been forgotten and the government only gets policy advice from free marketers of the school of Friedrich Hayek and Milton Friedman. (However today’s politicians are ignorant of the latter’s seminal work ‘Monetary theory and the Trade Cycle’. A book which if they read, they would realise that he would regard their current policy of quantitive easing and low interest rates as wrong headed.) Now all too often government policy has been that of trying to fit square pegs into round holes. Every government embarks on a new policy to make health care more market efficient, each reform costs billions, yet is considered as necessary by each new government. Never does any health minister ever stop to think that their policy might be wrong and that there are alternatives to remaking the NHS into a faux free market, by continually dividing and re-dividing health service care providers into competing groups of buyers and sellers. Never do they consider that each new bureaucratic structure they impose on the NHS, is yet another costly diversion of resources away from front line services.

What economists know but politicians do not is that evidence demonstrates that a health service run by health care professionals is more cost efficient that its for profit alternative. For example health care professionals might adopt some wasteful practices such as the over ordering of medicines, but this is less costly than its alternative. If this over ordering is to be eliminated a new and expensive bureaucracy of stock controllers, accountants and financial controllers is required to take over the purchasing and distribution of medicines. The cost of these bureaucrats far exceeds the cost of any over ordering of medicines. In the well managed private hospitals of the USA administrative costs account for 40% of the costs of running the business. Unfortunately in the U.K. the government with its various reforms is trying to divert an increasing share of the health care budget to these financial controllers in the name of cost efficiency.

Although Michael Polanyi was once was a well known economist, he is now virtually unknown. Contemporary economists are overwhelming free market economists and little is published that is contrary to their consensus view. What is now needed is a ‘Dead Economists’ society. A society that will popularise the policy prescriptions of these long dead and forgotten economists. There are a number that I can recall such as Michael Polanyi, J.K.Galbraith, Piero Staffa and John Maynard Keynes. If politicians were familiar with Friedrich Hayek’s work other than his short populist text, ‘The Return to Serfdom’, they would realise that he would have been critical of much their ill thought out policy making. There are numerous economists who have written about solutions to many of the now problems of facing the U.K. economy, but ignorance of them means they are never considered. What politicians want are the simple easy to under policies of the type offered by the free marketers, they have little patience with good economic practice, as it can be difficult to understand and ones that do not provide the simple answers that make good headlines in the popular press. Donald Trump is not a maverick politician contrary to the mainstream, but rather the exemplar of a mainstream politician that has little time for the different reality that is the real economy.

What adds urgency to my writing is an article published by the Institute for Public Policy Research that the Bank of England which states that the government is ill prepared for the next recession. They have exhausted all the possibilities that can derived from expanding the money supply, through a policy of quantitive easing and low interest rates. What they state is that the government’s policy cupboard is bare and they now lack the anti recessionary policies to deal with any future economic downturn.

* I don’t wish to claim originality for my title. It is one that I have borrowed and adapted from Larry Ridener’s website, Dead Sociologists Society, one which I used to good effect during my teaching career.