A Conservative Budget
George Osborne is a brainy man and occasionally he is allowed to give brainy speeches. His recent lecture to the RSA in London was one of them.
Robert Peston has highlighted the shadow chancellor's comments about the future of on Britain's banks. Clearly the Conservatives will be a big part of this debate going forward.
As I've discussed before, the lesson of this crisis is that even the most global banks will come home to die, or get bailed out. It matters whether we as a nation - or more accurately, we as taxpayers - have the capacity to bail them out. So any future chancellor needs to decide how many big international banks for the UK is enough.
However, I'd like to focus on another part of the speech - specifically his comments about borrowing.
In yesterday's blog I said: "debt cannot rise indefinitely without raising doubts about the ability to repay. In effect, the British Conservative party thinks that the UK reached that point some time ago - which is why they opposed the UK stimulus package last November."
One of Osborne's advisors has pointed out that this was not quite the Conservatives' view. They simply thought that Britain was in danger of reaching that point quite soon, so the stimulus was not a risk worth taking.
That may sound like a distinction without a difference (and, I should say, this advisor wasn't demanding a retraction.). But in fact it does matter, and it shows up a key challenge for the Conservatives as we approach the next budget.
To see why, you only need to look at Osborne's speech. The bulk of his remarks are devoted to how to build a safer financial system for the future. But he can't resist a brief victory lap on the right and wrongs of fiscal stimulus.
The jubilant "I told you so's" from senior Tories have been echoing through the corridors of Westminster ever since Mervyn King made his contribution to this debate a few weeks ago.
Osborne joined the chorus again in his speech: "the forthcoming Budget will mark the collapse of [the government's] strategy for dealing with the recession. And it will vindicate the principle of fiscal responsibility that we Conservatives have stood by in good times and bad."
You can understand the desire to gloat. It's fair to say that Mervyn King's comments did no favours to the government.
But economically speaking, the fiscal high ground that Her Majesty's Opposition is sitting on is more like a fence - and quite a narrow, uncomfortable one at that.
Why? Well, going back to that distinction from yesterday, remember that the Conservatives are not saying that we have reached the point where additional borrowing actively hurts the economy, by pushing up interest rates.
If they were, they would logically have to follow the Irish route of proposing tax rises and spending cuts right now, to bring borrowing down.
For obvious reasons, Osborne has no intention of proposing such a budget for two weeks' time. In fact, he and others have said they do not want to stop the "automatic stabilisers" from operating (that's the rise in borrowing that is not down to the stimulus but rather the natural impact of the recession).
But, as the Institute for Fiscal Studies keeps reminding us, the rising debt levels that the Conservatives are so concerned about have almost nothing to do with the fiscal stimulus package last November - it accounts for less than 1/15th of the total rise in debt expected between now and 2012.
It's true that the Conservatives think that borrowing was too high going into this recession, and that was within the government's control. But as far as I know, Osborne doesn't think we should be trying to reverse things right now, with the recession still raging. Nor have they suggested the government should have spent much less on bailing out the banks, which the IMF thinks could add another £130bn to Britain's debt.
All the Conservatives will say is that another stimulus package - like the first one - would be a step too far.
Perhaps the shadow chancellor thinks the markets can distinguish between voluntary and involuntary government borrowing - and it's the voluntary, stimulus borrowing that investors really object to. But if that's true, someone needs to tell the Irish. They haven't had any fiscal stimulus packages, yet the markets have bullied them into a tightening all the same.
What matters to the investors who fund our government debt is not the cause of high borrowing, but how large it is relative to the economy, how fast it is growing, and whether or not the government has the will to bring it back down.
Put it that way, and the Conservative's "principle of fiscal responsibility" starts to look rather arbitrary.
After all, back in November, they thought that borrowing was high to afford a roughly £12bn a year short-term stimulus. Now borrowing for this year alone is expected to be about £17bn more than we thought, with none of that extra borrowing due to the stimulus. Yet, as we approach the budget, the Conservatives still say it's only extra stimulus measures that we can't afford. All that other borrowing for this year is somehow OK.
The worse the figures get, the harder that position may be to sustain.
For, if the numbers do continue to deteriorate, the logic of the Tory position is going to point ever more firmly in the direction of an Irish-style budget-tightening - even if the economy is still heading downhill. Brainy as he is, it will be interesting to see how far down that road the shadow chancellor is willing to go.
~RS~q~RS~~RS~z~RS~39~RS~)
I'm 
© MMXI
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"George Osborne is a brainy man ........"
That is a most interesting comment, and to my mind most surprising. I have to say that Osborne has shown few signs of braininess that I have detected, but then I haven't ever spoken to him one on one as I am sure that Stephanie has.
For the rest, it seems that he is trying to give the impression of difference where little or none exists so far as the present difficulties are concerned. We can never know, of course, but I rather doubt whether we would have been in a very different position had George been Chancellor for the past ten years, although our standards of public services and level of overseas aid would have been significantly lower.
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This article is dancing on the head of a pin. George has a problem it's called Gordon's reputation. George can't convince the media that Gordon has driven the economy off a cliff, he has to wait until they realise it for themselves. As Gordon keeps promising cash hand outs and an economic bounce George can't risk talking the economy down. Once the media wakeup to Gordon’s mess and realise there is no money they may indeed focus on the debt. Our debt which must be repaid will indeed lead to a far higher price than the Irish have now to pay.
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I find conservative expression, i.e. not a great deal of detail
So my main question is why you blog about speculation? Are you now floating kites for the opposition?
Osbourne, as far as I know, doesn't actually know what the state of the public finances is like, unless he's been to more yacht parties with Mandy. He won't know until he is part of a team that wins an election and looks at the parlous state international markets have already passed judgement on.
How about a balance versus the achievements/failures of our government?
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So if George Osbourne talks about the economy he's talking the pound down, if he doesn't then he's got no ideas.
If he backs more stimulus he's bankrupting the country, if he doesn't he's prolonging the recession and if he does neither he's the 'do nothing chancellor'.
whatever he does rent-a-quote backbenchers will say something different and it's a split in the party (isn't everyone agreeing unaminousely with the PM / Chancellor how we got into this trouble in the first place?).
The way this blog is hammering G.O. for anything going can we also blame him for my last girlfriend breaking up with me, West Ham's injury crisis and the leaking of the Wolverine film please.
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Why do the BBC's correspondents concentrate on what the opposition is saying and totally ignore what the government's incompetence is doing to the economy ? The Tories are not involved in any way in what is happening to the country's finances, this is the government's province,they are the problem, not the solution. The BBC's correspondents should be asking questions of those who caused the problem, not those who are going to be left, after the next election , to repair the catastrophic damage Labour has done to Britain.
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Since Stephanie appears to be acting a mouthpiece for the Conservative party, I thought I would try to balance things up with this post.
First, we must not forget that the Conservatives spent 10 years warning of imminent economic demise in response to almost every economic decision the government made. 10 years of being wrong over and over and over again, hardly justifies them saying "I told you so" now. Let's not forget all those things they also told us all along.
Second, the Conservatives have during the last 12 years consistently pretended that they can maintain current levels of expenditure, cut taxes and at the same time reduce debt all magically provided for by unspecific pledges to "cut waste".
Third, over the last 12 years the Conservatives have consistently argued for less financial regulation. This is particularly shameful since the current crisis is known to be largely caused by lack of financial regulation.
Fourth, the Conservatives, broadly speaking, still follow the economic philosophy they had in government in the 80s and 90s which led to multiple recessions, high unemployment, high interest rates, high inflation, the collapse of manufacturing....
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I suspect Osborne would dearly love to cut spending, and reluctantly increase taxes. Both are absolutely the right things to do, but it probably isn't good politics to say so. Hence the fence sitting - wait for Labour to lose the election before opening their mouths.
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Thank you, Stephanie, for differentiating between stimulus and the "automatic stabilisers".
With the continued necessity of borrowing to counter the natural effects of recession, it would be foolhardy to consider borrowing any additional monies to stimulate the economy.
Although the Bank of England is nominally independent of Government, it must have taken real courage for Mervyn King to say that further stimulus borrowing was a step too far.
When is this self-seeking government going to stop political posturing, and do what's best for Briton our people?
We elected them for that latter purpose, didn't we ?
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Inside every Tory is a Thatcherite handbag. Their philosophy is slash and burn till there is nothing left of of public services no matter what they say.
There is a well established link between the reduction in regulation that is at the heart of their economic philosophy are the present economic difficulties. They are not to be trusted. The Tories spout economic errors almost every time they open their mouths. For example today - "break up the banks" - nice idea but it is an almost absolute certainty that the method that they choose will benefit their friends in the city more than the taxpayer - even at the expense of the taxpayer.
(Same comments go for the Labour party - for they did not deviate from the fundamentally flawed economic philosophy of the Tories when they came to power.)
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Stephanie,
I have enjoyed your thoughtful blogging since you returned from maternity leave but you have rather lost the plot with this one.
GB's favourite Nobel Prize-winning economist (you know who I mean)said last autumn that he was in favour of fiscal stimulus but that it had to be at least 2% of GDP to have any effect. Even back then, the Government realised that we didn't have that kind of money, so the stimulus package was around 0.5% of GDP. The Conservatives were therefore quite correct to oppose it. You say it only accounts for 1/15th of the total expected debt - but that is still many unnecessary billions we taxpayers will have to repay over the next few years.
You are right that the worse the figures get, the harder it will be to avoid Irish-style measures. But raising taxes in a recession is best avoided for as long as possible, so the Conservative position seems both logical and sensible to me.
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#8. newsjock wrote:
"...it must have taken real courage for Mervyn King to say..."
Sorry, but I disagree with your assessment of the man big time. He is a failed wimp. Mervyn King knew that asset price inflation was getting out of hand over a decade ago - yet he did nothing - if he had had even an iota of courage he would have done something about it and he bottled it and by so doing destroyed the UK's economy! He must go! He hasn't even the courage to resign!
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The truth is that Labour's profligacy, and specifically Gordon Brown's profligacy, has left us in the worst economic situation we've been in since the War. It's all very well to waffle on about "automatic stabilisers". But there's actually no evidence that they help avoid recession.
The government caused this disaster, by keeping interest rates too low for too long, and then ratcheting them up again too suddenly; and by suddenly imposing more severe capital requirements on the banks just as we went into a recession. And those automatic stabilisers (aka lack of control over government finances) played their part too, as did Gordon's shiny new tripartite regulatory system, that blurred responsibilities, took power away from the experts at the Bank of England, and allowed everyone to look the other way while the financial services industry went beserk.
And all the while Gordon was paying lip service to his "golden rule" that governments should only borrow for investment, whilst fiddling the figures to ensure he could direct a tidal wave of new government spending and borrowing into the economy.
The next Conservative government will actually have to increase taxes and cut spending. I believe the people understand that very well, and George is being too timid in not admitting it. What's more, if the Tories cut the right bits of the bloated State, nobody will even notice.
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#6. fair-and-balanced:
Your first and second points seem rather self-contradictory. The level of Government spending is a pretty major economic decision that, despite your point one, the Conservatives didn't warn against, as you correctly say in point two. This was certainly a mistake on their part but, to be fair, they were never likely to be listened to. At the first suggestion of introducing some restraint in the rise of spending (let alone an actual reduction) the knee jerk cries of "Tory cuts" rose from Labour voices and the media pressed for an answer to the financially illiterate question "what vital services would you cut?"
The Tories did indeed criticise every recent budget for increasing Government debt and it seems they have been proved right.
If you are troubled by the fact that pledges to "cut waste" were unspecified, you can set your mind at rest by visiting the Taxpayers' Alliance website where you will find a detailed explanation of where £400B has been wasted by this Government. And of course, Labour has promised to cut waste too - it just can't manage it somehow (e.g. Tax Credit overpayments, welfare fraud, NHS IT projects etc, etc).
Your third point is widely held but, IMHO, thoroughly mistaken. You say "the current crisis is known to be largely caused by lack of financial regulation". I'm afraid the new Chairman of the FSA doesn't agree with you, as he told the Commons Treasury Committee only last month. We have actually had a lot more regulation over the past 12 years and it manifestly hasn't worked. Box ticking regulation accompanied by reams of Key Features documents through the letterbox when you buy a simple financial product has been shown to protect no one. If it hasn't worked, perhaps it is time to try something different rather than more of the same: not more regulation but better regulation.
Just to complete the set, I note your last point says the last Conservative Government was responsible for "multiple" recessions. I don't think that two really counts as multiple - especially as the 1979/81 recession was obviously caused by the previous Wilson/Callaghan Government (remember the IMF bailout, Winter of Discontent anyone?).
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The reality is that the room for manoveure is probably small. The reason that labour are very wrong footed is that they failed to realise the size of the problems in the pipeline. Essentially they seem to have been planning for a short sharp recession. Doh. The problem is in terms of a conservative strategy all we have seem is a bit of conservative parsley spread on top of some labour small potatoes. I know we have a year to go but this just does not cut the mustard. Anyway wasnt this idea of salami slicing banks valid as it may be from over the pond. Why is the talk endlessly about banks, they dont manufacture anything other than debt.
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As the Shadow Chancellor, George Osborne has been remarkably quiet since last September. I suspect he has no more idea what to do in this crisis than Alastair Darling - perhaps less. Vince Cable seems to have the best take on matters. On the few occasions Osborne has spoken out, it is only to come out with superfluous comments such as this. I thought David Cameron's announcement that Conservatives would freeze the cost of the TV Licence to be equally irrelevant, particularly after they'd criticised the 2.5% VAT reduction, which is a similar measure but of much greater magnitude.
We haven't heard the Conservative solution to our present crisis - I daresay they're still working on it, but if they are simply going to rely on a "small government, de-regulated market economy, anti-trade union" solution then they'll lose all credibility. If they're thinking of increasing military spend and boosting arms exports they'll lose the next election. It's largely the 'right wing' policies which have got us into this mess. This crisis didn't start in China or Russia, neither did it start in France or Germany. It started in USA and was quickly followed by Britain before reverberating around the world.
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Stephanie, you make good points here.In a national emergency HM Opposition should show leadership, not reactive carping. The real worry is whether the deficit going to 118 billion and national debt over one trillion is becoming structurally unsustainable. Servicing debt interest alone is becoming an issue of concern. Osbourne is facing the prospect of making choices between promoting tax increases ( against his grain politically although he'll support 45% on the rich ) and/or expenditure cuts. Evan Davies exposed his weakness by making him look silly in suggesting public pay restraint was a key answer to the black hole.
He went along with the October bank bail-outs but criticised lack of due diligence. He wanted his national loan scheme to circumvent effects of bank deleveraging and has become frustrated at lack of positive results from bail-outs 2,3 and 4. He supported QE.He'll have an independent budget office to patrol book-balancing - OK.
To be fair, further unsustainable spending could question sterling credibility and make things worse - what you may consider small stimulii could be the straw the breaks the preverbial.
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I disagree with much that has been said above. IMO none of the established political parties are proposing the radical departure from "business as usual" that would be needed to see the UK prosper and grow in an ethical and sustainable manner; the political debate is all about (relatively) minor adjustments, mere tinkering.
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perhaps someone could shed some light on this for me....
Banks have been "bailed out by taxpayers". However, RBS' balance sheet is approx 2x UK GDP whereas total tax receipts of the UK are probably around 1/3 of GDP. So how can taxpayers bail out RBS et al?
Secondly, taxes have not risen since the bailouts (VAT has actually dropped) so how have "taxpayers" bailed out the banks. My rudimentary economics would suggest to me that the bailouts were paid for by issuing government debt and therefore it is the people that bought this debt that "bailed out" the banks.
Thirdly, I agree taxes may have to rise in the future but I do not see why they HAVE to. As long as the government can issue new debt to pay off the extra debt as a result of the bailouts then, there will be no need to raise taxes and therefore no effect on the taxpayer.
So back to my original point. How exactly have taxpayers bailed out the banks?
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Dear Stephanie,
The pith and wit of your blog has held me riveted. But to learn that the Conservatives are going to be "a big part of this debate going forward"? Without your gentle guidance, might I have thought they would be marching backwards? I think a small part of me has just died.
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I seems to me that, for the last 12 years, there has been a convergence of both the Labour and Tory parties. Labour went right and the Tories went left and they met in the middle of nowhere !! Both are just as bad as each other !! There is nothing to choose from between them.
Each is as bankrupt of solutions as the other and both are floundering around while attacking the other.
Do we have any hope other than these two lots ??
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#18 bigdaveisspursmad
"How exactly have taxpayers bailed out the banks?" Current taxpayers haven't - that burden is being passed on to our children and grandchildren.
"As long as the government can issue new debt to pay off the extra debt" - that's what got us into this sorry mess in the first place.
What do you expect from a state whose successive governments, instead of using oil as a one off resource which would last only 70 years, used it to fill the hole in current revenues, leaving the structural deficit untouched.
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John_from_Hendon # 9
Tory "slash and burn"? Ha, ha, ha! That's kids stuff; you obviously haven't met any Miseians yet!
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Along with what appears to be the majority of posters, I do not believe that the Conservatives have any more of a clue than Labour as to how to fix this mess. But then neither do the governments/oppositions of any other country in the world.
If we are honest then the majority of actions taken here and in the US and Japan have not really been economic stimulii (even though they have been branded so) they have been pops to support a failed financial system. Results so far appear to indicate that the banks have not responded in the ways that the administartions expected. The conclusion would appear that the patient is in fact too sick to recover. So let's stop being Chicken Little. Let the banks fail-the sky will not fall on our heas and new institutions will be born to take their place.
Only then can we have a true discussion on the merits or otherwise of stimulus verses "Irish" approach.
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#20 ishkandar
Interesting to see your perspective (and I think in UK terms probably right). In Scotland, of course, there is a different political dynamic.
If one tries to take the constitutional issue out of the equation (rather difficult since it is the main issue) then our choice is between the two main parties - SNP (a standard European social democratic party, whose instincts are decentralist), Labour (a wierd mix of old Socialists and modern centralists, whose only common interest is hanging on to power, which they want to centralise) plus the 2 minor parties - the Tories (who have re-invented themselves by ditching many of the links with English policies, and have been the only Unionist party to understand how a PR/minority government system actually works)or the Lib-Dems (frankly few here understand what they stand for - although their constitutional position is probably the one that would recieve majority support).
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I suppose it is inevitable, if rather tiresome, that this will degenerate into a partisan squabble - particularly with an election in the offing. But it's really a bit thick to suggest that Stephanie was stating anything other than the obvious.
On the partisan front, both parties (indeed all parties) subsrcibed to the economic consensus that borrowed money is the same as earned money, and credit the same as debt. All were in thrall to the City and believed that our future lay in financial services. All favoured light, and then lighter touch regulation. None challenged the course until after we hit the rocks - and then they started to reinvent themselves.
As for fiscal stimuli, and the maximum level of debt, no-one actually knows where the limit is: we are testing the limit, and the Government (whoever is in power) will go on testing the limit, until the markets decide to call a halt.
That point depends on the perceived ability of the UK economy to pay off it's debts - and therein lies the real question. As these debts increase the ability to repay will turn on (a) a return to economic growth and increasing tax revenues and/or (b) an increase in tax rates and increasing tax revenues. The big unanswered question is whether anything currently being done, or advocated, will actually stimulate growth: and whether they can hold off increasing taxes that could nip any growth in the bud.
Maybe they're sitting on the fence or maybe, as Tom Lehrer sang, "Soon we'll be sliding down the razorblade of life".
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#24 What we need is less of this "Party Political Broadcast" and more of someone with even a glimmer of knowledge of the mess we are in and, maybe, just maybe, offer us a solution(s) !!
Considering that the current and next generations are too egocentric, I think there will have to be a very radical shift in culture and thinking before we can actually rise again from the ashes of this recession. Far too many are *STILL* demanding a return to *more* lending by the banks and other financial institutions. What we *need* is a freezing of any more lending and try to pay down the debts already lent !! But not a word is said by anyone about how repayment will actually be made. Indeed, nothing is said about where the money is going to come from to make the repayment other than devaluing the Sterling !!
The SNP's dreams of an independent Scotland becoming a world financial centre comes from the same place as Our Glorious Leader's dreams of Britain being a world financial leader. Class-A substance dreams !!
As the old saying goes - Either we hang together or, most assuredly, we'll each be hanged separately !!
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What a completely inane article. Here we are after 10 years of Labour mismanagement, staring down a big black hole called public finances (which should read taxpayers liabilities) and yet we have commentators thinking Gordon Brown has done a good job? Dear oh dear, we really have no hope! Only when this country has been brought to its knees will the socialists be happy and by then will they be happy as we will all be poor and equal!
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#25 "The big unanswered question is whether anything currently being done, or advocated, will actually stimulate growth: and whether they can hold off increasing taxes that could nip any growth in the bud."
There is the third option - stop talking about growth and start talking about evolution !! Previous policies, concepts and creeds have failed. Why must we carry on doing the same thing again and again !! What we need is to move away from this focus on growth and towards more on building up what we already know works and try to develop other, new ways that may give us a better chance. Britain has not come to a total grinding halt (yet) !! Companies are still doing business; people are still employed !!
A famous Aesop's Fable about a dog with a bone crossing a stream illustrates this obsession with growth perfectly !! By obsessively chasing after growth, we may yet destroy what little good we have left. Surely, we must safeguard what works now and, only when that is safe, can we think of growth !!
And by safeguard, I do *NOT* mean protectionism !! That, more than anything else, will do more to destroy what we have left. Just what is the point of manufacturing is no one wants to buy those products. The acres and acres of disused airfields infested with unsold, brand new cars puts large exclamation marks on this point !! To carry on making yet more cars to be *unsold* is folly beyond belief !!
30 years ago, we laughed about the European "butter mountain" and the "wine lake". Well, now we have a "car swamp" that is sucking down any and all money thrown at it !! Anyone still laughing ??
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Ms Flanders, your article is an interesting read. But a few points:
1) As noted above the phrase "going forward" is meaningless business claptrap. It is bad English and I am certain you were not taught it in school.
2) As you well know, any talk of cutting public finances gets turned into articles in The Guardian, The BBC, and from Labour about getting rid of nurses who only make 21000 a year, or low-paid teachers... When in fact there's a lot of fat that can be trimmed.
3) As you also know, any talk of tax rises becomes talk in the Dailies about how the honest hard-working people are propping up teenage mothers' benefits, or how it will prevent families taking two holidays to DisneyWorld a year.
4) Since cutting public expenditure and raising taxes is turned into an emotive issue by the media and the Government (Labour), it hardly becomes a vote winner. However, since 1997 taxes have gone up under Labour and there are many who doubt key public services have become better.
5) The UK's public finances were in a very good position in 1999 and 2000. Government borrowing and debt was low and the budget was balanced. This came about through hard work under Kenneth Clarke's stewardship and the legacy of his 3 year spending plans. However, since 2000 the budget deficit has gradually become worse each year and Government borrowing and debt is now reaching a perilous state again.
In response to an above remark about the UK's oil. It is true that north sea oil revenue has been used to plug holes. In truth in the 80s it was used to pay off debts and by the late-90s its revenue actualy helped us get budget surpluses. Having used the oil to first save and then second strengthen the economy, the Conservatives did not do a bad thing. What we required under Labour and Gordon Brown was prudence and a wholesale review of government expenditure. What we got was a massive increase in the tax burden and public expenditure.
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#28 ishkandar
I agree, and stand corrected. "Growth" has become a dirty word, and anyway it automatically builds in the exponential factor which brought us to this pass.
Whzat I meant, was stimulate viable economic activity that will keep people in gainful employment with enough income to enjoy a decent standard of living.
I also agree that to reach this we will have to find a new economic model and indeed a new lifestyle. To "evolve" if you like - and certainly to "innovate".
My point is that the current borrowing is not investment in the future but paying for past excesses. This will not stimulate anything.
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When it comes to the British government's liabilities, we must remember the following which are currently "off balance sheet":
(i) Toxic Asset Insurance of GBP600bn provided to RBS and Lloyds
This is likely to cost the British taxpayer somewhere in the region of GBP100bn to GBP200bn
(ii) Public sector unfunded pension liabilities
Thought to amount to between GBP600bn and GBP900bn in total
(iii) Public liabilities under the PFI scheme
Thought to be in the region of GBP48bn in total
Bear in mind the GDP of the UK is GBP1,300bn and you then get an idea of the magnitude of the above liabilities.
These costs will be spread over a number of years, but they are liabilites just the same. If the government was a company, it would have to provide for these costs in its balance sheet. However, the government has not made any provision; hence it has little room for spending on big "stimulus" plans.....
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#30 Then we are in agreement !! :-)
However, all is *NOT* lost !! There are, still, many areas where "growth" can be had !! By growth, I mean from Zero to something worthwhile. There are new discoveries and inventions still being made in UK that can be turned into viable exports. Just looking into the scientific sections of our media will show many areas of research that can be exploited to produce viable exports. However, these are long term projects and governments are notoriously short-termists (and short-sighted, to boot) !!
What is *not* needed is the two-fisted throwing of money at failed and/or lame-duck "industries", including the money-for-old-rope financial "industry" with their toxic assets poisoning the economic landscape !!
For the billions and trillions thrown at these people we could have, for example, a flourishing stem cell technology industry in 5-10 years. The Chinese are using part of their wealth to do just that -
http://www.chinadaily.com.cn/china/2009-04/09/content_7661915.htm
If they can go down that route, so can we !!
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The paradox facing the Conservatives is this. On the one side, they are absolutely correct to point out that the Western reliance on ever higher levels of personal debt needs to be corrected. On the other, correcting this predicament in the midst of such a nasty recession is hugely unpopular. For the moment, it is a more populist strategy to throw government cash at the problem as only a small percentage of the population view this action as a financial penalty being placed on their own personal situation. It is distinctly unpopular to tell the less prudent that they cannot borrow as much in the future and have to save more, however truthful this might be. This paradox between what is right and what is popular is what vexes any opposition at this point in time. What is surely most important to any Briton concerned with the prosperity of his children and grandchildren is the medium to long term health of the British economy. Given where we are, there are sacrifices that need to be made in the immediate future, to give the country the best possible chance of securing the medium to long term prosperity. This balancing act requires skillful tactics by any political party wishing to form a government, simply because the best policies for our long term future are possibly the least popular ones.
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From the tone of the comments made here on the Irish budget, I gather that the general feeling (at least in this blog) is - Judge not lest ye be judged !!
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"Sorry, but I disagree with your assessment of the man big time. He is a failed wimp. Mervyn King knew that asset price inflation was getting out of hand over a decade ago - yet he did nothing - if he had had even an iota of courage he would have done something about it and he bottled it and by so doing destroyed the UK's economy!"
How can one policy rate be used to control domestic goods inflation at the same time as internationally traded asset price inflation? Not to mention the fact that his legal remit was only to tackle goods price inflation. Only a global agreement could be used to slow capital flows into certain kinds of assets and that isn't going to happen.
On the question Stephanie posed about the distinction between automatic stabilisers and discretionary spending and would the markets note this distinction, yes I most certainly think they do. Due to this government spending right the way through the economic cycle we have one of the highest structural deficits of the G8. If the government were to indicate that they did not see this as a problem by initiating more discretionary spending and pushing up interest payments still further then the difference between the primary deficit and the total deficit would widen.
I don't think political parties would worry too much about this detail but I am making the point that it is the intention to increase a structural deficit which matters to the market.
Both Parties will have to drastically slow public expenditure after the recession abates. The difference is that Labour are trying to tell us the Conservatives would cut public spending while keeping quiet on their own plans, and the Tories don't have any plans because the government will not release their forecasts.
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#27 NickinSingapore
I was going to ask if you had been living on a different planet for the last 12 years, although a different country may explain it.
Where are these socialists of whom you speak? Certainly not this Labour government! If they have caused this mess (and they can only shoulder some of the blame IMO, as can be seen by a similar state of affairs in the US, Japan and Europe), they have done so by adopting traditional tory policies (ie light touch regulation and primacy of the City), certainly not be adopting socialist ones.
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#31 MrTweedy:
"Bear in mind the GDP of the UK is GBP1,300bn and you then get an idea of the magnitude of the above liabilities."
You're missing an obvious point here. If the UK's GDP is 1.3bn, that means 1.3bn PER YEAR. In that context, 48bn of PFI liabilities, whilst certainly not insignificant, is not quite as earth-shattering as you make out.
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When Crash Gordon handed over interest rate control to the Bank of England he was lauded by all and sundry, but what's the use of giving up interest rate control when you still have uncontrolled borrowing to buy the voters with.
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No.37. GHBRich
The liabilities I have listed are in addition to the published public sector net debt figures. In the medium term, tax receipts will be low, toxic assets will increase (the IMF is currently revising its forecast), welfare costs will increase as unemployment continues to climb, government financial support to strategic industries continues....etc, etc.
In other words, government costs increase while its revenues fall.
This article by Nadeem Walayat is worth reading:
http://www.marketoracle.co.uk/Article9945.html
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Mr Tweedy - I am not disagreeing with your basic point - only a fool would not be concerned over the level of public sector debt. I am merely warning against sensationalism - you make out that PFI liabilities, for example, are equivalent to 3.% of GDP. However, in reality, they will have to be paid off over 10-20 years, so represent a much smaller 0.15 to 0.3% of GDP.
We need to keep all our issues in perspective if we are to find solutions to the very grave problems that threaten the prosperity of all of us.
As I have said before, what we need right now are measured reactions, not reactionary measure.
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I did say the liabilities will be spread out over many years, but they are very large liabilities. I still haven't recovered from the thought of the taxpayer insuring all those banking toxic assets. This insurance payout is likely to cost between GBP100bn and GBP200bn and could fall due within the next 5 years. That's the one which finished me off. I would have preferred the banks to pay for those out of their own profits. They could have treated them as "intangible assets" and written them off over the next 10 to 20 years. Instead, we the taxpayer got lumbered with the bally things.
I agree the following wording in Nadeen Walayat's article is rather sensational: "Quantitative Easing, exploding public sector debt and liabilities with the petrol of bankrupt banking sector liabilities that look set to reach £2 trillion thrown on top of the country's balance sheet, all paint a bleak picture for the UK economy for many years if not decades..." It still makes interesting reading, though.
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Not a big fan of any article which feels the need to write certain sentences in big red capital letters to be fair!
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The Conservatives' problem is that the next general election is for them to lose as Labour has already lost it and is going for oblivion. The Tories need to keep their powder dry. Therefore they will only think big thoughts for the next twelve months until we are in the campaign.
Everyone including the riot squad should be able to see that the country is deep in debt. The figure of GBP 3 trillion is a reasonable estimate. We need to know from both Labour, the Tories and Liberals as to how they expect to deal with such a mess if they get elected. We are not hearing this for the simple reason the issue is far too large to absorb.
The simple reality in my view is that the social democratic state which has been progressively erected in the UK since 1945 has now totally failed. This last Labour government has taken the expectations too far so that this model for the British state lies broken. It is just no longer useable.
We live in a time when the stupidity of Big Business is writ large alongside the sheer wrong-headedness of Big Government. Neither present us with a solution but just more of the same. The time of the big corporation, whther privately owned or taxpayer funded, is over for the simple reason it is unmanageable. This is the point the political class need to embrace and bring into the discussion. I doubt if they will have the moral capability to do this as it is against their basic self-interest.
However, if they don't then the public must. Do we need the state and if so, what should it do, how is it to be funded and what public management should it be subject to? These are the political questions for our time.
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It seems to me that too many reporters and respondents to this blog (and others) are all too keen to both blame politicians and to seek solace in a belief that their favourite politicians will somehow solve the situation. We all know that behind the scenes are a bunch of civil servants, complete with cushy salaries and feather-bed pensions. It is these unnamed people who have spent the past decades (perhaps century) ever expanding their own empires whilst creating a banking system that is the antipathy of a free market. (One of the criteria for setting up a bank is to have references from an appropriately connected chum!). It is about time that our financial journalists put some effort into analysing the actions of those pulling the levers of power and naming and shaming them.
It would also be helpful to analyse the impact of government spending. Stephanie, on the 7th, talking about the Irish experience, said
Back in the late * 1980s, debt was over 120% of GDP, and everyone thought that a recession would be the price to pay for bringing borrowing back down. Instead, getting the government's books in order was the start of the long boom.
Similarly, here in Britain, we saw the impact of government meddling in our economy through the 1960s and 70s. It forced the government to resort to IMF borrowing. Prima fasciae it looks like any and all cut backs in government correlate with improvements in economic performance. If this is true then the solution to the current difficulties is clear even if it is painful to some. Rather than policies that continue to load future debt onto the taxpayers it is clearly time to cut back massively on government expenditure.
I suggest that we make an immediate start by scraping all civil servant pensions forthwith. Afterall, it is unfair for hard working savers to be penalised whilst their supposed servants continue to live the high life.
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#27 Nickinsingapore "Only when this country has been brought to its knees will the socialists be happy and by then will they be happy as we will all be poor and equal!"
Possibly the most successful "socialist" government in the world is the Peoples' Action Party of Singapore. Mr. Lee senior, Mr Goh and Mr. (or should that be Brigadier) Lee junior have brought wealth and prosperity to an island of about 4 million people with *NO* natural resources except the ability of its people !!
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rwolff (#44) .."in Britain, we saw the impact of government meddling in our economy through the 1960s and 70s....
//
I suggest that we make an immediate start by scraping all civil servant pensions forthwith."
Why not just say 'I am an anarchist' and leave it there? How and why do anarchists go about trying to stop others organising and planning?
Should be not all look to the consequences of behaviour rather than discuss intentions?
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Whenever conservatives give details on their plans (or Lib Dems for that matter), Labour steal them. Fair enough and all for common good, but just shows they are completely out of ideas, running the country blind.
THAT is why it is important for them to highlight 'I told you so', because if Labour get away with taking credit from this they will continue to run the country into financial and social ruins built on lies.
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I haven't read all the earlier posts so apologies of I am repeating a point already made. However, whilst the relative extent of the public debt is probably incalculable, since it, and GDP, are constantly moving and no two bodies appear to use the same method of calculation, the absolute extent ought to be more easily pinned down, i.e. as a sum of money rather than a percentage of GDP.
It strikes me that we are in danger of repeating the mistakes of the mortgage brokers if we are not careful, consolling ourselves that debt is 'only' 60, 70 or 80% of GDP, and Italy, Japan, the US or whoever is much higher. In fact the issue is can we afford it? Where is the income coming from to not just pay the interest, but also repay the capital.
As the debt rises, so the annual interest cost rises and a higher proportion of government revenues is required just to service the debt. The question should not be what is the proportion of our debt to GDP, but what is the cost as a proportion of government income?
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#44 rwolff
What a constructive contribution!
I think you may have spent a little too much time watching Yes Minister and not enough time living in the real world.
If you had the slightest clue of what you are talking about, you would know that Blair spent the majority of his time in office reducing the power of civil servants (who are the only ones not up for re-election every 5 years and can therefore take a long term view of the country's needs) and replacing them with his own political advisors (ie the no. 10 policy unit), whose goal in life is to see Labour re-elected.
As for the idea that the civil service has created the banking system, I can only say that your ignorance knows no bounds.
Grow up.
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18 bigdaveisspursmad
''perhaps someone could shed some light on this for me....
Banks have been "bailed out by taxpayers". However, RBS' balance sheet is approx 2x UK GDP whereas total tax receipts of the UK are probably around 1/3 of GDP. So how can taxpayers bail out RBS et al?''
Total tax direct and indirect hovers between 43 and 46p in the pound. This is common across developed EU countries.
Only the taxpayer has the funds to stop the banks collapsing. Not my conclusion, others eg a major hedge fund in the US undertook an assessment aug 2008, plus others. The arguement effectively for intervention is banks are infrastructure. However this is the weakness in the arguement for continuing to put money into the banks, infrastucture is not a primary economic mover, it is an enabler, it is only part of a team. That is probably why the belief simply dealing with the problem via the banks is illfounded. That is why endless focus on the banks is a bad call.
''Secondly, taxes have not risen since the bailouts (VAT has actually dropped) so how have "taxpayers" bailed out the banks. My rudimentary economics would suggest to me that the bailouts were paid for by issuing government debt and therefore it is the people that bought this debt that "bailed out" the banks.''
Liability rests with the taxpayer.
''Thirdly, I agree taxes may have to rise in the future but I do not see why they HAVE to. As long as the government can issue new debt to pay off the extra debt as a result of the bailouts then, there will be no need to raise taxes and therefore no effect on the taxpayer.''
Books have to balance longterm or public borrowing stalls. You are suggesting a perpertual borrowing machine like Brown built.
Because a large debt is now on the books taxes have to rise, and 46 p in the pound appear a barrier so this is a problem, or public spending has to drop. Further as the economy shrinks welfare costs rise and tax take reduces as it is roughly pro rata. The fudge will be some tax small rise and some spending cut and wholesale means testing for access to services.
''So back to my original point. How exactly have taxpayers bailed out the banks?''
Via loans and swops and openended liability possiby for a generation, based on Browns 5 year bubble.
The problem is banks operate by taking a transaction fee on transactions and by arranging or manufacturing debt. They do not create economic activity they help enable it. Hence the failure of putting too much money into banks and not creating the right economic environment for the privates sector alongside it. How does anybody expect a mechanism that simply takes a skim on others endeavours to create economic growth, beats me. It is now too late to do much other than wait because there is now a collapse in consumer confidence and the contagion will spread. This is a psychological war which is inducing economic fallout and following a cascade. The problem I would suggest is that it was a one shot game and it will fail because the governments underestimated the scale of the recession and shot at the wrong target. this is a cultural problem of not wanting to hear other than what suits. There was one lone voice on the BoE committee saying thai was coming. The others took a rosy view. We are now in a situation where events move faster than the hMG policy can be implemented and the feedback loop has failed. eg HMG being 39bn GDP out in less than 6 months, Nov 08 budget to Apr 09 budget.
Doing all it takes is meaningless if you dont know what you are doing.
I hope that makes you feel better but I doubt it. If it is any help 85 percent of businesses traded throughout the Gt Depression and the majority of people remained in work. Housing is the key and economic recovery will only have occurred when the housing market functions 'normally' both here and in the US. However ave UK house prices, currently >150K may have to fall to 125K ish based on pre-bubble prices plus inflation, just a guess. Lets hope it is wrong.
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46 JJ
We have already been here anarchists are not a problem because they self defeat. They may be noisy but they are pointless. ; )
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Any political system which results in a shrinking population along with differential/dysgenic fertility is biologically unfit, and if there are other political systems, must therefore be replaced. Therfore, Liberal-Democracies must be/will be replaced. If one looks into this, they are, at a global level, being replaced.
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To the extent that the stimulus is successful it increases government revenues. Cutbacks can be expected to slow the economy further and decrease government revenues.
The lesson in this is for the future, not the past. In the future during the good times government should make sure that their financial position is strong enough to allow stimulus during recessions. Given that we are where we are stimulus is a lower risk.
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This comment was removed because the moderators found it broke the House Rules.
Im so glad he and the rest can gloat and do a victory lap as you point out, they can afford to , the rabble mob can struggle, everything can suffer , but so long as he is clever and glad.
Where was he and his predecessors before now shouting from the rooftops that it was going wrong ???
Even I can look clever and say it was wrong after the event.
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glanafon (#51) "We have already been here anarchists are not a problem because they self defeat. They may be noisy but they are pointless. ; )"
True, but many don't appreciate the extent to which their thinking and action is anarchistic. People lack self-awareness of the consequences of their actions and thus deny what is sometimes clearer to other observers.
As an aside, there was a revealing scene in the 1981 film REDS where Warren Beatty as 'Jack' Reed is seen going with Zinoviev, Radek etc to Baku in order to spread the word of the COMINTERN to the 'Middle East' (the country later becomes a Soviet Republic of course). Whilst there, his words are translated for the locals, and he asks why the crowd is excitedly shouting Jihad! Jihad! Jihad! He's told that they are supporting him in his call for Holy War against the US and other imperialists/capitalists. Later, back on the train, Reed angrily complains to Zinoviev the latter had no right to translate his words 'Class War' into 'Holy War'.....Zinoviev disagrees saying that the COMINTERN decided the phrasing of propaganda.
The original (largely Jewish) Bolsheviks who originally led the revolution and COMINTERN were later ousted/purged of course.
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I suppose it all depends on what is meant by anarchy. No government may well be better than bad government, whereas good government is a very precious thing.
I often quote from `Mutual Aid' by Piotr Kropotkin in management seminars, among other quotes, to promote team values between often disparate groups. Kropotkin was an anarchist communist whose writing is well worth a visit. He was an opponent of Social Darwinism, whose shadow still lurks within prevailing social mores.
Anarchists today tend to reflect the more egotistical values of our time which makes me question how different they actually are and what exactly would their revolution produce.
A revolutionary elite will still be an elite and that is the very thing which we should be getting away from.
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glanafon,
For what it's worth, I totally agree with you about the stupidity of pouring more and more resource into the banks.
"How does anybody expect a mechanism that simply takes a skim on others endeavours to create economic growth, beats me. It is now too late to do much other than wait because there is now a collapse in consumer confidence and the contagion will spread." The amazing thing is that the great and good either don't see it or have too much vested interest!
If I remember rightly when Brown started on his 'save the world' strategy, he promised capital investments in power, transport, hospitals etc? Can anybody tell me what happened to that? It would have been a far more beneficial stimulus to the economy. It all smacks of Chicken Little economics and politics.
Where we diverge is the housing market. The biggest failure of the government and City is not creating a viable long term investment product(s) to replace the reliance upon house prices. There is nothing magic about house ownership. Europe shows us that leasing and renting are viable long term alternatives. The 'need' to own your house is really just Thatcherite twaddle. If people can come to accept their houses as homes then more financial opportunities will be created. I don't know how you change this psychology but it is the biggest barrier to real development.
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No.58. foredeckdave
Once house prices have bottomed out (at around 40% less than their peak), we can introduce lending controls of no more than 3 x income plus proof of earnings. House prices should then remain affordable, and owning a house will work out cheaper than renting (mortgages don't go up with inflation but rent does).
My view is houses are a necessity (part of the basic human requirement for food, shelter and utilities), and shouldn't be bought and sold as investments. I am in agreement with you there. However, I do prefer home ownership over renting, as ownership provides stability for the occupant.
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This has nothing to do with the thread here, but I noticed the following in the BBC News Report about the BoE holding interest rates at 0.5%:
"The latest interest rate decision came shortly after economic data showed exporters were benefiting from a weaker pound. UK's goods trade gap with countries outside the European Union narrowed by more than expected to £3.964bn in February from £5.631bn the month before. Exports were up 12.8% and imports were down 5.4%, as the weak pound made UK goods cheaper abroad."
Curious as to why this only refers to trade outside the EU I popped over to the National Statistics Office site and found this:
"The UK's deficit on trade in goods and services was £3.2 billion in February, compared with the deficit of £3.1 billion in January (originally published as a deficit of £3.6 billion). The surplus on trade in services was £4.1 billion, compared with a surplus of £4.7 billion in January (originally published as a surplus of £4.2 billion). The deficit on trade in goods was £7.3 billion, compared with the deficit of £7.8 billion in January (originally published as a deficit of £7.7 billion). Exports rose by £0.4 billion, and imports fell by
£0.1 billion."
So, who chose the non-EU figures to show that the data shows that exporters are benefiting from the weaker pound? Is this in the BoE press release or a bit of BBC spin?
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Mr Tweedy,
Renting in the UK has been skewed. If you look to France or Germany you will se a very different type of rental market that is not based upon short term rental agreements. I once met a Frenchman who lived in a very large property in Somerset. He wanted to lease it for between 10 and 15 years and was prepared to spend a deal of money developing the property. However he was unable to convince the property owner or the financial institutions to assist him. He could not understand why such an arrangement that was usual in France could not be completed in the UK! If you want to rent an appartment in Paris you will be expected to sign for an intial term of 4 years. There can be stability for all parties concerned in rental markets.
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Here's one that's worth watching from Bobby Peston's blog....
234. At 1:07pm on 09 Apr 2009, Jericoa wrote:
All,
I dont think even Somali pirate can compete with the level of satire steeped in truth as you will find on the link below.
'Mervyn king' talking to the troops is brilliant. Credit to who ever did this.
http://www.youtube.com/watch?v=wtIjgsxe-jM&feature=related
They have done another similar one on the housing crisis which is even better.
jericoa
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stanilic (#57) "I often quote from `Mutual Aid' by Piotr Kropotkin in management seminars, among other quotes, to promote team values between often disparate groups. Kropotkin was an anarchist communist whose writing is well worth a visit. He was an opponent of Social Darwinism, whose shadow still lurks within prevailing social mores."
Here's a tip for any future management seminars which you run - dump anarchists!. The reason why people are being being made redundant in favour of automation (effective processes) is because the latter can be instructed what to do and relied upon to do as instructed.
Only anarchists believe otherwise (beliefs being non-effective, i.e. non-extensional).
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58 ffd
Wassup doc. Surely you have guessed that El Gordo has no money left, I mean he spent up to the buffers when things where up. Coffers drained dipping deeper and deeper to prop banks etc etc, all based on a short sharp shallow recession. All that has been going on is bringing existing budgets forward. Its like the rather barmy 'lets help people back to work'. If there are not the jobs which I am sure the newly unemployed will say is the case, nothing changes however much they are groomed. You remain with a nett downside.
I am not suggesting that houses are used as a vehicle for speculation. I am suggesting that they are needed, that undersupply has contributed to the problem, that loans need controlling, that work needs to be provided. Further that it would appear much of the US uplift following the Gt Depression appears to have been provided by the growth in house building. I dont see that house building has to be a problem. But people will not invest if they feel the house will dramatically drop in value or if interest rates will not remain stable. So the market needs to bottom and loans with some stability have to be available. A bit like they used to be several decades ago. If that worked they why do you think it is so damaging now. Houses by and large are built in this country, a few are shipped in in kit form, but most use local labour, local materials. When built they need fitting out, flooring, carpets, furniture. You know, that thing they used to call economic activity. Look around, where are the jobs going to come from. Making cars. Banks. The High Street. Dont think so. The variability of the price of a house is dominated by the plot value not the build cost. Seems to be plenty of land about. Oh, planning you say. Well that has been driven to protect house values and is under HMG control if required. It is a matter of will. If you say you dont like any idea of specualtion that is reasonable but you control that via the loan critera, like they used to. All this tripe about regulations and banks filling forms out. All it needs is a single sheet of paper at the point of sale. What is your verifiable income, what have you saved, what ratios are you seeking. remortgaging controlled on a similar basis, like they used to do.
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JadedJean 63
But that same logic also renders management redundant.
We are going to have change our thinking as the future will not be like the past. The bottom line is that we live in an unsustainable present.
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#60 As I have quoted ad nauseum - There's lies, damn lies and statistics" - and you have just proved that statement to be so true !! Who massaged the figures is not too relevant except to those who wish to score point but the central issue is that *ALL* figures must be cross-checked for their veracity before acceptance. When people accept such figures at face value, they are just asking to be gulled !!
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#63 "Here's a tip for any future management seminars which you run - dump anarchists!. The reason why people are being being made redundant in favour of automation (effective processes) is because the latter can be instructed what to do and relied upon to do as instructed."
And the reason why there's always a human/person in charge/command of a important function is that automation *cannot* make decisions outside its programmed instructions. Until AI can be made to function as well as or better than a human, and not merely mimic it, humans will always be needed to make "outside the box" decisions !!
Take the Hudson River Landing incident for example. An autopilot would have decided to plough on regardless and crash into houses and kill everyone in its path. A human pilot decided to risk a more dangerous landing in order to avoid a risk to more lives than those on board. Until AI can make such decisions, we will still need a few humans around.
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#66
Again we agree, but if you take it to the next level the question is not what the statistics are saying but who is saying what - and much more importantly why? If the BoE are trying to spin the Trade Statistics then they must be worried by them.
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61 ffd
Germany in particular has always been far more orientated to rental than ownership.
The majority of tenancies in the UK are short term 6 month contracts, which can be mutually extended but do not have to be. You have next to no security of continuation of occupation. This impacts on continity of schooling for kids, location for work etc. As has been reported if the landlord has financial problems the property is repo'd, locks are changed and the tenant is dumped on the street with no deposit recovery.
At least some privately owned rentals are in poor shape. Some are very good, but some are dubious. I do not see how you can force longer term lets onto landlords. Until recently there was a shortage of good quailty lets.
Possibly something like social housing, or housing assocations would help. Maybe they could even build such housing.
Incidentally it is noticeable that independent local housing build projects, lower prices (purchase, not rental) for locals based on conditonal planning are not actually coming to market much lower than open market prices in a falling market and usually are at a fixed price, non negociatable. Another policy not appearing to work too well.
Rather than experiment I would perfer to see something work which has worked in the past. Houseownership with controlled criteria for access to mortgages. It is something that can be done virtually immediately, there is nothing out of reach technically, even green tech can be incorporated easily. And we have the people capable of doing this twiddling their thumbs on welfare whilst bankers do their sums.
Am I missing something. It seems to me that we are forced to wander along at a timebase which is established in the good times when we are now effectively in an economic war in some sectors and need to make decisions a great deal faster rather than have politicans wandering about the planet agreeing about nothing much other than money going to banks and claiming this is an acheivement.
Researching and developing new products is long term, even assuming they are wanted by consumers or affordable, eg hydrogen cars. Nutty two wheeler cars that are like a bar stool under a brolly, would you want to drive at 30 mph on one. Brain dead, well you could well be in an accident. Never be commercially successful. Will never meet impact test criteria for a powered vehicle. Go fast and brake hard and it will fall over. Publicity stunt time.
BTW I expect at least some of the young to lose patience with the UK and emigrate. That is the message I am getting. The other field is measurably greener, it is not an illusion. And despite a contraction in acceptance rates far afield those with the right qualifications and experience are still welcome. What sort of society is it that encourages the bright and capable to emigrate. A failed one I would say.
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stanilic (#65) "But that same logic also renders management redundant.
Yes. Exactly. Hence so much redundancy in management. I suggest you explain this to them. They won't like it though, so you'll lose out too.
I agree, a lot does need to change. A lot is going to change. Effectivity is driving this. We have, to a very large extent, extensionalised (programed) what we call 'intelligent' behaviour and this will both continue, and get cheaper :-(
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67 ishkandar
''And the reason why there's always a human/person in charge/command of a important function is that automation *cannot* make decisions outside its programmed instructions. Until AI can be made to function as well as or better than a human, and not merely mimic it, humans will always be needed to make "outside the box" decisions !!''
Have you been in a bank recently. There is no outside the box. It is all driven by the great computer in the sky. They cannot make local decisions. It is computer says yes, computer says no. And if somebody unplugs the great computer in the sky, which happens occasionally, they have no other plan. Thats the way big business is heading. If a worm ever gets thru, I mean really thru, into the backups and all systems to lie dormant and trigger, they would implode. I would worry about AI. At present there are many cases where a customer appears to deal with an android, a human connected to a computer who can not make any independent decision. Next step AI makes the decisions and humans implement it. Assuming it is not already happening. I understand some AI systems may be in place in trading models on Wall St.
Anarchists support the people governing themselves, fair enough, assuming all the people can be bothered which does not seem to be the case at GEs. However anarchists can never agree on what is important so there is never any collective view, so nothing ever gets done. There does not need to be a collective term for anarchists because they never enter a collective state. They appear to be a complete waste of time because they never deliver. They seem to be white noise to me. If you are interested in managing politicans wandering off and doing what they want, not what the electorate want, after they have been elected you need a mechanism, a feedback loop, but anarchists who never deliver do not appear to be a solution. In fact my experience of anarchist types is if you bend over backwards and try to accommodate what they want when you get to implementation of all these wonderful caveats and clauses they are nowhere to be seen, gone off stirring it up somewhere else. The objective appears to be the state of agitation. Of course I could be wrong.
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JJ, think a little further. The reason people are being dumped in favour of machines has far more to do with the cost/profit effects and supposed higher productivity returns.
The relationship between cost and profit is a real area for management theorists to revisit. Let's take the statement made by RBS that, in order to maintain profitability it had to shed more UK staff whilst continuing to outsource more administrative tasks to India. Such a move may cut costs for RBS but there is a price to pay for that - customer satisfaction. If enough UK customers change banks merely because they can't understand the Indian accent at the other end of the telephone then the long term profitability of RBS.
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Tax revenues down due to economic contraction
Public spending up due to welfare costs
There is only more tax or less public spending or a mix, there is a limit to tax rises. Borrowing looks difficult all around.
As the objective wil inevitably move to identifying the most weakest target it has to be public expenditure. So cuts will be stealth and cutting 'waste', a bucket phrase. I cannot see anyway around the issue of more means testing. This is easier for Brown than Osborne but still difficult. It is just another reason for Osborne to wait and let Brown undermine himself. Meanwhile Osborne has to say something so keep it populist. The silence is deafening on an serious policy. Any war game says sit tight and let the oppositions position deteriorate. Brown is the one who has to play forced by the markets and a dire economic position. I am not sure anybody knows where the bottom is anyway. The drop is a straightline curve with no step yet. Brown has to keep calling it short because the pressure is on him not to depress things further, ie talking it down. He cannot win, he can at best call it accurately, he is more likely to call it wrong.
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ishkandar (#67) "And the reason why there's always a human/person in charge/command of a important function is that automation *cannot* make decisions outside its programmed instructions. Until AI can be made to function as well as or better than a human, and not merely mimic it, humans will always be needed to make "outside the box" decisions !!
Nor can people. AI is misnomer because most of those working in GOFAI had a basic misconception of 'intelligent' behaviour (which is Operant), and ANNs are just variants of regression/discriminant analysis (which takes us back to Fisher and eugenics). The empirical evdience is that actuarial decision making always does as well as, if not better than, 'clinical' (intuitive) decision making because the latter is really just derivative, i.e. based on uncontrolled sampling. We teach people to behave like computers (cf. maths attainment as the best, IQ proxy) but people are not as good (see Gaussian distribution of IQ and the factors which comrpise 'g').
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foredeckdave (#72) "The relationship between cost and profit is a real area for management theorists to revisit."
The world can do without 'management theorists'. Take a look at Behaviour Analysis/Management, it's a real science.
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The world can do without behaviour analysis/management!
You really remind me of undergraduates when the Boston Consulting Group's Growth/Share Matrix is explained and demonstrated to them. The majority believe that they have found the magic bullet. They now know what 42 means :)!! Few of them stop and think as 'the man' said "this may not be the truth" or at least the whole truth. Similarly you are basing your whole credo on an extension of a minor set of statistical facts as the basis for your empirical evidence. Again, you are really missing the bigger picture.
Science alone can not provide all of the answers man needs. We are more than a mere collection of atoms operating within a set of stimulii. We are more than an IQ score. Did you ever stop to ask yourself why the major portion of the scientific/academic community disavows your empical evidence or looks upon it as a mere (maybe dangerous?) abstarction? Are they ALL wrong, are you the only one marching in step? (OK along with a very few others). JJ you have nothing to offer.
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fortedeckdave (76) "The world can do without behaviour analysis/management!"
!
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THE MAN WITH THE BIG PICTURE (WHICH NOBODY ELSE CAN HAVE)
foredeckdave (76) Avast, me heartie... that be more (incorrigible) narcissistic grandiosity and rage, that be...
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You're right to spot that Osbourne's variable commentaries are more of a political gamble than informed economic analyses.
If the recession takes longer to play out than the Government predicts, his told-you-so incompetence narratives might stick. But if there's a turnaround within this year and sluggish growth next, government will say they've retrieved the UK from this US induced recession.
It's Opposition's role to criticise and hope. It'll be interesting to learn how Osbourne reacts over the coming year, if the recession shows clear signs of recovery.
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Jaded Jean
Over forty years ago I can recall arguing with my tutor over mathematical measurements of human responses. I said it can't work, he disagreed, moved on and I never heard of him again. It was/is a ridiculous theory.
In the last twenty years we have had the technology to amass and process vast amounts of data about human behaviour. This has led to the development of certain perspectives which suggest invincibility but which are actually just internally consistent. Yet such is human nature we are told they are truth; so given that they are the product of objective tools they then become science.
Sadly this is so very human: where have we all heard this sort of thing before? We are in the middle of the collapse following the new economic paradigm that had abolished boom and bust. Then we have the new great ontological issue of Climate Change which is diverting attention away from over-population, pollution and insufficient resources. Now we seem to have squared the circle on human behaviour. All this is the product of the processing capabilities of the silicon chip.
I will let you into a secret that the answer in every instance is not 42 but NO. In every case the conclusion is based not on the data but the nature of the original defining principles and how they are interpreted in the measurement of data, its collation and processing. Were all causal factors taken into consideration? They can't be as many are unknown. Whether you like it or not evolution continues.
These are all ideas and each has its own value but they are only a version of the truth and as such have only a marginal value. Human reality can only be determined by lived experience and that experience is dynamic. The important decisions are being made at the boundary of lived experience and not in the ivory towers.
I believe each human being must be critical of what they are told and be prepared to test it; group-think is a nightmare, as the Crash of 2008 proves, but rational debate among informed individuals working together each with their own strengths and weaknesses can produce dividends.
Perhaps we bipedal mammals need gods to keep us out of trouble?
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stanilic (#80) "Over forty years ago I can recall arguing with my tutor over mathematical measurements of human responses. I said it can't work, he disagreed, moved on and I never heard of him again. It was/is a ridiculous theory."
What you have written is irrational.
Most people argue from Natural Language assumptions/premises, which are invaribly non truth-functional (intensional) and therefore irrational.
That's a technical statement so don't read it too causually. Look into the sine qua non for logical reasoning (deduction), and what it effectively depends upon in terms of logical quantification and substitutivity of identicals.
Every time you go to a doctor you depend on the reliability of prediction of human behaviour. Topically, every maintained school uses prior human behaviour in their actuarially based risk assessment, i.e. in their prediction and management of behaviour i.e. prior SATs perfomance (amongst other CVA measures now for even better discrimination) to estimate (predict) KS3 and KS4 (GCSE) performance. Commercial CATs scores have a reliability of 0.7. This sort of measure (which use Data Reduction techologies like Factor Analysis or multivariate techniques like Regression and Discriminant Analysis) is widely used troughout the world and yet you say it can not be done.
People argue from ignorance, i.e their assumptions are unsound and so inevitably are their conclusions. At the individual level we do know how to shape behaviour. In addition, populations are manipulated/managed and market manipulated. Yet you say this can not be done. I have provided links to the SEAB site and referenced Herrnstein's work with others in Behavioural Economics where different parameters of reinforcement are titrated against one another (non Behavioural Economists call this value), roughly translating some of the key principles like Matching/Hyperbolic Discounting/Melioration into Natural Language terms like impulsivity, self-control and addiction. You say it can not be done.
I suggest you look into all this in the context of predatory economic boom and busts and human capital (intelligence). Rather than assert it can't be done. I suggest you ask some more probling questions as it seems to me that your assumptions are all wrong.
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JJ,
It's a load of tosh and deep down you know it but desperately cling on because doubting your 'scientific' proofs would leave you with nothing.
Get used to it. Life is far messier than a prescribed set of equations. Is it an art or a science - who knows but it certainly ain't anywhere near encompassed by you 'scientific' abstarctions.
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foredeckdave (#82) "Life is far messier than a prescribed set of equations. Is it an art or a science - who knows but it certainly ain't anywhere near encompassed by you 'scientific' abstarctions.
Many people make a career out of knowing, and contributing to others' knowledge of what's known about this. Would it be fair and rational to infer from the evidence posted here that whatever (higher) education/expertise/qualification) you might have, it is not in any of the sciences (or any of the other disciplines which require the rigorous application of logic and emprical evidence)?
If so, can I ask upon what basis you hold, and make, the assertions which you do?
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We need a change from all ''three' major UK parties, as they are n practice just variants on the same Liberal-Democratic/Social-Democratic, self-dstructive, theme. The electorate is not given any real choice at present.
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JJ,
Now just learn to read and comprehend. The point that I was making was that your 'understanding' of the world in terms of the 'empirical facts' is not the full story. If you cannot accept that life and society are more than your limited view than you are certainly a very disabled person.
If you must know my area of 'expertise' lies within the study of corporate and marketing strategy with particular reference to corporate culture. Now you come clean and tell us what YOU are expert at.
Could my research be considered as a science? At best it would be a social science as it has to acknowledge that it is dealing with 'real life' episodes that will not fit nicely into a lab experiment. But then neither do your 'empiriacl' facts contain themselves. You have introduced the concept of Behavioural Economics and fringe elements of the study of Psychology - neither of these can be claimed to be 'true' sciences in the terms that you demand of others.
So, in essence JJ, I am saying that neither you nor I have all of the answers. Unfortunately, you do not seem to be able to recognise the flaws in your arguments.
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JJ
I agree with you on post 84. The problem in the UK is the social-democratic state. Unfortunately for you and for me the vast majority of the electorate are wedded to the concept. They are wrong but until someone comes up with another model, more acceptable to the majority then we are rather lumbered with it. So it's evolution rather than revolution: which is more civilised anyway.
Sadly in post 81 in advising me that my remarks are irrational and derived from ignorance you have joined with the ranks of the new pararidigmers who said as much about my views when their boom or should we say Ponzi scheme was going strong. I am rather enjoying watching those selfsame individuals turn themselves inside out and dance on their heads now that times have changed. Only one has had the decency to apologise.
Being abused is the price of being different. I am my own person and so enjoy being different. Let's leave it at that.
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foredeckdave (85) "Now just learn to read and comprehend. The point that I was making was that your 'understanding' of the world in terms of the 'empirical facts' is not the full story. If you cannot accept that life and society are more than your limited view than you are certainly a very disabled person."
You further demonstrate that you have little understanding (and I am being charitable) of what science (and objective knowledge itself) comprises. This is a collective, cummulative, critical, measurement-based, set of behaviours, judged on teh basis of improvements in prediction and control. Outside of the analysis of empirical facts there's little which we can coherently speak or write of in that respect.
"If you must know my area of 'expertise' lies within the study of corporate and marketing strategy with particular reference to corporate culture.".....
//
Could my research be considered as a science?"
I have no idea what your 'research' comprises, but I suspect not from what you've written so far. No doubt this won't stop you telling me and others what you believe to be the case, any more than it will stop many others who think that they have earned degrees. The fact is, however, that we now live in times where education has been grossly devalued through half the population going to 'university' for purely commercial reasons.
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stanilic (#86) "So it's evolution rather than revolution: which is more civilised anyway".
If it were there would be no real problem. Sadly, the evidence shows (see Liberal-Democratic TFRs, especially East European) that it is hardly evolution at all, quite the reverse in fact, and some have been pointing this out for years (see Herrnstein and Murray 1994, Herrnstein 1989). Is it just cockup, or, is it, as Herrnstein allegedly thought, a 'liberal' conspiracy? One thing's for sure, it's more than just a Ponzi-scheme.
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JJ
You are getting sadder and sadder.
"You further demonstrate that you have little understanding (and I am being charitable) of what science (and objective knowledge itself) comprises. This is a collective, cummulative, critical, measurement-based, set of behaviours, judged on teh basis of improvements in prediction and control. Outside of the analysis of empirical facts there's little which we can coherently speak or write of in that respect."
Unfortunately for you, life is far more than your supposed set of behaviours. Your science is limited. So you can better predict and control can you? If that were the case then you would not be in the same mess as the rest of us. Pray tell me what are you planning to do with this CONTROL?
If you take your precious SATS then there is a great debate regarding what you believe that you are measuring and the usefulness, or otherwise, of your findings. If the majority are correct then SATS measurements were supposed to promote better information for the improvement of education. However, it would appear that you wish to use them for a very different purpose. Surely that is fraud? The move towards more and more measurement maybe scientific in essence but it's application has so far failed to improve the life of man.
No JJ, you can stay in your psuedo-scientific tower and pontificate all you wish but you will still not be correct because the basis of your assumptions are far far too limited.
Now you came and tell me what qualifications you have upon which to make your value judgements. You cast aspertions on the value of my qualifications so let's see how yours stand up to scrutiny. I note that you conveniently forgot to take up that part of my challenge.
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stanilic (#86) "Being abused is the price of being different. I am my own person and so enjoy being different."
That soudns like post-modern self-delusion. Being corrected/educated is the price one pays for being wrong. Are you absolutely sure that you can tell the difference between (your response to) being publicly corrected/educated and being abused?
foredeckdave (#89) On the basis of that post, you should ask Derek Draper or Damian McBride for a job.
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Answer the question JJ
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foredeckdave (#91) "Answer the question JJ"
If you look into what I have written, and give it some time, you will see that I have.
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No JJ you haven't, can't, or are not willing to. Grow up
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foredeckdave (#93) "No JJ you haven't, can't, or are not willing to. Grow up"
Once again you demonstrate that you a) have not followed what I have been telling you, and b) that you do not appreciate why I've made the ad hominem, and empirical evidence central to that I've posted.
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JJ 90
Quite frankly, madam, I just couldn't care less......
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stanilic (#95) "Quite frankly, madam, I just couldn't care less......
Well, ah do declare ...
Speaking of Oppositional Defiance, have you noticed that whenever we see/hear TV broadcasts from N Korea, the news presenters lips don't appear to match the sounds, and the sounds seem very 'shouty'/distorted/demented?
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