When Labour were elected in 1997 they more or less stuck to Tory spending plans for an election. They did this to build up their reputation for fiscal responsibility with financial markets. Everything I’ve just written is wrong.
In reality from 1997-2001 Labour spent more than the Tories would have, just as they did subsequently, but they did it off balance sheet. You can see the explosion of PFI deals from 1998 onwards. That is how Labour kept to their spending plans and built and refurbished loads of hospitals.
When it comes to fiscal responsibility you paper balance sheet doesn’t really matter, it’s your real future liability and assets that matter. Or at least that’s true in finance. What really happened is that financiers knew that the British state needed to invest in infrastructure and were happy to lend Labour money.
Labour could have got this money on normal sovereign rates but they were restricted by the press and by public opinion. A similar thing is playing out with the difference between Labour and Tory spending plans for the 2015 election. Labour are promising to be fiscally responsible but to borrow for investment.
In reality there’s no clear line between current spending and investment spending. Would tens of billions of pounds spent on effective mental health care pay reduce days lost to work and pay for itself and more? Would improved child care allow more people into work and pay for itself and more? Is repairing roads that are heavily congested really a valuable investment?
Just like in 1997, 2015 Labour are dancing to a tune that only exists in the public and press’s heads. It will probably end up with things better than if the Tories were in but worse than if they didn’t have to pander to nonsense paranoia about the national credit card. I expect to be writing this post in 2035 too so don’t expect this to change any time soon.
One of the problems with the world is a shortage of safe assets, places you can put your money and come back to it later. It sounds simple but if you have lots of money then it starts to get difficult. You can see this shortage in people paying negative rates to borrow money, there’s such a lack of safety that people will lend some states money and be happy when they don’t quite get it all back.
Wealth being kept safely is very useful service all round. People want to borrow money cheaply and people want safe investments. Good times all round. At the moment there’s a global shortage but that problem is soluble even if we are obsessed with deficit reduction we don’t have to be. But what about crooks?
Crooks can be very rich, in places where property is less safe than in the UK they can be very rich indeed. But they have a problem, the same weak institutions that helped them get rich – fiddle a procurement here, expropriate a village there etc – means they need to find safe assets to purchase.
You can, presumably, see it in the chart above, with London housing being bought by shell corporations with final owners unclear. You can see it in the uninsured safety deposit boxes cleared last week in what I think has to be called a “daring raid.” Swiss watches are very expensive, but it does help you move £100,000s across borders with the minimum of hassle. I’ve never seen a £50 note, but they are easier to store than 20s, and an awful lot of them are used that way. None of these are as safe as Swiss bonds but they all offer varying degrees of safety transformation.
I don’t know what impact this has on a broad level. The super prime London properties targeted may as well be in another country for all the effect they have on me but I do wonder how. It might be annoying for the Bank of England is a big chunk of the money supply sits unused but they can adjust to take this into account.
Crooks are, presumably, more ruthless than even investment bankers so with a generalised shortage of safe assets it seems possible that more and more safe assets (the glue of the financial world) will be owned by worse and worse people. What effect this will have I don’t know but it doesn’t seem like a terribly good situation. No conclusion to this post. I’m just going to stop writing now.
A thought occurs to me, one for here rather than Medium.
Given that journalism is so dominated by Oxford and Cambridge educated, private school white people (to a greater degree than average, not totally of course, normal disclaimers apply) it is helping social mobility.
The people I know in journalism are very smart people who are earning a pitiful amount in an industry destined to terminal decline. Its entirely possible people entering journalism today could be earning thousands of pounds a year more (and on a trajectory to earn tens of thousands of pounds more) but they’re not. This downward mobility, and we normally measure mobility in hard cash, is in some ways good for society.
Maybe if we pay attention to happiness economics these people are still getting a good deal. Journalism is a job with great intrinsic rewards. Women, people of colour, poor people still find it difficult to enter journalism, so perhaps it isn’t so good for society.
In either case, I salute young journalists commitment to doing work that makes them happy and jumping on the downwards scissor of social mobility.
Hello, not dead, just tweeting.
I’ve done a couple of pieces on Medium, which is a lovely site to write on. Not going to close this blog, but will try and use this more for scrappier stuff that’s not meant to look polished and for stuff too long for twitter.
Last week I took issue with Dan Hannan’s terrible history. It really was dreadful and I recommend you read this post. It shows the danger of reading your ideology back into history rather than letting the sources tell you what really happened.
Tonight I wrote about the Tory’s doomed planned to weaponise Ed Miliband and invented the phrase “Begging the Miliband” for the tendency to presume Miliband’s unpopularity is innate, not state dependent. It’s here. Weirdly Phil had the same idea, must mean we’re right.
I wrote it be fore the bizarre revelations that Ed Miliband was dating Stephanie Flanders for ages…I believe this is meant to make him look bad, but it just makes him look cool… Even after all this time I still don’t think the Tories really get sleaze.
There’s two stories this week that interest me. They’re both about power and authority and who can wield it. They look like pretty similar to me, but the reaction to each has been the opposite. Who gets to be violent towards women with children?
It seems pretty clear the answer should probably be nobody. But sometimes violence is necessary, like in Hannibal [Spoiler alert] when Clarice Starling has to gun down a woman holding a baby to save her own life. In what ways are waitresses and Bus drivers like Clarice Starling? Should waitresses roughhouse women with babies? Should Bus drivers push them about? You might ask, as she does herself, should even Clarice Starling be able to do this?
Nobody asked these questions this week. This is what made for the stark contrast between the reaction to Claridge’s banning women from breastfeeding openly and to First Bus winning a court case saying saying women with children in buggies couldn’t be forced to give up space reserved for wheelchairs.
If Claridge’s really wanted to enforce their ban it would ultimately involve either their staff violently ejecting and breastfeeding women who didn’t comply. First Bus argued that yes, the wheelchair space is for wheelchairs, but no, their drivers aren’t authorised to force a woman to move. The first of these was greeted with incredulity, especially when Nigel Farage requested an end to ostentatious breastfeeding. Of course women can breastfeed where they like. The second was greeted with outrage. Of course wheelchair users can use the space reserved for them.
But both of these questions revolve around who gets to exercise violence. Perhaps bus drivers wrestling with mothers and newly born is a good idea, but it’s not a clear cut case. The court may look callous in its decision, but it has laid out where legitimate violence may and may not be used. This is to the detriment of disabled people, if a mother can’t be reasoned with, but I can’t see a way around this because that unreason is not a cause for violence.
Few people think about what private property means, but it means excluding people, sometimes consensually, often violently. There’s lots of advantages to this system but there’s also drawbacks and these cases sit at this intersection. Private property means being able to force people to do what you want, but society places constraints on what and who you can boss about. I think Clarice Starling was right and FirstBus was right but I think Claridge’s was wrong and those positions are perfectly coherent. Violence can be put to good use, rarely though against women with children.
Owen Jones has a video up at The Guardian on the evils of property developers. He blames them for pricing people out of their homes, but I think he’s wrong. Sure property developers are building unaffordable housing, but that’s because land is unaffordable. When land is unaffordable it makes sense to build the most expensive property you can to make the best margin you can.
In the 1930s in the UK’s recovery from the Great Depression and terrible twenties Property Developers went wild. Just like today people responded to low interest rates by investing in housing. The problem is the 1930s saw housing built that people could afford and that people liked, today low interest rates push prices go up. It was the opposite in the 1930s. As Nick Crafts explains “85% of new houses sold for less than £750 (£45,000 in today’s money). Terraced houses in the London area could be bought for £395 in the mid-1930s when average earnings were about £165 per year.”
Why was this? Is wasn’t out of the benevolence of 1930s property developers, it was because the supply of land was far less regulated. There was no incentive to sit on land and even affordable housing becomes an attractive investment when land is easy to come by. Property Developers were just as selfish then but the system channeled that to something useful. The Second World War stopped this housing boom and the 1947 Town and Planning Act made sure it never came back.
In fact, get the rules right and property developers could go from enemies to heroes. Housing expanded so quickly in the 1930s it was the primary motor pulling Britain out of its long slump. Sound familiar? That could happen today, we just need to make it much, much easier for people to use land how they want, where they want.
PS Owen talks about India too. Slum residents (not owners) are cleared out of their slums so they can be redeveloped as better quality housing. This really is something to be angry about. People without deed to their property getting expropriated by developers working (probably) with corrupt local government. This is awful and I don’t have a good solution to this, primitive accumulation accompanies the early stages of capitalist development everywhere. Solutions on a postcard please.
In 2000 we agreed that financial contributions to the EU should be linked to Gross National Product because that is a sensible way to do it. Recently these figures were revised for incredibly boring reasons, R&D became value adding instead of a cost, some services which weren’t counted properly now are, and so on and on as boring and inevitable as statistics.
These revisions are important because of VAT, value added tax. Because part of the EU budget is paid for through VAT so we have to reassess how much we owe to the EU budget , it’s laid out in this pdf, via the FT. We’ve just found out we’ve added more value so should have contributed more tax. Those CRAZY Eurocrats.
It’s clear that David Cameron will pay this charge. He’ll make a big deal out of it, but he’ll pay. David Cameron made it his government’s mission to return the UK to a balanced budget. He’s not going to do that, but he wanted to move in that direction to protect the reputation and borrowing privileges of the UK.
The UK is in an a small club of countries which haven’t defaulted. There’s an advantage to keeping your promises and David Cameron wanted to sensibly protect that. People believing you is valuable and keeping your promises is the only way to guarantee that. I think he’s gone about it in a stupid way, and that’s his prerogative, his intention was to protect the UK’s history of keeping promises.
That’s why he’ll pay this. The UK updated its 1994 agreement 14 years ago and promised to pay. So pay it we will. Paying your debt means keeping your promises. If David Cameron cares about keeping the UK’s word he’ll pay up. He thinks he can play the offended statesmen for the home media without worrying lenders and he’s probably right, but if he wants to be a proper statesman he should shut up and pay up.