Economics

Labour don’t need 35 bills. They need Brexit and economic strategies

Published by Anonymous (not verified) on Fri, 20/07/2018 - 7:18pm in

Labour is apparently having an awayday on Monday to draft 35 bills to form a Queen’s Speech in the event of there being a snap election.

I have to admit the idea brought deckchairs to mind.

Labour can dream all it likes of power. And who knows, maybe it will get it, so shambolic might things become. But to think it will have time or resource for major change at present without first settling its Brexit and economic strategies is just absurd.

Forr the record, in my opinion, Labour has no discernable viable alternative Brexit strategy to that of the government at present. That begs the question of why anyone might vote for it with any confidence at present.

More important, it has no viable economic strategy at present. John McDonnell remains committed to the Jonathon Portes / Simon Wren-Lewis neoliberal strategy of a balanced current budget and borrowing only for investment, all overseen by an independent central bank that only uses QE for bailing out the finance sector. In other words, it remains in current and foreseeable circumstances quite firmly committed to pro-cyclical, recession enhancing, austerity.

It can dream of as many Bills as it wishes in that case, but with as much likelihood of success as my dream of Ipswich Town winning the Premiership next season has. And for those not in the know, Ipswich Town is not in the Premiership next season.

In other words, it’s time Labour stopped playing fantasy politics.

It needs to say what it would do on Brexit. And saying it will honour a corruptly secured election result is not a strategy. It's waffle.

But more important, Labour needs to say that it will run deficits if required; that it will QE them if it wants, and it will direct the use of that funding for the public good. And if the Bank of England does not like that it needs to say that the Bank of England will lose its powers.

Labour, in other words, needs to do three things.

It needs to realise Brexit is as much an issue for it as the Tories if anyone is to take its prospects of power seriously.

And it needs to realise that Brexit is creating abnormal times.

And in those abnormal times, it thirdly needs to have the courage to rewrite the rules of the economic game, which means abandoning neoclassical economics, embracing the reality of modern monetary theory and to argue that, as was the case in 1945, this is the moment to not just change things at the periphery but at the core as well.

But attempting to do that without tackling these fundamental issues is pointless. And I am still not convinced it knows that.

The shortest economic suicide note in history

Published by Anonymous (not verified) on Fri, 20/07/2018 - 7:10pm in

Tags 

Economics, Europe

The people of this country are at their limits. As I have already noted this week, despite supposed record numbers of people in work real and notional incomes are falling, which is not what economic theory says should happen in that situation.

And, to make matters worse, the UK population are saving less than they ever have. This data on the so-called savings ratio is from the ONS:

The reality is that people simply do not have enough left over to save. Margins have been cut to the bone. And a decline at the rate now being seen is quite extraordinary.

And this is before Brexit destroys jobs, cuts government cash flows, and increases prices because of additional costs, even if there are no additional tariffs or shortages.

We are already at breaking point. It’s either that, or the employment data is bogus. I confess the latter equally plausible, although if it is that only confirms my hypothesis that we are already in a terrible economic place.

And now we wish to impose more chaos on it? Brexit is the shortest economic suicide note in history. Has a nation ever before chosen something quite so destructive?

The government’s answer to Brexit chaos is that it will give up collecting taxes owing

Published by Anonymous (not verified) on Fri, 20/07/2018 - 7:06pm in

Tags 

Economics, Europe

The government has now suggested how it will respond to the suggestion that Dover will cease to function in the case of a No Deal Brexit. According to the FT:

The UK government will instruct officials to relax efforts to collect border taxes if Britain leaves the EU without a withdrawal deal, a junior minister told peers on Thursday.

Speaking to a House of Lords subcommittee, Mel Stride, financial secretary to the Treasury, said the government knew it would have to balance security concerns, revenue expectations and the pressure to keep goods flowing across borders.

“We will not compromise on security,” Mr Stride said. “But there will, perhaps particularly in the case of a place like Dover, where you have to keep flow moving very quickly or you have all sorts of problems, there will be a trade off between keeping the flow going and revenue protection.”

He added: “The priority will be to keep flow moving”.

This is is a quite extraordinary statement. First, it acknowledges that there will be a break down in law and order.

Second, it acknowledges that the resultin criminality will be permitted.

Third, it admits that an unfair playing field, biased against honest domestic businesses, will be created as importers not paying VAT will be able to undermine them.

Fourth, it ignores that the problems will not just be on imports; there will also (and glaringly obviously) be an issue on exports, where the issue will be just as significant, if not more so as every driver and vehicle will need to be checked for the right paperwork as well as the load, with payment being required.

Fifth, with no timescale being given maybe Mr Stride would like to give an estimate of this uncontested proposal? None has been seen. He might also like to consider why it is discriminatory for Dover.

But most of all, shouldn’t publicity be given to the fact that the government is now admitting that no deal Brexit now means a breakdown in the machinery of government? When a government realises the machinery of tax will no longer function one of its most basic functions has failed. And that is what Mel Strife has admitted will happen. And, apparently, we now think that a price worth paying fir the dogmatic stupidity of Brexit.

I despair.

Hey big spenders, upsizing our government only shrinks its value

Published by Anonymous (not verified) on Fri, 20/07/2018 - 7:44am in

Tags 

Economics

Why government grows, and how its size affects the broader economy, are important questions that have attracted surprisingly ­little attention as topics for economic research.

The Department of Transport is not on track for Brexit

Published by Anonymous (not verified) on Thu, 19/07/2018 - 8:35pm in

Tags 

Economics, Europe

I am not sure a National Audit Office report on the Department of Transport is standard holiday reading. But in the light of my comments on the potential for traffic issues to create crippling cash flow issues for UK business this one could not pass me by, and is out today.

These are the issues thatDepartmentnment for Transport is working on with regard to Brexit:

And this is the state of progress:

And this is the state of progress:

Note that as yet they have no idea what to do about borders.

And the only way to control the problems at Dover is to turn the M20 into a giant car park on a scale not previously imagined, with consequent transport chaos.

Maybe 7 million new driving licences are required. No one knows if they will be available by 29 March.

Or if UK lorry trailers will be allowed on the continent then.

Or if planes really will fly.

Am I right to predict chaos, when all this is dependent on a Department with an appalling track record? I think so. I strongly suspect the NAO shares the view, overall. As they say:

In essence, the NAO are saying that the official DExEU line is hopelessly optimistic; that the reality is nothing is safely on track for delivery; the border issue is being ignored and quite a lot is causing concern. What is more, the NAO imply they think this assessment too optimistic.

It's not looking good.

I stick by my forecast of chaos.

Reality is biting back at markets

Published by Anonymous (not verified) on Thu, 19/07/2018 - 8:03pm in

Tags 

Economics

The economy is reflecting the state of chaos in the government.

Real and nominal wage growth is declining again:

Retail sales growth is unsurprisingly depressed.

The pound has fallen below $1.30 this morning.

Beyond the UK, the Fed is having problems making the idea of interest rate rises stick.

They're just a banking fantasist's pipe dream here.

And the FTSE 100 sales on at near record highs:

The markets are trying to ignore reality.

Reality is biting back.

And its message is deeply uncomfortable. I do not see that changing. And sometime the markets will note.

Offshore

Published by Anonymous (not verified) on Thu, 19/07/2018 - 7:47pm in

Tags 

Economics

There are distractions this morning. I am offshore for a few days.

That's Bryher, in the Isles of Scilly. For the record, they opted into UK income tax in the '50s. They got the NHS in exchange.

And they're beautiful.

 

What’s the use of economics?

Published by Anonymous (not verified) on Thu, 19/07/2018 - 5:57pm in

Tags 

Economics

The simple question that was raised during a recent conference … was to what extent has – or should – the teaching of economics be modified in the light of the current economic crisis? The simple answer is that the economics profession is unlikely to change. Why would economists be willing to give up much of […]

On Solana's Civic Anarchism; or a liberalism for free spirits

Published by Anonymous (not verified) on Wed, 18/07/2018 - 11:18pm in

Life in this society being, at best, an utter bore and no aspect of society being at all relevant to women, there remains to civic-minded, responsible, thrill-seeking females only to overthrow the government, eliminate the money system, institute complete automation and destroy the male sex.

It is now technically feasible to reproduce without the aid of males (or, for that matter, females) and to produce only females. We must begin immediately to do so. Retaining the male has not even the dubious purpose of reproduction. The male is a biological accident: the Y (male) gene is an incomplete X (female) gene, that is, it has an incomplete set of chromosomes. In other words, the male is an incomplete female, a walking abortion, aborted at the gene stage. To be male is to be deficient, emotionally limited; maleness is a deficiency disease and males are emotional cripples.--Valerie Solanas (1967) SCUM Manifesto [HT Petra Van Brabandt]

The second paragraph is so arresting, as revolutionary transitions are wont to be, that it is easy to overlook, or deliberately pass over, the first sentence of SCUM manifesto. To do so would miss the extraordinary ambition of the text: it aims to establish the conditions of life worth living within a true society. The whole text is structured around two kinds of societies; the false or unauthentic one -- denoted 'society'-- and the true one to come after the civic-minded females have done their revolutionary work. The manifesto sharply distinguishes among three stages: the boring status quo; the thrilling revolution, which makes possible, a grooving society (society is the repetition that holds the manifest together). But it does it in the name of life and (thrilling) civic-mindedness. 

For, a true "society" consists "of rational beings capable of empathizing with each other." Today I wish to articulate the nature of such a true society. In so doing, I pass over what is most exciting in her work: the critique of patriarchy, the unmasking of the art industry, the stinging attack on the corruption of science for life-destroying ends (go read SCUM Manifesto for yourself). This society, which is essentially "complete" and lacking competitive principles is anarchic in character without "a government, laws or leaders." Solanas associates philosophy, not unfairly, with pompous prattle, but she echoes (recall) Socrates' true city and Spinoza that the best political community is one with true companionship and no hierarchy (she also refers to it as "eternity and Utopia"). For in a true society, true community is possible: 

A true community consists of individuals -- not mere species members, not couples -- respecting each others individuality and privacy, at the same time interacting with each other mentally and emotionally -- free spirits in free relation to each other -- and co-operating with each other to achieve common ends. Traditionalists say the basic unit of `society' is the family; `hippies' say the tribe; no one says the individual.

I do not wish to irritate more radical readers of Solanas (they can console themselves that before long my type is dispensable), but what she advocates here is the liberal good life.* She just thinks that men as they have been bred are incapable of it. Of course, she is not a thoroughgoing liberal; she embraces illiberal even thrilling means to solve the transition problem. But in this she is little different than those liberals who pine for Enlightened despots to help escape the cul-de-sac that is everyday politics. 

The point for Solanas of stressing the individual is not to make possible possessive individualism, but to promote the better kind, "to relate, groove, love and be herself, irreplaceable by anyone else." And "like conversation, love can exist only between two secure, free-wheeling, independent groovy female females, since friendship is based upon respect, not contempt." Of course, the material conditions  for this better kind of individualism "requires complete economic as well as personal freedom, leisure time and the opportunity to engage in intensely absorbing, emotionally satisfying activities which, when shared with those you respect, lead to deep friendship."

Not unlike Keynes, Solanas thinks the material conditions to make a true society possible are easily within reach. In fact, she advocates big data computing half a century before it became fashionable ("There now exists a wealth of data which, if sorted out and correlated, would reveal the cure for cancer and several other diseases and possibly the key to life itself. But the data is so massive it requires high speed computers to correlate it all.")

Before I close, I wish to prevent two misunderstandings: first, I do not mean to minimize Solanas's rejection of reform. Hers is a revolutionary program. As she writes, "SCUM will always operate on a criminal as opposed to a civil disobedience basis, that is, as opposed to openly violating the law and going to jail in order to draw attention to an injustice. Such tactics acknowledge the rightness overall system and are used only to modify it slightly, change specific laws. SCUM is against the entire system, the very idea of law and government. SCUM is out to destroy the system, not attain certain rights within it."**  The destruction is menacing for those attached to the status quo.

Second, I do not mean to suggest that for Solanas the best community is only love and conversation. Near the end of her manifesto, she points to a range of activities presupposed in it "to explore, discover, invent, solve problems, crack jokes, make music -- all with love. In other words, create a magic world."

There is, thus, a lush gentility in Solanas's vision. In fact, it is so gentle that one wonders how the civic thrill-seekers will adjust to it once they can repose from their revolutionary work.  

 

 

*This is compatible with the thought that in a second best society, a state, opting for neutrality may be more prudential choice under some conditions.  

**It is notable that authoritarian-minded critics of, say, Black Lives Matter or athletes that take a kneel, are unwilling to acknowledge that such protesters are symbolically committed to preserving the system rather than overthrowing it. 

The coming Brexit cash flow crisis

Published by Anonymous (not verified) on Wed, 18/07/2018 - 8:25pm in

Tags 

Economics, Europe

What will next April be like? I suggest April is the moment of concern simply because we will leave the EU on 29 March with no guarantee of a transitional deal, but I assume it will take a few days for the shock to hit.

I make the point deliberately that a shock will hit. I am well aware that millions of people cannot work out what the fuss about leaving Brexit is all about. As far as I can tell, they think leaving the EU is about as hard as leaving a pub: you decide to go, walk out and let the door slam behind you, appears to be their attitude. I don’t wish to to be patronising when saying that: I am instead reflecting what appears to be the commonly held incomprehension that there is any issue to deal with here.

The biggest shock of Brexit will, then, be the dawning reality that leaving the EU changes a lot, and at the same time very little. For example, there will be no mass expulsions of migrants from the UK. That’s going to disappoint many. That was, many think, what this was all about. At the same time there will be economic chaos.

Again, I use the word deliberately. Let’s assume that somehow or other the most potent indications of separation will not happen. Let’s assume then that, against the odds, planes do still fly to and from the EU. But let’s assume there is Hard Brexit, without agreement, because nothing else seems plausible right now.

This will men that planes might fly and ships might sail. But how long it then takes to get into and out of the UK is anyone’s guess. Unless the UK decides to abandon all border controls, the flow of people into the UK will take longer than it did before. And IT systems previously shared with the EU probably just won’t work. But we may get round this by simply giving up migration control. But the EU, I think we can be fairly sure, will not be so relaxed. Getting out of this country next year is likely to be hard work.

However, people will be the easy bit. It’s goods that matter. And again, even if we decide to throw open our borders (with considerable risk to loss of existing tariff revenues arising as a result) there is no prospect of other countries doing so, in my opinion. The EU will impose tariffs on UK sourced goods, and these and VAT on import will be collected, as they should also be in this country, without (it has to be added) the advantage of EU based IT systems.

I am not saying the additional time per consignment need be much. Only a fractional increase is required for chaos to ensue, and we in the UK (at least) have done nothing to prepare for this, at all. Nor, I suspect, have we now got any time to do so. The warnings have been given, time and again, and have been ignored. The consequences will follow.

Most suggest these consequences will arise from reduced investment and problems in complex supply chains criss-crossing the EU into and out of the U.K. I accept that there will be problems there. This will happen. Investment is already declining in anticipation of this. Disinvestment is likely soon.

But this dimension, and the loss of jobs, will be for the long term. In April 2019 the problem will be short term, fundamental, and catastrophic.

Every truck stuck at a port will not be working. It will take days for supply chains to collapse as all trucks will go into short supply as there will be simply too many at ports.

Paying for trucks to do nothing will cripple those hiring them.

The possibility that VAT will be due on import will be devastating for the cash flow of many small businesses.

And goods will simply not arrive. Some will perish, and the owners will not be able to sustain the losses.

Some will be too late to be useful, and payment disputes will proliferate.

And people will stand idle as all this goes in.

Losses will mount.

I think all this is foreseeable. In precisely which order, and what timescale I am not sure. But in April 2019 seems likely to me. And the result will be a national cash flow crisis.

Business survives on keeping money moving. As we know, money is nothing more than a promise to pay. If the delivery on that promise is delayed - and that, I think, will be the inevitable consequence of Brexit - then a cash flow crisis follows. And in business, one broken promise leads to another, which leads to another. No one can be sure where a crisis at the ports created by Customs delays will lead. All I can be fairly sure of is that it will lead quite quickly to a cash flow crisis for importers, exporters, hauliers, those who depend on them, and into the wider economy. And at the same time I suspect a simple shortage of trucks will have a massive knock on effect in the national economy as well.

Anyone who knows anything about business knows that it is cash flow crises that kill businesses. It’s not, in my opinion, tariffs, changed regulation, the Irish border, disinvestment or anything else that will deliver mayhem in the UK next year. It’s something much more prosaic that will do that. It will be giant traffic jams at ports that will impose lasting damage on the UK. So many businesses will suffer crippling cash flow problems the impact could be massive, and cumulative of course.

Mark Carney has said he may need to reduce interest rates to compensate for Brexit. He’s not got much scope to do so. And the cost of money will not be the issue next year. It will be its absence that will matter as debts do not get paid. This is the coming crisis of Brexit. And it is beyond Mark Carney’s reach to address it.

The government could though. It will be the only creditor able to waive what is owing next year and survive the experience. PAYE, VAT and other sums owing may have to be put on hold if business is to survive Brexit, in my opinion.

But, and let me make the point very loud and clear, that will require a government that understands money; the nature of debt and the the indifference government can have to accumulating deficits if they are used to keep the economy going, as will be the requirement next year. Without that understanding, and if the government imposes its own cash flow demands on business next year as it faces a crisis not of its own making, then the government could make things very much worse. And that is what I fear will happen.

I just hope I will be proven wrong, but systemically, this is, I think, by far the biggest and potentially most dangerous crisis Brexit might create, and the most urgent that has to be addressed. But I am not hearing that this is happening.

Pages