Blog 2023 Malcolm Blair-Robinson

China and Liverpool

The news that the Chinese state investment arm, CIC, is funding a bid for Liverpool F.C. is at some level the most important piece of news today, notwithstanding floods and other human suffering. This is because as it emerges as one of the the world’s  financial mega powers, the concept of Communist State Capitalism is more obviously revealed. This is a far cry from the moribund and stagnating Soviet model, which was echoed in the manner in which our own public utilities were nationalised and run.

The Chinese model is much more dynamic, based upon the principles of investment rather than ownership. It is very successful. Much more so than the old system of ownership of everything ‘by the people’ and arguably as good as, or even better, than free market capitalism, with which it works in partnership. This is very important, not least because of the unresolved issues left by the financial crisis and the large government holdings of shares in rescued banks.

It can have political consequences in the West. Socialist groupings which have had a lean time electorally for some years may find a revival in their fortunes if they promote not public ownership, but public investment, giving to taxpayers the same control of key financial and energy companies through shareholdings as other shareholders enjoy. The difference is that the dividends and profits would help fund the public services provided by the state.  If Labour finds the centre ground too crowded to offer a convincing electoral opportunity, a fact finding trip to China by the newly elected Labour leader could provide some interesting food for thought.

Social Housing

David Cameron has floated an idea that council house tenancies should no longer be for life. On the face of it this makes sense, but as Simon Hughes has pointed out, there is a lot more to this than a soundbite in the ear. Without exploring the complexities of the nature of public tenancy and its role in shaping communities, I would urge caution before tinkering. The last great reform was the sale of council houses to tenants and I was opposed to that for many reasons.

The first reason was that it would lead to a shortage of social housing, especially in more affluent areas. The second was that unpopular locations would become ghettos of decay and deprivation. The third was that a substantial rented sector in housing at all levels of affluence provides economic flexibility, easy moving, and mobility of labour. This seizes up if all homes are owned and when in fashionable areas become beyond the purse of the people in vital jobs, for whom such houses where originally designed. The fourth was that such an idea would create a culture in which owning a home was seen as a social necessity, leading to an over concentration on housing assets, which would inflate and eventually undermine the competitiveness and stability of the economy as a whole.

Smugly confident that I was right across the piece, I now urge caution before some well intentioned nostrum becomes a policy with a clear beginning, but an unforeseen end. Everyone in the land should be able to live in a home where the cost either owned or rented or provided is at a utility level to ensure reduced debt, improved quality of life, more saving and competitiveness of the British workforce in a global market. Anything which fits that bill is worth a try. I am not sure that the P.M.’s musing on this matter does.

The President

There is something entirely unreal about the Pakistani President travelling around Europe mostly on a private visit, with an official meeting here and an official dinner there, when his country struggles with its greatest environmental disaster for eighty years. This tells us something, although I am not sure what.

What it may tell us is that it does not matter where he is, because he no longer counts as a power in his country. In the past this would have signalled a coup in preparation. We shall have to see. Meanwhile it is another element of uncertainty in toxic mix in which we are, to such folly, militarily engaged in the region. Taken in the round the situation in Pakistan, the border region and Afghanistan is a lot less stable and the future a good deal less certain than when we plunged in nine years ago. However it is finally brought to some kind of stability, it will not be by the route we think.

Banks and Lending

I am beginning to suspect something. There is a mis-match between the exhortations of politicians to banks to lend, the banks’ excuses, anecdotal evidence of businesses starved of funds and general reports of improvements in the economy overall.

This may be (or may not be, this is a rather early day shot) because there are two economies at work. The old one based on credit and lending, which is in decline (hooray) and a new emerging one based on earning, saving, initiative and investing. This new structure is far less dependent on banks and loans and could, if it is there, provide exactly the firm foundation on which to build future prosperity, long promoted by this writer in book and blog.

We shall have to wait a little longer to see. Fingers crossed.

Trident and Related Matters

It is a very good thing that George Osborne has told the MOD that if it wants to upgrade Trident it will have to pay for it. This will concentrate minds on the fact that realism must be the basis of the Defence Review.

I have given a lot of thought to this over the last few months and stimulated this with some research. I now have a clear idea of where we should be headed. Britain must concentrate its armed forces for its own defence. This includes its vital interests but does not include pretending our true boundaries are in the mountains of some far off continent. We are not a  military superpower and we do not need a global projection capability.

The Army needs to be re-organised to provide home defence and support of other agencies in times of national emergency whether caused by enemy threat, terrorists, disasters, weather or disease. It needs to have a rescue capabilty in hostage or other situations involving British citizens overseas, but it does not need to prepare to take part in invasions or fight foreign wars. This whole Blair generated adventure with overt use of armed force overseas has been a disaster, the magnitude of which an unforgiving history will show.

The Navy should have the role of defending our approaches and home waters as well as keeping our vital trade routes open. Its capital ships should be the type 45 Daring class destroyers, among the world’s most advanced warships, and the new mega capable Astute class  submarines. The latter can form the platform for our better focused nuclear deterrent, but the type 45s can also have nuclear tipped cruise missiles on board if needed. Trident should be phased out and a way must be found for cancellation of the unaffordable giant aircraft carriers, already specified sub standard with steam turbines because we cannot afford nuclear power plants. Maybe they could become humanitarian aid and rescue platforms paid for by the U.N., or a NATO or a joint Euro project. We need lots of small, cheap, fast anti-submarine and anti-missile frigates which can ring our shores and probe the Atlantic approaches, blowing up anything under the sea or in the air which threatens our island homeland. Not lumbering bumble bees, but fast and agile wasps.

In WWII we essentially had two world class aircraft which led the considerable fleet of others not as good. These were the Spitfire and the Lancaster. Now the RAF need just the one, apart from support and transport workhorses. This should be a flexible fighter, missile armed for ground or air, which we can afford in large enough numbers to guarantee the integrity of our airspace from whatever kind of threat can come from the sky. We may need to add anti-missile batteries on the ground capable of dealing with wild card rockets fired by rogue states, rather than MIRV type mega weapons.

Finally, this is the most dramatic bit, we need to shut down the Ministry of Defence. It has been a spendthrift shambles from the beginning. We did not fight either of the world wars with this bureaucratic leviathan, which cannot even add up the cost of its programmes or keep track of its money. We should go back to focused Ministries (not sprawling departments). A small Air Ministry, Army Ministry (the old title War Office is very non pc) and a revived Admiralty would again serve us very much better and at much less cost.

Anybody who tells you that bigger is better, more efficient, more effective or cheaper has either had their eyes closed as all these super departments have devloped over the years, or they have an axe to grind or they are fools or all of those things in combination. Smaller, more focussed, leaner, keener ministries would greatly improve the value and efficiency of government generally and defence is a good place to start. Not only will we save money but we will have both a credible deterrent and a viable, secure defence. Our streets will be safer and the heroic citizens of Wooten Bassett, who have stood proxy for the nation’s gratitude and grief week after week, month after month, year after year, will be able to get on with their everyday lives.

Banks in Profit

This week the Banks will be announcing their first half profits which are predicted to be much higher than more recent figures. HSBC, which did not directly involve itself in taxpayer loans, though benefited indirectly from the whole industry wide rescue package, is first up with a big jump. This has provoked the refrain from Osborne et al that banks must lend more to business.

In the round I agree, but I do not think it is as clear as that. The banks have to mend their ways from past follies and strengthen their own financial base. This means bigger reserves and wiser lending. Wiser lending is more cautious lending. That means not supporting daft or fanciful propositions. It also means a risk premium. If this recovery is going to gather momentum and remain sound, it will be built on sound business. A big start up bubble with lavish funding of businesses, without a model which will work, a product with a market, or management that knows it stuff will do no more  than create another credit boom of the style to which we are addicted, followed by another spectacular bust. 

So whilst supporting the call to boost business, I support caution in how it’s done. What is needed is the much talked about, but not yet happened, separation of proprietary trading by banks and the restoration of something akin to the old Merchant Bank. The bits are all there but they are mixed up in one pot. There is a Commission looking into this. The Coalition should have been more assertive and got on with it without another enquiry. It is a pity Vince was forced into an appeasement deal to calm certain vested interests in the City. There was no need. Now that the U.S has enacted its own legislation those people stand on low lying ground with an incoming tide. They know they will have to get into the boat sooner or later.

There is another point. Banks (real ones as opposed to building societies calling themselves banks) need to be less balanced in favour of property and more focused on business and industry. We keep getting to the point where a property boom is the spark igniting a slump. It happened to Heath and Barber, to Thatcher and Lawson then Major, and of course to Blair and Brown, or better said Brown Brown and Brown. We are slow to learn. We need to sharpen up.

Home Truths

Whatever the hoohaa over Cameron and Pakistan the essential truth remains and we have to face it. It is not unusual for intellgence services to be split on ideological issues. We had some problems of our own during the cold war and there is powerful evidence of large scale betrayal during WWII of SOE by MI6 double agents. The probelm in Pakistan is that the military, intelligence services and government often work to different agendas. Both Pakistan and indeed the whole region has been seriously de-stabilised by the so called war on terror, which has proved entirely counter productive.

The country is now flooded with CIA operatives amid increasing unrest among the young who see radical Islam as nationalism which will restore their country’s independence. What the West  needs to do is get its forces out of the region and with our allies, ring fence it to give it time and space to find its own way forward. Plenty of economic aid but no military involvement is the recipe. Our potential allies are China, India and Russia, all of whom would be happy to see our troops come home. We need a fresh approach to Iran too.

The oily Miliband is having his moment on the airwaves. Somebody needs to remind him of his failures in the Middle East, Iraq and Afhghanistan, together with his clumsiness in the Georgia crisis,  his ineptidude in Iran and his impotence in Europe. Under his stewardship there was a complete stagnation in every sphere. The sole decision of merit was the release of the Lockerbie so called bomber, of which, in craven submission to his masters in the State Department, he entirely washed his hands.