Blog 2023 Malcolm Blair-Robinson

Not since the time of VE Day in 1945 has there been such an outpouring of unity and celebration. The success of Team GB, exceeding all expectations after a faltering start, has brought these islands together in a  common purpose  of which we generally feel ourselves to be incapable. This has unleashed a sense of national pride and shared identity of which we have little experience in the post empire years. Put another way, we have surprised the world with a side of ourselves which we had forgotten we had. To make it even better it has nothing to do with war.

Throughout the lives of even those in their seventies, national success in sport has been an experience rarely enjoyed. One Football World Cup and one Rugby World Cup, a few Ashes and some Olympic Gold medals, although until Beijing there were hardly any of those. Of disappointments, humiliations and failures there have been a multitude too large and painful to recall.

London 2012 began the way we thought we liked it best. A shambles at G4S, predictions that most visitors would spend their entire Olympics stuck on the underground and a wacky take on who we think we are at the opening ceremony which left many from overseas charmed but bemused. The certain golds we were expecting in the early days did not happen. By the dawn of day four we lay at around twenty in the medals table. Oh dear! But then we could cope; we were used to it. What a pity it was not in our nature to do better.

Or was it?

Then something began to happen. The entire nation was mobilised. Inspired by the  flame passing close to every community in the land no matter how far flung, spectators, numbered sometimes in millions, appeared at every Olympic location cheering their hearts out and waving union flags (yes union), national reserve abandoned. Team GB found itself on the receiving end of energy and encouragement beyond anything it had imagined. Suddenly the message found its mark. This was not about taking part. This was about winning. And to win, giving of your best was not enough, as all competitors give of their best. To win you have to go through the best barrier to a hyper mode beyond it, to reach out above all you thought you were and absorb the combined energy of all who will you on.

We know the rest. There were still disappointments and not all found their form, but Great Britain has put on an Olympic spectacular which ranks with the finest ever staged and Team GB have taken on the world and won, beating all but  two of the superpowers and holding the third to our lead in gold. We cannot know for sure  how all of it has changed our country or whether the benefit will last, but we can be sure that few events in our history have given as great a boost to our self confidence, national pride and shared identity. When Team GB enters the stadium for the closing ceremony they will be greeted by an unprecedented roar of acclamation. Gone will be the stiff upper lips. Smiles will shine through a cascade of joyful tears. The noise will be stupendous. Team GB will deserve every decibel.

The latest predictions from the Bank of England will come as a disappointment to many economists, but they should not come as a surprise. When this crisis broke five years ago, I predicted it would take a whole generation to correct. This ultra gloomy view came from my own conviction that the economic model to which the West has been wedded for the last thirty odd years, in which economic activity was driven by consumption, funded by borrowing and regulated by markets, was flawed, with insufficient equilibrium to sustain itself in the long run. Things were made worse by the fact that no economist seemed to know for sure what was happening. All of them could analyse where we were, but the theories of why we got there and where we were headed were both multiple and conflicting.

Nobody seemed worried because the alternative, command socialism, led at best to stagnation and at worst to collapse. Given that the aim is to continue with free markets and wealth creation in private hands, there has yet to emerge a way forward which does not involve borrowing to stimulate activity, which would be the certain way to upgrade the current controlled crisis into an uncontrolled calamity. At the root of the problem is debt, both private and public and until this is brought back to manageable levels it will be good to flat-line rather than shrink. This condemns an entire generation to a long bleak winter of low aspiration and lack of opportunity.

Quantitative Easing is the silver bullet to get out of the mire, but like all bullets, it can kill. For this reason it has thus far been used very cautiously, with little imagination and without much effect. There are two golden rules in its use in the modern global economy with instant electronic and plastic money taking precedence over note and coin. One golden rule is that you use it to reduce debt. The other is you use it to stimulate activity to create wealth building employment. In other words use QE to buy back government debt  to reduce the leverage burden, and also use QE directly to finance infrastructure renewal, affordable housing development, school rebuilds etc. No loans or fancy initiatives. Pay the bills with clean new money.

If the economy begins to overheat the Bank of England can raise interest rates or pull excess money out of circulation by calling for special deposits. The government itself can raise taxation levels, so there are more than enough safety valves to prevent the hyper inflation people fear. This method would not only reduce the debt burden, but it would also close the budget deficit, while at the same time put people back into real jobs and stimulate the private sector. It would reduce the cost of housing and all of this could and would be done without borrowing a single extra pound.

At the moment we hover nervously in the economic shadows. QE pumped into the banking system may have stopped things getting any worse, but it has had little effect in making things any better, because it does nothing to deal with the underlying structural problems. Moreover if it does succeed in stimulating lending it takes us down exactly the road we should on no account follow.

The time has surely come to move away from the inertia of uncertain expectations into a positive drive to punch our way back to economic growth. We have to move from a posture of weary acceptance to one of hope and ambition. If our athletes are teaching us anything, it is that if you try, you really try, you really really try, you can do anything.

The failure of the Tory party to back the House of Lords reforms marks an interesting watershed in the life of the Coalition. From now on neither of its two parties thinks much of the other. It was never a marriage, but more of an affair. Now the attraction is wearing thin. There will now be slights, digs and rows. There can be no parting yet, because they have staked all on an economic recovery, now stalled. Until it lifts, any break which triggered an election would lead to defeat for both. Like a warring couple trapped together by a joint mortgage in a house with negative equity, they know they have to make the best of it until times improve, or time runs out.

The back bench Tories knew that they could make mischief, because from the moment the Lib Dems broke their signed pledge with their voters not to support an increase in tuition fees, the Tories sensed their coalition partners were electorally doomed. The Tories may have misjudged the Lib Dem response. Their decision to oppose the plan to reduce the number of seats in the House of Commons will hit the Tories more than any other party. It will wipe out any advantage the Tories may gain from the reduction in Lib Dem support in the West Country and the Shires.

Although the little spat made the headlines yesterday, the country is totally absorbed in the Olympics and will not have noticed. The majority is against any scheme which advances the power of elected politicians. Allowing only half the original plan to go ahead, in other words continuing with the reduction in MPs but dropping the elected Lords, would make Westminster significantly more powerful.  Fewer MPs, without some corresponding increase in the power of the Lords, would make the government of the day  less easy to check; modern governments are huge and drawn mainly from the Commons, of which they would represent an increased and top heavy proportion in a reduced House. Increasing the power of the Lords by democratisation, even if by the fifteen year term plan, would offset this increase in executive weight.

Put simply you cannot have one without the other and the Lib Dems, if they muster this argument in their defence, cannot be accused of petulance. There is however a much wider issue. It concerns the operation of the Constitution as a whole. This Blog is emphatically in favour of a fully elected House of Lords. It also promotes the need for a Written Constitution. Unfortunately at the moment we do not have one and that the majority of voters, if consulted, would say they prefer it that way.

We must therefore concentrate on making our unwritten constitution work smoothly. The essence of a fabric of State based on precedent, custom, practice and a very few statutes, is that it is continuously evolving in small increments, is very flexible and all the parts are both in harmony and at the same time in tension. Moreover they are not always what they seem. The British arrangements are these.

The State is a monarchy, the Government is the Queen’s, Parliament is there to check the government, not to provide it and the Judiciary, which is separate from the government, is tasked with interpreting both the Law and the Constitution. Parliament is divided into two Houses, one, fully elected, with the power to pass into law legislation proposed by the government, the other is part appointed, part inherited, with the power only to revise and improve whatever the other wants to do. Actual power, all of it, is entirely with the monarch and such as it is exercised by the various institutions of the government and the law, is so exercised because it is ceded to them by the Crown.

That this arcane and near unfathomable arrangement works so well and so smoothly must be among the great wonders of modern civilisation. It does so because it is cherished and cared for and is adjusted with great precision and as little as possible. Neither the Tory plan for equal sized and fewer constituencies, nor the Lib Dem plan for fifteen year senators has any of the qualities necessary to meet the criteria of real improvement and both would likely cause harm and discord. It is better that they perish in a summer squabble and are never heard of again. If we want to modernise, as this Blog does, we have to go the whole hog with a written constitution et al. If we do not fancy that, it is better to leave well alone.

It is difficult to comprehend that the European Central Bank cannot follow up the bold declarations of its president that it will do ‘whatever it takes’ to secure the euro with anything more dramatic than a statement that it is ‘working on a plan’. Really?

The inability of the euro authorities to turn words into action is, looked at in isolation, bizarre or even funny. The truth behind the confusion is quite simple and very plain. These authorities do not have the power to do so. The consequence of setting up a currency without all the structures, political and fiscal, to run one, is that the currency exists in form but not in fact. The reality is there is no such thing as the euro. There is the deutsche mark, somewhat devalued and by another name, run, controlled, directed and financed by Germany on its terms, to its rules, within its political preferences and according to the terms of its national constitution. All Europe is using this German currency.

The effect of this mismatch is that the countries, which prior to joining were operating much looser fiscal disciplines with currencies of much lower value, are squeezed to the point of economic stagnation, unmanageable debt and potential financial collapse. The Germans offer tea and sympathy and an austere programme of reform beyond the political capacity of shackled governments to deliver. What is needed is German money. This will not be given without the reforms. These will break the social cohesion of the errant countries. Another way would be for the ECB to print money. It hints it might, but it cannot because the Germans will not allow it to do so. The Bundesbank says no. And it is the Bundesbank, not the ECB, which is, when push comes to shove, in charge.

The euro will not go under because Germany will not let it. But southern Europe will be condemned to decades of stagnation and falling living standards as the price of trying to head off German dominance after unification by the ruse of a common currency. Instead of stripping Germany of the mark, they threw away the lire, peseta, drachma et al and joined a currency subject to exactly the same austere purity of the mark, the standards of which were beyond their reach and outside their cultural capabilities. They are faced now with the demand they become Germans in all but name.

There is only one way these more profligate countries can now escape. Instead of making declarations that they want to stay in the Euro no matter what, they need to announce they have had enough and they are going to leave. If Italy started by saying enough was enough and they were laying plans to return to the lire, the Germans might start to re-think their approach. Nothing less will have any effect.