Blog 2023 Malcolm Blair-Robinson

The shock deficit requiring unexpected government borrowing of £ two thirds of a billion for July, has set economists off on an urgent media round to expound their theories. As usual these are conflicting, though a degree of unanimity is beginning to emerge across the piece: the present growth element, such as it exists, is not working well enough to allow the whole deficit reduction plan to come good in the end. However, both ends of the economic theory spectrum are flawed in current conditions.

Cuts alone will not deliver. They did in Canada because at the time the US was having a boom, so the Canadians had a bull market to sell to. Here our main market, the EU, is affected by a structural crisis for which there is no clear solution, predicating years of stagnation, so the Canada model, which informed much of the economic planning when the Conservatives were preparing for government, no longer applies.

On the other hand the government is right to stick to the mantra that you cannot borrow your way out of debt and it is a debt crisis, both private and public, which ails us now. Additional imbalances in the economic model, including asset inflation and banking dysfunction make matters worse. What is missing is a clear idea about what money is and what function it needs to play in setting the economy on a better path.

This is why the Blog disapproves of quantitative easing being used to fund banks with a few to making them easier on loans. What is needed is newly created money to directly fund infrastructure renewal and development, a massive public housing programme for rental properties, which will drive down rents and mortgage costs to sustainable levels. There is also a need for start up funds for neighbourhood industries to manufacture consumables and help close the trade gap.

A mix on these lines would deliver and any inflation created by printing money can be readily controlled by shrewd use of interest rates and taxation, because all who are fit will have jobs and the true role of wealth creation in the real economy will be re-established.

The alternative is to blunder on with increasing benefit costs  and falling revenues, until the markets start to lose confidence and dump our bonds. In the global market with electronic money, it is not currencies which come under attack from speculators, it is government paper.

It is difficult to imagine a more inept move by the FCO, than threatening to enter the embassy of a foreign country and seize an asylum seeker who had sought refuge within. Not only would it breech international law but it would put at risk every embassy and diplomatic mission of the UK  across the world.

The law which provides for the British government to suspend the diplomatic status of premises and enter them was enacted to allow the authorities to restore order when an embassy was being used for non diplomatic purposes, i.e shooting people in the street below, as in the shocking case of  WPC Yvonne Fletcher.

There is nothing improper about the operation of the Ecuadorian embassy, although the granting of asylum to Mr Assange is controversial. The Ecuadorian government might have been hard pressed to defend their decision internationally, but for the smokescreen of the idiotic threat to storm the embassy and arrest the Wikileaks founder, wanted for extradition to Sweden in connection with allegations of sexual assault.

This is a major foreign policy blunder which is being used to stir up further antipathy to Britain in South America, already under pressure from a frustrated Argentina. The mission of the Foreign Office is to further Britain’s interests by cultivating partnerships and alliances, while promoting the principles which inform our policies in our dealings with international issues.

This imbecile threat, from which even North Korea would shrink to utter, achieves none of these goals. Indeed quite the reverse. With our principle market, Europe, in long term economic difficulty, our recovery depends on forging new markets. Many of these opportunities are in South America.

Oh Dear.