Blog 2023 Malcolm Blair-Robinson

The dreadful fire at Grenfell Tower, an event which becomes more shocking with each new day, is the final act in a process which began in innocence, but has ended with a terrible truth told in the deaths of innocent men, women and children, burned alive in their homes in the middle of a summer night. That truth is that the shrinking of the State, which in the 1970s had become overbearing and inflexible in the eyes of so many, was at first a benefit which liberated, empowered and enriched. But like so much in life, too much of a good thing is worse than a little of a bad thing.

In the beginning was the notion that there were limits to what the State could do well and as time went on, the bar for those limits was set lower and lower. Privatization, outsourcing, agencies and quangos took over responsibility from government. The State became an enemy and a drain. Finally came the bonfire of regulations begun in 2010. It is there that the seat of the Grenfell Tower tragedy lurks, for it is a fact beyond denial that a fire-safe block was turned into a death trap during refurbishment, allegedly in compliance with the regulations then in force. The police will discover if those regulations were breached and the public inquiry will reveal whether they were adequate. None of that will bring the dead back to life, nor restore to normality lives scarred forever by loss.

But it may, indeed it should, teach us all a lesson. The State is a friend, not an enemy, which it is why we have one and some things it does much better than the private sector. It is a guarantor and an enabler, a guardian and a helpmate. It belongs to all of us and we are part of it. Because of it we are free. Let us resolve to treat it with better respect in future. And once again empower it to work for the public good. Of everyone.

This Blog has always been an interest rate hawk. Indeed worse than that. I believe, unlike almost every economist anywhere, that control of currency and interest rates by central banks has been a mistake. It has had advantages for global business, but its impact on ordinary lives has been negative, the gap between rich and poor has grown and that squeeze on living standards is creeping up to the middle classes. That produces political unpredictability, unexpected election outcomes and a creeping tide of uncertainty, which in the end, is not only bad for business at every level, but bad for everybody else too.

At the heart of a well balanced economy must be the power to create new wealth. That wealth must produce a profit at the corporate level, but it must also show a profit for ordinary foot soldiers right across the economy. The surplus of income over living costs should in part be invested in improvement and part saved to provide for a rainy day. These savings are the source of new capital to finance further economic growth. But if the return on saving is tantamount to nil, it dries up. Instead replacement money is pulled in from international markets, most of which is now the product of quantitative easing by the US, UK and EU.

This is used not to create new wealth, but to pump up assets. That makes the rich richer and the poor poorer. The crunch comes when it begins to pull the aspiring middle backwards towards relative poverty. That is happening now. In the US it gave us Trump, France has Macron on a voter turnout below 50%, a shocking statistic for a democracy noted for high voter participation, and in GB it gave us first Brexit, then the shock outcomes of the Corbyn surge and the May humiliation.

It is imperative that interest rates begin their slow climb back to viability, as a necessary spur to saving and an effective lever of prudent economic management. Failure to act will create a combination of social and economic volatility which could easily slide out of control.