Blog 2023 Malcolm Blair-Robinson

For nine years I have been arguing for a re-balancing of the economy from one which borrows and inflates assets to one which invests and creates new wealth. I am not going to argue this again here; refer to old blog posts or click on my dissertations below for the detail.

Dynamic Quantitative Easing,

Turn Left to Power,

2017 Labour Can Win 

What is now needed is a massive stimulus of the UK economy designed to reboot the wealth creating base to match the asset inflating summit, to bring the economy back into balance and inaugurate a period of sustained growth of around 5% per annum over several years. Only then will we resolve the productivity crisis and increase the revenue stream sufficient to fund public services and in so doing increase the standard of living for all generations and the opportunities for the young. There are two ways of doing it. Borrow or print. There is nothing else.

When the summit of the economy, the banking and financial sector was under threat, first in 2008 crash and again but less after the Brexit vote, the Bank of England printed a total of £435 billion of new money to pump into the system and keep it afloat. The Bank bought in government bonds and certain high quality corporate debentures to inject liquidity into cash strapped banks. These assets are now owned by the Bank, which is owned by the Government. This means the government in effect owns a good deal of its own debt. This can either be written off or resold back into the market to reduce liquidity at some future point.

The problem is that with relatively little oil production, low manufacturing as a percentage of GDP and almost no coal or mineral mining, next to no new wealth is coming into the base of the economy (a ton of coal mined or a thousand barrels of oil pumped are converted to new cash at the base within days). Any money coming into the base to fund infrastructure and investment in new technology, plant and machinery has to be mostly borrowed from the top.

What is required is for the Treasury to print new money, £435 billion of it, which goes straight into the government’s bank account. This is then used over five years to pay directly, without borrowing, for the development of major infrastructure modernisation and renewal, massive affordable public house building and state of the art info technology (it takes me an hour to download onto my tablet and episode of a TV documentary, in South Korea it takes 3 seconds to download an HD feature film) all of which become national assets. This in turn fuels growth overall, boosts employment in jobs which pay good incomes, deals with the productivity problem without increasing unemployment, and re-balances the economy in favour of wealth creation, rather than consumer borrowing and asset inflation.

This is the only way forward that makes the numbers work. Ten years of austerity, flatlining growth and shopping on borrowed money simply has not. We can all see that now. So can the government but it is at a loss what to do. That is why we are where we are and going nowhere fast, because all the policies announced yesterday were either too little, too late, wrong headed or gimmicks and will keep us in the slow lane for keeps.

Finally a word of warning. Money is a measure. That is all it is. If it is printed to measure the creation of new wealth, it is real money and the currency remains sound. If it is printed to pay bills and fund extravagance, it ceases to have value and the currency debases. That is the difference between the Greenbacks of Lincoln’s United States Of America or the UK’s introduction of Treasury bank notes in 1914, and Mugabe’s Zimbabwe.

Any response this early to a budget is hardly well informed, until all the small print has been digested, but so obvious were the needs of the hour and so glaring was the inability to grip them, the overview is more than enough to condemn this second Hammond budget as a shocking waste of time.

What was called for was a radical stimulus to lift GDP to a higher level, sufficient to deal with the deficit, pay down debt, stimulate enough revenue to restore public services and set Britain on a steady course for future prosperity in or out of the EU, hard or soft Brexit. Pressing social issues involving healthcare, social care, education, universal credit, and affordable public housing demanded action now.

There was tinkering at the margins of all these issues with promises of jam tomorrow, a proposition devalued by the sad fact that with this government and treasury model, tomorrow never comes. What is coming is lacklustre growth far into the future, bumping along the bottom at just above 1%. America, the EU and Asia are all doing better and once again will draw ahead. Britain is drifting into the slow lane and Hammond is making sure we stay there. The question on every lip in Westminster will soon be, how long will he stay at the treasury?

Meanwhile the eye catching abolition of stamp duty for first time buyers on cheaper properties will simply push up house prices, so the net effect to first time buyers will be less tax but more borrowing. The public are utterly fed up with these theatrical con tricks, to gain a dumb cheer from the Tory benches on budget day, which unravel within hours.

The astonishing news that up to 10,000 court cases may be at risk of being overturned because of irregularities at two forensic science companies, which took over from the public service privatised a few years back, demonstrates once again that public services must be run by the State to fulfill its obligations to its people in a democratically accountable structure. If the public pays the bill, the public, via ministers and parliament must be boss.

Handing over elements of the justice system including forensics and prisons to private companies to make profits, as if they were a supermarket or a gas station, is morally bankrupt and fundamentally stupid. It also breaches the integrity of the justice system and undermines confidence in the authority of the entire legal process and its consequences.

The list of failures in the private sector in its provision of public services is long and growing. But electoral retribution for this mess will come. The public has had enough.

The Queen and Prince Philip have been married seventy years today. This is an extraordinary achievement by any standard anywhere and unique in the long history of our monarchy. I remember the day. I was 8 years old. I think children were given a day off school, but my school did not join in as there were boarders who would miss out. In 1947 November 20th was a Thursday. So that the boarders could go home for a long weekend we had Friday off instead.

So on the day we assembled in the largest classroom, sitting in rows on benches and listened to the radio, then called the wireless, which had been specially rigged, The BBC broadcast the entire event, from the processions to the service and all of it live. I remember the famous Audrey Russell was one of the commentators. I am sure Richard Dimbleby, father of David and Johnathan, was involved as well, but it is a long time ago.

I do remember there was food, clothing, petrol and coal rationing, people looked threadbare and bomb sites peppered the urban landscape. The summer, now over, had been unusually long and hot, following on from the longest and coldest winter in living memory. The ground had been frozen to such a depth that pneumatic road drills had been used to dig the potato crop. In February I had measles, surrounded by hushed voices and frequent visits from the doctor.  In the coming New Year I went down with pneumonia, an even greater crisis before antibiotics, involving kaolin poultices on my chest at night, heated on a Primus stove in the bedroom. I can smell the whole thing still. Again a lot of whispering. Mothers had to be very self sufficient in those days.

There was a darkness in those times. The happy Royal couple shone a warm light upon the country. It shines still.

But how long will it take? It is clear that Robert Mugabe is no longer in power and his rambling address and continued stumbles while reading it more than demonstrated, even if there were no other considerations, that he is not immortal, age has caught up with him and the burden of office is beyond his capacity. Add to this the facts that he is essentially the prisoner of a reluctant military, he is no longer leader of ZanuPF and there were unprecedented celebrations and demonstrations when it was thought he was about to formally resign as President.

This has now turned to bewilderment as Parliament prepares to impeach him. Nobody quite knows how long this long goodbye is going take, but this Blog hopes very much that all Zimbabweans will soon be free to build a better future. They deserve a new beginning. They and their country have enormous potential to do great things. I have a special interest in wishing them well. My mother was born  in Zimbabwe, then Southern Rhodesia, in 1906.

The era of the soundbite to explain Brexit is over. We have now arrived at the specifics. Several things are clear and if in the next two weeks some are not resolved we are in trouble. The biggest underlying problems are twofold. First the ardent Brexiteers, who promoted the project in the first place, never worked a plan or thought the details through. This led them into wild and optimistic assumptions which  drove promises to the electorate which cannot be honoured and expectations about the EU’s responses which are plain wrong.

The second is that, once the penny began to drop that this whole Brexit deal was not a doddle but a potential disaster, the government, split on all the detail, has been united on one floored assumption. That in the end EU would allow economic self interest to trump political objectives. At the heart of this catastrophic misunderstanding lies the traditional distrust of foreigners by the British, who, as a consequence never take the trouble to understand them.

So Britain has always seen the EU as an economic structure, with an annoying clutter of political cooperation as the price it was once willing to pay to take part. But the continent of Europe has seen the EU as a political salvation from endless tribal warfare, shifting borders, diasporas and repressions in an almost unbroken stream since the fall of Rome. United, borderless and with common citizenship, with complete freedom of movement of domicile, capital and employment, it represents the greatest political achievement in 2000 years and one which nothing and nobody will be allowed to damage. Economics are the icing on the cake, but not the cake itself. It is the integrity of the cake that takes precedence overall.

So there is no meeting of minds in these negotiations, nor even a common purpose. They are like two parties agreeing to meet each other under the clock of a train station. But due to a misunderstanding they stand under clocks at different stations. The next two weeks will tell us whether they have the wits to find each other. Or whether the one, a party of 26 friends, wanders off in one direction to enjoy a shared future together and the other, on its own, wanders into uncertainty alone.

Hammond’s upcoming budget can certainly break the government, even if it totters on in a political trance for the time being. If we get another white van man blunder, or if a major new funding initiative turns out to be robbing Peter to pay Paul, or some other issue arises as the small print is read, the level of incompetence of governance will pass the point of no return.

On the other hand if Hammond surprises with a major economic boost covering infrastructure development, affordable housing, funding the NHS, Education, Prisons and Social Care, he will have bought time for the rest of the Cabinet to sort out the chaos and opacity of Brexit. Neither the EU, nor the country, nor it appears the government, has even now any idea what kind of Brexit we are seeking to achieve.

But even if there were no such thing as Brexit, this budget would be critical because, nine years after the  2008 Crash, we are still trapped in crisis level austerity and flatlining growth. Living standards for the majority are falling. Public services are cut to the bone. So Brexit is a self inflicted extra problem. The underlying problem of an economy which does not create new wealth for all to share, but recycles money from the poor to the rich, will remain until somebody decides to do something. Will it be Phil?

Perhaps it is to do with my Baltic family roots. Perhaps it is my interpretation of history. Perhaps it is my unwillingness to follow the herd. But I have always seen Russia as the saviour of Europe, rather than the threat to its integrity. It was Russia that wore down and destroyed Napoleon’s all conquering army in 1812. Wellington led the allied force which beat him a Waterloo, but by then his attempted comeback was a shadow of his former power. It was Russia’s advance into East Prussia which saved France in 1914 and it was the Red Army which destroyed the mighty Wehrmacht 1941-5. In WWII 90% of German casualties in the armed forces were on the Russian front.

Over that period Russia has traveled a road which took it through Czarist autocracy and serfdom, through the Soviet era and into a republican democracy of a less fluid and more oligarch influenced model than anything in the West. Just as we have learned to live with a united Germany no longer the Third Reich, we should have done likewise with modern Russia,  no longer the Soviet Union. But we have not had the self-confidence to do that. For the most part the West sees Russia as a rival. This has cost us, because it has become one.

Just as Russia initially pulled ahead in the Space Race, to the Western astonishment and fright, so it has now pulled ahead in what can be called cyber propaganda. Cyber warfare is when your power system is shut down and your own missiles fall down on your head. Russia might be ahead with that too, although the West has significant undisclosed capability in that sphere. It is very high tech, so the West is likely to lead.

Cyber propaganda is very low tech involving little more than fake twitter and social media accounts and can very easily be run by governments, security agencies or agents acting on their behalf. It can be run also by organised crime likely to benefit from political change and mischief makers for fun. It can be used by fraudsters to influence markets and inflate gains. It is the essential foundation of modern terrorism. Just as printed and broadcast media created the modern propaganda agenda, which took off in the 1930s, so the huge advance in on line communication through which people everywhere conduct and control their lives in modern times, has enabled the opportunity for this latest manifestation. Nothing can stop it. It is here to stay. Get savvy and get on.

As for Russia, either ignore it as most do, or do it back to deter. Putin is coming up for election soon remember. But be careful what you wish for. Because in the end the world’s largest country will always be a player and few, if any, major world problems can be resolved without its input. As history reveals.

Finally if you contend that Trump and Brexit are not the product of open democracy, but a triumph of Russian cyber propaganda to direct outcomes it favours in countries it does not control, up your game. This is the new world. The old one is history. If you do not rise to the challenge of getting as good and better, so will you be.

May’s remarks at the Mansion House last night about Russia were politically childish. It was a vain attempt to project herself as a strong leader and echoed the attacks by Margaret Thatcher upon the Soviet Kremlin, which earned her the title, the Iron Lady, which she wore as a star of honour for the rest of her life. But this nonsense about fake news. Everybody is at it, including the UK, because this is how cyber rivalry works. But to suggest that we are all so stupid that we cannot tell the difference in this country between fake news and the real thing, insults us all.

May needs to remember that Russia is a critical ally of the West in the fight against IS, upon whom we have depended to degrade its military prowess and reduce the territory it controls. Without Putin IS would now control Damascus. Moreover Russia is a critical ally in trying to prevent war in the Korean Peninsular and played a major part in the negotiations stopping nuclear weapons development in Iran, of which agreement, like us, Russia is a signatory.

Sadly all this reinforces the disappointing truth that in the end May hasn’t a clue.

Two things happened today which are really telling.

The first was a hastily convened meeting  in Downing Street attended by representatives of British business and leading EU business leaders, who read the riot act to ministers about the muddle of the Brexit negotiations and the fact that not a single thing was yet agreed, making the future for trade and business dangerously uncertain.

Flustered ministers promised that things were happening. Whether they are or not remains to be seen. This inept government, unique in British history for its inability to govern coherently, either cannot tell the difference between the generalities of a speech, ie Florence, and the specifics of the offers needed to advance towards a deal. Or it cannot agree among its ranks what those specifics should be. The clear message now coming loud and clear to the hapless cabinet mired in argument, plotting and scandal is this. Time is running out.

The second and even more telling is the announcement within the past hour that parliament will be given a vote on the final terms of whatever deal is agreed with the EU, before it can come into force. Parliament will have the power to reject a deal for which there is no majority. That means hard Brexit is out.  If that is all the government has finally to offer, Brexit is over.