Why Capitalism Has To Step Up

Ring the bell, call off the dogs...the time has come to admit it. Our green and pleasant land (though not perhaps as Green as it could be, if campaigning groups are to be believed) in is more than just a bit of a pickle.

George Osborne's Autumn Statement reflected a government that knew full well that it has no answers for the current economic crisis. But then, we live in unprecedented times, so who does? When your opposition are offering nothing more creative than the same slash-and-burn policy that you are offering yourself - albeit with a caveat that it should be somehow slower and more touchy-feely - where is the impetus to deliver an alternative option? What is certain without a shadow of a doubt is that if we follow the current economic plan, we stand to see a decade of misery that will have a social impact on the lowest paid that goes beyond the understanding of the middle earners, who will be too distracted by their own financial concerns to realise how this is all interconnected.

So misery there is, and misery there will be. And what of solutions? I am minded of the young Occupy campaigner, who when asked for a solution to the current economic crisis, replied, 'a kind of system that works both like capitalism and like communism.' I scoffed. And I remind you, I am pro-Occupy and left-wing by birthright. But then, I got thinking. We have all worked for capitalism. And as it failed us so badly when it was circumvented to allow a safety net for banks who could have been allowed to fail (an ultimate lesson that may have proved more painful than the bailout that was agreed), it is time to make capitalism into a tool that works for us, rather than a giant rolling ball that crushes us all on route.

So as the public sector realises it can no longer cling onto the terms and conditions that insulate them from the real world, so the private sector must realise that they can no longer claim vast wages and put the needs of the shareholders above the needs of the societies in which they operate. I realise that in both instances, this represents a paradigm shift to how each sector operates, but greater clarity of understanding is required if social unrest and bitter rivalry are not to bring the country to its knees.

In times of crisis, a government faced with falling living standards has a responsibility to arrest this decline by operating in a role that redistributes wealth. Much has been made of George Osbourne's pledge to reduce tax rates for the highest paid to encourage entrepreneurism. Well, rather than waiting for this to happen of its own accord, why not legislate for it? For example, you could try increasing the tax rate for individuals above a certain level, and investing the monies received in a growth and job creation fund. And yes, I realise that this takes money away from servicing the UK's vast debts, but as we have discussed in previous posts, we have to think about growth rather than just debt. To use an analogy employed by a friend of mine, when you buy a house, you don't starve your family so you can pay off the debt in a year.

The scariest of notions, and the one that all of our political parties have yet to face because the public itself remains in denial, is that we are now playing a different game to any that we have played before. Our ideologies of individual responsibility and free-market determination will not save us, and as things become increasingly fraught in the decade to come, we will need fresh ideas and a different model for how to run a society. And to prove how innovative we can be, we will need to completely remodel capitalism and make it work for us.

Our new capitalism must lead by promoting social interest. It must espouse the virtues of investment and innovation above all else. It must encourage us to ask ourselves what has happened to our manufacturing industries and to ask ourselves why our high streets have become clones of one another, supporting only the interests of giant chains who do so little to meet their social obligations to the rest of us. We must ask what our high earners do that makes them worth their high salaries. And when we think we have answers to these questions, we must have the courage to act on the answers that we have, rather than allowing political inclination or fear to temper our response.

A Bad Day In Britain

It's a bad day to be living in modern Britain. As the unemployment figures reach their highest level for seventeen years, the House of Lords has rubber-stamped the Government's plan to tender the NHS to any willing provider. Let's hope you weren't planning to get ill any time soon, because frankly, none of us can afford it.

I'm not going to go into a right wing vs. left wing debate about the merits of publicly vs. privately provided services, especially when there is plenty of scope to do that underneath the comments on the Guardian website. I especially love the trolls who comment that anyone with a public-sector ethos doesn't live in the real world and thinks that money grows on trees. All I can say by way of slightly smug response is that you can get a lot of money in the short-term by selling a goose that lays golden eggs, but that doesn't necessarily make it a good idea.

For the benefit of the lobotomised, here's a quick summary. All else being equal, if a private sector company can deliver the services that the public sector would deliver to the same standard while funding the profit margin that the shareholders demand at the same or lower cost, then you should use the private company. Otherwise, public will out.

Simple, right? A calculation that any of us could do, surely. I have spent my career watching the private sector cherry pick public services and I know that as with most things, sometimes the private sector contracts work well and sometimes they fail. I also know that the failures tend to be expensive and spectacular, and for your convenience, I have enclosed links to news items on the Connaught and Southern Cross debacles which have both directly impacted on people living in Norwich.

What is often forgotten or ignored in the midst of howling rhetoric and hysterical political point-scoring is that the true cost of such failures goes well beyond the balance sheet. How can any accountant, however skilled, put a price on the anxiety of a private sector worker with no employment protection, or an elderly person who fears they may lose their home?

As George Osborne presides over a second risky round of quantitative easing in a desperate and forlorn attempt to kick-start the economy and inflation begins to spiral upwards, the ministers in charge of the government of these isles are spending their days debating cats rather than putting their noses to the grindstone and coming up with some new ideas for creating growth and social prospects.

At the head of the table, David Cameron dons his top hat, pours tea and spouts nonsense as his unelected minions ride roughshod over public opinion with all the social grace of Panzers in wartime Europe.

An amusing image it may be, but it could soon spell the end for a free health service envied worldwide but nonetheless soon to be sold off for private profit.

Why 50% isn't half the story

There was some predictable left-wing anger this week about the hints by Chancellor George Osborne that he plans to abolish the 50% top rate tax band for high earners. Brendan Barber, General Secretary of the Trades Union Congress, described the plans as "monstrously unfair" and Labour Shadow Chancellor Ed Balls has come out firmly against the idea.


In addition to those notable figures, senior Liberal Democrat figures including Danny Alexander and Vince Cable have received the idea with a certain degree of sulky reluctance, though prominent LibDem bloggers are firmly behind the idea and see it as an opportunity to exhibit the party's pro-entrepreneurial stance.

This may surprise a few people, but I'm not against the idea on principle. The top-band tax rate only ever brought in amounts in the region of £2bn a year - not the kind of money to be sneezed at in a crisis, admittedly, but still a drop in the ocean in the context of total tax revenues annually of £550bn in the UK.

However, there is still a reason why the planned change is a bad one - and it is not an ideological reason.

Critics of the 50% tax rate say that it quashes self-advancement and makes the UK uncompetitive internationally. There are figures that suggest that the UK is certainly becoming less attractive for international investors, though there could be a host of reasons why this is the case, such as skills shortages or an overpriced currency. The argument in favour of cancelling the 50% rate is that the extra money earned by the richest will be spent, reinvigorating the economy and promoting growth.

The flaw in this particular theory is that poor people have a greater propensity to spend their disposable income than rich ones. The old adage is that rich people plan for three generations, where poor ones plan for Saturday night - and even in these times of ridiculously low interest rates, it still holds true. Figures bear out that low-earners are less likely to save or invest in pension plans.

In short, this suggests that if you really wanted to stimulate the economy by cutting taxes, you would get more bang for your buck by doing so at the low-income end of the equation. Also, tax cuts for low earners could be particularly good news for local traders in key geographical areas. In the short-term, the UK has to do something to stimulate domestic demand, or soon there will be no high streets left to shop on.

Every economic action comes with an attached opportunity cost - that is, the cost of not doing something else. You might be making a healthy 3% return on your savings, but you incur an opportunity cost by not taking advantage of a 4% offer elsewhere. Government continually incurs those opportunity costs on our behalf, in this instance doing so by cutting jobs at the low end and reducing taxes at the high end when there is evidence to suggest that spending on subsidies and infrastructure would do more to boost growth in the long run.

Ultimately, it is UK citizens that stand to suffer economic hardship and more pertinently, the poorest that experience the worst affects of social breakdown. Unemployment is at its highest level for three years and continuing to climb as the private sector fails to fill the gap left by grossly unnecessary public sector cuts that threaten to destabilise the economy further and wreak havoc on the health and social fabric of our nation.

Maybe You've Been Brainwashed Too

I'm going to be a dissenting voice today. It's okay to have a blog and give people my opinions, but realistically if I don't want this page to become a pro-Labourite Tory-bashing page, I have to present an alternative viewpoint where I see one.

Today, the point I will be considering is this: I frequently get upset by the half-truths and absolute garbage that is fed to the British people by such execrable rags as the Daily Express and the Daily Mail. However, it is reasonable to expect that the liberal press will take every opportunity to push forward their own agenda and it stands to reason that their tactics will be the same as those newspapers I mentioned before. By separating fact from conjecture on the anti-government side of the debate, we benefit from strengthening our arguments.

The story that prompted this thought process was written by Polly Toynbee in the Guardian and can be found here. I won't discuss the story at length, except to say that it focuses on the many ways in which projected growth in the economy has failed to meet expectations. However, if I blindly accept this as the truth, I am no better than those Daily Mail readers who accept that immigration is the cause of all the problems in the UK.

How does one person measure the true story of fiscal strength in the UK? Commodity prices have certainly increased, based on the increased price of my weekly shop. But inflation will do that, and we have become so used to inflation at ridiculously- low levels in the UK that this could just be part of the normal rise-and-fall of the economic cycle. Yes, consumer confidence certainly appears to be low and spending on luxury items has decreased. But is this just good sense on the part of the informed consumer, who responds warily to the word 'recession' by paying off debts rather than seeking to incur more?

There are many different viewpoints on the above and based on my experience of those so-called experts that you see on the television and read in the news, they are no better informed than most of the rest of us. This may not even be such a bad thing. More power to your elbow if you take the time to learn about your own crisis, because you are better prepared to deal with it when you are working from a position of genuine knowledge and understanding.

When the government first proposed cuts to public sector jobs, I was the first person on my feet opposing the move. Now, you can argue that public sector cuts are necessary or not, but the pertinent fact for me is that I am a public sector worker and my first instinct is to defend my job. David Cameron then said that people who had lost their jobs in the public sector would be easily re-employed as a result of the thousands of jobs that would be created by the private sector. Rubbish, scores of voices boomed, my own among them. I'm working from a gut instinct that the private sector is suffering terribly from the cuts in the same way that the public sector is. But how do I know? I see no evidence to suggest the economic growth that would be necessary for such job creation to begin, but how can I be sure which way the wind will blow tomorrow? Who would I work for if I didn't work for the public? Tesco? Would that even be such a bad thing? I might have more responsibility, earn more, make them a better supermarket for my being there.

So, there are simply too many unknowns, and watching George Osborne with his hand on the tiller of the HMS Future Prosperity, I am hoping that his view is clearer than mine. Sadly, I suspect that that is not the case. Gambling with your own future is fine, especially when if everything goes wrong, you will have millions in a trust fund to fall back on. For those of us who do not have such a safety net, we may become ever more reliant upon our quick wits and fate dealing us a good hand.