All Keynesians Now?

With one or two exceptions, western governments and significant others such as China have rediscovered the merits of the good old fashioned economics of J M Keynes in which stimuli are provided to depressed or damaged (not to say broken) economies.

As an unreformed lifelong Keynesian myself I am naturally very pleased about this. It means that there is a fighting chance that the recession will result in a loss of Gross Domestic Product (GDP) of ‘only’ 3 or 4 percent. This will be bad enough, make no mistake about that, and even with the measures applied it could be a lot worse. I do not recall a period since the war when there were so many factors pointing towards depression (a very deep recession with a loss of GDP of around 9 or 10 percent).
Major countries - particularly the US and ourselves, have been living in a fantasy world of non-existent ‘wealth’ ‘created’ by bankers. Alas, ‘bonkers’ would be more like it. One pointer so far as we are concerned is how ill prepared the economy is for this recession (statements by the Prime Minister and the Chancellor about being ‘well prepared’ never said why apart from their far-sighted leadership of course). Truly creative industry (and by this I mean manufacturing - nothing is more ‘creative’ than making things) has been hollowed out since the disastrous years of the early eighties. I recall Mrs Thatcher’s chief economic adviser asking (privately but not in public) ‘why does the country need manufacturing?’ I was flabbergasted and angry then and have been so ever since as successive governments acted as if they’d been reading the same too-clever-by-half monetarist textbooks. We can co-exist with Monetarists in good times but when the going gets really rough its time to send for Uncle Maynard.
We need to make things (and have a thriving agriculture) not just because self-sufficiency means that the country is less exposed to the consequences of get-rich-quick behaviour elsewhere but because the nation’s self-respect demands it. And ownership does matter - again because of national pride but also because being a ‘branch plant economy’ leaves us more exposed to closures made by foreign owners.
There’s a Dorian Grey feeling about an economy that has relied so much on money lending, taking in washing (sorry, providing services) and wheel clamping (one of our strongest growth sectors). With industries eviscerated and household name ‘British’ corporations exporting jobs by the thousand each month, what exactly is it that has supposed to have been growing all these years at 2.5%? You can only consume so much candy floss.
Casino capitalism creates nothing - the amount won exactly equals the amount lost. Real capitalists - our Victorian forebears - would be horrified to be bracketed with today’s fly-boys pretending to be beacons of free enterprise. These old-fashioned entrepreneurs had many faults not least their exploitativeness but they had two other qualities - a sense that what they were doing was important for the nation and that the national interest counted as well as their own profits, and the basic money-morality that meant that you didn’t set out to lie and cheat your way to riches.
The other downside of an industry shrunk in the name of globalisation is that some Keynesian remedies do not work quite as well these days because more of any tax-cut stimulus leaks out through being spent on imports. In the old days we would have been making the goods that people spent their extra money on, thus creating more wealth which in turn was spent leading to the Keynesian ‘multiplier’ where an original pound of stimulus creates several pounds worth of economic recovery. This is also why in my view the Government and most others have got the balance wrong.
More of the stimulus should have been on expanding public works (in which more of the good stays at home) and helping to rebuild industry and less on leaky tax cuts. Incidentally, a Keynesian solution does not necessarily imply huge budget deficits. There is a long neglected balanced budget multiplier where higher tax rates are applied to those who spend smaller proportions of their income (the rich) with lower taxes, higher pensions etc to those who spend greater proportions of income (the rest). But since the nonsense of Reaganomics (continued until recently by Mr Bush) and its followers here, the idea of taxing people who can afford it has been swept off the table with the crumbs.
I’m also sick to death of hearing about the ‘vital importance’ of free trade - whatever is meant by that - and hearing chancellors and former chancellors urging the creation of ‘level playing fields’ when what they should be doing is applying the same degree of tilt as the others. I say ‘whatever is meant by that’ because no (legal) trade is completely free in the sense of having a complete absence of regulations. It’s a question of how much regulation do you need? Just how poor do working conditions have to be in India before you admit that this isn’t competition it’s exploitative cheating? Just how much pollution is it OK to belch out in China? We have been exporting pollution along with our jobs. Production under domestic conditions would have caused less pollution so globalisation (even without the additional transport emissions) has made global warming worse.
In this context there’s also a lot of dangerous talk about so-called ‘comparative advantage’ where countries to the east make goods cheaper for some reason (almost always low pay and poor conditions). After apparent short term gains in the quantity of household bric-a-brac in our homes, this theory leads ultimately to ruin for us too. It is alleged that we surely have a comparative advantage in being ‘smart’ doing designs and selling services - as if the competitors to whom we have handed basic work are stupid and that these things are not next on the list.
So do I favour so called ‘protectionism’, whatever is meant by that, as opposed to ‘free’ trade? It seems that you can use the word ‘protect’ positively when you insure or take other precautions to secure the future of your home and family but to apply ‘protect’ to the economy on which all this depends has been given utterly negative connotations. But it is not a binary choice. Nothing is ever totally free or totally protected. I favour a trading environment where our industry, independence, national pride and environment are conserved (but I’d better not describe myself with the associated adjective!), where we as a country display the extent of self interest that other nations do, where our business leaders rediscover loyalty (bankers need more - a cultural revolution and a few years spreading muck in the fields to see if they can turn this into brass) and act in the wider interest, where we do our utmost to buy English and local and where government, national and local, sets out to rebuild the industry so long dismissed and derided by service economy smart alecs and quick fixers.
Can’t be done? Of course it can! But first there needs to be the will, robustness in international terms and a genuinely long run vision for the national future. Quite a lot to ask for these days I suspect. In the meantime we should apply the approach of John Maynard Keynes to our national infrastructure in all its aspects and not be averse to a fairer system of taxation that would make this an affordable reality.

Blog from America

While I was recently in Boston (Massachusetts rather than Lincolnshire) visiting relatives, I had a most welcome chance to observe the United States elections, personnel and process, at first hand. What a stunning outcome it was! Much has been written (to which I will refrain from adding except to express delight) and many parallels drawn.

But here I want to draw a different parallel, a much lesser one but nevertheless locally important. This results from the fact that I also had an unanticipated opportunity to reflect on two Birmingham matters. The first concerns the Central Library building and the second concerns the City Council.

The grey eminence of the Central Library (here viewed on the approach from Centenary Square) looms over Chamberlain Square, well and truly blotting the landscape across from two admirable listed buildings, the beautifully restored Town Hall and the fine building in which I have the privilege to work, the Council House. While the staff are magnificent and do a sterling job to give a good service and there are immensely valuable holdings they could do as much in a warehouse. But the Central Library building, the aesthetic equivalent of foul language, unsightly, dysfunctional and deteriorating is not completely friendless. There were pressures to list the Library pile from certain quarters as an example of the so-called ‘brutalist’ school of architecture. I used to work in another dire effort from this genre, the Muirhead Tower at Birmingham University (also ugly, costly, unfit and wearing out) which is now undergoing a prodigiously expensive overhaul. Unbelievably, an architectural body gave themselves an award for this assault on the senses which, much to its credit, the University attempted to resist.
And there’s more. When my sons were studying at London University, just round the corner from them was a ghastly sixties concrete garage which, incredibly, is a listed building. Would you credit it! I think that brutalism is not an example of taste, style and capability but a complete absence of these and even of of technical skills or any other desirable quality that you care to name. Pretty much the architectural equivalent of Tracy Emin’s bed. Indeed in my view the Central Library we have now is a bad example even of ‘brutalism’ – the Stalinist skyscrapers in Moscow, while grossly excessive and with challenging fixtures, at least look much better.

The Boston connection comes because the City Hall there (shown at left) was designed by the same architects as Birmingham Central Library. It is the building that I think the Birmingham Post alluded to in a feature a few months ago in connection with Birmingham Central Library. Incidentally, The Public Library in Boston is nothing like their City Hall. It is a very fine building in beaux-arts style built in 1895 and shown in the picture below, taken from across the attractive Copley Square.

Boston City Hall is, however, quite another kettle of fish. Ugly, depressing, dysfunctional – even bleaker inside than out and the recipient of no less than four awards from the architectural industry. Remind you of anything? Put up in 1969 it assumed the functions of the very pleasant traditional City Hall which is, fortunately, still there just round the corner (although now a restaurant and offices).
The Mayor of Boston quite rightly wants to get rid of the sixties shocker and replace it with a building that the majority of people would regard as fitting and at least pleasant. But, wouldn’t you know it, there is a small group that wants to stop this happening – a sort of eyesore support group just as we have in Birmingham for the Central Library. Let’s hope that both cities get rid of their respective blemishes on the civic landscapes. It’s ironic that in Birmingham many fine Victorian buildings were demolished to make way for the late 20th century junk architecture that we are faced with today. In Birmingham I hope that whatever replaces the Central Library is something that citizens will broadly welcome – as they did our great buildings of the past to which they often contributed.
My personal test of a good public building is whether the young people of today will be taking their grandchildren to admire it. This means that not only is it worth looking at but that it will still be there - rather than falling to bits - after just thirty or forty years. The modern approach seems to relish being ‘challenging’ - that is to say divisive – with, at most, 20% of people in favour and 80% or more against. Those proportions need at least to be reversed and whatever buildings are approved from now on should reflect the wishes and tastes of the population as a whole – after all, we’re the ones paying for them one way or another - rather than the arrogant vanities of architects, planners or politicians.
The other matter that I was prompted to think about while abroad is the question of elected Mayors which in England are favoured by the Government and also by Mr Cameron. A large majority of members on Birmingham City Council are rightly against any such change enforced by Government. I won’t go through all the arguments against elected mayors here, particularly the well-known ones about too much power being concentrated in the hands of idiosyncratic individuals, but if it was brought about in Birmingham there would be a greatly diminished Council in the City.
In Boston the City Council has just thirteen members and at the meeting that I attended the business was extremely formal with few contributions from the floor and much of it was pre-digested and went through on the nod or was referred to committees. I have never been a great admirer of confrontational partisan politics, especially of the ugly ‘Punch and Judy’ variety with its bullying aggression still to be found in its most undesirable form in Westminster. But there must continue to be a place for well-reasoned challenge and robust, public debating of important issues in a council’s principal forum. City Councils throughout the country have already suffered extensively from the ‘modernisation’ (for which read ‘Westmisterisation’) imposed under Mr Blair and continued under Mr Brown.
Further vitality must not be drained from our democracy, especially in Birmingham (which has the privilege of being the largest local authority in Europe) and where the meetings of the full City Council are the premier Local Government debating forum. And the long respected role of the Lord Mayor (who brings impartial chairmanship to meetings of the City Council) as the first citizen of Birmingham must be retained - and indeed restored to its full pre-eminence. This I am sure would be endorsed by everyone who has met Lord Mayors in their official capacity over the years, acting in the dedicated manner for which they are renowned. Long may this too continue.

To finish on an entirely cheerful note, while in Boston I attended a college game of American Football. The attendance was over 40,000 and the atmospherics and supporting cast of bands and cheerleaders contributed as much to the entertainment as the players - as this short video shows!