Words across the World

What a deeply impressive occasion President Obama’s inauguration was. The very sight of the million plus people gathered for the historic day set the inspirational scene and that picture will endure in memory and record. So also will the President Obama’s speech endure. Some commentators, no doubt seeking highbrow entertainment, have complained that it was not drenched in soaring phrases. There was poetry there aplenty but it seemed clear to me that this was a speech of great substance setting out the character of the new United States administration, its broad intentions, some clear imperatives and struck notes of genuine change and what I would characterise as ‘ambitious realism’.
As with all the limited selection of Obama material that I have heard, including the half-hour ‘infomercial’, not a word was wasted. It was laden with significance and for that reason will outlast speeches remembered mostly for their memorable phrases (‘ask not...’, ‘land a man on the moon...’, ‘nothing to fear but fear itself...’) from Kennedy or Franklin Roosevelt. And, I will wager, we will see more of President Obama’s speech implemented - that was the clear intention. And such are Obama’s gifts of organisation, the structure of decision making, confidence and sheer ability - clearly comfortable with power from the outset - that he will do this himself.
Franklin Roosevelt, in my view the greatest US president to date, had major achievements both at home and abroad but could have pulled the United States out of the Great Depression sooner had he not been somewhat hamstrung both by institutions and the thinking of the times. It was President Johnson of course who carried forward much of the Kennedy programme and, despite his less attractive qualities, began material delivery on civil rights with considerable political skill.
President Obama has got down to work immediately - and so should national leaders elsewhere. In this connection, one less commented upon point of Obama’s speech is how the powerful and poetic phrases are deployable to other contexts. Before illustrating this in an English context, could I point towards a completely unrelated source that is richly usable in the same way.

This is Ecclesiasticus from the Biblical Apocrypha, which will reward a reflective browse. I once gave a speech at a cricket dinner reviewing the season my club had had, illuminated by phrases from this both multi-levelled and profound source. It would probably work for other sports too, should you want to try something a bit different. No doubt your ‘delivery’ would be a distinct improvement on mine - no wonder half the members seemed to be nodding off!
So, as a few examples of the relevance of the Obama phrases and the lamentable English economic condition:
‘An economic crisis caused by greed and irresponsibility...’ Applies here too - unchanged and, alas, probably with even greater force, now amplified for England by having to pick up another huge chunk of losses from the Royal Bank of Scotland.
‘Our collective failure to make hard choices...’ In my book principally the choice to live within our means, abandoning the ‘have it all’, ‘must have’ and ‘generation now’ advertising mentalities as well as unmade selections of options in political economy.
‘The challenges we face are real...’ All too true of the real economy skewered by the avaricious and incompetent bankers and the glut of globalisation thrust upon us in a cruel kind of industrial pate de foie gras.
‘Clinging to power through corruption and deceit...’ Today’s (or yesterday’s) possessors of economic power, corrupted by bonuses and deceiving themselves as well as both citizens and leaders here. In my view we must do something about the culture of customer deceit on which so much of our economy became based.
‘Bold and swift action...’ on the economy - not so swift and only retrospectively emboldened by discoveries of the emerging scale of the debt the banks have saddled us with.
There are many more widely adaptable phrases in an eloquent speech, the relevance of which extends to large parts of the Western World.

An Effective Keynesian Stimulus

Contrary to the repeated assertions made by the Government, there is no doubt that the British economy was particularly badly placed to withstand the crises in the financial sector and, even more importantly, in the productive sectors. Badly placed indeed, due an unbalanced economy that had become far too reliant on casino capitalism, to imprudence in government management of finances, mismanaged contracts and misdirected spend over very many years. And of course, on a truly epic scale, due to the abandonment of prudence, wisdom, diligence and even plain common sense in the banking and financial sector and the absence of effective financial regulation.
Added to this have been the ravages of the globalisation bandwagon on domestic industry, manufacturing in particular, with much of it closed down and many jobs already exported. The evisceration of our industries of substance rather than froth leaves the country less able to benefit from the lower value of the pound by producing for export - where the demand is there. The commercial banks have added further to this problem by effectively forcing viable producers out of business with severely tightened conditions or recalled loans. I sometimes think that banks, in their behaviour towards industry and individuals alike, are little better than a fifth column. As a result, there is still a real and present danger of approaching a 1930s situation.
How is this dire predicament to be remedied? Certainly not without a cost. Folly always has its price. We will do well to escape with 5% reduction in Gross Domestic Product. But how do we ensure that such a deep recession, where output recedes and where spending and income are well below normal, does not worsen further into depression where there are disastrous falls and the loss of GDP approaches double digits? And how do we ensure that a sustainable economic recovery begins as soon as possible?
Those in power, or aspiring to power, must have a clearly thought through and effective recovery strategy. It is not clear that this exists in government and certainly not in the principal opposition. In these circumstances, does it sound like good sense to start cutting back? Most certainly not. If output and income are to go up, then there must be extra spending from some quarter. The rational debate - and there is plenty of scope for discussion of which measures will prove to be most effective - is about how a Keynesian solution that would achieve this is to be implemented, and which quarters can be persuaded and enabled to spend more.
A certain amount of benefit, but probably not all that much in the shorter term, may come from exports (not evident as yet) and visitors from overseas (some evidence of this). If the death grip of the banks can be loosened, and companies can be enabled at least to retain what they already have, and to increase their investment spending, then that would indeed be ideal. But, in order to justify investment, companies need to see demand for their products, which of course is precisely what isn’t there. So, once again, it makes no sense to cut back.
In terms of expanding aggregate demand, you can try to create that extra consumption with tax cuts. In this connection, income tax cuts would have been better than the VAT reduction, which clearly isn’t working. And transmitted interest rate reductions will also cause borrowers to have more at their disposal.
But interest rates are a double-edged sword whereby those who rely on savings for income are made worse off and so spend less. We know only too well that, courtesy of the banks, savers are hit early and in full and borrowers benefit later and less, if at all. Additionally, Experience in Japan in the 1990s found that in the face of interest rate cuts people saved harder to preserve their future security and incomes. We may see something of that effect here.
Important though they are, in my opinion there has been too much concentration on interest rates and taxation (though not enough about helping those who save) and now talk of increasingly imaginative and risky monetary policies too. Though all these policies have a role, there has in my view been not nearly enough of a focus on public works projects and support for manufacturing industry.
With infrastructure work - and goodness knows that after decades of under-investment we need it in energy, transport and right across the board - we generate business to firms and encourage them to invest, create or save jobs, keep more of the money at home and provide a better quality infrastructure and the much needed energy security and stable prices in the future. To my mind that’s a whole lot better and wiser than, in effect, saying: ‘Here’s £100, dash down the shopping centre and spend it on imports’.
What about Government waste? All too much of this is gone for good, but no-one in their senses would object to cutting current waste and improving efficiency - it’s important to do this. But in my view it is also important to divert the bulk of such savings to public works projects - and then to add to this total. It is imperative that the total be increased. Also in my view, if too much of the savings from waste reduction are passed on in the form of tax cuts then, entirely rationally in individual terms, people will probably use most of it to repair their domestic balance sheets - rather like the banks and with the same lack of benefit to the economy as a whole.
Economic recessions are about a serious shortage of aggregate demand. And in my view it also matters what makes up that demand. The less expenditure that is frittered away on bric-a-brac and which leaks out on imports, and the more of it that is invested in improvements in the nation’s infrastructure and the environment, securing productive jobs and supporting manufacturing, the better. And in the longer term, a restored and re-balanced economy, achieved by these Keynesian means described, will provide the firmest foundation for the restoration of future public finances and the resumption of prudent and sustainable ways of living.

Gaza

The relentless bombardment of Gaza must stop, as must random rocket attacks on Israeli people. Israel has no right to make the whole Palestinian people, least of all children, culpable for the actions of Hamas and those who arm it. Hamas has no licence to act in ways that it knows will bring suffering and death to innocent people - not least to the afflicted, powerless people that it claims to represent. There must be an immediate, durable and fully respected ceasefire to ensure that there is no further loss of life in and around Gaza. International peacekeepers and experts should be deployed in key positions and arms exports should cease. There should be credible and independent investigations into any violations of international humanitarian law.
The Israeli government and those who support it must realise that the problems of the Middle East cannot be solved by armed and disproportionate force and that the Palestinian people have rights to homeland, peace and prosperity. Hamas and its backers must realise that the welfare and interests of the Palestinian people are undermined by acts of violence and vengeance, and that Israel is an established fact. The world must realise and base its actions upon the strength of the convictions of the two peoples about their rights to live in the same area of land.
If Israel’s aim is to destroy Hamas (as if something worse would not spring up in its place) then it must rapidly reconsider. If eradication is not its aim, the attack upon Gaza is senseless as well as barbaric. If the objective of Hamas is to destroy Israel (as if the roles would not then be reversed) it too must reassess and relate to reality. If not, the siting of rocket launchers in populated and vulnerable areas is also senseless as well as abusive and dishonourable. A cycle of merciless violence, fuelled by hatred, loathing and disregard for individual life, will be victory for no-one and defeat for humanity.
Yet there are people of pragmatism - and indeed good will - in both causes. By means that cannot yet be set out in full, their hands must be strengthened and those of the ideologues diminished. Some leaders who show insight in calmer times should promote their own level-headed counsel in ending this conflict. For example: "Israel will never turn armed might into strategic security. If need be it could win a war against all its enemies combined. But if it wants peace it must face the decision it has avoided for forty years: withdrawal from the occupied Palestinian territories. Military victories and land grabs are futile. Security will only come with political resolution." So reflected Ehud Olmert last September.
For ill or for good, and certainly forever, the destinies of the Palestinian and Israeli peoples are bound together, obliging them to live side by side. In the interests of ordinary people, those who command or govern must come to the conclusion, however reluctantly, that this is to be constructive rather than cursed, developmental rather than desolate and act accordingly. Through continued diplomatic pressure from the United Nations, the United States (now, we cannot wait for the new leadership), through the EU with a serious mandate, through our own Government and through the actions of other nation states - and thousands of organisations within them - the world must put its weight behind a massive effort to bring an end to the humanitarian disaster in Gaza and work with unprecedented commitment to achieve a just and lasting political resolution in the Middle East.

The Saving of the Nation (2)

It is clearly essential that effective measures are taken to stimulate economies throughout both the developed and developing world. No effective alternatives have been presented to the broadly Keynesian actions that most governments (with some regrettable exceptions) have taken. Criticism by conservative politicians (many Republicans in the United States and the Conservative Party leadership in England) has smacked, not so much of firm government, but of opportunist political self-interest and has conspicuously lacked anything that resembles even coherence or consistency - let alone rigorous analysis.
But it is also clear that very careful consideration must be given to the form that the policy initiatives take and the effects - by no means all of them positive - that the measures are having on different groups of people. For example, there has in my opinion been far too much reliance on both interest rate reductions and tax cuts. There should be a much greater emphasis on public works such as transport infrastructure, power generation and increasing the nation’s pitiful fuel storage capacity that remains at not much more than a tenth of German and French capacity. This despite the huge and exploitative profits that continue to be made by the privatised gas and electricity companies. The only ‘transparency’ they exhibit is in the inconsistency of their excuses and their disregard of toothless ‘regulation’. Perhaps the example of the incoming Obama administration in the United States will provide an inspiring example.
In the present circumstances further interest rate cuts will have only a limited - if any - positive impact on the economy as we head for the worst recession since the 1930s. Any further reductions in bank rate by the Bank of England will have next to no effect so far as industry and borrowers are concerned. Despite the colossal subsidies that they have received from the taxpayer, banks continue to penalise good businesses while tempting individuals with unsolicited loan offers.
In recent instances of the banks’ destructive and corrupting behaviour, a viable and competitive Midlands metal plating company with fifty employees had a debt of £200,000 called in. A few years ago the company had borrowed and invested £1,000,000 on new capital equipment to compete (very successfully) with firms in Eastern Europe and had already paid back £800,000 of the loan. The crassly irresponsible and unpatriotic bankers called in the remainder and have destroyed this local company and the real and valuable jobs that it provided. At around the same time a close friend of mine was offered, out of the blue, a loan of £20,000 that they neither needed nor wanted. My friend threw this unworthy document straight into the bin where it belonged. But there will undoubtedly be other people who may well be tempted to extravagance. There are times when the commercial banks seem to be acting like a fifth column intent upon undermining the nation.
Furthermore, reductions in interest rates hit savers hard and early, considerably reducing both their standard of living and their security. We need a different financial SOS - Save Our Savers! Bank rate reductions however are only partly passed on by the banks to borrowers - in some cases loan charges have actually been put up along with the imposition of more restrictive conditions. Even some Building Societies, though still as mutuals retaining prudence and much more soundly based than the commercial banks, have not been immune from deceitful practices such as reducing the interest rates to savers by more than the reductions in bank rate.
There are seven times as many savers as borrowers - a fact that both the Government and the Bank of England need to remember. Savings are the bedrock on which long term investment should be built. Not only this, but savers, particularly older people in or near retirement, are having their incomes severely reduced by interest rates already at derisory levels of around one percent on many savings accounts. Ways must be found to moderate this highly adverse impact on people who are trying, responsibly, to live within their means, provide for themselves and indeed set a good example to others.
Furthermore, the economic effect of rate cuts can even be perverse. The income reductions for savers mean that they have less - much less - available to spend. In Japan in the 1990s as interest rates were progressively pared back towards zero people saved even harder to make up for the loss in growth of their wealth and the security that gave them. But then Japanese industry always took a patient approach to money (which accounts for much of their success against our own ‘get rich quick’ brigade). And the Japanese people can be more traditional which is reflected in the fact that the Yen continues rising as the Pound continues falling.
How this country has lost its way over the years! It is certainly no use relying on the banks to be responsible citizens in their approach to businesses or to be reasonable about the interest rates that they offer to individual savers. There needs to be direct action by the Government. The Government should not confine themselves to tax cuts on the income from savings that have been suggested in some quarters. This would be a benefit at the margin but if there is precious little income to tax what impact could this be expected to have? Effective action in my view could take the form of nationalisation of the banks or, should they be too faint-hearted, the Government could achieve a similar end by ramping up the role of National Savings and Investments. A clue here is that NS&I used to be called the National Savings Bank.

The country desperately needs a bank or banks that operate in the public interest either at national level through the Government or at municipal level through Local Authorities. This cannot come soon enough.

The Usurer's Tale?

Definitions (from the Cobuild dictionary, compiled in Birmingham):
Hangover:
1 If someone wakes up with a hangover, they feel sick and have a headache because they have drunk a lot of alcohol the night before.
2 Something that is a hangover from the past is an idea or way of behaving which people used to have in the past but which people no longer generally have

As the grey dawn of the New Year broke I recalled, while progressing towards Canterbury some years ago, finding an apparently centuries-old manuscript. Taking the form of a coarse lament and dedicated to a close friend named Geoffrey, it seems that the writer, at least without further support from a higher power, is still disinclined to reform his errant ways in the New Year:

Abed at noon,
ill-slept and indisposed
to rising yet.
And yet ten hours have passed
since last
my reddened eyes saw light.
Pulsating head indeed exceeds the beat of racing heart.
Oh me! And how
my troubled bowels
do vent their airs of grace devoid
(and needs must I avoid their pungent path!)
And as to work,
upon my soul I shall not shirk
one day of toil,
lest I forfeit a quenching cup
of grape’s intoxicating oil.

My researches suggest that this rough verse may have been written by someone in a much reduced, distinctly sub-prime condition, used to extravagant living on the ill-gotten proceeds of money lending. In the spirit of a New Year let’s hope nonetheless that he completed his journey and, however reluctantly, gained enlightenment and regained his senses in a transformation from which the whole of society would benefit. And let’s hope as well that in 2009 we shall all suffer fewer headaches and live in less interesting times!