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!

A Landscape Rich in History

With Sarehole Mill near its centre, The Shire Country Park in Birmingham extends for about four miles along the River Cole. Along with its satellite areas, this is one of the most interesting and varied country parks in the English Midlands both in terms of natural environment and historic legacy.

The Shire Country Park contains a wide variety of habitats and wildlife including around eighty species (some of them rare) of birds, some scarce heathland, and a wide range of plants that include meadow flowers and orchids. Ancient agricultural land use leaves intriguing traces at various points.

The outstanding ridge and furrow field in The Dingles probably dates from the 11th century. There is evidence of agricultural use in Anglo-Saxon times in Priory Fields and there are Bronze Age burnt mounds in Moseley Bog, which have been listed as a scheduled ancient monument.
There are four main pools in the park. Starting at Priory Fields, the pool is sometimes described as a Mill Pool but was, and still is, used as a fish pond. The once nearby mill, scandalously demolished in the 1960’s - truly a heroic age of developmental vandalism - was a windmill. This characterful mill was removed in order to increase the size of a development by one bungalow. The old windmill put up a good fight and was so soundly built that in the end, dynamite had to be used.

Trittiford Pool was originally called Titterford, meaning ‘place of small birds’ and the associated Mill was where Mill Pool Gardens now stand. Trittiford Pool is thought by many to be the inspiration for the Long Lake in The Hobbit. The Mill Pool at Sarehole is a lovely if secluded site. While it is a green oasis it is ‘silting’ up (mostly leaves in fact) and will need to be de-silted if milling is to continue. The pool at the end of Moseley Bog nearest to the Dell was originally a garden feature. Moseley bog itself is the probable basis of the Old Forest in JRR Tolkien's works and was once a feeder pool to Sarehole Mill. There were once very many water mills in the Cole and associated river valleys which were key to both industry and agriculture. Our extract from the map produced by the late John Morris Jones gives an idea of just how many there were.

Beyond Sarehole Mill towards the Stratford Road is the Greet Mill Meadows section in which are set the attractive stepping stone crossings. The park then continues on through the Forman’s Road section to the site of the former Burbury Brickworks, now itself very rich in flora and with attractive wetland area and good viewing points along the ridge away from the river. The Shire Country Park currently extends just beyond Burbury to the bridge leading into The Ackers Trust. One of our long term objectives is to incorporate The Ackers - and a little beyond past the intriguing St Cyprian’s Church - to make a connection with the Kingfisher Country Park, which also continues for several miles further along the River Cole.
As well as Moseley Bog, The Dell and Priory Fields we are seeking to incorporate other areas as satellite green oases. One of these is the surprisingly large area enclosed between Green Road and Cubley Road which itself has a pool and is worthy of designation at least as a site of local interest for nature conservation (SLINC). Another is the green area between the Dell and Moseley Bog below the Wake Green Centre. Again this is well worth keeping as green land and which could be part of an attractive green way linking the Dell with the Bog so enhancing the country park. Part of the land has been used from time to time as a Forest School. There are interesting trees including a small-leafed lime that we understand is indicative of old woodland. Certainly the Tolkien brothers would have played there and walked across this when they lived in Sarehole. The land runs right up to the pool in the bog.
Near to Sarehole Mill, on a strip of land sometimes known as the peninsula, work is progressing on an open-air performance area - a grassed mini-amphitheatre in a natural setting of willows and grassy banks. The Withywindle Performance Arena is being prepared by groups of volunteers (withy is an old word for willows, which the Cole winds through). It is hoped the Arena will be ready next year for outdoor performances, concerts, lectures, picnics or whatever might catch the imagination. The name Withywindle is used by Tolkien in his poem about his character Tom Bombadil: 'He lived up under the hill, where the Withywindle ran from a grassy well down into the dingle.' Those who know Sarehole will also know of the nearby Dingles (the word ‘dingle’ means a wooded valley). It is interesting to think of Tolkien and his brother Hilary exploring this area along the River Cole as children when they lived in Sarehole.

We trust that the preservation, extension and improvement of The Shire Country Park under the auspices of The Shire Country Park Friends will enhance our distinctive and historic area and we await these and other welcome developments with much interest.

Pensions at 100!

There is renewed discussion of the adequacy, or rather the inadequacy, of the state pension in times when elderly people, because of the high proportion of their spend represented by fuel and food, face much higher inflation than the average. But at least there is a pension there - this year seeing the centenary of its introduction. The state pension has been the cornerstone of social security for these hundred years and it has contributed greatly to the goal of a reasonable quality of life for those reaching retirement age.
A state pension was introduced in 1908 by David Lloyd George, the Chancellor of the Exchequer in the Liberal Government at that time. The new pension, which was paid to those over 70, was worth between one and five shillings a week depending on means. Five shillings, also called a crown, was about 20% of average earnings at the time. Winston Churchill, then a Liberal and a member of the Government, described the pension as the making of "that provision for the aged which compassion demands". Such values stand in sharp contrast with the 1980 Government decision to end the link between pensions and earnings.
Liberal politicians introduced the state pension in the face of substantial opposition including resistance from the House of Lords. In the Liberal Democrat office in the Council House in Birmingham we have copies of some posters of the time that illustrate the battle in an old-fashioned political way and I’ve included some of them here.
Lloyd George and other campaigners for the pension sought to start a process that would lead to the ending of poverty for those in old age and to "lift the shadow of the workhouse from the homes of the poor". The social reform legislation of the Liberal government of 1906 - 1914, especially after 1908, is one of the most important collections of measures to improve the lives and opportunities of ordinary people. It made possible future laws and social provision following the 1942 Beveridge Report (the work of another Liberal).

A short history of pensions
1908: The Old Age Pensions Act introduced the first general old age pension of between one shilling and five shillings a week, from the age of 70, dependent on means, from January 1st 1909 - "Pensions Day". William Beveridge, father of the welfare state, was an adviser to the government.
1921: The Finance Act gave tax relief to pension schemes under certain conditions.
1925: The Contributory Pensions Act set up a contributory state scheme for manual workers and others earning up to £250 a year. The pension was ten shillings a week from age 65.
1942: Sir William Beveridge publishes his "Social Insurance and Allied Services" report with state welfare proposals.
1946: The National Insurance Act introduced a contributory state pension for all. Initially pensions were one pound six shillings a week for a single person and two pounds two shillings for a married couple. Paid from age 65 for men and 60 for women, effective from 1948.
1947: The Finance Act limited the maximum amount of tax relief on pensions, and the proportion that could be taken as a lump sum.
1959: The National Insurance Act introduced a top-up state pensions scheme (graduated pensions) based on earnings of between £9 and £15 a week.
1975: The Social Security Pensions Act set up the State Earnings Related Pension Scheme (SERPS). Introduced in 1978, the scheme replaced graduated pensions. Rules for contracting out were also introduced.
1980: The Social Security Act broke the link between state pension increases and average earnings. Future increases based on prices. If the link with earnings had been kept, a single pensioner would now be about £30 better off.
1995: The Pensions Act was a response to the Maxwell scandal. The act set up regulatory and compensation schemes.
1997 saw the removal of tax credits for pension funds on company dividends.
1999 saw the introduction of Minimum Income Guarantee for the poorest pensioners.

Notes and coins in good measure.
In the pre-decimalization currency there were twenty shillings in the pound and twelve pennies in a shilling. There were four crowns to the pound but crown coins were rare. Much more common were half-crowns (also known colloquially as ‘half a dollar’ from the faraway times when the exchange rate was four US dollars to the pound sterling). Coinage used to have character in those days. The coins I recall well started at a farthing - a mere one quarter of a penny so 960 farthings in a pound. Then there was a half penny or ha’penny, the penny, two different threepenny coins, a sixpence, a shilling, a two shilling piece, a half-crown (two shillings and sixpence) and occasional crown coins. This gloriously illogical medley of denominations was the source of much pleasure, not least in the confusion caused to visitors to the country! The next unit up was the very popular ten-shilling note (so fifty pence in today’s terms), then there were one pound notes, five, ten and beyond the likes of which people like me never saw! The most unusual unit of currency was perhaps the guinea - one pound and one shilling - which could be the occasion of an unpleasant surprise when you discovered that a price was quoted in guineas rather than pounds and you had to pay 5% more!
Personally, I still regret the demise of all this (along with imperial units of measure) especially the one pound note. I take the view that the basic unit of national currency should be available in paper form, but the Government eventually put a minor cost saving over the wishes of most of us. Meanwhile in the United States they continued with dollar bills, not daring to face the wrath of the people. I will say nothing of the Euro! In the United States the authorities are trying to run dollar coins in parallel with the notes, but since machines read paper currency very well there’s not much demand for them, and there’s usually a muffled apology when your change includes these coins. One of the problems for US treasury officials is that the dollar bill carries the image of George Washington, the most revered figure in US history. So it is likely that Americans will keep the benefit of having their basic unit of currency in note form for some time yet.

GM - Get More Modesty

The issue of Genetically Modified food ‘technology’ has rightly been raised again by H.R.H. Prince Charles. It is right that there should be a vigorous national debate, and it is not necessary to agree with everything that the Prince says to recognise that he does the country an important service by promoting this vital discussion. The disdainful responses to the Prince’s views from certain predictable quarters tell us a great deal about the GM proponents and the state of their minds, their morality and their money.

There are major risks with GM, and they do need to be talked about. Financial meltdowns pale into insignificance in comparison with the possible consequences of adverse and ill-considered human impact on the natural world
In learning with dismay, but not surprise, about the spread of GM crop contamination in England (the full extent of which is not known) it seems to me that not only has nothing been learnt from food production disasters such as BSE / CJD, but that the arrogant mindset that gives rise to such dire events has contaminated Whitehall and Westminster as well as the interested parties in commercial science and industry. In broad terms I take the view that our lords and masters (of you and me that is - not our environment) and all too many of their advisers, not to mention those with direct financial interest, are possessed of three dangerous delusions which, if they persist, could well one day lead to even greater disaster. These are:
The illusion of objectivity: the view that the natural world is an object to be manipulated and that we are not an integral part of it.
The illusion of knowledge: that in the making of crucial decisions we know all that needs knowing about natural systems.
The illusion of control: that we will be able to manage and channel the changes to natural systems.
What is so sadly lacking today and what is so desperately needed, is a bit more modesty and humility in the face of our own limitations and the stupendous complexity and interlinkage of the natural world. If, as we are now seeing, we can get into such deep trouble with a failure to grasp the purely human construction of financial markets, how can we possibly imagine that we can give assurances (no government guarantees possible here) about the safety and stability of genetic intrusion into the environment?
There needs to be a return to fundamental respect for nature and life. This simple but crucial value would have spared us from the money-driven and amoral decision to feed ruminants their own remains and the subsequent Treasury penny-pinching in the attempt to first hide and then clear up that mess which has devastated hundreds of lives. We have a similar mess-potential with GM foods and genetic tampering (a better description than the flattering term ‘engineering’). I am sure that most ordinary people would also take the view that less self-seeking attitudes in our behaviour within nature would not go amiss either. But I suspect that the Government is wedded to yet another ‘change’ in the industry of food. It is likely that these basic points will prove too demanding for our leaders, given their track record. So, in more specific terms, here are some observations on the current position and draft legislation.
Firstly we should ensure that the right of both farmers and consumers throughout England as well as Scotland and Wales (who as usual can act more independently) to choose to be GM-free is fully protected. Furthermore, and at the very least, any GM Food that is imported into the UK as a result of the use of GM technology abroad must be clearly labeled in order that British consumers are fully aware of what to avoid and what to purchase.
Secondly, the draft legislation sets far too high a threshold for permitted contamination from genetically modified food production. If the Government does insist on going down the track of genetic modification, the maximum threshold for GM presence allowed in both organic and conventional non-GM produce should not be 0.9% as the Government proposes, but an absolute limit of 0.1% or less. We should also insist that the liability for any contamination above this threshold, including all income lost - such as through the loss of organic certification - should fall on the biotechnology companies.
Thirdly the Government’s proposed ‘separation distances’ between genetically modified and conventional crops in England are inadequate to ensure that significant contamination does not occur. Communities should have the right to create GM-free zones and use organic and traditional farming methods for their contribution to biodiversity. Unfortunately, the Government’s obsession with GM crops risks undermining the organic movement.
Fourthly, a major concern about the way GM is used around the world is that the multinational companies who own the patents on genetically modified seeds can make low-income farmers dependent on them as monopoly suppliers. This is by so-called ‘terminator’ genes being inserted to prevent a crop naturally re-seeding for the following year. This means that for the next year’s crop farmers who may already be facing severe financial difficulty, have to buy another crop from the supplier, further increasing the profits that the multinational companies make at the expense of the farmers.
Fifthly, an argument advanced in favour of genetically modified crops is that they produce higher yields than natural crops. In fact it is by no means clear that using GM seeds always produces larger crops. And, quite apart from the environmental consequences, bearing in mind the ‘terminator’ technology, the argument does not in any case justify the introduction of GM seeds and crops.
Finally, there is the question of timescale. Returning to the thrust of the original argument, until much more is known, with unbiased confirmation, about the potential impact of these crops on the natural world and local economies, any use of genetically modified crops should be avoided.

The Saving of the Nation

There has been a recent revival in National Savings as a direct result of the insecurity that people rightly feel about profit (or loss) making financial institutions and reminding some of us of times, better in most respects except the material, when futures were built on firm foundations.
The lamentable revelations of the financial crisis once more make clear that it is not so much institutions that are at risk but ordinary people. It is not so much government that pays as you and me. Governments have no money but ours and the same is true of the banks. Both make decisions about what to do with our money. Governments at least are elected albeit by a flawed system. If they make a mess they can be thrown out rather than bailed out. As we have discovered, much of our money entrusted to banks has been ill-used and put at dire risk.
Sooner or later the bills from both quarters come back to us as taxpayers, shareholders (directly or indirectly through pension schemes) or customers. The Government appears to think that it has pulled a fine stroke by apparently leaving banks (and the relatively innocent building societies) with part of the bill for the latest bailout. But if so they are misleading themselves and, perhaps with intent, us as well.
From whom do you think the banks will get their money back - as they surely will? From us of course through higher charges for big items such as mortgages or bread and butter transactions, foreign exchange, dubious penalties, obscure charges or further shaved rates for savings and greater disconnection to bank rate. This they can do since they conduct their affairs as a none-too-subtle cartel, competing only to extract greater profits from you and me - and indeed ordinary people abroad. The same personnel with the same corroded culture will, before long, again be looking for more ways to make a quicker quid and sowing the sleazy seeds of the next crisis/bailout.
Which is why I sincerely hope that the recent revival of National Savings grows and becomes permanent. And I hope that the government, when it hears the wailing from the banks, does not set tighter limits or deliberately dismal rates. It would be ideal if NS was complemented by municipal initiatives, but there is not the will to do this at present. I hope also that the Post Office prospers, with its savings side outsourced, to the surprise of many, to the Bank of Ireland and so at least benefiting from the Irish Government’s 100% savings guarantee. It could be well worth waiting in the queues at those post offices still open and reflecting on the times when there were principles as well as profits worth fighting for - principles that underpinned the saving of the nation.

Passing the hat round

Government intervention to prevent the collapse of Bradford and Bingley brings to an end the sorry tale of former building societies that so ill advisedly threw away their trusted mutual status. If only we could be sure that the corrosive impact on the real economy would end too. And if only it would also bring to an end the intemperate attitudes and worthless values that riddle so much of the financial sector today. Alas, short of sustained and creative public involvement - or intervention from much higher, celestial quarters, it will not.
We hear much - far too much - these days about the creation of value - usually for institutional owners and bonus besotted boards of directors. We don’t hear half enough about the destruction of values that is the core reason for the whole financial crisis in my view. This latest particular tale of woe is symptomatic of finance and banking as value free zones.
While many were surprised to learn of the extent of the unprincipled dangling of tantalising and falsely cheap mortgages in the United States to those who could not afford them, not dissimilar things were going on here. For example the practice of so called ‘self certification’ (cutting out precautionary checks cuts short run costs too) where people seeking a home of their own were offered the tempting chance to lie about their incomes was almost equally devilish.
In the United States the resulting financial ‘assets’ were mixed up with others in deliberately overcomplicated and obscure packages which, with rank duplicity, were hawked to lazy and incompetent bankers abroad who had no idea of their true nature and didn’t trouble themselves to find out on their way to collecting their latest bonuses.
How could our national leaders and supposed regulators have let this happen? And how could we as a nation have allowed our various leaders over recent decades to permit - indeed to encourage - the loss of ownership and the evisceration of the real economy that make us so dependent on these kinds of ‘services’? We have to rebuild our prosperity on more than money lending and the economics of the casino.
Here in England it was in 1986 that the government of Mrs Thatcher allowed building societies to cast caution to the winds, throw away their mutual status and cave in to the carpetbaggers looking for a quick killing. This invited and rewarded behaviour that utterly contradicted the principles of thrift on which so many ordinary people had been brought up. But one hopeful fact is, I believe, that a majority of people still hold fast to these good traditional values both here at home and in the United States. What is needed are secure opportunities for people to put their principles into practice.
To help encourage this is one of the reasons why I have been arguing for the re-establishment of the trusted and trustworthy Municipal Banks. I am convinced that there is a major role for the public as well as the voluntary sector in the realm of savings and loans. There is more on this in other articles posted in this blog. Public sector involvement should not in my view be confined to clearing up private sector messes, picking up liabilities and organising fire sales.
While those not currently responsible will assert that it could have been better done, the Government was right to intervene. However I do think that Building Societies should not have to bear part of the burden - the diminishment of this sector’s role through demutualisation has been part of the problem. I wish that there was a prospect of continuing public involvement in good times as well as bad.
One reason for my thinking here, apart from a belief in co-operation as well as competition, is that I also believe that it will take far longer to infuse values rather than value into the financial sector. And please don’t tell me you can’t change ‘human nature’, whatever you might mean by that. If you do take this view, get out more and speak to ordinary decent people who would never dream of acting like feckless financiers. It is their nature that is inspiringly human and whose example should be followed.
We also need to ensure that remaining Building Societies stay mutual and return fully to their traditional approaches. There have been more than a few signs of contagion of practices from the banking sector, particularly taking advantage of, instead of respecting the loyalty of their savers. There would be substantial obstacles to be overcome (many put there by governments) but it could be done - if the will was there.
Founded (separately as the Bradford Equitable Benefit and the Bingley Permanent societies) in 1851, merged in 1964 and steadily and prudently built up over 150 years, they were destroyed by recklessness in a decade. Bradford and Bingley’s advertising for many years created an air of solidity and trustworthiness in the days when the bowler hats associated with city gents were a symbol of respect. The flash Bradford & Bingley directors along with the similar ill-begotten brood at Northern Rock have severely damaged the wealth of many people and have wrecked the reputation of the North of England as a place where traditional values still hold sway. That is why in my view the country needs far fewer flyboys and many more Mannerings!
About five years before throwing away their respected status as a Building Society, the would-be big shots at Bradford & Bingley bought Stan Laurel’s bowler hat. Would that the joke was now on them, but there’s little chance that they will be out of the door with only cap, or rather bowler, in hand. Laughing all the way to some other commercial bank no doubt.