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And Finally on Finance

Conscious that there will only be a few more blogs before the end of term, I will take the chance this week to wrap up some final thoughts from three books that I have reviewed recently, all of which have focused on the economy in one way or another.  As the election campaign rolls on (or should that be drags on?), I was reminded of the sign that was hung up by the strategist James Carville in Bill Clinton’s presidential campaign headquarters in Little Rock in 1992, which reminded the team of the three key issues that have pretty much formed the basis of most elections in the last thirty years:

  1. Change vs More of the Same
  2. It’s the Economy, Stupid
  3. Don’t Forget Healthcare.

In ‘Butler to the World’, Oliver Bullough highlights that a joint report from UBS and PwC revealed that between April and July 2020, at the height of the pandemic, the world’s 2,189 billionaires increased their collective wealth by $2.2 trillion.  How, the report asked, should the world respond to this, particularly with governments facing such huge deficits as the pandemic dented their economies, and their spending surged in response?  The report stated that it would not be effective to tax the billionaires, who could just move their money out of the reach of national tax authorities.  

Instead, it recommended that governments should allow inflation to increase, to erode what savings the rest of us have left, because that is the money that can be reached.  Handing the bill for society to those too poor to avoid paying it has become the default solution to all the challenges we face, Bullough argues, which is the logic that the Eurodollar has bequeathed us.  When money can flow wherever it likes, governments need to treat its owners well.  This is the consequence of the decision that the Bank of England made in the aftermath of the Suez Crisis, a decision which allowed Britain’s merchant banks to free wealth from democratic controls – and we are all still living with it.

We may wish to believe, he concludes, that we are a country that does the right thing whatever the cost – the country that abolished slavery, freed the colonies and defeated the Nazis.  However, Bullough’s contention is that the most important date is 1956, the year of the said Suez Crisis and the year the City of London gave birth to offshore finance and thereby became nothing more than a butler to the world.  Britain, surely, should be better than that, he argues.

Herman Narula’s ‘Virtual Society’ makes the point that, for many developed nations, productivity has become an end in itself, one that primarily serves the few plutocrats who sit at the top of the economy; an end that exists apart from any ambitions of securing individual dignity and prosperity for those who serve as the cogs in the machine.  The notion of productivity as an unreconstructed good, he says, is today inescapable.  From the moment we begin our schooling, many of us are exposed to a relentless social narrative of productivity improvement, efficiency, economic output and collective progress through creation. 

We live and work, he highlights, in societies that literally depend on endless productivity growth in their economic and political foundations; as such, we borrow against a future in which we hope we will be more productive than today.  The pension funds that pay for our aging populations are invested in, and require, that same promise of future growth.  To be more productive, or inventive in ways that will make you more productive, is the nature and purpose of our most important work.

Productivity, Narula continues, is the point, and the modern workplace is a tremendously efficient process that has been refined over the years to eliminate all aspects that are extraneous to quantifiable productivity.  But humans have innate needs for complexity and fulfilment.  We want to feel good at things, challenged by things, with a measure of control over our own choices and a sense of belonging within our milieu.  We want to use our ingenuity to create value, both for ourselves and for the worlds that matter to us.  In other words, the prospect of payment is not the only thing that might motivate someone to do their work – just ask any teacher!

One of the next big challenges, the author explains, is how we are going to deal with the move from manufacturing to data as being at the centre of our economic world.  By way of example, he points out that at the end of the twentieth century, the global economy was still stuck in the past.  In 1996, General Motors sat atop the Fortune 500, in the same spot it had occupied when the list was inaugurated in 1955.  Close behind were several other old corporate stalwarts – Ford, Exxon, AT&T – all of them companies whose business models of cars, oil and telephones our grandparents would have understood.  For the most part, the massive corporations that ran the world thirty years ago presided over an economy of tangible things.

By the start of the current decade, however, both the world and the global economy looked very different.  While the top slot on the Fortune 500 in 2021 was occupied by Walmart, slots two and three were occupied by Apple and Amazon – with Alphabet, the parent company of Google, not too far behind.  General Motors, Ford, AT&T and Exxon occupied slots twenty-two, twenty-one, eleven and ten respectively.  The world’s biggest companies by market capital were Apple, Microsoft, Alphabet and Amazon, with Tesla and Meta not far behind – all of them trillion-dollar companies, five of them paragons of the new data economy.  The times, they are a-changin’, to coin a phrase.

Finally, as I predicted last time, Paul Johnson and his colleagues at the Institute for Fiscal Studies have been busy in the media commenting on the various promises around taxation and spending from the politicians jostling for our votes.  As Johnson says in ‘Follow the Money’, government is often like everyday life, in that difficult but manageable decisions that are postponed can often fester and become ever more painful over time.

Our health, he points out, is the ultimate outcome of all our life experiences.  The poorer we are, the more stress we suffer and less control we feel, the more likely we are to become ill and to die before our time.  Health inequalities in the UK are perhaps the single greatest indictment of the way we live, the way we organise our society, and the failure of government.  They are not essentially a failure of the NHS.  Rather, it is there to pick up the pieces left behind by the poor housing, unemployment, low wages, insecure work and the range of inequalities that create poor health.

The repair job for the way the country is run, particularly regarding its policies on taxation and spending, he concludes, must start with honesty about the costs and benefits and trade-offs inherent in any policy decisions.  Promising the earth through lower taxes and higher spending is a way to ruin.  Effective policy instead acknowledges that change takes time and puts in place long-term strategies to accomplish sustainable change. 

It recognises the importance of the detail of delivery and values that over rhetoric.  It appoints competent ministers and keeps them in post long enough to get on top of a brief.  It values effective management throughout the public sector.  It rewards public servants appropriately.  It is brave when it comes to confronting vested interests, whether they be taxpayers benefiting from quirks of the current system, homeowners preventing valuable development or public sector institutions resisting necessary change.  It focuses on growth and the delivery of services.  None of that is easy.  But it is not impossible either.  It is very hard to disagree with him when he too says that we can, and must, do better.


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