Last time I checked, Gordon Brown was not in charge of the German or Japanese economies, which are both shrinking at a far faster rate than in Britain.
Most recent figures in the annual decline in industrial output show it going down 21 per cent in Japan, 19 per cent in South Korea, 12 per cent in Germany, 10 per cent in the US and 9 per cent in the UK. Demands that someone says sorry are economically illiterate unless there is going to be a mass apology from every leader in the world, from Beijing to Berlin. The crisis is systemic and it is system change that is needed. So far, British Conservatives show no understanding of what needs to be done. The question is: does Labour?
Brown may be blamed for many things but he is not responsible for this abrupt end to the long 30-year cycle of deregulated economics that took root after the end of the 30-year cycle of welfare state capitalism put in place after 1945. Every newspaper we have opened in the last 30 years has told us that regulation was bad, privatisation was good and profit greed was wonderful.
As chancellor for a decade, Brown could not escape the generalised worldview, which set in from 1980 onwards, that allowing capitalism to proceed without rules – which is what deregulation means – was the only way forward. Tony Blair never challenged the Treasury’s absolute control of economic affairs after 1997. Blair’s tentative efforts to make Britain adopt some European thinking, including the euro – which has saved many eurozone nations from speculative runs on their currency – were lobbied against by Treasury spinners who pandered to the deep anti-Europeanism in the Whitehall-City-London media nexus.
Business outfits like the Confederation of British Industry, the British Chambers of Commerce and others campaigned against regulation rather like shipowners before 1912 arguing that to equip liners with adequate lifeboats was a regulatory burden which should not be imposed on them.
Now everyone is wise after the event. But instead of calmly analysing what needs to be done to restore confidence in the British economy, we are having a periodic fit of hysteria which makes matters worse.
Anyone can rant against the banksters but the Treasury select committee, which is enjoying its moment of glory, might ask where are its reports two, five or 10 years ago castigating the government, Bank of England and the City for its light touch policy of allowing financial institutions to build houses made of cards?
Alistair Darling attacks Swiss banking secrecy. Eh? Has he ever looked at the Cayman Islands, Bermuda, the Isle of Man or the Channel Islands tax havens, all of which are under British jurisdiction? And, as an EU member, when will Britain campaign against banking secrecy in Luxembourg, Austria or the tax haven of Monaco where rich Brits who do not want to pay fair taxes in our country go and hide? And when, but when, will David Cameron come clear on Lord Ashcroft’s tax status?
But in the end, this is not a made-in-Britain problem but a global crisis of market economics. It will not be solved by the nostrums of the left, still less by the 1930s Tory view that reducing the volume of economic activity by cutting public expenditure is the way forward. Even the arch monetarist Professor Tim Congdon advocates the government giving £100bn to banks – the biggest one-off use of taxpayers’ money ever proposed in economic history.
Leading French economists, usually critical of British economic management, have praised the VAT cut which reduced at a stroke the cost of all business transactions in Britain. At some stage full nationalisation of banks may be needed. Yes, we need to get mortgages going again. But we all need to build more houses and that means facing down the nimby refusal to allow house building that we see from councils and anyone complaining that their garden views might change to allow fellow citizens a right to live in their own home, whether as social housing tenants or owner-occupiers.
Savings have to be revalued and a new approach to pensions agreed, as the view that privately funded pension pots will be adequate is nonsense. The British government is taking a world lead in bringing states together. While petty point-scoring continues unabated in the rancorous cockpit of the Commons and the media, there is a recognition in America, China and Europe that a Labour prime minister is seeking to find a way out of the crisis which has no national solutions.
Above all, we need European and international cooperation. Those advocating nationalist and protectionist approaches will only make matters worse. Millions of British citizens work in other countries and will be the first to suffer from the adoption of nationalist labour market protectionism. Nearly 400,000 foreign firms have come to Britain as a result of the open economic policy which is now contested by the BNP and other xenophobic voices. Britain must confront protectionism and the Tory political isolationism of cutting links with the EU. When the crisis is over, Britain should be the world leader in welcoming foreign capital and foreign talent to help regrow the British economy.
Britain should also take a lead in bringing the International Labour Organisation into play as part of the solution to the world imbalance between need and greed. The hundreds of millions of new workers in the global labour market who are denied democratic rights to organise for fair wages must be allowed to consume as well as produce. The Koh-i-Noor of social democracy is the recognition that workers must earn enough to buy what they produce and enjoy collective provision of health, housing, education, old age care and unemployment insurance. Put that in place in China, India, and those swathes of the European and American economy where workers do not enjoy these rights, and the world economy will rebalance itself. No Labour cabinet minister has shown any interest in the ILO and Whitehall under Labour has scorned the European TUC and efforts to make social Europe work. This needs to change.
Unlike America, where a new president can inspire the nation, Britain is at a different stage in the political cycle. Inspiration is replaced by recrimination and mutual accusation and denunciation. Our adversarial political system is making the economic crisis worse, not better. Perhaps as well as a statutory minimum wage we need a statutory maximum wage. Bashing the banks is feel-good demagogy but we need banks and professional bankers. Their bonus culture is unjustified but why do the bosses of the BBC pay themselves lavish salaries and bonuses taken from the poorest of the poor via a regressive licence tax system? Much is made of Sir Fred Goodwin’s £600,000 annual income. Yet Jonathan Ross earns three times that amount from the taxpayer to deform the English language.
Do we need a ‘Hippocratic oath’ for the banking community? We entrust our bodies to doctors who live by an ethical code. As we entrust our money to financial institutions, should we not expect them to abide by a code of ethics we can trust?
In short, out of this crisis a new model of economics must grow. All can play their part in shaping the debate, much as Harold Macmillan paved the way for postwar Keynesian economics with his writing in the 1930s. But until politics rises to the challenge of economics, the hysteria will continue and wisdom will have to wait for calmer times.