Friday 2 January 2009

Blowing bubbles in Hard Times?

Are we Bishops out to get Gordon Brown? Heck no. All my Lords of Canterbury, York, Winchester, Durham and London meant in what they said at Christmas was exactly what they said. Desperate attempts by the Daily Telegraph to turn their sermons into a party personal campaign are ridiculous. No wonder DT’s readership has dwindled to under half what it used to be.

But what about Gordon Brown and the economy? Like most colleagues in funny hats, I have a great personal respect for the Prime Minister. His words at the Lambeth Conference were brilliant and impassioned, showing deep personal understanding of, familiarity with and commitment to the millennium development goals. They were entirely ignored by the UK flock of Salaried Hacks, who were trying to portray him at the time as all washed up and about to resign. In the flesh, he seemed nothing of the sort, and so it has proved. He wasn’t and he didn’t.

In bigger terms, Labour government since 1997 deserves credit for at least trying to adress many significant issues, often long term problems and trends around which predecessors failed. It’s striven nobly to use the fiscal system and other means to tackle Child Poverty and help pensioners. Having gotten us into the hole in Iraq, it’s trying to dig us out. It’s talked the talk on development, globalization and the environment, and sometimes even walked the walk.

At home, HMG has tried to address questions of social cohesion, although some of its initiatives here smack of boy scouts helping old ladies across a road they don’t need or want to cross. Education and, even more, healthcare are areas where it’s poured money in, although there’s still chronic doubt about bangs per buck. On Civil Liberties, the record is dubious, but, in fairness, this area of governance has been a chronic tidal race between ideals and pragmatism for all our rulers these past 500 years. Let’s be kind and draw a tactful veil over transportation and penal policy, both disaster areas. Since the days UK penal policy was transportation, all governments have been clueless about both.

On the Economy? By the wisdom of the world and curent economics Labour has played up, played up and played the game — and reaped many benefits for us all. It was a bit hilarious to see politicians on all sides clambering over each other as they turned on a sixpence last autumn about the need for tough regulation of financial institutions, after years of loud boasting about the virtues of low to zero regulation. However, it would be unfair to suggest our politicians were greedier or naughtier at the party trough than anybody else’s.

Fact is, We’re all in this mess together — The Church of England, the Bank of England, the Labour Party, the Conservative party, the owners of newspapers, and indeed everybody else in Britain with a house, or a pension, or money in a bank, is implicated up to the eyeballs. To look ahead in hard times, we need to address the “meta” level. As we all stand around the bonfire of the Vanties, trying to warm our hands, some “meta” questions strike me:
  1. We need a reboot not a bailout, as the man said. It’s time to think different. The fantasy that the answer to one housing Ponzi is another is profoundly barmy. Debt fuelled growth is problematic. It makes everybody feel good for all the wrong reasons. The wealth is like fairies in Peter Pan — fine as long as you believe it really is wealth, but every time a house is undersold, a fairy dies. It’s certainly no substitute for hard work, added value, goods and services. Borrowing to bailout has to be paid for by future taxation. If we must borrow heavily off our children, perhaps even our grandchildren, as the UK did to defeat fascism in the 1940’s, at least let it be for a rational and worthy cause, not just more of the same.
  2. Rich and Poor — the gap has widened, though the government has sincerely tried to reduce child poverty. This is exactly the global problem highlighted by the Pope at New Year. It’s right on the button and nothing like unique to the UK. But what do we do about it? What about the losers? What about savers? What about pensioners struggling with bills and taxes, often on fixed savings-based incomes for which they’ve worked damned hard, and which now seem so inadequate? MP’s read their post and know exactly who I mean — it matters that the poor are not forgotten.
  3. Has our economic effort gotten out of balance? Not enough manufacturing, design and R&D — too many bubbles blown. Ingenuity that has been applied to repackaging debt as profit could now be applied to, er, what — the real world?
  4. Was “more” in itself a sufficient object? — yes and no? It would have been, if we had a greater vision of how to invest it, perhaps. But then our greater vision would have been the sufficient object. So, logically, no. Sure we all need to feed outselves. There’s nothing wrong with growth, and lots that’s right with it, but it is not big enough to be the purpose of our civilisation in itself.
These concerns touch core traditional theology as well as secular economics. Christian theologians talk about social as well as personal regeneration. In the Christian Scriptures, Poverty and Justice are issues that will not go away, from the prophet Amos to the Letter of James or the beatitudes in Luke. The Old Testament principle of Jubilee, and its radical questioning of debt as an instrument of power speaks into this mess. It deserves serious contemplation, after years of being sidelined and thought unthinkable.


W said...

Re point 1,

Governments and corporations are immortal. They also have a presumably infinite, and presumably growing, stream of future earnings (from taxes and revenues respectively). In that sense, it is reasonable to expect them to carry a reasonable level of debt in perpetuity. It would even be reasonable for a government, say the United Kingdom, to increase its level of debt over the years. It would not be reasonable for a person to do the same because s/he will die and their stream of earnings will cease.

Debt fueled growth is not problematic per se - after all, it is reasonable for a person to borrow money to pay for college. I keep hearing the UK bishops saying not to borrow money to conduct an economic stimulus - the fact is that if the UK and the US don't, the consequences will probably be more dire.

Now, that's not to say that the UK isn't too heavily indebted. The US certainly is. The US absolutely must reduce its national debt over time. I respect Bishop Alan's contention that the UK must do the same, but what I'm hearing him and other bishops say is that the UK must not borrow. Borrowing not per se a Ponzi scheme. The mismanagement has occurred before this point. The Bishop should have opposed it then, not now.

Bishop Alan Wilson said...

Many thanks for your stimulatng and helpful thoughts. I'm not entirely opposed to borrowing — hey, when I did school economics we were all Keynsians, and I have no antipathy to government borrowing per se under all circumstances. Sure, a bit of borrowing now may grease the wheels, BUT:
(1) We've all been there, done that excessively of late. In the UK we already have an average per capita personal debt of, I believe £12K ($18K) quite apart from mortgage debt, which is far higher than in the US because more people have it, and house prices have been far higher. It's high elasticity stuff, in economic terms, but this side of the pond, the math don't figure of increasing it that much higher. People are already groaning under the weight. They are not personally financially immortal, and repos are piling up now.
(2) Borrowing over a certain level is mathematically unsustainable, especially in an economy like the UK where personal consumers are already paying (sometimes as high as) 18-23%APR for their personal debt — at a time minimum lending rate is 2.5%. Thus are we all cranking megabucks into the banking system anyway, apart from our taxes, to a greater deree than US consumers who are averagely less indebted and would not be idiots enough to offer to pay those crazy credit rate premiums in the first place in quite the mass numbers we Brits have been. On the streets there is precious little room for manoevre here. The only ray of light is that the govt did get a reasonably good deal on its initial bank bailout deal — canny ol'Gordon. Canny enough? We'll see.
(3) Like Thomas L Friedman, whom I quoted about rebooting, I'm not entirely against borrowing in principle, but seeking a serious answer to the question "when we borrow, what is a worthwhile long term object, and what is throwing good money after bad?" For example the recent VAT reduction in the UK — has it helped, or not? We don't know, and all I'm calling is for an intelligent assessment of our long term objects rather than we borrow more willy-nilly. If we're doing a new deal, let's at least get a Hoover Dam out of it, not just chunter our way through another $600Bn. We can't go on doing that for ever, without some payback.
(4) I'm not sure anything is entirely immortal, except perhaps the phenomenon the scriptures draw attention to — the dog returns to its own vomit. Let's not do that.

Borrow strategically, sure, I called for that; but IMHO not unreflectively as we have been in danger of doing! Payback day always comes in the end (sounds apocalytic. It is)

Anonymous said...

"Governments and corporations are immortal"?

Would you like to think about that a bit more?

Does that mean immortal like Czarist Russia or Yugoslavia.

Or does it mean immortal like Bear Stearnes and Woolworths?

A government which has over-borrowed becomes a candidate for default or hyper inflation

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