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Posts Tagged ‘Capitalism
is this any way to manage your pension money?
In 1983, at the age of 24, I started working for an investment bank in The City of London. In those days I thought I disagreed with capitalism. Even as the banking industry swirled around me I thought that for every winner there was a loser. I now have more time for capitalism. I no longer believe that investment of spare funds by people trying to save for retirement is wrong or likely to deprive someone else of value. Indeed I can see now how capitalism is merely the free allocation of funds in a free society and that it is a more efficient way of allocating funds than some bureaucrat in Whitehall.
If I have a few thousand pounds saved which I want to invest for retirement it is acceptable to lend that money to an entrepreneur who has a plan to form a company to provide goods or a service which will make a profit. If, after a few years, I consider that my investment has grown sufficiently and I can’t see the guy making much more money or if I see that another guy has a better chance of making money then it is legitimate for me to sell my stake in the first company and buy into the second.
These are fairly standard arguments and, if one believes in freedom of the individual and of individuals to act together as groups, then they are difficult to disagree with. A whole industry has grown up to facilitate these transactions along with information services to allow me to analyse various economic and financial information.
Yes, much of the money washing around the system does belong to pension funds holding capital on behalf of rich and poor alike. From rich bankers to grieving widows.
But not all who take part in the market are equal. The people who run the companies providing the financial transactions and related services realised that they were making a lot of money and that they could make even more money by ploughing their profits back into the system and trading on their own account.
Further, an article in the Financial Times on June 7th reported that big institutional traders “are winning preferential access to deals because computers used by exchanges are programmed to accept bigger orders first when matching prices”.
So we have a market where the small invester in my initial example is at a considerable disdavantage to large pension funds and banks and as the large organisations may jump in and out of a stock several times within a day we have to ask: Is this investment or gambling?
Another fault that I see in the system is the frenzied nature of professional dealers. In 1986 a wave of deregulation swept through The City in a process known as “Big Bang”. Prior to this trading took place using a process known as open-outcry where traders use hand signals to transfer information. There was a lot of shouting and yelling and things were pretty frenetic. The process is still used by the London Metal Exchange but, after Big Bang, the London Stock Exchange replaced open-outcry by rows of traders sitting at computer screens. Technology went berserk and computers now regularly buy and sell automatically. Volumes have increased and the pace is now extraordinary. A trader will have numerous computer screens displaying graphs and figures and they will need to assimilate this information quickly and then make decisions involving huge amounts of money.
Walking around The City one has to be impressed by the fantastic granite and glass buildings with vast marble entrance halls. One has to be impressed by the frenetic pace of trading activity and by the vigour and determination of the traders but one also has to ask:
Is this any way to invest the funds you are saving for retirement?
Should the various banks be spending your pension money on the most expensive real estate in England? Should they be using your money to build luxurious head offices? Should they be rigging the pay scales of their traders to encourage them to engage in undue risk? Should they be trading in an atmosphere of hysteria?
So what’s to be done? Ban something? Many would argue that you cannot restrict such activity without restricting our fundamental freedoms. They argue that, yes, there are outrageous abuses and failings of the system but that, overall, the system functions better than any other system yet devised. As with the saying about democracy, that it is “the least worst” of all the systems of government.
I read an article recently on the risk assessment process undertaken for nuclear power stations and I recall discussing risk management with an ex-colleague who now works in the oil industry managing the movement of supertankers around the world. In bith nuclear power and oil transportation the impact of a failure can be catastrophic and risk management is tasked with analysing and controlling these risks.
It seems to me that the risk management strategies in use by banks and financial institutions are mere fig leaves when compared with the very real risk management which takes place in other industries.
The British government are now making plans to require banks to ring fence their retail banking divisions keeping them at arms length from more risky investment banking. The United States had a similar law known as Glass Steagall requiring separation of high street banking and investment banking. The law was enacted to control speculation following the 1929 Wall Street Crash. However, as the American economy recovered various parts of the law were repealed until the whole thing was dismantled in 1999.
Let’s hope that the British have leaned from the American experience and that the ring fencing legislation currently being discussed will remain in force in bad times and in good.
Worth his weight in paper clips
I have started to speculate about the efficiency of Capitalism.
While having sympathy for Socialistic ideals I can see that Socialism is more prone to bureaucracy and autocracy than Capitalism. The reason I say this is that Socialism has no in built mechanism to correct activities that are wasteful, inefficient or detrimental. This is somewhat broad and debatable so an example may help understand my meaning.
In the Soviet Union irrigation of land meant that less and less water flowed into the inland Aral Sea which started to dry up. Leave aside whether this itself was good or bad for the moment and consider the factories on the edge of the Aral Sea which canned the fish for delivery to customers. Of course these factories had less and less work to do. The solution fond by the bureaucrats was to fly in fish from Vladivostok. This was, of course, tremendously wasteful but it didn’t matter in the Soviet Union. Waste was not an issue. Nobody was watching the bottom line.
In a capitalist economy flying in the fish would have been so expensive that the company would have gone bust and that would have been the end to the madness.
This “evolutionary” tendency seems to me to be built into capitalism. It works to eradicate inefficiency and, when working at its best, it works to provide the best goods and services to the consumer. Admittedly there can be detrimental effects to this tendency within capitalism but for the moment let’s leave them aside. I think it is generally accepted that Socialism is less efficient and less adept at modifying its processes to suit the general public.
I had seen this as a feature of Capitalism which made it simpler and more efficient than Socialism but recently I have been wondering about this.
Let us suppose that we tried to create a mechanism within Socialism to provide this feedback. A mechanism which forced factories to adapt to produce what the consumer wanted and to close down wasteful industry. How might it work?
One way it could work would be to employ an army of bureaucrats working for a separate government department to monitor activity. It would be the responsibility of this department to review the workings of industry and to assess whether the desires of the general public were being met.
At a practical level this would mean industries being forced to record information on their work which would be raked over by officials who would then direct them to stop flying in fish and close down the canning factory.
It would also mean thousands of bureaucrats visiting a representative sample of households and interviewing them on their satisfaction with their products. It would mean more officials analysing the statistics.
On the doorstep:
“Are you happy with your television set?”
“When you last purchased a car what colour did you choose?”
“Was your first colour preference available”
In the office:
OK people we have work to do. In brighton the people have started to listen to their radio in the bath so we need to make radios with suckers to attach to the tiles and we need water proof front panels. We also need to produce more red cars.
OK, OK, This is, of course, absurd.
It is the sort of plan that might be dreamt up by silly bureaucratic state officials in the old Soviet Union but in a modern, democratic capitalist country nobody in their right might would try to implement such a scheme.
But hold on.
That is exactly what has happened.
Consider all the activities which we take for granted in a Capitalist economy which provide no basic function but merely exist to enable the workings of the system.
Consider insurance, audit and finance. Consider that Financial Services was the second biggest contributor to the British exchequer in 2008 after oil and gas. Consider the Financial area of London. The City and Docklands. Consider the thousands, if not millions, of people who commute into London every day from the home counties. Consider the advertising industry and the marketing departments. Consider the customer relations people, the complaints departments and the public opinion survey organisation such as Gallup.
And consider that in capitalist economies the people who work for banks and finance institutions are not low skilled bureaucrats but extremely well paid professionals.
Of course I don’t know the figures and I doubt that anyone does but one has to wonder.
With all that activity, with all that money spent on secondary tasks one has to consider whether it might have been more efficient to simply modify socialism a little bit.
I work with a guy from Pakistan. He observes the way we in England spend enormous amounts of time weighing up the pros and cons of every purchase. (Should I buy the Prius because it’s green or the Avensis because it’s got a big boot?) He is amused at this for, as he says, these things are not important. And of course he’s right. A car is a car. Despite what the guy from the finance company says and despite what the advertising industry would have us believe differing models of cars will really not make a difference to our lives.
Efficiency in motion
09
Jul
10
The UK in the red
The uk in the red
I saw a cartoon in The Independent yesterday which implied that The Tory/Lib Dem coalition are using scare tactics to introduce spending cuts. I’ve also heard the Labour cabinet condemning all the cuts but giving no guide as to how the deficit (and the debt) which New Labour ran up should be brought under control. For those not steeped in financial jargon the debt is how much we owe and the deficit is the shortfall in our annual spending. So by running a deficit we increase the national debt. The talk by the new coalition government so far has concentrated on getting the deficit under control but bare in mind that Gordon Brown ran a deficit even during the boom years as the UK was spending more than the government gained in taxes!
Depressingly but, perhaps predictably, all we hear from everyone who has been asked to make cuts is justification for why their particular budget should not be cut. There was an education official on the radio recently “explaining” that the national debt is not like a credit card and that we can simply roll over the debt. Easy! We’re in debt, no problem, borrow more. It is this daft logic that has lead to the UK national debt of nearly 70% of GDP in 2009.
During the 18th and 19th centuries the United Kingdom became wealthy through empire and the industrial revolution and used that wealth to provide comfy lives for the British elite. Note that the majority of the British people had lives worse than many of those in India or elsewhere in the Empire mainly because of the cold British climate and the appalling working conditions during the industrial revolution. The British elite, however, did very well.
During the two world wars the European powers smashed each other to bits and America and the USSR stepped in as world leaders. The U.S. had ensured that the UK paid for aid during the war but the Marshall Plan got the UK and Western Europe back on their feat. The UK then hung on to it’s place in the world for a while. Our industry and trained workforce gave us “comparative advantage” compared to “developing countries” and so the UK and other European countries remained fairly wealthy and fairly secure. Sure Japan, Taiwan and others developed their own industry but most of the world remained pre-industrial.
Post World War 2 a Labour government came to power and, dazzled by the apparent success of Socialism in the USSR, started looking after the working class. For the first time ordinary people gained access to clean water, health care and pensions.
We developed a world view roughly as follows: The West leads the world, developing technology and operating industry, the far east copies the West and and performs some production and the “third world” supplies the raw materials but remains poor and dependent on aid.
But the UK was complacent., we became convinced that all our wealth was a natural state of affairs and that it could all be paid for by creative accounting. While we were naval gazing the Soviet Union collapsed, open markets became the vogue, China joined the World Trade Organisation and the rest of the world adopted capitalism and found that they were pretty good at it. Not only were they good at it they were unencumbered by a mature democracy or legislation to protect workers.
Global leadership, industry and power is now shifting from the democratic Western nations to nations who are either dictatorships or corrupt token democracies. As a quick preamble to my next bit of ranting I should explain, for the uninitiated, that the a common measure of a countries wealth is Gross Domestic Product (GDP). This is a measure of the total value of goods and services produced by a country. Because countries vary in populations another common measure is to divide GDP by the population and derive a figure known as GDP per capita. This gives a measure of how much each person, on average, produces.
Time for some figures.
UK GDP is sixth in the world, just above Brazil at 8 and India at 11 and below China at 3.
UK GDP per capita is 22nd just after Italy at 21 and Iceland at 19.
National debt is at 68% of GDP, higher than Ghana at 67.5% or Uganda at 19.3%
The UK’s budget deficit (how much more we spend than we earn) is at 14.2% of GDP, above Sierra Leone at 12.35% and Vietnam at 9.3%
And yet
The UK’s defence budget is 2.5% of GDP, that’s more than above China at 2% and Germany at 1.3%.
The UK’s Education spending is the same as South Africa and Mexico at 5.3% of GDP. That’s above Bhutan at 5.2% but below Fiji at 5.6% and Bolivia at 6.3% and Yemen at 9.5%!
It’s also worth considering that other countries do not have debt, they have surplus! They have saved money and built up substantial wealth in Sovereign Wealth Funds. For example:
United Arab Emirates 627 $Billion
Norway 443 $Billion
China 288.8 $Billion
The UK still has some cards up it sleeve. In 2008 we were the sixth biggest manufacturer after Italy but Russia was at 7 and Brazil at 8.
In recent history the UK has relied on North Sea oil to top up our income. I cannot find any figures on what percentage of our GDP is made up from Oil and Gas but I recall reading that the tax take on Oil and Gas was the largest contributor to the British exchequer followed by Finance. I believe that was before the financial crisis.
But north sea oil is predicted to run out within eight years.
All this is not to say that the United Kingdom is doomed, just that the world is changing and we can’t rely on the UK remaining wealthy by default. British policies today dictate the future of this country and if we continue to run up a debt our nation will decline. It not rocket science. There are younger and fitter countries in the world.
Just today I heard a British politician talking about maintaining British leadership. Our political elite have not yet caught up with the 21st century. Why should Brazil, Taiwan or China be interested in being lead by a mid size debtor nation on the other side of the world?
No nation or empire lasts for ever. Nations and Empires rise and fall. The British Empire has fallen and one day the UK will fall and I suggest that, if we are not careful, people will look back and see that the obvious start was the 21st century due to complacency, vested interests and the inability of a people to make tough decisions..
We are no longer one of the few great industrialised powers in a world populated by uneducated and illiterate farmers. The UK is now just one of many educated and industrialised countries. It is true that we have a more mature system of law and democracy but undemocratic and corrupt governments around the world see this as an encumbrance and not as something to emulate.
We are in massive debt, the oil money is running out. New Labour’s policies of spend and hope have failed. I support the current government’s prescription of large scale cuts but this should be supplemented by informed strategic planning.
We should also reconsider our commitment to allowing foreign entities to buy British assets and industry. Sovereign Wealth Funds referred to above often buy industry and assets from the developed world and this is acceptable if everyone plays by the same rules. However some of the largest of these funds are owned by nations who play by very few rules. Specifically we should be wary of allowing SWFs of single party dictatorships or corrupt regimes owning large stakes in the UK.
Globalisation is all very well while the foreign money is pouring in and funding industry and jobs but once these foreign owners have their feet under the table they often find that it is more efficient to centralise production and transfer the industry abroad. This would be fair enough were it possible for British companies to buy up industry in China, Germany or Japan in the same way but other countries are not as open as the UK.
Last Sunday night there was a TV program enthusing about one industry in the UK which remains cutting edge and world leading. This was British Aerospace and it’s production of Rolls Royce Trent aircraft engines in Derby.
The company was very impressive. What is less impressive are rumours that in order to gain access to the larger and more lucrative U.S. military business British Aerospace is trying to morph into a United States company. Once this is achieved how long will it be able to justify dispersing it’s business over two continents?
17
May
10
Warsaw 2010
Warsaw
Last week I visited Warsaw, staying at the Sheraton on Bolesława Prusa. A good hotel with plenty of marble. One evening I took a short walk north past the Charles de Gaulle statue onto a street named Nowy Swiat. Here can be found many restaurants and bars, probably frequented by the wealthy along with ex-patriots. After an excellent Indian at the Bhuda restaurant I took coffee at the Cafe Colombia while listening to an elderly American explaining to a couple young Poles how he admired the Russians because they had launched a military attack on a Russian cargo ship which had been commandeered by Sudanese pirates. “They picked on the wrong country!” he exclaimed many times.
On the aeroplane I had chatted to a Pole who had picked strawberries in Kent one summer in his youth. Sleeping in tents they had travelled from farm to farm. Now he was a business man travelling throughout Europe but he thought that perhaps he had enjoyed strawberry picking more.
The Russians will discuss World War 2 at the drop of a hat and he told me that when Hitler’s attention turned from attacking the UK to invading Russia this had been because the Russians had been massing an army on Germany’s eastern border. Proof of this, he said, were the thousands of Russian troops taken prisoner in the first few months.
Rondo Charles de Gaulle
This had never occurred to me. Like many Brits my knowledge of Eastern Europe during World War 2 is scanty and I had been taught that Hitler was a bit unstable and had invaded Russia merely because he wanted to take over the world. Of course this is Rubbish. With Great Britain at bay Hitler had turned his attention to a pre-emptive strike which, he must have hoped, would disable Russia.
Walking back from Nowy Swiat as the light faded I thought that Warsaw is in fact a great place to live. The public transport seems excellent and the buildings, though often blocky, are interesting and nature seems hell bent on tacking back the city with trees and grass growing everywhere. Almost as ubiquitous as the grass are the statues. I remarked on this to a Pole and was told cynically that the Russians love their statues. I got the impression that the former communist regime would throw up a statue at every intersection and I guess that after a while they must have run out of anything relevant and started building monuments to every petty bureaucrat. No offence intended to Charles de Gaulle who I’m sure played a great part in the history of Nowy Swiat.
I liked the mixture of the old and the new. The modern trams contrasting with those from the old soviet era; though noisy and drafty they have charm from having been designed before the obsession with efficiency ironed out every crease of character. I was reminded of the old open backed Route Master buses in London and how they rattled and shook.
Tram
Warsaw appears to have embraced capitalism and commercialism for it’s promise of a better future. It seems a city with a destination firmly in mind. Though not yet as rampantly commercialised as London, in some ways it is more advanced with taxis having TV screens in the headrest to beam advertising at the helpless passenger.
Unlike London, Warsaw has not yet choked on the obsession with materialism and the false individualism of choice.
Once the old trams are gone they will be missed.
How many need to die to save the face of Wen Jinbao?
The British media is reporting that China has gone ahead with the execution of Kmal Shaikh, a 53 year old father-of-three from London who was convicted of drug smuggling in China. His family have claimed that he was mentally ill and requested a medical examination. The examination was refused by the Chinese and Mr. Shaikh was executed by lethal injection.
The British government had made representation to the Chinese but I suspect that there was some fall out from the recent Copenhagen summit where the authoritarian Chinese leadership “lost face”. The Chinese regime has a reputation for throwing tantrums whenever anyone tries to interfere in it’s “internal affairs” and this time was no exception. As far as the Chinese were concerned Mr. Shaikh had to die for China to save face.
So, the British government is now angry, but one has to ask why? Why did anyone believe that a regime that maintains it’s grip on power at the point of a gun would worry about killing one man? Why does the West kowtow to China?
The answer we are given, by our supposedly informed elite, is that we need to “engage” with China and this will bring reform. Engagement usually boils down to allowing western companies to employ Chinese workers in order to lower costs.
This engagement is taken as an article of faith but I wonder if anyone can site an example where it has worked. I know of no instance where an authoritarian regime has liberalised because outside influences have traded with it and thereby increased that regime’s power. In fact, if assisting a regime to grow richer and more powerful is a recipe for improved human rights, liberalisation and greater democracy then surely this tactic should be tried with Iran.
Our elite are of course TALKING BOLLOCKS! Supporting authoritarian regimes makes them stronger and entrenches their totalitarian instincts. The key to this is that our elites are not interested in greater democracy, they are interested in greater profits.
Our leaders frequently use the terms democracy and capitalism interchangeably but they are not the same. Since the second world war western countries have, in general, been both capitalist and democratic but prior to the war democracy was not so prevalent.
In the UK, prior to 1832 only male landowners could vote. This gradually changed until it included most males by 1918 but women did not get complete voting rights until 1928. So the UK’s claims to be an ancient democracy is complete poppy cock! The UK was, and remains, a capitalist country while democracy is a recent add-on brought about by two world wars and the rise of an alternative to capitalism in the Soviet Union.
During the Cold War, with the threat (and implied alternative), of the Soviet Union, western countries became more liberal. Pensions, health care and workers rights blossomed. However, since the collapse of the Soviet Union, and the inferred failure of socialism, these hard won gains are being eroded. In the UK, one hears constantly of companies closing pension schemes along with exhortations that we must “compete” with China. By “compete” our elite mean that we must accept lower standards in the work place and lower wages.
Our leaders claim that “engagement” with an authoritarian regime will raise their standard of democracy and human rights but the truth is that the Chinese regime has no interest or need to improve human rights and rather than their standards rising we are being forced to lower ours.
We are told that we must compete or we will lose out, but hold on, the implication of this is that if China did not exist we would suffer some terrible fate as we would not be able to take advantage of their cheap labour. This is bollocks! The west went from strength to strength when the Soviet Union and China were both outside the World Trade Organisation. We may choose to trade with China but we do not “need” China.
It is true that the west has benefitted from all sorts of cheap goods from China. One only has to go onto ebay to wonder that it’s possible to buy a USB flash memory radio transmitter for £ 4.61 (yes , I did this!!). This is amazing value but do I need it? No. Would I sacrifice democracy, human rights and our children’s future for the ability to treat all goods as throw away items? NO! Do I want a world where goods are cheap but freedom is limited to an elite? NO!
The truth is that elites are always greedy – socialist or capitalist. Our leaders want engagement to increase profits but at the cost of democracy, civil rights and human rights. The protection from powerful elites is democracy. China is not a democracy and has shown no interest in democratizing.
We should be extremely cautious about becoming reliant on China for any key product or service. We should also be more robust when dealing with the Chinese. As a start there should be major repercussions from the Chinese leaders reckless behaviour at Copenhagen and execution of Kmal Shaikh.
Which do we value more, democracy and human rights or a Chinese USB stick?
Related posts:
china loses face by sabotaging climate change talks
china in who’s hands?
20
Dec
09
China in Who’s hands?
President Hu - Who made him leader?
There is an interesting article in todays’s Independent blaming China for the failure of the Copenhagen climate summit. The article quotes a source who was supposedly in the room when the heads of state were drafting the document who says:
“If China had not been in that room you would have had a deal which would have had everyone popping champagne corks…..”
“The Chinese were happy as they’d win either way. If the process collapsed they’d win because they don’t have to do anything and they know the rich countries will get the blame.
“If the deal doesn’t collapse because everyone is so desperate to accommodate them that they water it down to something completely meaningless, they get their way again. Either way they win. I think all the other world leaders knew that by that stage and were just furious that they couldn’t do anything about it.”
Why am I not surprised?
Protestors? - pah!
China was admitted to the World Trade Organisation (WTO) in December 2001 after the United States dropped it’s veto. Since that time trade with China has grown very quickly and the Chinese economy has grown massively. The generally accepted view is that China is now OK as it has accepted capitalism. This is wrong. The regime in power in China today is not substantially different from the regime which drove tanks over unarmed protesters in Tiananmen Square just two years before being admitted to the WTO.
The West too often confuses democracy with capitalism, they are not the same. It is possible to have a democratic government that is socialist. It is certainly possible to have a capitalist government which is non-democratic and China is the proof of this.
Both China and the West have gained from the flow of trade but we should consider that, having now allowed so much industry to move to China, we have become reliant on an authoritarian regime which cares for nothing but perpetuating it’s own existence. We should also keep this in mind when businessmen and political leaders talk of the necessity of allowing the free flow of trade to countries where there is “competitive advantage”. This competitive advantage is, very often, the absence of political rights, civil rights and the rule of law.
China may have legitimate reasons for not being able to commit to the climate change targets discussed in Copenhagen but it’s impossible to tell. The Chinese regime is not elected and therefore illegitimate and cannot be said to represent the views of the Chinese people. When one deals with regimes such as China one must accept that their word is worth nothing.
During the negotiations between the United States and the Soviet Union to limit Nuclear Forces Ronald Regan frequently used the phrase “Trust, but verify”. United States president, Barack Obama, seemed to understand this when, during a speech at Copenhagen he appeared to upset the Chinese by implying that verification was key to any agreement. The fact that this was mentioned caused the Chinese representatives to throw a hissy fit and refuse to attend various meetings.
Send in the tanks!
And that’s another thing, China too often uses tantrums as a negotiating tactic. We are told by Chinese watchers that this anger is related to the difference in culture. Perhaps it is. Perhaps the Chinese fly off the handle so often because they are not used to having to justify themselves.
I wonder how the Chinese regime would have responded to the demonstrators in Copenhagen? Rather than explaining their position perhaps they would simply have sent in the tanks.
This should give us pause for thought.
Photography
overcrowded Britain
Tags: balance sheet, Business, Capitalism, cheap labour, competitiveness, corporate profits, economists, EU, Financial Times, forests, Foundation, George Osbourne, house prices, housing, immigration, immigration. economic migrants, Isaac Asimov, Lack London, london, new labour, overcrowding, overpopulated, overpopulation, People Of The Abyss, Trantor, Unaffordable housing
What passes for a kitchen in Hackney
A front page article in the Financial Times (FT) on the 21st November reported that a bunch of “leading economists” had written a letter to the British Chancellor, George Osbourne, urging him to rethink his plans to curb immigration. Mr. Osbourne is planning to limit economic migrants entering the UK from outside the EU and the economists believe that this would be “deeply damaging to the competitiveness of our science and research sectors and the wider economy”.
The UK had 13 years of New Labour during which immigration was used to provide cheap skilled workers to business mitigating the need to properly educate the indigenous workforce. This is obviously not a sustainable policy and will merely store up trouble for the future as British people sit on their arses and let Johnny Foreigner do all the work.
The restrictions to be brought in are for non-EU citizens so British business would still have the entire population of the EU from which to draw its workers. That means the economists believe that the educated percentage of a total population of around 500 million people is not sufficient for the British economy!
What utter tosh!
If 500 million are not enough then why should we believe that a world of 7 billion people is? Perhaps, if we looked hard, we could find an even dafter set of economists who believe that UK business needs the educated population of 10 Earth size planets.
The truth is that large corporations are driven by the need for profit and this means limiting costs. Land and labour are major costs and so it is most efficient for corporations to build mega office complexes and have the entire planet as a pool of potential employees. It’s even more profitable if the workforce are educated at someone else’s expense.
I’m sure the economists are all clever gentlemen but my experience is that bean counters only count beans. By this I mean they only count that which can be counted. However, some resources cannot be quantified and the top of my list is housing. House prices in London have more than tripled in 14 years and are still way over priced as discussed in an article in The Economist in 26th November.
Since a basic tenet of capitalism is that increased demand and fixed supply drives up the price of an asset. The deliberate importing of people into the UK may support corporate profits but it will also provide upward pressure on housing.
Corporations push the idea that capitalism creates wealth for the population and this can sometimes be true. At the moment, in China, capitalism is helping raise many people out of poverty. But read a book like The People Of The Abyss by Jack London and you realise that, at the height of the British Empire, which was powered by capitalism, the lives of the people living in the east end of London were worse than Australian aboriginals on the other side of the world living as hunter-gatherers.
The People Of The Abys shows capitalism at its rawest, un-tempered by socialism or the fears of socialism. It shows that the welfare of a population is not directly related to the profits of business.
Over the past decade or so, while businesses earned fat profits, ordinary people had to endure costs which did not appear on the balance sheets of any businessmen or politician. Unaffordable housing is just one example but the ordinary worker must also endure standing like tinned sardines on Bakerloo Line trains from London Bridge on a Saturday evening. We must sit in traffic jams. We must stand in rush hour queues, not to get on the train, not to get on the platform, not to get on to the escalator but to get into the bloody station!
All this boils down to supply of land and it is possible to argue that the UK should release more land for building to ease congestion and prices. This would be fine were the UK the size of the United States. It isn’t. Open up Google Earth and have a fly over the UK. Most of the land is either farm land or already built upon. There are very few patches of wilderness. Scotland is more thinly populated and we could just shrug and decide that we will give over the entire UK to human needs. The UK could become the first concrete country.
In 1951 Isaac Asimov published the first of his Foundation series of Science Fiction novels which portrayed a world known as Trantor which was completely covered in metal. The whole planet had been taken up by humans for homes or factories or offices. Food and raw materials were shipped in from other worlds.
I don’t want to live in a country without wilderness. I do not want to live on Trantor!
The pro-immigration lobby scoff and say that it will be centuries before we even approach a situation resembling the planet Trantor. True but then can they give us an indication of when we are going to stop building?
A couple of hundred years ago England was covered in forest and someone argued that we should chop down just this little bit more wilderness and give it over to some landowner to farm. They probably said “…but England is covered in forest, it will be centuries before it is all chopped down….”. They were right; it did take centuries.
But HELLO! here we are centuries later and the forests are gone.
On the 24 November 2011 the BBC reported that annual net migration to the UK hit a record high in 2010 at 252,000 though the figure may have now fallen to something more like 245,000. Growth is often expressed as a percentage but a more enlightening indicator of growth is “doubling period”. i.e. The time it takes for a population to double in size? The UK’s current population stands at about 62 million. If the current population carried on at replacement level and if the population only grew by the current immigration rate then the population would double in about 255 years.
That’s about nine generations if we take a generation as 28 years. By 2265 the UK would have a population of 124,500,000 and our descendants (that’s the grandchildren of our grandchildren’s grandchildren) will look back and wonder what the hell we thought we were doing.
One by one the trees are cut down. Little by little our forests were destroyed. Little by little forest becomes farm. Little by little farms become houses and offices. Little by little we accept smaller seats on buses and no leg room on trains. Little by little we trade space for gadgets. Little by little we are squeezed into chickens runs and little by little the UK becomes grossly overpopulated.
I’m sure that it’s true that adding 10% more workers to London and letting them live like factory hens would make London’s corporations more profitable. Londoners may even acquire more tablet computers and smart phones. Yet our lives would be worse! Already the definition of a kitchen in a flat in Hackney is a line of cupboards down the side of the living room. Just how many times can they divide up these beautiful old houses into smaller and smaller boxes?
The mistake that these economists make is to become totally business centric. Their analysis stops at the profits of business and they fail to follow the process through to ensure that it benefits the population as a whole.
It is notable that the venerable economists who wrote the letter to Mr. Osbourne uttered not a squeak about the corporate profits which are being filched away overseas to avoid paying tax as was reported in the same edition of the FT. Surely that too is “deeply damaging to the competitiveness of our science and research sectors and the wider economy”.
Poppies