Shortly before the Government’s ill-fated budget, I had coffee with a Conservative MP who was keen to stress that the Tory party was heading towards disaster. It isn’t going to work, the MP told me, likening Truss’s breakneck dash for growth to the Barber budget of 1971, which created sudden unsustainable GDP growth followed by a calamitous economic crash — “a naive, irresponsible gamble”, as Dominic Sandbrook has it, “based on rosily optimistic predictions that were never, ever vindicated”. The MP was right, up to a point: we got the bust without the intervening boom.
Instead, Truss’s dash for growth spooked the markets, which disbelieved her tax cuts could ever create enough growth to pay for her massive borrowing, and in a desperate attempt to mollify them we’ve been suddenly plunged back to the grim economics of austerity. Learning nothing from the last time, public spending will be slashed, along with investment in research and development, hobbling prospects of future growth. At this stage, and in such a deteriorating international climate, a return to stagnation would seem almost like a blessed relief. But there’s another way of looking at the problem, as the MP wondered out loud: “do normal people even care about growth anyway?”
It’s a good question. As the authors of The Future is Degrowth remind us, despite being taken for granted by economists and ordinary people alike, GDP growth as a measure of economic health is a very recent phenomenon, the product of the need to measure the success of investment and to track industrial capacity during the Second World War. As they observe: “Before 1950, there was almost no interest at all in economic growth as a policy goal in political statements or economic literature.” Rather, full employment, stability and reconstruction were the government’s priorities.
The one-off conjunction of spectacular growth rates and rising living standards following the Second World War led, they argue, to a folk association of GDP growth and personal prosperity. As they argue: “The fact that key democratic, social, and cultural rights were… fought for in the context of expansive modernity, and that within the growth paradigm societal progress became conflated with GDP growth, has laid the foundation for a powerful common sense, based on lived experience, that social improvements do indeed require economic growth and the development of the productive forces.”
It’s not an unreasonable deduction: of course, post-war “high growth rates did translate to a certain democratisation of prosperity”. Yet the relationship between GDP growth and prosperity is far from exact. Britain’s economy grew 7.5% last year as we came out of lockdown, dwarfing the post-war boom, though few would claim we’ve never had it so good as in the halcyon days of 2021. The highest ever upward GDP swing came in 1939 as Britain pivoted to a war economy, though the Second World War was hardly a golden era of mass prosperity. At the peak of Britain’s industrial, economic and political might in the 19th century, growth rates averaged 1.1% — significantly below GDP growth during the 2010s, commonly experienced as an era of stagnation and falling living standards. The unsettling prospect of an imminent nuclear exchange would, after what would admittedly be a sharp fall in GDP, surely unlock a great deal of potential for long-term economic growth as the survivors rebuilt Europe’s irradiated ruins. Most people would, nevertheless, prefer it not to happen. There are, simply, many more aspects to prosperity than abstract GDP growth: the map is not the territory.
So much for the abstract: in the real world, living standards are dropping sharply, as public spending cuts have led to a collapsing health service, creaking transport infrastructure and the police’s withdrawal from their basic functions of providing law and order. The stratospheric upward rise in housing costs functions, on paper, as GDP growth, even as it erodes actual prosperity. Desperate attempts to make the line go up on the chart — whether through Thatcher’s sell-off of public assets, the shifting of industrial production to the Far East, or the conversion of Western economies to debt-fueled speculative bubbles — have all brought temporary bursts of GDP growth even as they made the economy’s fundamentals weaker and brought lower living standards in their wake. We need a different way. The problem is, no-one agrees what that way is.
It is reasonable to assume, as has now swiftly become common opinion, that just as the economic crash of the Seventies swung the pendulum of economic orthodoxy away from Keynesianism towards free-market capitalism, so is the pendulum now swinging violently back away from what it is politically useful to term “libertarianism”. But to what?
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SubscribeI find it interesting that borrowing half a trillion and shutting down the entire economy for 18 months was fine with “the markets” but tax cuts worth a 1/10 of that and the energy support package are a step too far? I have no time for Truss or the “Conservative” party but it is a blatant Coup by the blob – Hunt as PM in all but name proves that (Loves the CCP, Zero covid zealot, Net Zero now)
Yes, traders in Asia (the ones that started to dump £ and gilts) got “the go ahead” signal from the blob to start the coup.
Genius!
Hi Jeremy, day out of the unit?
Personal experience?
Actually Kwasi K told Cripin Odey his plans before the mini budget, no doubt Crispin mentioned it to his Pals in the City?? The Tories and the city are corrupt, Labour can’t be worse.
Surely it’s highly likely that sacked Snake in the Grass, ex Treasury Secretary/ Financial Sector Agent, Tom Scholar was the one who fired up the reaction!
Maybe they watched the BoE do sweet FA to help? At least that appears to be roughly what the Austria School thinks of it all.
https://mises.org/wire/bank-england-made-liz-truss-scapegoat
I strongly suspect that sacked Snake in the Grass, ex Treasury Secretary/ Financial Sector Agent, Tom Scholar was the one who fired up the reaction!
Your bank manager will lend you money for a one off cost- but not a continuing annual cost.
I don’t think it’s that at all. “the markets” only have the patina of rationality, but in truth are sentiment driven. There is no coup by the blob, but there is herd sentiment, which follows patterns but patterns which are neither clear cut nor deterministic.
And the proof of that will be what I expect to happen when focus moves away from the UK, which it will in a while. Country after country will see the same market driven attacks over time, and each time there will be different concocted narratives, a) in the MSM and b) in the finance industries – not a conspiracy, but because retrofitted reasons are needed by humans – no different from claiming Zeus zapped my dog.
Not a Truss fan, but she and Kwateng were simply unlucky at a point in time – and that is not something anyone can do anything about.
The bond markets were primarily responding to the inflationary aspects of the mini budget which would have required further interest rate rises and therefore increasing yields and a reduction in the price of bonds.
It is the price of bonds that is important for the bond markets, not so much the yields.
The extra government borrowing itself was seen as a threat because the BoE were about to embark on quantative tightening. Both of which would have flooded the market with more bonds and reduced their price even further.
The combination of these factors accelerated the bond sell off that was already underway due to interest rate rises. The bond sell off was to avoid losses in relation to what had initially been paid for the bonds.
This acceleration created the pension crisis as the price of the bonds being used as collateral for LDIs rapidly descended. This created a spike in margin calls which was then mitigated by further QE which temporarily increased the price of bonds as bonds were taken off the market.
The reversal of the mini budget removed both the inflationary threat and therefore the further threat of interest rate rises as well as withdrawing the intention of putting more bonds on to the market which settled the bond markets.
The bond markets have been in decline since the start of December last year. The mini budget. hardly changed the curve, in fact if you look at 30 year bond prices, the mini budget initially reduced the decline.
It wasn’t the mini-Budget, it was the 2-year blank cheque of the energy bills support package that accompanied it (the support package needed to be announced but the other budgetary measures could have waited) that set the markets off. Understandably.
But the energy bills support was popular with voters of all political persuasions, so the blob (which by now included Tory MPs smarting over their boy Rishi’s loss in the leadership contest) had to put the market reaction down to other factors.
Agreed. But is not the Trillion Dollar Question still; does the Magic Money Tree work?? Or is it game over? The markets since 2008 were quiescent with Trillion on Bank bailout; 900bn on QE; 400bn Covid and v happy only last week for the 65bn panic bung to plug their dreadful LDI bets. Does the Energy Bill of 60-100bn truly mark the high point and end of the famed Tree? Are we set only for austerity?? Poor Keir must be fretting. The astronomical ‘Green’ splurge by Biden looks set to unleash inflationary Hell and mayhem. Money Tree economics and State Bailout could both be dead by winter. What then Labour?
So effective -ve interest rates are needed for bonds to survive? Interesting. No wonder Pension funds are stuffed and resort to derivatives.
Around 1997 I was writing the illustration systems for selling pensions and their returns were based upon 4%,6% and 9% returns. Ironically Brown was also in the process of stiffing them and the pensions bods were saying how clever he was (or was it sly?) for no one would understand just how badly he had screwed them for at least 20 years. Interesting bloke Brown, we live with so many of his policies. Deficit – still here, QE – still here, 0% interest rates – still here, insufficient gold – still here. About the only things he didn’t invent that is hastening our doom, was lockdown and the obsession with Net Zero.
A hugely valid point.
And all of the sudden all the money injection is in green energy as in the WEF playbook. Like if that was the biggest problem in ordinary people life.
It really does feel like we’re experiencing a paradigm shift, and this article reflects it well. The inability of our current ‘government’ – and i’d suggest, any current alternative government – to not only deal with but to even understand the events that are taking place is glaringly obvious. Political careers that’ve taken decades to nurture are going up in smoke in minutes, via a rash policy announcement or an unwise WhatsApp post.
The same applies to our politico-economic foes, as Putin’s army retreats in recently gained territory and generals are fired in favour of more ruthless ones.Matters of life and death; whilst in Beijing, the party congress ends careers and ushers in new ones.
Roussinos refers to ‘survival’. I don’t know about anyone else, but i’m in “battening down the hatches” mode. Perhaps the Covid pandemic was a primer rather than an aberration. Assets will be protected, not spent. Thoughts of travel to winter sunshine, as of yesteryear, aren’t even considered. Simple pleasures will be pursued; treasured. My first grandchild is due in the new year. The pubs are open. Restaurants that offer good value for money and provide sustaining meals rather than a ‘celebrity’ chef’s flights of fancy will be patronised. I’ll consider myself lucky – which, in terms of the conditions that 99.99% of humans have hitherto had to endure – i am.
I’m fully aware that the choices many others have to make will be more stark.
When the news media start harping on about “Christmas shopping declining” (as of today), i’ll smile and think of the endless tat that gets produced, and hope we’re at least seeing an end to that, as a reassessment of what Growth means to us all.
My hatches are battered down rather than battened down, but I agree that my quality of life is still very good. My fear is that, with or without re-distribution, growth is still needed because we are, as a nation, much poorer than we think we are: We are like aristocrats of old, living on the indulgence of our creditors, but heading for debtors prison. At least Truss, inept as she is, saw that.
and she showed us just what a mess the system is – something to be thankful for, as no one else wanted to admit to the disaster they have foisted upon us.
I feel we’re very very lucky as the older generation. And despite the gloom, many of us are able to actively help the younger generations, and finally through inheritance. It’s a fairly easy ride once you’re halfway up the ladder.
We too are budgeting – though the wife telling me yesterday I should get a £18 steak instead of a £28 steak was firmly rejected since we only dine out once a fortnight. Wearing merely a fleece means we haven’t turned on the central heating yet. Caravan holidays which are cheaper and, because we’re still shielding due to transplant (no immunity), we can’t even consider going abroad by plane. But the U.K. is a glorious place to tour, and it’s still an easy life for us.
Recent events have changed priorities – Covid had some silver linings – and many of us will bumble along comfortably despite the political chaos. And Steve, you’re about to find out about the incredible experience of grandkids – we have two (11 and 13) – and because there isn’t a wee handbook of life, the revelation about the joyful impact of grandkids was a complete surprise to me.
I’ll look forward to that (the joyful impact) and congratulate you on still having teeth* that’ll do justice to a decent steak without hours of regret!!
Hopefully the shift is realising that we need a proper energy policy. That is what growth or survival is based on. It seems harsh that Liz and Kwasi get all the blame, but we like a simple solution.
They got the blame because they exposed brutally the reality that most the Treasury and BoE and probably most of the City already knew, but wished to keep from the prying eyes of us plebs who may depend on such pensions.
Excellent post Steve.
“A collapsing health service”
I often read pieces that state facts like this and just accept them as true, partly because of the statistics on record waiting lists and the horror stories in the press about extreme ambulance waiting times. But then sometimes my own limited experience causes me to pause and challenge such statements.
In this case I’ve had four significant experiences in the last month with the NHS – an elderly relative requiring treatment prior to dying; another elderly relative who is seriously ill; my own spouse who has an ongoing illness that requires interventions by the NHS; and finally my own requirement for NHS action on an issue. In every one of these cases the NHS has been exemplary in its responses, treatment and support. I know it’s anecdotal, but it does suggest to me that our media driven habit of catastrophising over everything is quite extreme and very misleading.
I also have had excellent treatment from the NHS but the facts are the facts and one cannot deny the patient outcomes on many illnesses are found to be well below some of our European counterparts
Some people though abuse the health service, in fact many do, by seeking help for trivial conditions and thus clogging up the system..
A&E being one example. GP surgeries another. I’m not suggesting there should be charges but when anything is free it will be abused. Whereas our grandparents generation, who grew with the history of only paid for medicine still fresh in their minds only sought help when really needed… Not for every common ailment or self inflicted condition. People only appreciate what they have to pay for… And frankly there are too many in this country who are all too happy to take out but give nothing back.
“seeking help for trivial conditions and thus clogging up the system”
Are there statistics to back this up?
More to the point, how do you know they are trivial until a Doctor tells you? Google?
That is no excuse for poor patient outcomes they cost lives … it’s up to the NHS to have the correct processes in place … clearly like other Health Services appear to do
Well said similar to my own experience media need a crisis so they make them up as they go along
A vast number of people and organisations are grouped under ‘NHS’, unlike the health systems of almost any other country with health scheme for all citizens. It is only to be expected that quality will vary, and poor performance tends to be diluted within a mammoth system, or explained away for political ends.
Our family experiences also vary between excellent and bad. I’m glad to say that the former tend to be clinical, and the latter the result of administration, and I pity workers who have to live with latter every hour of their working lives while doing their best.
My suggestion would be to choose another country with a successful system, and copy it, e.g. Spain, France, Germany, Netherlands, Switzerland, and on and on, but the moment one suggests this kind of change, one is accused of wanting to copy the USA’s.
France’s has been struggling of late.
Not my experience, or Anne Clywds for that matter. I spent close on a year fighting for my uncle to have NHS care but the local CCQC or whatever it is now called paid a whacking great salary to a very exprienced nurse to fight me all the way. My interpretation of their own assesment was finally accepted and they agreed to fund him, about a week before he died. Such experiences are not 1 off’s. Though perhaps it is post code stuff, Liverpool appears to attract incompetence and corruption in most things relating to the State. Curiously it also elects socialists. I wait for the enthronement of Starmer, or more to the point what he promises in any manifesto to achieve that.
.
The biggest spending of every government is welfare (look at your tax breakdown, if you pay tax) and welfare , like all spending, is funded from wealth. GDP counts government spending so is a particularly useless measure of prosperity.
Low growth (growth does not mean “more stuff”, but more productivity and innovation) means less money for welfare, so we’ll all be worse off, but hey, a few percentage points more “equal” so we’ll all be really happy. Right?
All the prescriptions for government I’ve read involve more government spending, i.e, digging a bigger hole for future generations.
Govt spending is funded from tax and borrowing. If you really want to be poor keep importing people who use services but dont pay much tax.
a tiny number of people pay the vast majority of income tax
Because a tiny number of people earn a vast majority of the income and hold a vast majority of the wealth
and so, your precise point is?….
If they hold the majority of the wealth and earn the majority of income then it’s common sense they’ll contribute the most taxes.
A more relevant number would be how much tax they pay as a proportion of their income, when all taxes are allowed for (income tax, VAT, petrol duties, council tax etc) I’d wager it’s less than those at the bottom
We should drive them out of the country, though we’d have a lot less money. However, because of the way we measure poverty, we’d also have less of that. Perhaps that’s why socialists are forever attempting to drive anything that makes money away?
Not true: The Institute for Fiscal Studies (IFS) – an economic think tank – has analysed how much households pay in tax. Their analysis – which covers around three quarters of tax revenues (including income tax, NICs, VAT, excise duties and council tax) – found that the 50% of households with the largest incomes contribute around 78% of taxes.
https://commonslibrary.parliament.uk/research-briefings/cbp-8513/#:~:text=The%20majority%20of%20receipts%20come,value%20added%20tax%20(VAT).
And the top 1% rinse everything through tax havens anyway so that incomes not likely declared for taxing is it?
As a share of household income its actually pretty even, although the lowest band pays less in direct tax it ends up paying more in indirect taxes. So its actually pretty fair. If the top 1% paid the taxes they were supposed to and didn’t mess up the economy with their dodgy deals in derivatives, shadow banks, tax havens and goodness knows what else we wouldn’t be in this financial mess anyway.
Part of the problem with the electricity prices is to do with these derivatives we are being scammed by the 1%
https://m.youtube.com/watch?v=NicE0-N9ux0
https://ifs.org.uk/taxlab/taxlab-key-questions/where-does-government-get-its-money
Only a quarter of govt tax revenues is from income tax.
True enough. However, one of the reasons why welfare payments are so large is that wages don’t meet the cost of living for many, many people. For example, the Housing Benefit bill is one of the largest components of the benefit system. It could be much smaller if there was more social housing (in the long term) and if the Government were willing to push down on private sector rents (in the short term).
–
Similarly, another big chunk of the benefit bill is in-work benefits to those who work but do not earn enough from that work to live (not least because of housing costs). If wages made up as large a share of the UK’s economic pie as they do in Germany. then the cost of those benefits would fall.
In the UK, wages account for 57% of GDP, in Germany they account for 63%
If earnings inequality were also reduced the same would happen because the incomes of the poorest (those supported by welfare) would rise, reducing the need for support.
The GIni co-efficient in the UK is 0.37 – in Germany, it’s 0.29
Thus, in theory, you could cut the cost of welfare and improve general wellbeing significantly without adding a single £ to GDP or raising taxes.
Welfare provides some pretty posh cars where I live. Despite the ‘tongue in cheek’ thought behind that, there is actually the reality that a neighbour of mine had a very smart top-of-the-range vehicle on the ‘mobility scheme’ – he even told me about it, explaining that he had to provide a ‘top up’ otherwise he’d have had the bog-standard vehicle.
Seems possible to me to question the notion as to who are the true beneficiaries of “welfare” highlighted by the fact that many people in work are necessary recipients of monetary support to keep them in a position to work full time or at all. In short those who do pay tax, those not in a position to avoid doing so, are subsidising profits made from lower wages than would otherwise have to be paid if no “welfare” spending by governments made available.
The most blinkered denial as to who are the real beneficiaries of “welfare” are those who like Priti Patel &Co who divide the nation into and devise policies for that ugliest of descriptions of fellow
citizens, the “economic inactives”.
I always ask myself, if we had zero growth, how would an unemployed person get a job, or how does a low paid person get a higher salary.
They don’t. The zero-growth and degrowth crowd hates you and hates humanity.
When older workers retire, don’t their positions & salaries become available? IOW, why can’t an economy be steady-state, instead of infinitely growing? That’s what I always ask myself.
More than 50 years ago my History teacher pointed out that despite all the financial doom and gloom Britain was still a rich country. All our possessions from Caterpillar tractors to the blackboard (he gave it a thump in emphasis) were wealth.
I see from the article that doom and gloom is still popular with the press. While some of it is undoubtably true it is all pretty much short term and exaggerated by the chaos surrounding the fading gerontocracy of the Elite (particularly the USA) and the birth of the new Elite (probably further to the East). Claiming that Labour will address the chaos are hopeful – the UK will be too different for the old nostrums to be believed, and the World a different place entirely.
Yes, UK is a rich country and will remain rich for a long time. It will also remain a very well governed country (despite the current mess).
The problem is that the British people will not compare their lot with Nigerians but with the Germans and Danes and Co. And all those countries are richer and more productive and with better social services.
Agreed, but those two county your mention either have a simply appalling history or a rather boring one.
With both Trafalgar Day & Agincourt day looming, we can soon bask in past glories.
I assume you mean Germany with the “appalling history”. Whilst not doubting that it was so in the 20th Century and partially because of the appalling behaviour of the axis powers after ww1 it may well serve you to take an indepth look at your own history of colonisation and slavery before you comment. “first cast out the beam out of thine own eye; and then shalt thou see clearly to cast out the mote out of thy brother’s eye.”
who cares about colonialism and slavery? Why not have a good whine at how appallingly the former enslaved and colonised ( with a few notable Asian exceptions) have done since with their ” economies” let alone their totalitarian politics?
Exactly, we should be proud of the fact that we created the greatest Empire the world has ever seen since Ancient Rome.
In fact a true the case of “Look on my works ye mighty and despair “ as PBS put it so eloquently.
After all why are Sinbad & Co paddling across the Channel on Lilos as I type?
Are they masochists or do they seek salvation in ‘this green and pleasant land’?
The other irony is that only the Soviet Union dismantled their empire with less bloodshed. Though subsquently US/NATO sponsored revolutions spilt a fair amount.
Are you seriously
trying to make the case for some equivalence between say, Amritsar and Auschwitz?
Incidentally who exactly were the “Axis Powers” after WW I?
Jawhol mein Obernsturmerfuhrer!
We actually put a stop to a timeless practice, one that we didn’t start and which some of our population simply exploited. The African slavers discovered that the Europeans were more profitable customers than the Arabs. You might also like to research on ‘White Slaves’ – you may be somewhat surprised at how many and how widespread the practice.
Besides the point, he was pointing out that all countries have bad stuff in their history, and we shouldn’t be hypocritical, you’re not seriously defending this pair are you?
I agree with you, I understand the hefty reparations levied against Germany after ww1 and the weimar hyperinflation contributed to the rise of nationalism in Germany pre ww2. We basically stripped it of everything. This pair are right piece of work. Nicky Samengo Turner and Charles Stanhope. I have seen your behaviour on these threads and it’s diabolical. The point of unherd is to be open minded to all opinions, you two are the most xenophobic, up your own arse, I don’t know what’s, I have come across for a long time. I don’t understand why you are on here.
Your comment nicky ‘who cares about colonialism and slavery’
There’s a good cause for caring about and learning about colonialism and slavery, first up you cannot learn about or discuss any empire without addressing colonialism and slavery as that is fundamentally what building an empire entails historically. Secondly, most of Africa’s problems now stem from the various shenanagins the west has inflicted on it, including apartheid.
And your comment below Charles Stanhope: ‘why are sinbad and Co paddling the channel as I speak.. ‘ is most of the most ignorant, diabolical comments I have read to date. You don’t think it’s because maybe 22million people in east Africa are starving after the worst drought in 40 years?
pathetic even by your zealotic standards Charles.
Praise indeed Sir, thank you.
You are living in the past. No one with any knowledge of the effect of EU sanctions aimed at Putin would want to be in any place in the EU this coming winter. As for the Netherlands –
https://unherd.com/2022/03/how-the-netherlands-became-a-narco-state/
You shouldn’t believe everything you read on the BBC or the Europhile press. They have an agenda and it is globalist anti-Brexit. Even Bloomberg/Reuters are guilty of it. So when they report on something bad for the EU, it is best to understand that probably means it is VERY bad.
No problem with a lot of this.
But do we have the political leaders to motivate the population, and carry this through in the UK?
Are they anywhere at all? In any party? Forget party politics, and point-scoring, and answer me that.
Nope.
Take a look at the SDP .. you might like what William Clouston says on most policy areas.
Well said Ian.
I particular like his views on housing: build council housing on the scale we did in the 1950s-1980s; limit immigration to below 50k per year; allow long term council tenants to buy their houses but use the profits to replace the missing council stock one-for-one.
No.
Hard to imagine the system which got us here delivering a solution.
Why? The patriotic Brexiters (17M of them – right?!) need motivation? By now UK should be full of world class companies going out there and winning!
It might well have been, but for Chinese COVID-19 and the hysterical response to it by Messrs Cummings & Johnson, both of whom should be facing a Capital charge.
You know full well that the answer is no!
“Hope springs eternal “.
Only in your imagination. The EU is currently fighting for its very survival, and we, fortunately won’t be required to sacrifice ourselves on its Altar. The IMF apologised to Greece for
“Immolating it on the Altar of the Euro”
https://www.telegraph.co.uk/business/2016/07/28/imf-admits-disastrous-love-affair-with-euro-apologises-for-the-i/
The Euro survives thanks to German industry. Currently it is closing down the basic plants it needs to keep that industry going. Aluminium and Zinc producers, and more alarming for the potential of famine, fertilisers are affected by the cutting of Ammonia production.
https://www.reuters.com/markets/commodities/third-european-smelter-closure-compounds-zinc-conundrum-2022-10-06/
BASF is considering moving any energy intensive plant to the US. We are well out of that, because when the Euro fails, the Germans are likely to discover who is right about Target 2 balances. The ECB who insist they are paper processes or the German Economists who insist they are interest free, collateral free, repayment legislation free, loans to Southern Europe. If the latter, then the wasteland produced is not going to something you want to be part of.
One last point of interest, Ammonia is needed to produce AdBlu – the additive for most modern clean diesels. Whilst you can continue to run an engine with no AdBlu if it runs out, a lot of the modern machines have software that stops you starting your diesel without AdBlu. Let’s hope all the local Supermarkets have really old diesel Artics – otherwise it won’t only be a lack of fertiliser ensuring the shelves are not full. 😉
Agreed but the media and Sage forced their hand….
“They” had the ultimate authority and should not have pandered to the worthless cretins of Sage nor to the perennial bedwetters of the Media.
Neither of them are/were ‘fit to command troops’ as we used to say in the good old days of Empire. They should now both do the ‘decent thing’.
Like Germany’s? 😉 Try reading up on the EU and then you can thank us Brexiteers from saving you from the unfolding catastrophe there.
“When Starmer wins the next election….. Debt will grow, and it will have to…”
Who s going to lend us this extra debt and, if they do, at what rate of interest?
They will just print the money, and let inflation do its worst
Capped off with them constantly beating us over the head by telling us we’re all a load of knuckle-dragging racists and gender is just a poisonous social construct.
The Tories seem to have found no end of magic money trees, the ones they derided Labour about! The tories are a joke and certainly not the party for the economy or law and order.
The Tories discovered that any attempt to eliminate Brown’s deficit just resulted in abuse and cries of ‘Austerity’ so they stopped and kept it. The BoE, those ‘Independent Rulers of All’, who we can’t vote for, loved their printing presses so much that they kept them running under Brown’s QE regime. The Tories realising that this WAS the Labour Magic Money Tree also kept that along with Brown’s deficit. Finally the only thing the BoE had to do in fact, to keep inflation low, went out the window because they’d screwed the value of money and the whole economy with magic money that they couldn’t raise interest rates to reign it in, and that meant the Tories kept that too. In fact I can’t recall if they also took a leaf out of Brown’s playbook and stiffed private pension funds, and I can’t be bothered at this time to check.
The only thing the Tories can claim credit for that Labour wouldn’t have done, is leave the EU. But they didn’t exactly do that well. Although Mr Benn’s bill in the infamous Remain Parliament helped screw Boris on that.
He’ll be going after ISA’s as in cancelling them. Raise the interest on dividends. In other words taxing the savings of ordinary citizens. The rich will have fled by then. Sadly our Politicians are naive, lacking any political construct in the wider world. That two autocratic regimes have unleashed a virus and a war that has hobbled Western democracies will not go unnoticed by them. Also note one is a manufacturing superpower and the other an energy superpower. In the UK and Europe we’re a bankrupt society.
For God’s sake LEARN about bond markets? You are just one of so many on this medium who make yourself look foolish by making crass comments on the subject? Read.. research… learn about how sovereign and supra fixed-income debt markets work?!
Do you need to be so awful? Not everyone has time to take on the subject of the UK bond market as a hobby. If you’re such an expert why don’t you use your time more wisely and instead of insulting people take the time to explain and address their point? Would that be too difficult?
I tried, but all I got was people offering to sell me them. Perhaps some links to explanations might be in order? I have to confess, like Mr Lucey, I imagine someone has to buy them AND given I was told Truss had to go because money was ‘fleeing’ the UK it does seem that someone wasn’t keen on investing in us. I also read that the reason the BoE stepped in was to ensure there was a market for the bonds the Pension funds were flogging to meet margin calls. Which suggests that without the BoE either there wasn’t an market or it wasn’t doing pension funds any favours.
I think your cavail against growth has some justification but you do realise that high growth is needed to fund the Big State and their massive spending which you wish to increase?
If you want a more sane World then we need a Small State and low taxes so working people can keep their own hard earned money putting them in the position of making their own decisions.
How fulfilling would that be for the vast majority?
“If more of us valued food and cheer and song above hoarded gold, it would be a merrier world.” Thorin, J.R.R. Tolkien, The Return Journey, The Hobbit
That is a story book for kids. When someone needs help, it’s the people with the hoarded gold who will be able to provide it.
That would be Russia and China at present.
If you think that stories don’t matter you betray yourself. It’s close to sacrilegious.
What a hysterical piece. The atmosphere at the moment reminds me of the emotional meltdowns following the death of Diana, or the Brexit vote. The Truss ‘bust’ lasted a week and had a real impact on precisely nobody outside Westminster. One telling comment in the piece is the claim that ‘public spending cuts have led to a collapsing health service‘, which is objectively false but contains a germ of truth that undercuts the author’s own argument. If less spending leads to worse heathcare, more spending must at least enable it to be better. Growth is what powers improvements in quality of life: more choices, more opportunities, broader horizons, more access to good things, even greater state capacity to the benefit of more people. If normal people really don’t care about growth, a harsh recession will re-focus minds. Whether countries throwing off communism, or people looking to migrate, people will always choose prosperity.
The NHS has swallowed the largest boost to its budget ever in the past two years and services have collapsed at the same time. Nor is this due to colossal extra demand due to the pandemic: the number of non-medically trained staff in the NHS has ballooned enormously as a direct consequence of the extra money having been poured in with no conditions attached. It is a classic case of government spending actually causing economic contraction, the opposite to growth.
What amazes me is that we don’t have enough doctors or nurses, and yet seem to have government policies which encourage that, to reduce government expenditure of lack of imagination, but simultaneously as throwing more money at the NHS, who are unable to spend it on doctors and nurses, but can do so on managers, consultants, PR, and HR.
Meanwhile, the Treasury is keen on plans to raise money by reducing premises.
It may have received a large boost (although it still lags behind France and Germany), however that coincided with a worldwide pandemic so it’s no surprise we didn’t see vast improvements.
It doesn’t lag behind France and Germany when it comes to employing people it seems.
1 US Department of Defense
2 People’s Liberation Army
3 Walmart
4 McDonald’s
5 China National Petroleum Corporation
6 State Grid Corporation of China
7 China National Petroleum
8 NHS (United Kingdom)
9 Indian Railways
10 Indian Armed Forces
The author never once distinguishes between the total UK measurement of GDP, and GDP per capita. Most British peoples’ experience of GDP growth per capita is that it has stagnated while immigration continues apace.
GDP is an outdated and pernicious way to measure growth, because it includes not just healthy growth, if any, but feverish swelling caused by governments’ various ways of artificially boosting it by public spending.
It is like assessing someone’s health solely by their weight, so that a massively obese bedridden person is considered healthier than a marathon-running bodybuilder!
Ireland has the second highest GDP pc in the world! But it’s a total fraud.. the multinationals have their HQs there and allegedly make all their EU profits there (to avail of low corp. tax).. BUT the net profits are then repatriated to the US.. So yes, GDP is a false measurement.
Mind you, we still do very well on the deal.. and now doing much better since Brexit as the only English speaking, unquestioning US ‘partner’ left in the EU. We are also very smart of course!
Speak for yourself. Like the ant, people like me have worked hard to provide for winters to come only to have my hard-earned money confiscated in tax and squandered on layabouts and gimmegrants, who don’t even sing and dance as grasshoppers do.
Ah yes.. the scapegoats and the xenophobia. The good old reliables. How did you manage to have all your tax diverted to just two small areas of expenditure? You make no mention of the £billions spent on a fruitless war! Is that taxpayers’ money well spent? And all the wealth transferred to the super greedy ultra rich: also well spent ‘you think? And HS2? ..Why focus on the motes with those great beams weighing down in you?
“Labour must provide the basics of common comfort: if people can still eat, heat their homes and shelter themselves from the weather, they will count themselves prosperous.” Not with a rush for useless Unreliables they won’t.
Thought-provoking article out of the box.
But given our aging society and the real rising real cost of health and social care and other key public services, real tax revenues also need to rise likewise.
That requires the trend growth rate to rise or a more efficient and equitable tax system based on asset wealth rather than labour and capital: preferably both.
Politicians of all stripes need to internalise and communicate that fact of life and act accordingly.
There is one major problem with this analysis and it is readily seen in the two examples provided in which GDP growth was high but can hardly be claimed to have delivered mass prosperity: the war preparations in 1939 and the post-pandemic growth swing of 2021. What they have in common is that the growth in question in both cases was the result of government interference in markets, and not the sort of growth that comes from the ongoing process of commercial and technological innovation that continuously delivers goods and services that are better and cheaper.
Improving mass prosperity is not rising wages, it is the rise in what the same wages will buy in future as opposed to the past. Markets deliver this, not governments, and whether you like it or not, the figure of GDP per capita is a fairly reasonable means of measuring this.
This article is depressing not merely in its predictions, but in the fatalism it demands of the rest of us. I do not believe that social stability can be maintained in a 1% growth economy, and I do not believe we should tolerate a democratic system in which competing prospectuses can get away with lazily assuming we will all put up with it.
Liz Truss may well be about the worst communicator to achieve residence in No10 Downing Street, and her team may well have the tactical ability of a village idiot, but she and Kwasi Kwarteng were telling us the truth in stating that there is no alternative to improved growth and the sort of economic discipline that looks first to how resources are allocated.
The great tragedy of the past few weeks is that opportunist Statists have succeeded in smearing the pro-growth agenda by convincing millions of voters that supply-side reform, market discipline, and the need to allow for the Laffer Effect in deciding tax-rates can all be neatly summarised via the phrase “trickle down economics”. This is the sort of demented ignorance that can lead us to ruin if a sufficient number of voters act upon it, and the way the polls are looking right now, that’s what might actually happen.
The compound effect of never ending growth through exploiting the resources of a finite and heavily damaged planet can have only one result: apocalypse! Furthermore, growth on the backs of the exploited becomes very difficult when you’ve taken virtually everything from the exploited and rhe exploited are sick of it@
There’s much that I agree with here, but it’s very odd to discuss GDP growth rates (especially as compared to during post WWII decades’ baby boom) without mentioning demographics.
Aris. The economy isn’t everything but because it didn’t work in 1971 (your opinion) it doesn’t mean that we should deny it from people in 2022. Unless you believe in command and control economies.
You have obviously been on an NLP course. Everybody has a different map of the world. I want to see growth.
Your (NLP) generalization of the reaction to the mini budget was……. A generalisation! The pound remind higher then it was 5 years ago against the euro.
We now have Remainer interests in control. Globalists who think they know what’s right for us to appease markets.
The Tories are finished as a party. Boris borrowed a vote from the red wall that the Cult of Hunt has absolutely no regard for.
Goodbye Tories. Hello a new party but it won’t be Labour and it won’t be you Aris.
Since the 2007/8 crash £ is the worst performing major currency in the world.
You had Leavers in power – how did that work out?! Farage (the failed broker – yes he was!) as a true Leaver is going to do what? Turn UK into Singapore on the Atlantic?!
Even the Telegraph have now accepted that Project Fear was right all along. If anything it was understated.
Just because the proles voted for it doesn’t mean the w⚓️s in charge were ever going to honour it.
Excellent use of the anchor of the late, lamented
H.M.S. Hood.
Oh really?
https://www.gov.uk/government/news/britain-to-enter-recession-with-500000-uk-jobs-lost-if-it-left-eu-new-treasury-analysis-shows
😉
Youre right Jeremy Boris and Farage fooled a lot of people….
If remainers are going to repeat themselves then so will I. Neither Boris nor Farage produced this.
https://www.gov.uk/government/news/britain-to-enter-recession-with-500000-uk-jobs-lost-if-it-left-eu-new-treasury-analysis-shows
It has been doing wonders against the Japanese Yen – I know, I’m saving to go visit Japan and so buy Yen. 😉
Meanwhile the EU’s citizens turn to the Green Drax solution of keeping warm this winter – chopping down trees.
>Unless you believe in command and control economies.
That’s exactly what today’s antiliberal, degrowth, etc. people believe in.
It amuses me to watch our politicians fighting and plotting to get themselves into power. I wonder how many of them will still be around to celebrate victory, or lament defeat, in a couple of years time. Not many I suspect. Starmer will challange Truss for the record of shortest serving PM in our history.
Overseas visitors might like to listen to the latest broadcast of The Telegraph’s Planet Normal podcast, with Liam Halligan,Allison Pearson and guests. Our politics are even madder than yours, though with more refined accents.
The future is Japan but without the cohesive population.
And hopefully without the godawful anime cartoons too.
A thought provoking article but I can’t agree that “public spending cuts have led to a collapsing health service, creaking transport infrastructure …”. Public spending is on a ratchet and keeps on going up, up, up. If it feels like spending is being cut, that can only be because we’re expecting the state to do more, more, more.
Much of the spending is syphoned off (not just during Covid either). Look at where wealth grew and you’ll get a strong hint. Qui bono.. qui bono?
I think the premise is correct. We do have a crumbling infrastructure, getting less and less in return for the throwing more and more money at the problem.
I think it is important to remember that Nobody Knows Nothing, including the writer.
Who saw the industrial revolution coming?
Who saw steam railways and steamships transforming the world?
Who saw the internal combustion engine allowing the average punter to travel around needlessly?
Who predicted that World War I would be a total disaster?
Who predicted that communism would leave an unprecedented mountain of skulls?
Therefore, to imagine that we have a clue what is coming down the road today in terms of growth, politics, war, silly-putty green energy, is utter folly.
Just because you and your ilk didn’t and don’t see what’s coming doesn’t mean nobody does. There are many visionaries in the world: they may not get it 100% right but like regression in statistics they are more likely to get it right than the random chance of your view.
Who saw that deindustrialisation would emerge if we decided to deindustrialise? Who saw dependency on Russian gas if we decide to buy most of our gas from Russia? Who saw a war coming if NATO shoved a red hot poker up Putin’s rear end? Who saw China’s amazing growth and development. Who saw that funny money economies built on sand couldn’t last?
Answer: everyone except the deluded and deliberately misinformed: and the super greedy who didn’t even look at the blatently obvious because they were too focussed on their greedy profits!
Let us cut to the chase- This country should not be run by third rate jumped up clerks, and factoti with all the sense of duty of quislings, interested in politics merely as a job, and one that they will lie and cheat to keep at any costs. We already have the public sector, local authorities and large swathes of the ghastly IT industry run by these self serving, backbone devoid quasi automatons, and they also now infest the benches of our magistrates and lower civil and family division courts.
You’re writing off quite a number of people there, what a superior attitude. You come across as someone who likes the sound of their own voice. Do you have any respect for anybody? What, pray tell, does one have to do to be branded a third rate back bone devoid quasi auto maton in your eyes? What are you suggesting – a test designed by you to keep people you perceive like this out of these institutions? If it wasn’t for the ghastly it industry this medium wouldn’t exist.
A falacy now grown threadbare.. only a very few are still convinced by the giant Ponzi scheme. “If we all hold our nerve we might just pull it off. It’s worked fine in the past”.. Liz Truss’s ladt throw of the dice!
The party’s over I’m afraid and the hangover begins.
Not looking good then is it? A massive exposé of the dry rot is needed before repairs can begin I feel. Otherwise it will be more of the same: ie papering over the gaping cracks with the oligarch owned MSM whipping up xenophobia and scapegoating.
Its time for a major overhall. You might start with a wealth tax: UK wealth is estimated at £183,000,000,000,000! 1% of which is £1,830,000,000,000: yep, £1.83 trillion!
Maybe the Labour Party will (do a Tory music chairs and) replace Starmer with Corbyn so as to tap into the UK’s vast (illgotten?) wealth and save the country. I suggest, as a start, sell off the crown jewels? ..and the palaces? That will show the rest the way forward..
Will Liz Truss’ resignation make any difference? Why does the Tory party have so many different, contradictory, policies – does it stand for everything or anything or nothing? Will clarity emerge in the choosing of a new party leader this week or just confirmation that there is very little talent to choose from? It is all very Gilbert and Sullivan.
The one common denominator: it suits the upper echelons of the party abd their oligarch puppetmasters. In other words it has nothing whatsoever to do with the country at large!
The limited charisma and political sense of Liz Truss, coupled with the gravitational inevitability of Brexit/neo-Liberal contradictions and what in all honesty could have been expected? Probably the only thing that can really be said is the former at least quickened the illumination of the latter.
If I understand you, Brexit is to blame, at least partially? IF so then the EU has had more than its fill of Brexit it would seem. 😉
What’s that bloody great grey thing sitting on the sofa? Don’t ask!
Words of wisdom!
The structural problems of society, government and economy long predate Brexit.
An interesting article and a good question: do we really need growth? However, it’s nonsense to say “public spending cuts have led to a collapsing health service, creaking transport infrastructure …”. Public spending has grown every year since the year dot, massively in the past three years.
The tax burden can’t go up indefinitely, so we’ll definitely need growth if public spending is going to increase. But we should have learnt by now that increased funding doesn’t guarantee improved public services.
Endless growth from a finite planet? Eh …no!
We need boris back right now. This article is pants, the government were sticking to the free trade low tax model that they were elected to deliver, was the promise of brexit and was responsible for Hong Kongs success, the civil servent that was responsible for Hong Kongs success famously rejected collecting gdp figures and this thinking can be seen at play when Jacob rees mogg wanted to ignore the obr.
I could not make any sense of this article – but maybe I am distracted by my own financial mess – only where he quotes this as being meaningful made me know I could not wade through this essay:
”“The fact that key democratic, social, and cultural rights were… fought for in the context of expansive modernity, and that within the growth paradigm societal progress became conflated with GDP growth, has laid the foundation for a powerful common sense, based on lived experience, that social improvements do indeed require economic growth and the development of the productive forces.”
I kind of get that it means as social growth was coincidental with GDP growth we think the two are linked, (and that growth is not really necessary)(MMT). It is pretty meaningless to me – but I was lost the whole way – only writer missed the two biggest factors – he invoked Keynes, but then stops at the point.
Zero Interest, and QE. Brown loosened it on UK 2009 I think, and as it is financial heroin everyone kept doing it.
Basically we spent the next generations savings – to get growth then. And now we have spent their inheritance there is nothing left, and so hard times must fallow.
High interest and QT, and that means recession and high unemployment, and you cannot borrow your way out of it without making it a lot worse and creating hyperinflation.
This writer seems to think we should spend our way out of debt, at least I think he says that (that is called Inflation), but we did it till no one wants to buy anymore debt, and so hard times must fallow till it is paid back – it will be a long time..I know Unherd is big on MMT, but I believe it is poison.
We have not spent ” the next generations savings” one of the problems with our Government debt bond market is precisely that NOT enough Government bonds are held by UK retail investors, as they are in Japan, Germany, Italy and elsewhere: why? because the UK clearing banks lobbied Governments NOT to put in place retail Gilt buying incentives, as it would affect their deposits.. How do I know? Because I was involved in a proposal to vastly increase the ability for retail investors to buy gilts via The Post Office Bank, post to the Lehman debacle.. ” HM Treasury said no”….
Interesting, but why is it then that the Italian’s were the ones who provoke most fear in the EU because of their ‘doom loop’ due to their banks, population all holding their Govt debt and many of the valuations of their banks depend on it? Such that is one goes down, they all do – at least that is my understanding of their doom loop. Probably why the ECB won’t let the Italians do anything much without their say so.
Monte dei Paschi had to rely on the Italian Govt “bribing” underwriters to help them raise 2.5 Bn Euro last week. Though quite what level of bribery and how it worked was not explained.
“If Italy fails the EU fails.” was a Bloomberg headline almost a year ago.
Mind you I did see
“If Germany fails the EU fails.”
When it became clear how badly the sanctions of Putin were hitting their economy. So it seems that debt, whoever owns it, might be a problem in itself?
Liz Truss will hang in there until November 6th. After then she’ll be entitled to her £126,000 per year pension for life courtesy of the taxpayers.
Is that two thirds final salary may I ask?
One might also ask if it would subject to LTA.
Lawn Tennis Association?
Please tell me you’re joking 🙁
I wasn’t but she’s now resigned. Get ready for the next Globalist puppet PM…..
Well we now know she will leave office on the 28th October.
In an increasingly uncertain world there can only be one national plan.
To create a sustainable, resilient and sufficient future for Britain.
Labour listened, the Conservatives did not.
Labour 1 Conservative 0
Not sure Labour have been good at listening, other than to lefty-lunies.
You’re a tad out of date. The LP expelled all its looney lefties..
“Create a sustainable, resilient and sufficient future for Britain.”
At last, a practical policy!
Not rocket science is it? You could start by stopping wasteful exports of arms to corrupt Ukraine and focus closer to home maybe?
I can’t help but laugh at that. The Tories kept most of Brown’s deficit spending, all of his QE/Low interest rate policies, didn’t try and replace all the gold he flogged off, and only under big duress reversed his ‘kill off our nuclear power capability by flogging it’ Then they adopted everything from Net Zero, lockdown and LGBQTIA+ and other philosophies, though not to the same degree, as Labour. In fact the ONLY thing I can see (other than them being in Government) that they did differently to Labour was leave the EU.
When you put it like that it has a ring of primary school logic about it…
Ah who cares – I got my Ashes tickets for Edgbaston next June today!
Hopefully Putin will hold off on the nuclear war until after the game.
Are you sure it is Putin? I see now that Putin isn’t winning the US is now poking the Chinese Tiger over Taiwan rather than the Russia bear over NATO.
If the US+UK keep playing the same game it might well be a combined effort! Tiger+Bear vs Eagle+Lion..
I must read John’s Apocalypse again and see how that worked out….
Got my Ashes tickets for Old Trafford in July today, so I’d like the nuclear catastrophe to be postponed for an additional month, if that’s ok.
In the words of the Emporer Ming, “The humans will be satisfied with less.”
In the words of designer and architect Ludwig Mies van der Rohe, “Less is More”!
And in the words of E.F.Shumacher, philosopher etc: “Small is Beautiful”
And in my own words: “I guess we gotta suck it up or get smart”..
Truss happened because the Tory party members are profoundly out of touch.
Truss happened because the Tory party members temporarily lost their minds and voted for the long-term health of the economy instead of short-term advantage. Today is a dark day in the history of liberalism and capitalism.
You are deluded I’m afraid. So are the upper echelons of the Tory party but they can afford it!
The opinions in Unherd are now so mainstream there is no value to be had reading such coformist tripe.
‘Growth’ is a catchy term which means more specifically ‘growth in GDP’. It is ASSUMED, not proven, that growth in GDP leads to widespread prosperity, which is a very dubious assumption, because how GDP grows determines entirely whether or not growth leads to widespread prosperity.
‘Growth’ is stimulated every time an electronic trader makes 0.01% on a trade in the ‘markets’. That trade produced nothing, delivered zero services to anyone, fed no-one, housed no-one, clothed no-one, educated no-one. It merely transferred a bit of capital from one person to another. Mostly from poorer people to richer people, as it happens.
So the question arises: ‘Is GDP the best measure of human prosperity?’ to which any A level economics student should be capable of answering: ‘no, of course not’.
Why not? Well, the UK’s GDP dwarfs that of Kazakhstan,but you can buy yourself a tidy apartment in Almaty for $40,000, I have been reliably informed by a denizen of that part of the world. You couldn’t buy a shoebox in London for under $100,000, so if all that increased GDP does is increase the prices of everything, then GDP has done precisely zero for the people here.
So the move to a definition of prosperity being ‘purchasing power’, in other words, what does a given salary allow you to buy? In this case, everyone tends to look at the median and never questions the spread. What you have in the UK right now is an obscenely rich top rump, who control everything so that they get richer, when none of them need any more richers. You have a middle class, currently getting hollowed out, that has traditionally kept its mouth shut in return for a nice house, a good job and some false sense of status. And you have everyone else, increasing numbers of whom are using food banks.
You have obscene rental values on homes, meaning that the majority are in effect living to work, not working to live. You have energy prices going through the roof, along with food prices, so that the majority for whom that is a significant percentage of their outgoings are going to really suffer this winter. And you have the multimillionaires laughing their heads off because they could spend 10 times as much on those things and it still be insignificant to them. They care about the costs of executive jets, third properties in St Moritz etc. They let the servants worry about the cost of food.
Bottom line is: the ‘figures’ are designed by the rich to make out like everyone is doing better.
Reality is observed by the majority, who see each week where their money is going to.
The era of bankers is about to end and they will be put firmly away for generations.
It won’t be pretty, but it’s the inevitable outcome of those with mental health problems claiming that they are normal…..
It is magnificent that some people still believe that “redistribution” is possible in today’s world!
Interesting article. Thanks for sharing this.
The entire premise of this article is flawed. (“Survival is more important than growth.”) If you don’t grow economically you won’t survive. Truss brought the best chance for booming UK economics but apparently the people didn’t recognize what they had. If only she had been strong enough to withstand the onslaught.