‘Oh Jeremy Corbyn’ has spoken and it doesn’t sound good for those of us who believe in free markets. Fluent for him, with some witty lines, he took apart capitalism at his Party Conference claiming our economic system is broken.

Indeed, there was a flurry of economic initiatives throughout Labour’s time in Liverpool and, uncomfortably, it reminded me of the 2017 General Election campaign. However impractical, sharply defined policies sounding superficially good were showcased, making the Tories, drowning in Brexit, appear flat footed. Umm…Ground Hog Day…

And those policy initiatives will resonate with many of the electorate. Taxes on the rich, massive increases in public spending, hundreds of thousands of ‘green’ jobs, extended childcare, workers on boards, wholesale nationalisation of utilities and a scheme to hand out 10% of the shares of big companies to workers. These policies could really fly and a Labour Government is not nearly as improbable as it should sound. The only firewall is a few DUP MPs keeping the Tories afloat. It all feels a bit precarious.

Of course the shear incompetence of the Labour front bench, the fact that nationalisation doesn’t work despite the failings of some privatisation structures, massive debts which will ultimately be paid for by the ordinary public, all mean many of these policies would be disastrous.

The first problem of course is that many voters don’t remember the chaos of a left-wing Labour Government. The second problem is more intractable; capitalism globally has failed in several respects over the past decade and is losing popular support.

A brilliant article by Martin Wolf in Wednesday’s FT summed it all up incisively. Inequality is rising across the West, driven by quantitative easing and inflated asset prices. Austerity is being borne by the poorest, global corporations avoid tax due to tax structures rarely crossing borders and excessive market liberalism, which caused the 2008 financial crash in the first place, has fuelled migration causing enormous tensions and the rise of populism.

Capitalism should be reformed and in the UK I would rather that was undertaken by the Right rather than the likes of Corbyn.

So what needs to change? As Wolf says, those who govern us should ‘promote a little less liberalism, show a little more respect for the ties binding citizens to one another and pay more tax’. Only in this way can we keep politics close to the centre ground and protect the social liberalism and democratic values that we take for granted.

There needs to be negotiations on comprehensive global tax structures. At home, subsidies favouring the rich such as higher rate tax relief on pension contributions need to end.  The obsession of cutting corporation tax has also run out of control. Planned further cuts should be frozen and companies also need to reform excessive remuneration structures. It is perfectly fair to reconsider reforming NI contributions for the self-employed too so that they are treated equally with other workers. Then there has to be comprehensive social care reform and a commitment to infrastructure spending in the North.

As for immigration pressures, they should be managed but the solution is not Brexit. It is at least a pan-European issue and we are walking away from the table at the very moment our influence is needed.

If there is any bandwidth outside the Tories’ obsession with Brexit, they need a radical agenda to reform capitalism that most of us can buy into. Otherwise Corbyn will do it for them and not in a good way.

 

 

I am a Remainer. Always have been, always will be. But even I felt the urge to shout f**k off at the TV as I watched Donald Tusk give his statement that the Chequers solution for the UK’s departure had been wholly rejected by EU leaders at their summit in Salzburg. The language was blunt, Theresa May ambushed and dismissed. The attitude had arrogance written all over it.

The problem with those EU leaders driving an ever closer union is that they are out of touch with their electorates and certainly the Commission is out of touch with almost everyone. It has fuelled populism and provided an easy target for those advocating Brexit.

In treating Theresa May so badly, they continue to be blind to the consequences of their actions. It may fuel a rise in support for Brexit, and I suspect a rise in support for Theresa ‘the battler’ May. She came out fighting today and pictures of her isolated at the summit in a striking red jacket facing a gang of mostly white, bullying European male leaders will resonate with all sections of the British electorate. A People’s Vote should no longer be seen as a route back to EU membership. Well done Merkel and Macron…not.

However, the UK has always underestimated the strength of commitment of Germany and France to the EU as a political project. Our negotiators in advocating a Chequers solution which threatened this have made the same mistake again. A deal will probably still be done but don’t bank on it. Theresa May politically can’t budge from where she is and has thrown down the gauntlet to the EU. The EU will find it difficult to backtrack from here. There is either some brilliant acting going on or a ‘no deal’ is now a real possibility. Oh dear.

The obvious solution to this impasse is to join the European Free Trade Association a la Norway (see an earlier blog). This could be sold as stage 1 of a decisive break from the EU with an extended transition period leading to further escape routes from the EU’s embrace. Sounds like Michael Gove? Umm…what is this disastrous process turning us into…

The problem with this solution is that it crosses Theresa May’s foolish red lines and she would have to go. A General Election? Corbyn? None of these options are palatable to the Tories so for the time being we stay as we are. A ‘no deal’ is possible with really serious consequence for the EU as well as the UK and all because arrogant European leaders in Salzburg overplayed their hand.

It started with the collapse of Lehman and nearly finished with the end of capitalism as we know it. At the time it seemed every bank was about to go under and Alistair Darling, then the UK’s Chancellor of the Exchequer, made the staggering claim that we were 24 hours away from cash points running out of money to dispense.

Governments responded correctly in the end (even if they failed to regulate in advance) by pumping massive liquidity into the system to prop up the banks and keep the financial system afloat. Subsequent bureaucratic, but necessary, regulation followed; separating retail and investment banking, cleaning up balance sheets and raising capital ratios to name but a few initiatives.

So where are we now? Partly in a good place. The future of the global financial system has been secured (until the next time), asset prices have risen, steady global economic growth has been achieved and unemployment cut.

However, there are worrying consequences too and further lessons to be learnt. First, those consequences…

The massive quantitative easing (central banks buying bonds) has to be unwound and some estimates suggest the sums involved are in excess of $20 trillion. It has gone on too long with record low interest rates over a prolonged period causing pain for savers and worrying asset price bubbles. If a crisis were to occur tomorrow, a no-deal Brexit for example, there is no further fire power in central banks’ arsenal until policies are reversed.

Government debt has also soared, causing austerity measures that have acerbated the divide between rich and poor. All this sowing the seeds of the populist surge in politics we are seeing now.

The unfortunate consequences point to lessons still to be learnt. If capitalism is to succeed it needs to retain consensual support and that means implementing firm measures to encourage long termism in our financial system.

Disparity of wealth within companies needs to be tackled too. Executive pay amongst FTSE 100 CEO’s, for example, went up 11% last year to £3.93m whilst that of full-time workers rose 2%. The mean pay-out ratio between FTSE 100 bosses and their workers has been on a steadily rising trend, up from 128:1 to 145:1 in 2016/17 alone. Such inequality and the feelings of injustice that accompany them, have arguably led to Trump, Brexit and other challenging populist political consequences, all of which can be traced back to the events of 2008.

Here in the UK, policies across all arms of government are under review but so too is corporate governance, with a view to correcting key elements of short-termism and fairness in society. There is a massive opportunity for the City to play its activist part on a host of issues from executive pay to diversity issues and broader ESG initiatives, let alone helping to solve a growing savings and retirement crisis. No wonder the financial services industry is in the spotlight. How great it would be, Brexit allowing, if it takes the lead in learning the lessons of 2008..?

The clouds of global politics just seem to get darker. The partly understandable but appalling drift to populism across continents continues relentlessly.

Trump lashes out as he is trashed anonymously by a senior White House adviser who outlines the sheer awfulness of his presidency. We are protected apparently only by the actions of White House staffers who, with ‘quiet resistance’,  work around the president’s ‘amorality’. Yet his popularity amongst core supporters remains undiminished.

In Europe, the Far Right advance with riots in the German town of Chemnitz. They are present in the anarchy of Italian politics and are predicted to make major gains even in traditionally liberal Sweden. They run or part run governments in Poland, Hungary and Austria.

In the UK, Putin continues his thuggery with the now proven attempted assignation of Russian nationals by his gangster State, killing a vulnerable British woman in the process.

And there is Brexit… Here we are, watching with growing incredulity, contingency planning for the stockpiling of medicines and food in the event of a no-deal EU exit, advocated by many in the Tory Party. The only opposition to the government’s reckless actions is the Labour Party, hopelessly mired in self-inflicted anti-Semitism and hard left ideological disputes.

Wow. Not even a week has gone by since the summer break!

But no further comment on all this for now…. There is little new to say until further events unfold.

So let’s focus on an immensely solid and heart warming silver lining that has gone fairly unnoticed.

India’s Supreme Court has just ruled that a colonial-era law criminalising homosexual sex is unconstitutional. This is a huge victory for the LGBT community who have battled to have this law overturned for 20 plus years. It also unanimously confirmed that India’s LGBT community has a fundamental right to equality, dignity, self-expression and privacy. Even Modi’s conservative inclined government chose to sit on the side-lines as the rulings were announced, leaving it to the ‘court’s wisdom’. This in the knowledge that popular opinion was supportive of the judgements.

So a nation with a population of 1.4 billion, almost certain to be a future super power, takes a great step forward in embracing equality and social liberalism. There are silver linings and this is a major one. Worth celebrating amongst the gloom.