The Japanese, German, French and Hong Kong economies are now coming out of recession. This leaves all eyes on the original core of the economic crisis - the Wall Street/London axis - and, of course, on the effects on the global economy of any wild card collapses like the Ukraine or perhaps Russia.
'Ave a Cup of Tea, Dearie'
The consensus amongst the British establishment is no longer grim so much as dogged. Things may be tough for some time to come, but (so it is believed) capitalism will not collapse, adjustments will be made and things will right themselves in due course.
James Buchan in Prospect Magazine asked last month whether Britain was bust. The conclusion was that we would 'muddle through'. "Ave a cup of tea, dearie". Dunkirk spirit.
There is certainly something very British about our grumpy belief that our Government is like the British weather - changeable, unpredictable, subject to some sort of 'hurricane' very very occasionally but basically dull, stable and gloomy, something to be endured.
Market Tolerance
The markets appear to have worked out that the Government has to continue to over-spend for political reasons until the election takes place, but that, once the need to be nice to the electorate is over, it will err on the side of the international investor over the demands of its people.
This helps to explain the tolerance of the market for the oodles of debt being offered to the market. Of course, the UK economy is one of the world's largest. It is also politically stable by global standards with a strong state and a stubborn and large anti-socialist middle class.
In short, the UK is a very good bet for repayment and for eventual fiscal stability. The market believes that the British state is so strong that it can enforce almost anything that is required on its people without threat to itself. It is probably correct in this assessment.
Nothing Is Certain In Politics
We have elsewhere suggested that the British political structure comprises a newly dominant Tory Party with three parties vying for the party of opposition - the troubled New Labour Party, the weak Liberal Democrats and the rising UKIP (at least in the South).
But the assumption that New Labour might not win a majority in the House of Commons may be false. The Tory Party is as tainted by scandal as its main rivals. As Cameron moves to the centre-ground, he alienates his 'tribesmen' who may be inclined to dabble in UKIP's waters.
The Tory Front Bench attack on Tory Daniel Hannan, MEP, over his Fox News remarks on the NHS may appeal to the mass of British voters but an attack on Hannan is also a coded attack on the eurosceptic right within the Party.
Libertarian Dissent
There is a complex of dissident values here - euroscepticism, a demand for tax cuts and a call for cuts in 'waste' in public services. Hannan's comments on the NHS open up the irritation amongst some of the libertarian Southern middle class at the remnants of the old social democratic consensus.
The markets will demand that the 'Keynesian' explosion of expenditures (as much political as economic) be reined back by whoever is in Government next year. Given this requirement, the parties only differ on the balance of spending cuts and tax rises.
The Conservative High Command is trying to ring-fence the health and education sectors for political reasons (though it keeps adding departments as different constituencies moan that they are being left out). Now it finds that it has its own Fifth Column.
Tweedledum and Tweedledee
But all the major parties are now just squabbling over the type of pain to be inflicted on the population and who will be most victimised.
What would a Government of 'national interest' rather than one of party advantage being doing now? Almost certainly, despite the Keynesian claims, it would be beginning to cut public expenditures that do not relate directly to current or future economic growth and innovation.
Each week that passes without some recognition of the scale of the crisis burdens future generations that are wholly innocent of the greed and stupidity of their elders.
Community and Market
Similarly, no major party (with the partial exception of the Liberal Democrats) has grasped the nettle that the crisis arose from permitting a market system to follow its instincts without any community intervention.
In the struggle between community and market, the State, as representative of the community interest, has moved in thirty years from being the sclerotic social democratic assassin of innovation to the other extreme - a mere player in a game whose rules are being set elsewhere.
Even now, there is no sign that Government of any stripe has any understanding that the State, even if it is a State that fully supports liberal economics, is not just a player but the player. In the absence of world government and a weakening US hegemon, it must set the rules so that it can always win.
A Bit of Political Philosophy
This begs the question of what the State is and what it is for. The institutionalist view is that the State is an interest separate from the community it notionally serves. History tends to confirm the truth of this proposition.
Conservative opinion is understandably nervous that any attempt by the State to set the rules for the economy is tantamount if not to socialism then to corporatism and rule by special interests. This is the libertarian driver for the Tory Right's concern to cut taxes and weaken the State.
It is a point of view that bringsthe Tory Right into alignment with the US Republican Right - and with Fox News. Without a strong alternative - that state and community are fully aligned in practice - this emphasis on individual freedom becomes increasingly attractive to many angry citizens.
The Alternative Tradition
There is another radical tradition, historically of the Left, which identifies the interest of the community with the State.
Conservative opinion is rightly nervous here because, since the foundation of the Labour Party, this has meant, in practice, a strong state directed first at socialism and, latterly, at support for the special interests that sustain the clique at the top of the main Party of the Left.
However, there is no need for an identification of the State with the community to mean the domination of the community by the State - in practice, the domination of the population by whichever clique captures the party that captures the State.
A Jeffersonian Alternative
An alternative might be the radical recasting of the political system so that the State becomes the servant of the people, decentralised and much closer to the model of Thomas Jefferson. There is no voice for this model at the heart of British politics, although the Liberal Democrats come closest.
Given the lack of the political classes' support for any radical recasting of the political system (despite the growing evidence that increasing numbers in the wider population are inclined to 'revolution'), the mainstream parties are repeatedly trapped into making the existing system work.
But what would a Jeffersonian model look like? Well, we use Jefferson loosely here. The UK is an advanced service economy with exploited migrants, not an agrarian economy based on slavery. Similarly, the Enlightenment would scarcely stand up to the intellectual scrutiny that it would receive nowadays.
Spending Cuts
But we can adapt to the general principle by which the State is merely a tool of the community and has no desire to expand except that it be in the interests of the community. The community will make its own assessment of its needs through democratic means without the intrusion of special interests.
The honest position is that we have all got drunk at the party and have been presented with the bill. This bill must now be paid but those who drank the most should pay it. Revellers should not scarper and leave the bill to be paid by servants.
Public spending must be cut but the cuts must be, and be seen to be, at the expense of the State structure and of the special interests who benefited most, generationally and sectionally, from the revelry.
The Banking System
The UK has made itself highly vulnerable to the global economy by allowing mega-financial institutions to dominate its economic policy-making. There is a role in servicing such global institutions but the national banking system and the global banking system need separating out from each other.
Regional and community banks and stock markets need support and to be discouraged from becoming sucked into the global market in the way that the Landesbanken in Germany and the Icelandic banks have done. This means a far more active engagement by Government in regulating the banking sector.
The aims must be to restore the capital base of the banking sector as a prerequisite for stable lending and increased transparency in banking business. This will not nationalise banks but will demand the same sort of standards that we might require in food quality, consumer rights or travel safety.
Social Capitalism
The one concession to post-Jeffersonian socialism is that, when Government takes tax revenue, the bias in expenditure must be less towards immediate consumption (employment and general services) and increasingly towards investment in the infrastructure for innovation and growth.
New Labour's model appeared to be to pump money into people's pockets so that economic growth could be fuelled by demand for goods and services. An alternative is to create the infrastructure for economic prosperity through investment and education.
To be fair, Gordon Brown eventually changed his tune with plans for investment in energy and, latterly, transport infrastructure - and one of the few successes of this government has been investment in parts of vocational education - but all this is still relatively late in the day and still limited in scope.
The Bonus Culture
While not fully accepting the po-faced earnestness of Compass in its plans for a High Pay Commission (since innovation and success deserve high rewards), there must be a link between pay and long term success that recognises that short term bonuses are not the way to run an economy.
The short term bonus distorts the market and fails to build up long term national capital. There can be no objection to regulation of such tools so that they can become linked to real long term measures of wealth creation.
This author can certainly see no objection to progressive retrospective taxation of recent bonus income in the light of the crisis if ever we get to the point where unemployment is sustained at 3m for more than a year and there are massive cuts in public services.
A Jeffersonian Programme
So, there we have it ... a Jeffersonian programme of sorts ...
- The State given to the community and taken away from special interests.
- 'Fair' public spending cuts.
- A partial withdrawal of the national economy from the global system in order to stabilise it.
- A shift of expenditures from support for consumption to investment in economic infrastructure and innovation [the 'new deal' model].
- Government intervention to assist the bottom 15% and to restrain the top 15% without intervening in the liberties and independence of the 70% inbetween.
Bodging It
Does any current political party come close to this sort of moderate national programme? The current political class is, as Buchan has suggested, muddling through.
All parties are still committed to an economic model that dominated the period from the 1980s to the credit crunch. None have a sense of a nation that is greater than the sum of its individuals.
It is a recipe for long term decline as a succession of political oligopolists bodge their way through social order problems, spending cuts and economic distress.
For all the communitarian talk of Brown and Cameron, neither has presented a workable model for the command of the State by the people nor for the just sharing of the pain in the coming years of austerity.
Either we give up on the interventionist State altogether and take the libertarian route of the Tory Right and of UKIP or we develop some sort of communitarian democratic model, tantamount to a revolution from below.
This author suspects that we will be muddling through for decades to come.
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