I agree completely. I did a degree in economics in 1961 when Keynesian economics was at its height and the country was slowly recovering from WW2. When I worked in the City the number of bomb sites being built on was a constant source of inspiration with spy holes in the protection boarding to enable the curious to see what was going on. Then along came Thatcher with Friedman money restrictions and 40% of our industrial output was bankrupted in three years. That we had a financial crisis within a decade was inevitable. I was working for Tesco during the 1980’s when the management decided to employ 500 computer staff, of whom I was one. When I started there was one mainframe computer and, in an office of 100 personnel, six test terminals with a 30 minute session for testing new developments every day. In six years of intensive investment we had three mainframes and every one of us had a terminal on their desk with test slots part of the programme of one of the mainframes. That Tesco is the leading retailer in the UK should not surprise anyone. That the margin on sales went from 1 penny in a £1 to first 2 pence and the up to the current level where staff bonuses amazed even me.
Regarding investment, both private and governmental, the problem is, as always, profitability. HS2 and the Lower Thames Crossing are just two examples of what happens when private enterprise is using public funds. The ability of private enterprise to believe that the public purse is inexhaustible is a national scandal. However the redevelopment of the A14 cross country highway is a marvel of experience by road builders. A journey to visit relatives in Coventry used to take hours longer than it currently does, with half hours taken to get across major intersections like the M1. If it was raining the entire traffic column slowed to 10 miles an hour.
It is difficult to advise people at the front of a £3 trillion sized economy on how to improve both private and public investment but surely others, say the Manchester Mayor, who has achieved 3.1% growth in the past 10 years, must provide some example to those who appear to be unable to better 1%. Time for a change at the top.
While most of what I know about Keynes was gleaned from Lord Skidelsky's three-volume biography, which I read last year and enjoyed more than most biographies I have encountered, I do seem to recall that his most famous prescription was for the government to spend more in times of recession and less in times of prosperity. The second half seems to have been forgotten, either because governments never like to spend less, or because Britain has seen so few times of prosperity.
I am a great admirer of Keynes, and regret the travesty of some of his views that goes by the name of "neo-Keynesianism". Bertrand Russell (later Lord Russell) declared that:
"Keynes's intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool. I was sometimes inclined to feel that so much cleverness must be incompatible with depth, but I do not think that this feeling was justified".
- Bertrand Russell, (Autobiography Ch. 3 : Cambridge, p. 69)
Almost everything Keynes said seems freighted with meaning and valuable lessons. Not least today,
"The blockade of Russia, lately proclaimed by the Allies, is therefore a foolish and short-sighted proceeding; we are blockading not so much Russia as ourselves... The more successful we are in snapping economic relations between Germany and Russia, the more we shall depress the level of our own economic standards and increase the gravity of our own domestic problems".
- John Maynard Keynes (Economic Consequences of the Peace, Chapter VII)
Excellent quote on Russia. The idea of sanctions came out of wartime blockades.The effect of sanctioning Russia is to make us poorer -mainly, but not only, by raising the price of energy.
The problems Lord Skidelsky speaks of are - to my mind - much deeper than just one budget.
I have lived and worked in Western European countries for much of my life, and found that doing business was a lot easier than it would have been in the UK.
The reasons are quite simple: European workers are paid more than they would be in the UK, have substantially more rights and as importantly, access to housing - both council and commercial - that is affordable. This means that their disposable income is substantially more than someone living in the UK.
I want to add that a friend of mine has just closed his business in a dilapidated part of Newcastle. He was facing another increase in rent - high enough to compete with central Paris - but with the added luxuries of a leaking roof and rats. For him, it was the last straw. I once spoke to him and wondered what he would think if he had to pay the kind of rent that would be expected in Leipzig... but for a property that was adequately maintained. The look in his eyes told me all I needed to know.
Leipzig is a city that is analogous to Newcastle in many ways.
I have been told that affordable rented accommodation in England is so hard to find that tenants do not dare to ask for leaking roofs, broken appliances, and the like to be mended as the landlords hold the whip hand and are likely to reply, "Find a better place - if you can".
That is certainly not unknown, and the prices are very high, even in dump areas such as the one I live in. (I will add that the characters who live there make it worth my while, they are wonderful people.)
It is a great shame that the British government will not do the job it is paid to do!!
It seems to me that, once they are paid - and generously - they feel that they need do no more. Not content with contributing nothing, however, they persist in doing harm.
Keynes would have dealt with capital inflows. Britain’s problem is that it’s absorbing surplus capital without any exports to show for it. We are the world’s offshore central bank & our currency has been staked as collateral. We must also recognise that moral hazard drives capital into financial markets (fast, frothy, exponential returns) rather than slow, boring domestic investment. You can call it liquidity preference if you like but it is far more simple than that. If a pension fund has the choice of doubling on tech stocks or putting their money into some half baked, private equity controlled infrastructure projects with an uncertain 20 year payback, what do you think they’ll choose? Or let’s put it another way - which fund manager wants to stand up & say: we’re going to put some money into the last manufacturing firm in Britain that is unprofitable (currency too high, labour too expensive) low productivity (lacks skills / broad based technical knowhow, logistics costs way too high) & you may get paid back in 20 years if it direct collapse with the Gov having to pay out the pension fund. We need to stop absorbing surplus global capital, stop backstopping financial markets & split up the banks befire the coming crash.
Excellent speech. Keynes here drew upon all the classical economists that investment in production leads to new efficiencies; financialization extracts rents that transfer wealth to ownership classes without broader economic benefit.
I agree completely. I did a degree in economics in 1961 when Keynesian economics was at its height and the country was slowly recovering from WW2. When I worked in the City the number of bomb sites being built on was a constant source of inspiration with spy holes in the protection boarding to enable the curious to see what was going on. Then along came Thatcher with Friedman money restrictions and 40% of our industrial output was bankrupted in three years. That we had a financial crisis within a decade was inevitable. I was working for Tesco during the 1980’s when the management decided to employ 500 computer staff, of whom I was one. When I started there was one mainframe computer and, in an office of 100 personnel, six test terminals with a 30 minute session for testing new developments every day. In six years of intensive investment we had three mainframes and every one of us had a terminal on their desk with test slots part of the programme of one of the mainframes. That Tesco is the leading retailer in the UK should not surprise anyone. That the margin on sales went from 1 penny in a £1 to first 2 pence and the up to the current level where staff bonuses amazed even me.
Regarding investment, both private and governmental, the problem is, as always, profitability. HS2 and the Lower Thames Crossing are just two examples of what happens when private enterprise is using public funds. The ability of private enterprise to believe that the public purse is inexhaustible is a national scandal. However the redevelopment of the A14 cross country highway is a marvel of experience by road builders. A journey to visit relatives in Coventry used to take hours longer than it currently does, with half hours taken to get across major intersections like the M1. If it was raining the entire traffic column slowed to 10 miles an hour.
It is difficult to advise people at the front of a £3 trillion sized economy on how to improve both private and public investment but surely others, say the Manchester Mayor, who has achieved 3.1% growth in the past 10 years, must provide some example to those who appear to be unable to better 1%. Time for a change at the top.
While most of what I know about Keynes was gleaned from Lord Skidelsky's three-volume biography, which I read last year and enjoyed more than most biographies I have encountered, I do seem to recall that his most famous prescription was for the government to spend more in times of recession and less in times of prosperity. The second half seems to have been forgotten, either because governments never like to spend less, or because Britain has seen so few times of prosperity.
I am a great admirer of Keynes, and regret the travesty of some of his views that goes by the name of "neo-Keynesianism". Bertrand Russell (later Lord Russell) declared that:
"Keynes's intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool. I was sometimes inclined to feel that so much cleverness must be incompatible with depth, but I do not think that this feeling was justified".
- Bertrand Russell, (Autobiography Ch. 3 : Cambridge, p. 69)
Almost everything Keynes said seems freighted with meaning and valuable lessons. Not least today,
"The blockade of Russia, lately proclaimed by the Allies, is therefore a foolish and short-sighted proceeding; we are blockading not so much Russia as ourselves... The more successful we are in snapping economic relations between Germany and Russia, the more we shall depress the level of our own economic standards and increase the gravity of our own domestic problems".
- John Maynard Keynes (Economic Consequences of the Peace, Chapter VII)
Excellent quote on Russia. The idea of sanctions came out of wartime blockades.The effect of sanctioning Russia is to make us poorer -mainly, but not only, by raising the price of energy.
The problems Lord Skidelsky speaks of are - to my mind - much deeper than just one budget.
I have lived and worked in Western European countries for much of my life, and found that doing business was a lot easier than it would have been in the UK.
The reasons are quite simple: European workers are paid more than they would be in the UK, have substantially more rights and as importantly, access to housing - both council and commercial - that is affordable. This means that their disposable income is substantially more than someone living in the UK.
I want to add that a friend of mine has just closed his business in a dilapidated part of Newcastle. He was facing another increase in rent - high enough to compete with central Paris - but with the added luxuries of a leaking roof and rats. For him, it was the last straw. I once spoke to him and wondered what he would think if he had to pay the kind of rent that would be expected in Leipzig... but for a property that was adequately maintained. The look in his eyes told me all I needed to know.
Leipzig is a city that is analogous to Newcastle in many ways.
I have been told that affordable rented accommodation in England is so hard to find that tenants do not dare to ask for leaking roofs, broken appliances, and the like to be mended as the landlords hold the whip hand and are likely to reply, "Find a better place - if you can".
That is certainly not unknown, and the prices are very high, even in dump areas such as the one I live in. (I will add that the characters who live there make it worth my while, they are wonderful people.)
It is a great shame that the British government will not do the job it is paid to do!!
It seems to me that, once they are paid - and generously - they feel that they need do no more. Not content with contributing nothing, however, they persist in doing harm.
That is a very real problem in a country that lacks even the most vestigial form of democracy - and accountability.
Keynes would have dealt with capital inflows. Britain’s problem is that it’s absorbing surplus capital without any exports to show for it. We are the world’s offshore central bank & our currency has been staked as collateral. We must also recognise that moral hazard drives capital into financial markets (fast, frothy, exponential returns) rather than slow, boring domestic investment. You can call it liquidity preference if you like but it is far more simple than that. If a pension fund has the choice of doubling on tech stocks or putting their money into some half baked, private equity controlled infrastructure projects with an uncertain 20 year payback, what do you think they’ll choose? Or let’s put it another way - which fund manager wants to stand up & say: we’re going to put some money into the last manufacturing firm in Britain that is unprofitable (currency too high, labour too expensive) low productivity (lacks skills / broad based technical knowhow, logistics costs way too high) & you may get paid back in 20 years if it direct collapse with the Gov having to pay out the pension fund. We need to stop absorbing surplus global capital, stop backstopping financial markets & split up the banks befire the coming crash.
Excellent speech. Keynes here drew upon all the classical economists that investment in production leads to new efficiencies; financialization extracts rents that transfer wealth to ownership classes without broader economic benefit.