Why are there no alternatives?

It’s a part of today's financial crisis that doesn’t seem to compare easily when the analysts talk about the similarities with the 1930’s and that is why there hasn’t been a credible alternative narrative emerging to replace what we have now. as happened after the Depression. It could just be a time lag after all Keynes groundbreaking economic theory at the time wasn’t published until 7 years after the crash of 1929 or it could be that the consequences haven’t really started to affect us all in a major way yet.

So apart from the time lag the best offering to date as to why nothing is emerging I have read is from Newsnight’s Business Editor Paul Mason in lengthy blog post, he writes

'It think this comes down to three things.

First, technology. We might moan about the collapse of representative democracy but we do live in an age of networked communications: that is, the old model of information flowing from the centre outwards is dead.

Just as the story of Tolkien's Lord of the Rings becomes impossible if you give Frodo a cellphone, so many of the great political impositions of the 20th Century would have been impossible with networked comms. That's why the Chinese and North Korean governments are so hostile to the internet and SMS. Unpopular policies have become quite difficult to impose: you have to manufacture consent and you have to control the information flow.

Second, the demise of deference. The populations of the West are not greatly content even with central banks printing money, slashing interest rates and governments handing out large dollops of cash to keep unspectacular small firms afloat. Any attempt to do what the red flag man anticipated - that is to foist pay cuts, job losses, givebacks of work conditions etc over a short period of time - would have provoked resistance. The one country where it became unavoidable - Latvia - went from Swedish-style apathy to violent rioting within weeks and was only stabilised by external intervention.

Third, there is this sense that - even if something was deeply wrong within the financial system - the real-world economy was not broken and did not need fixing with a dose of Depression. Those who remember the 1980s will know that the pro-cyclical (ie crisis worsening) measures adopted by governments were rationalised by the need to drive out inefficient businesses and archaic labour practices: Fleet Street printers, legendarily clocking on with the assumed name of Mickey Mouse to draw an extra salary, with the connivance of managers; British Leyland shop stewards who could bring the entire factory to a standstill by ringing a bell etc.

There is no sense now that the real-world economy is beset by labour strife or inefficiency, and that has been a major factor conditioning the response of those in power. However it is beset by debt and we are probably kidding ourselves that there is not a deep malaise out there in a world where cappucino cafes rise while real wages fall.

The result of all this, one year on, is an ideological hiatus. Free-market capitalism did not behave as its red flag waving critics thought it would. Indeed, it did not even behave in a way its supporters assumed it would. It found - pun intended - a "third way".

Adam’s Off to America

Its seems that Labour are not the only Welsh party looking to the future as Plaid Cymru’s Adam Price today announced he is not standing at the next General Election, the only real surprise is the timing of his announcement after his well received speech last week to Plaid Cymru’s conference in Llandudno because he has always said he wants to be in Cardiff Bay, I guess it’s good to out on a high.

According to the press reports Adam has confirmed he is will be seeking election to the National Assembly in 2011, so he’s only leaving frontline politics for a year in which he is will study in America on a Fullbright Award in Public Policy and Economic Development.

With his departure two things come to mind first will Plaid Cymru hold on to Carmarthen East & Dinefwr and if so who gets the seat and is this, the opening short for a possible leadership challenge? I guess we wont know immediately but Ieuan Wyn Jones must feel a mixture of short term relief and longer term anxiety following today’s revelations.

It looks like after a dull few years that Welsh politics might start to get interesting again with a new Labour leader on the way and changes in Plaid Cymru teams in Westminster and Assembly

Official Government Response to Calman Due, What about Holtham?

Normally statements following meetings between the UK Government and the Devolved Administrations are pretty routine affairs full of political speak that don’t say much and the latest statement from the Joint Ministerial Committee was much the same, but there is one interesting bit

‘It was noted that the Secretary of State for Scotland stated that HM Government would publish a formal response to the Calman Commission report before the end of 2009.’

No big deal you’d think but the report recommended borrowing powers to add to the tax vary powers the Scottish Parliament among other things and despite ignoring and dismissing it when it was published its seems Labour’s Secretary of State for Scotland Jim Murphy has convinced his colleagues to issue an official reply. Even if the report's recommendations are dumped which many analysts predict, the fact the Government is bothering to reply at all is significant.

It raises the question about whether or not it will happen with regards Wales’s Holtham Report on Finance, is Welsh Secretary Peter Hain lobbying for an Official Response by the Government by the end of the year to Wales’s equally important report on how the National Assembly for Wales is funded the first part was published in July and made recommendations to change to a needs based formula. If he isn't then we need to know why?

Unemployment and Social Mobility

Today’s unemployment figures show a sharp increase of 7,000 to 116,000 (8.1% of the workforce) in Wales after two months of decreases and shows how fragile any recovery still is, but i want to look at one factor not often mentioned in the effects of unemployment but still has a big impact in the short, medium and long term on those effected and that is the lack of social mobility it creates and entrenches.

A new survey conducted in July this year by the Sutton Trust into the public’s attitudes to Social Mobility found that three quarters believe the recession will limit chances for upward mobility. Only 43% of people agreed that opportunities for social mobility are ‘about right’, compared to 50% last year, while 38% now believe it is ‘too low’.

The results also show a big drop in just a year on people believing that in the UK we all have equal opportunities to get ahead, just 38% of the British public think that compared to 53% in 2008 and not surprisingly seventy per cent now believe that parents’ income plays too big a part in children’s life chances.

Sir Peter Lampl, chairman of the Sutton Trust, said: ‘The economic recession has made people more gloomy about their chances of rising up the social ladder, which, sadly confirms academic evidence that levels of mobility in the UK are lower than in many other advanced countries.’

This survey comes on top of research commissioned by the Sutton Trust and carried out by the London School of Economics published in June proving that the UK is the least upwardly mobile country compared to the USA, Canada and eight other European Countries and the two main factors for this were firstly that the better off have benefited disproportionately from increased educational opportunity and secondly the strength of the relationship between educational attainment and family income, especially for access to higher education are at the heart of Britain's low mobility culture.

Here in Wales even by objective measures our educational standards and opportunities for long terms careers were not good before the recession and this latest research although UK wide shows the scale of the task WAG still has ahead to improve education and job opportunities for the Welsh workforce in the coming months and years.

Whistling in the Wind

So a year on from the collapse Lehman Brothers Investment Bank, its seems little has changed in the world of global finance whatever the political leaders in the UK, USA and Europe have said since.

According to the New York Times hardly a left leaning newspaper writing this week ‘One year after the collapse of Lehman Brothers, the surprise is not how much has changed in the financial industry, but how little.

Backstopped by huge federal guarantees, the biggest banks have restructured only around the edges. Employment in the industry has fallen just 8 percent since last September. Only a handful of big hedge funds have closed. Pay is already returning to precrash levels, topped by the 30,000 employees of Goldman Sachs who are on track to earn an average of $700,000 this year. Nor are major pay cuts likely, according to a report last week from J P Morgan Securities. Executives at most big banks have kept their jobs. Financial stocks have soared since their winter lows.'

And on Bonuses ‘Despite the predictions last year about pay cuts, those bonuses appear secure. Kian Abouhossein, an analyst at J.P. Morgan in London, predicted this week that eight major American and European banks would pay the 141,000 employees in their investment banking units $77 billion in 2011 — about $543,000 per worker, not far from the 2007 peak — even after minor regulatory changes are adopted.

Because the rewards are so rich, the banks will not change unless regulators and lawmakers force them, Mr. Taleb said.'

“I don’t know anyone on Wall Street who goes to work every day thinking of anything but how to increase their bonus,” he said.’


Its seems 12 months on the talk of banks being too big to fail has fallen on deaf years in Wall Street and the City of London and bonuses continue to drive those who work there, more worryingly for the UK the crisis has further highlighted the reliance of the UK economy on finance and proves that meaningful reform is unlikely after all if the UK didn't have finance what would the UK do instead, i doubt the politicians or their advisers know the answer to that.

Up to 30% cuts in Departmental Spending Possible

There will budget cuts and tax rises after the next election for sure and there is consensus emerging between the political class and the public to reign in some of the Government’s excess over the past 12 years. Peter Oborne yesterday claimed ‘the truth is that (George) Osborne will be forced to implement swingeing cuts after the election. Indeed, I can reveal he has ordered the Treasury's permanent secretary, Nick Macpherson, to find savings of nearly 30 per cent in departmental budgets which would come into effect immediately if the Tories gain power’.

If that is the case has WAG and the Civil service prepared a plan of action for the impact of a possible 30% budget cuts across the Welsh public sector especially when over a third of the workforce is employed within it.

In the last week both myself and Lee Waters have written about the need for fresh thinking on public service delivery and the lack of engagement in this problem by Welsh politician to date. It remains to be seen if our politicians are up to the task of truly innovating in public service delivery, as well as re-balancing the Assembly’s budget and strengthening the private sector in Wales to take some of the strain of job losses. It’s a big task with much reward for those willing to take the risks and no party can say they haven’t been warned in advance.

What comes next?

Reading an Our Kingdom post a few days ago about Scotland on what ideas and forces might shape the future, I came across the following section below which to my mind could equally apply to us in Wales and reflects what our politicians of all stripes are still trying to define as an their parties authentic message.

‘What are the radical ideas which come after socialism and labourism in a land shaped in their image? Will they come from the nationalist tradition as it gains more confidence and diversity and embraces a movement for wider self-determination? Or will it come from a mix of green and community empowerment ideas which opposes the vested interests of the big state and corporate power?'