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Reversion to the extreme

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Stephanie Flanders | 12:19 UK time, Friday, 24 April 2009

Today's GDP figures confirm that this recession is already on a par with the downturn of the early 1980s, and quite possibly worse. Taken alongside the bad news on the public finances revealed in the Budget, this may go down as the week that defined Britain's political and economic choices for at least a decade.

Take the GDP numbers first. If this preliminary estimate is right, then the economy was 4.1% smaller at the end of March than it was 12 months earlier. That is worse than anything that happened in the early 1990s recession and equals the decline in the last quarter of 1980.

gdp growth

But the pace of the downturn - 3.5% down in the past six months alone - is actually worse than any equivalent period in the early 1980s. In fact, we haven't seen a decline this rapid since comparable records began in 1955, and probably not since the Great Depression.

This is a preliminary estimate, at an unusually difficult time. The estimates for growth in the production sector are based on data covering just the first two months of the year, and the basis for the service sector estimate is even patchier.

We know that several surveys in the past month or so have suggested that the pace of decline is slowing down. If that is true, this early estimate could be revised up, and the first quarter could mark the worst of the recession, as the CBI and others suggest.

But even if that were the case, we could still have many months of declining GDP to go. And there is nothing to stop the pace of the downturn from speeding back up.

The economy shrank by just 0.3% in the third quarter of 1980, after a 2.6% decline over the previous six months. Everyone thought that the worst was over, and it was. But the economy still shrank by another 1.7% in the two quarters after that.

To state the obvious, these figures make the government's forecast of negative growth of 3.5% in 2009 look very difficult to achieve. The borrowing figures already look set to be revised upwards yet again.

darling_ap_osborne_getty.jpgBut here's the funny thing - as the nation's economic options have shrunk this week, our political landscape seems to have opened up.

Call it "reversion to the extreme". When the economy was booming, it was common to point out how small the differences between the main parties had become.

The realm of the economically possible during that period now looks positively luxurious: our debt level was fairly low, and stable, and tax revenues were pouring in. But back then, the room for manoeuvre from a political standpoint was perceived to be very small.

Take the 2005 election. On the economy, the great dividing line between the parties back then came down to a difference in spending plans of just £12bn. Yes, you did read that right. The Conservatives planned to increase public spending by £12bn less than Labour over the three years after the election, whereas the Liberal Democrats planned to spend about £12bn more.

That seemed a small number even then. In the week when this year's borrowing figure alone was revised up by £57bn, it sounds like an elaborate practical joke.

There are now no good economic options available to a British chancellor. Indeed, with borrowing at this level, there aren't many options at all. Yet listen to the politicians and you would think the opposite.

Suddenly, Labour seems to think it can win support by taxing the rich, after more than 15 years when it was convinced that any such talk would scare voters away.

Likewise, the Conservatives, privately at least, think that the sense of crisis is such that they will be able to pose hard spending choices to the electorate which would have been unthinkable even one year ago.

There's a lot of this story still to play out, on the economy, the budget and everything else. But already the political economy of Britain has been turned on its head.

Comments

Page 1 of 3

  • Comment number 1.

    Steph, you are so wrong. You say there are now no good economic options available to a British chancellor. The fact, is he wont face the facts. As long as we give million and billions to private greedy firms to run our schools, exam markings, hospital paperworks, trains, and the rest, we the taxpayer will be milked like cow. Who on earth thought of giving millions of pounds private firms to make unemployed sign on. Its absurd. Chancellor can get rid of all this useless wastage of £5000,000,000 pounds a year and bring this runway train under control. Otherswise, we will not recover and Britain will be lose top 10 economic superpower status.

  • Comment number 2.

    New Labour was a buzzword with now substance. 'New Labour' managed some radical things: The first Blair term, a national minimum wage, signed up to the Social Chapter and did establish devolution.

    The only image I get from the Brown Government is no coherence, no order, no purpose, just the hope that if we throw a few things together, they'll all work out.

    That is the defining point of the Budget, it is a snapshot of this Labour Government as a whole.

    JM
    Spryka.com

  • Comment number 3.

    This was a budget for jobs and growth. The predictions for future growth are perfectly feasible. With the QE measures now kicking-in a mini-boom of sorts in the housing sector should create just enough of a feel-good-factor to get Gordon re-elected next year.

  • Comment number 4.

    I suppose, Stephanie, that all these PFI schemes, are part of the structural annual debt with which we are now saddled, as the Government are now contracted to pay off such schemes over the next 30 years or more, for no further improvement in services.

    All this talk of borrowing requirements in terms of GDP, are delightfully vague, as the Chancellor meant them to be. With GDP now on a steady downward curve, it makes our borrowing even more catastrophic.

    Messers Brown and Darling (first word not misspelled) would never run their personal or own business finances in this way. If the did, they would soon land up in a Debtors' Prison.

    To allow them to EXPERIMENT with the county's finances in the way they are doing, is nothing short of criminal.

  • Comment number 5.

    Could we please ask Mr. Darling what his forecast is for this year in the light of today's GDP figures.
    How could anyone have the nerve to stand up at Westminster and say we have a strong economy and in the next breath explain that because of the decline in the value of Sterling exports would be boosted.
    That leads to two questions:
    Isn't a weak currency a sign of a weak economy?
    Has anybody any ideas what we are going to export?

  • Comment number 6.

    Any comments yet from Drowning Street about this rebuttal to their fantasy figures?

    Darling must have been aware that these figures were about to be released, and brazenly stood up and still gave them out.

  • Comment number 7.

    Nice to see you still have a sense of humour, LordGreenShoots. I wonder which Government dept you come from?

    Anyhow, as is mentioned above, if debt will reach aboout 75-80% of GDP, and GDP is shrinking, then GB and AD plus the Treasury have dropped us, as a nation, right in smelly stuff and for many many years.

    For what? Political gain? The next election? If this isn't 'abuse of public office', then perhaps a new definition of the term is needed!

  • Comment number 8.

    I sympathise strongly with the feeling in #1 Kambar but the conslusion is wrong. The out-sourcing of public services to private companies is not increasing the cost of public services and a reversal of the process will not reduce costs. Outsourcing was a trick to allow the degradation of public services - reducing costs while claiming that quality would be maintained by 'competition' and/or 'the sort of investment and innovative practices not possible in the public sector.

    The real effect has been a squeeze on the income and status of the front-line service providers are the private managers squeeze costs so as to maximise profits within the constraints of the tight service contracts agreed by Government/local authorities.

    Government comes away smelling of roses ("We're fighting to keep spending down") the private companies carry the can for poorer services - and the public who receive the service get short changed.

    Time was that there was a "public service" ethos which attributed something more than economic vaue to these services and something more than financial status to bthe providers. This was lost years ago. I recall someone working in the social services saying to me (many years ago) "It's a job not a crusade". I know what she meant - but once everything is defined in purely pecuniary terms them something of far greater value is lost.

  • Comment number 9.

    What a shame the election is at most 14mths away. Labour can cook the figures for that long and land us all with the bill on someone elses watch. The figures are mind boggling and that only refers to the ones we know about.
    There is a lot more that Darling could have done. There is a real army of consultants and quangos that are highly expensive and frankly unneccessary right now, so it would save a small fortune to clean up there. We would all be saved the irritation of having to listen to the 'speakababble' they pump out and get back to plain english that we all understand.

    Few jounalists had their their fingers on the pulse and saw any of this and swam along with all those who told us how good it all was, so truely I have little regard for the forcasts that are in the main right now.

    There is no measure for any of it, this is certainly unprecedented. We had cheap, readily available credit and a government that encouraged borrowing. There were a few journalists and (M King) that warned about the consequences but they were drowned out by the mass media who did not challenge the government about the route they were taking.

    The figures will certainly be revised and it is a brave prediction that we are past the worst. The real problem is we have no nest egg to fall back on and act as a buffer and help with the mending of the economy. We import a lage amount of our food which we buy with our devalued £. We are still puting another 5% of our farming into set aside, unlike our European partners. No joined up thinking, but then Labour are THE KNOW NOTHING PARTY.

  • Comment number 10.

    Alistair Darling is a loony bin that has put us all in danger if he thinks this will get better by next year. What we're seeing now is just the beginning of this 'recession' and is the result of all that debt and excess of the past ten years catching up. We've seen a lot of institutions borrowing money and then lending that money to others, and so on, and that cycle hasn't even begin to catch up with us yet.

    What should have happened was that the banks should have been nationalised months ago so we weren't just borrowing money to pur down the drain and government spending should have been slashed then.

    Oh, and just remember that we have other debts. Lots of those Public Private Partnerships where we pay a company to build something, we pay for the upkeep and then we buy back over thirty years will be kicking in at just the time that our borrowing repayments will kick in. We're in trouble, and I don't think anyone is pointing out just how much of it we're in.

  • Comment number 11.

    There's another story to be written here about the end of the New Labour project. New Labour were supposed to be about demonstrating economic competence. That has been blown out of the water. New Labour was also about using the benefits of economic growth to enhance public services. Now there's no economic growth and huge cuts in public spending are on their way.

    1,000,000,000,000 pounds. Next year's national debt. Scary.

  • Comment number 12.

    Good lord. Given that this "downturn" will be turning down for the next 10 years or so, how long will we have to keep talking about it?

    As for the other comments, this has nothing to do with the UK or party politics. This downturn is a catastrophic global economic breakdown. In the current frameworks, for the foreseeable future, there is no hope, nothing positive.

    The only way out is investment in cost-reducing technologies, which should open the doors to a rapid transition to completely alternative energy and transport infrastructure. This will give people hope and a new vision of hope and optimism should emerge based on technological advance.

  • Comment number 13.

    Why is it we allow this idiot Brown to get away with taking any responsibility for the glaring errors of fiscal judgement he has made over the last decade. Poor old Darling was given the biggest hospital pass ever and yet everyone seems to be swallowing it and placing none of this firmly at Browns door. Brown loves to think he is the saviour and basks in limelight when it suits him but then puts anyone else in the firing line when it doesnt. His policy of spend spend spend your way out of trouble again is the reason we need so much money now to just survive. I for one will bear the financial price of his incompetence. i suspect my children will too.

  • Comment number 14.

    Gordon is clearly man of the moment. Lionized by other world leaders for his resolute action against world economic depression.

    The steps taken have already saved the banks and are on the way to bringing forth early green shoots of recovery in a country best-placed to do so, because of low level debt and sound economic management over the past ten years.

    This is a global problem requiring global solutions that affect every hard working family in the UK. Only by pulling together in the blitz spirit can we creat British jobs for British workers.

    Our current problems stem from the United States and once the markets realize how strongly the UK is now positioned, recovery can only be days or even hours away

  • Comment number 15.

    Given that the chancellors numbers are continuing to be proven to be totally fictitious, at what point does this turn out to be a depression rather than a recession?

  • Comment number 16.

    "14. At 3:00pm on 24 Apr 2009, LordGreenShoots wrote:

    Gordon is clearly man of the moment. Lionized by other world leaders for his resolute action against world economic depression.

    The steps taken have already saved the banks and are on the way to bringing forth early green shoots of recovery in a country best-placed to do so, because of low level debt and sound economic management over the past ten years.

    This is a global problem requiring global solutions that affect every hard working family in the UK. Only by pulling together in the blitz spirit can we creat British jobs for British workers.

    Our current problems stem from the United States and once the markets realize how strongly the UK is now positioned, recovery can only be days or even hours away"


    I truly hope that was you being sarcastic?

  • Comment number 17.

    Why do we have to keep this failed administration for another fourteen months. They need to stand in front of the statue of Cromwell outside Westminster hall and listen to his words:

    "Depart, I say, and let us have done with you. In the name of God, now go."

  • Comment number 18.

    This all came from poor banking practice and dreadful government regulation. Nobdy has a real solution; doing nothing would have been awful; the governments strategy is in alignment with economic thinking; nobody is happy at this situation - talking it down will just make it worse.

    We may end up with a saner lifestyle - istead of people wasting money on flash cars; food which is thrown away; big houses with rooms they never go in and too many clothes which they don't wear.

    I'm not sure calling Brown an idiot achieves anything - but if you feel better then fine.

    The headline numbers are just that - Stephanie should look into them and see where the changes have come from - I bet that the decline in cars is a huge factor in all of this.

    So is giving £2,000 for your old banger towards a new car a good idea - if your car is worth less than £2,000 you can't afford a new one. The price of old bangers may go up considerably now?????????????????



  • Comment number 19.

    The markets simply haven't got the appetite for the amount of money the government wants to raise.

    Who's going to buy UK government debt when :

    i) The Americans are doing the same.
    ii) The price of oil is down.
    iii) The Chinese are busy trying to stimulate their own economy.

    Two choices :

    i) Sell the debt with massive incentive - so the debt will cost the government even more. Surely leading to a default.

    ii) Don't sell the debt, leading to spending cuts or raise taxes.

    The budget won't stand, simply because the markets won't allow it, not because of any politicians choices.

    In order for the UK to borrow money someone has to be willing to lend it.

    IMF loan anyone ?

  • Comment number 20.

    Yes it does make me feel better because he is an idiot and is going to bankrupt this country for years. We dont have North Sea oil now to bail us out or have even any gold reserves. He can't manipulate pension as that has a black hole in it too...I know..... maybe Gordo is thinking he can wrap UK plc into a derivative and some bigger banking idiot will buy it in a years time..

    You say this eminated from the US...well we've known about their subprime problems for 5 years now....where has prudence been in that time. Why is it Gordo said we were in the
    best financial shape ever only 2 years ago....hmm

  • Comment number 21.

    Although I am no fan of 'New Labour' (I think of them as crpto-thatcherites on economic policy), I am getting more than a bit fed up with comments attributing the current econimic crisis to them. Does anyone for one moment believe that we would be any better off if we had had the Conservative government in power for the last 10 years or that they would have put in place a regulatory regime to protect Britain from the international, financial kleptocracy that has determined economic policies since the 80's?

    Would they have championed British industry in the same way that they did in the 80's & 90's (that's called irony)or would they have continued to dissipate our wealth and opportunities to invest by bribing the electorate with tax cuts.

    I agree with #1 Kambars regarding the stupidies of the waste in the public sector, but again, I don't see that it would have been structurally any different under the Conservatives, after all the crypto-thatcherites were in charge

  • Comment number 22.

    The main point that EVERYBODY, including Steph, is getting wrong is this: There will be NO RECOVERY.
    As soon as there is any sign of a possible world recovery, oil prices will skyrocket again, followed by fuel, energy, food and everything else, killing any recovery off at birth.
    Why? Because world oil production has peaked. From 2010 world oil production will start to decline. That will drive a 30 or 40 year spiral of decline across the world, which may only stop when our energy consumption is forcibly reduced to some 25% of current energy consumption - a level capable of being supplied from renewables.
    For more details have a look at the blogs on www.TransitionNC.org and the rest of the website for discussion, news, events and help to transition from high energy to low energy lifestyle.
    I have not heard anyone in politics, in the media or any of the 'experts' correctly identifying this, the underlying problem. And we are almost out of time.

  • Comment number 23.

    Andywr, actually there are possible solutions. Look at http://www.transitionnc.org/?q=node/50/126#comment-126 for an excellent short video which not only explains the origins of the financial meltdown, but also offers possible solutions.

  • Comment number 24.

    Re 22

    Umm. The oil industry is an industry I actually know something about. There are some pointers to suggest we are approaching peak oil. But there are also others to suggest there is plenty left. Recovery techniques are improving all the time, as are formation characterisation techniques. There are new hydrocarbon sources available (hydrates and tar sands) and there are plenty of areas (Alaska,Artic and Antartic) where significant reserves are thought to reside.

    Oil running out makes a nice scare story. But there is a massive uncertainty in knowing when its going to happen. And no-one knows what the fall off in production will be like, or future demand.

  • Comment number 25.

    i am no convservative, but trying to simply suggest they would have done no better is crass. Who if not our elected government should take responsibility to steer this country? If we are so worldly as labour makes out to be...how did they miss this...or my guess is they didnt. Darling at least had the honesty to come clean last year and say it as it was...

    How to repair this mess...good question. My intial view is making us all pay more taxes is only worthwhile if they then tighten their belt....something that should have been done last year. You cant spend your way out of a mess unless every other country does too otherwise you risk most of this money simply being spent on foreign commodities and then the benefits of same are really passed to other economies...it is staggering to think we need 175 billion just for this year. I also like the way the government say they will put 2k towards any old vehicle for new...its our money being used all the time...

  • Comment number 26.

    We are facing a national crisis the like of which we haven't seen since the end of World War Two. The current government ran the country whilst the situation developed. Any honourable leader would take responsibility and resign. It must be time for this government to reign and for the parties to put their solutions to the people. This debacle cannot be allowed to run on for another year.

    The cures are going to be painful and it is only right that the government asked to carry out such should have the backing of the people. I do not believe this current leadership team do have the backing any longer.

  • Comment number 27.

    "Lord greenshoots"; you've skipped your medication again, haven't you ? Do you honestly believe that this government and it's leader are anything other than the greatest incompetents this country has seen since the Attlee government in the forties ?

  • Comment number 28.

    Labour have left the national finances in so much of a mess that I now see no alternative to an immediate slash-and-burn Tory Government, and I consider myself left-wing.

  • Comment number 29.

    Yes,it's about time for some serious differences about economic policy between the parties.

    I can't help thinking, though, that the Tory focus on 'cuts to balance the books' looks more ridiculous the worst the real economy gets. Do they honestly believe they should limit public expenditure when there is still a risk of a slump? (The Eurozone is due some very nasty growth figures soon and, like it or not, this will delay the resumption of growth here).

    Regards balancing the budget a) no one can predict when but eventually businesses, especially the banks, will post big profits as all the panic pricing of assests moderates and b) the govt. will one day, well before 2016, sell off its holdings for a paper profit and reduce its contingencies. The budget will start to sort itself out providing we don't do anything stupid(like cut public expenditure) to turn recession to slump. Regards the notion of the National finances, I really don't think any Chancellor could do anything other than 'wait and see' just now - it's a reasonable assumption things will turn but we can't know when, so why make a song and dance about it?

    I appreciate that stupid people think a national economy should be managed like an Aberdeen shopkeepers purse but really, BBC, can't you help put things in context? Balancing the budget may be a respectable aspiration (though much less time critical than people might think) but a 'cuts now' policy? Unbelievable.

  • Comment number 30.

    Stephanie has it that "Today's GDP figures confirm that this recession.. bla bla bla". The mistake you are making here Stephanie is that you are assuming that the "figures" are an accurate representation of reality. This, if you can think about it for a moment, is nonsense : the Real World is rich - what can't we make ? what have we run short of ? It's financial books say that the World is poor... so the financial books are wrong so fix them. Change the numbers to match reality rather than taking a wrecking ball to reality to get it to match the numbers.
    If you can't see this, maybe you are too "financial" then look at it from another angle : Imagine if we had a new Financial asset boom - say tulips : People and Corporations bought Tulips at ever higher prices for the next 20 years - if this happens you are in no doubt that we could afford all the schools and hospitals we want and loads of people would be driving round in big flashy cars. Well if we can physically do this then that is what I mean by us being in reality physically rich - Why do we have to mess around with the hullabaloo of an asset boom in Tulips to do this ? - Does this not show what a silly Financial system we have ? There is better solution - Called NEFS Net Export Financial Simulation www.worldnews.blog-city.com

  • Comment number 31.

    "When the economy was booming, it was common to point out how small the differences between the main parties had become.
    //
    Take the 2005 election. On the economy, the great dividing line between the parties back then came down to a difference in spending plans of just £12bn. Yes, you did read that right. The Conservatives planned to increase public spending by £12bn less than Labour over the three years after the election, whereas the Liberal Democrats planned to spend about £12bn more."


    Which, as I keep saying is prima facie evidence that all 'three' parties are in fact clone which ensured that however people voted, the same economic/hegemonic interests behind the scenes were always going to be served.

    Now that this has been exposed as the predatory venality which it always was, where are the so-called electorates of the Liberal-Democracies going to turn to for government? It isn't any of these main parties I suggest, as without their cosmetically differnet presmnetations of Chicago School/neocon economics, they don't have any credible policies as the latter spent decades vilifying statism/nationalism everywhere in order to keep the free-market booming (and busting)

    So... please stop comparing New Labour with essentially the same bankrupt ideas of Conservatives and the Liberal-Democrats, when the only economy which looks remotely like it's going anywhere, is that of the Democratic-Centralist (i.e. still essentialy State-Planned economy with SEZs) PRC and her SCO allies/friends.

  • Comment number 32.

    Chasej - I detect an anger that comes from your helplessness in the face of this enourmous crisis, but attributing all evils to Brown & Darling obscure both the origins and the resolutions to our problems. Again, I am no fan of Brown, the waste associated with PFI and his too-clever-by-half budgets has never done it for me, but I do actually think he has grasped the nettle on preventing things from getting worse and, probably, accelerating recovery. Unfortunately, the truth is, we need to spend now and cut later, otherwise we could have a longer and deeper recession even that currently forecast, costing us even more in the long term.

    If you want to direct your anger and make it personal, please aim at those people who championed and participated in the 'greed is good' philosophy, those people who believe that awarding themselves ever-increasing amounts of money, while paying ever-decreasing amounts of taxes is a sane way to run ana economy. My anger and helplessness is knowing that financial system has increasingly been run and populated by people who you wouldn't trust with your beer kitty - a lot of 'little' people knwe this, but our views don't count, only are taxes do.

  • Comment number 33.

    Yes indeed, political economy has been turned upside down and this is just the begining.

    I recall in early 1981 glancing out late one morning from the window of an office on a major trunk route into Central london and wondering where the traffic had gone. I suspect there is more traffic now so the decline will take longer.

    What has happened has happened and cannot be undone. We have had a statement from the political class as to our current situation and the outlook is very poor. So what actually is happening?

    Some parts of industry are in a very bad way but other parts seem to be doing well. The same applies to middlemen like me: we are surprised at the prevailing take up in business after a very rocky start to the year. What does this portend?

    The economy is far to weak for this to be sustained growth so the idea of green shoots is just silly. So what is going on has to be connected with a recovery of bank lending but it is limited and constrained.

    In the last six months or so a lot of businesses have gone down so perhaps a small recovery in demand or just in liquidity alone means more work for those who have survived. I am not going to complain about that.

    What the government has presented to us is an optimistic picture which, coupled to such apocryphal circumstances which I have just outlined, is causing a spasm of hope. I don't think any of us want to cry stinking fish at the thought of hope, but I am afraid I just don't see any sign of a lasting improvement starting until well into next year.

    We have had the bank-bust. It seems to be almost over. Now we have the recession to tackle. There is no money left to provide a fiscal stimulus for that so we are just going to have to lump it. In all probability it can only get worse for the time being. So in reality the economy has yet to hit the ground and the landing will be hard. I think we have another year of this and the unemployment will become even more dire.

    The opening scene has now ended. The main plot has now to develop before we can see the outcome of this particular play. It will be like Henry IV: in two parts with a seperate sequel in Henry V.

  • Comment number 34.

    What really annoyed me was seeing the very people who participated in the creation of this mess shedding tears on CNBC for the creation of the new 50% tax band. Someone has to pay for the damage that has been done, so why should it be people earning £25,000 and not those earning £150,000 - the economy would shrink further if we start taxing people who are already cutting back on consumption.

    Did anybody see that article on this website with comments from people earning £150,000 whining about 10p extra in every pound they earn over £150,000? One of them was saying he won't be able to go on holiday this year (Despite putting his kids through state schooling and living in an 'ordinary' 4 bedroom house, which makes you wonder whether he has a secret gambling habit or something) Oh boo-hoo, god forbid you might have to take a rain check on the holiday to Florida this year whilst others might loose their homes. I tell you what, I wouldn't mind giving an extra £5k to the government if it meant I was on £200,000!

  • Comment number 35.

    Oh, and totally right 'thatcherslegacy', it seems, from watching the bankers and politicians, we will have learned nothing once we emerge form this mess. All the ingredients seem to be still there - Including the inexplicable belief that ever increasing house prices, home ownership (And mortgage debt)is somehow making us more prosperous.

  • Comment number 36.

    By cutting out the culture of the Public Sector in thinking that the Private Sector only exists to be milked for taxes, I would address the people numbers, remuneration and benefits in kind, for ALL CIVIL SERVANTS and those paid by the State and Councils, including Teachers, Doctors, Police and Quangoes too.

    There are about 5.6 Million People involved in this area and this is where CUTS must come, either now or later. Rather than place any of them on the dole, I would offer similar deals to those being forced on Private Sector Employees. That is a 10% wage cut, no further guarrantees of final salary pensions, no First Class Travel and a Full Efficiency Review annually. All New Hires in the Public Sector would be frozen and all Adverts of same in the Guardian would be BANNED.

    I would bring our Troops home from foreign fields and War in Afganistan, then scrap Trident, scrap ID cards and scrap any further silly schemes such as New Aircraft Carriers too. The Public Sector needs to understand humilty, being insecure and vunerable like the rest of us. I would also support Savers and complete the Nationalization of Banks while starting a "Toxic Bank" A New Savings Bank or People's Bank would be started through the Nation's Post Offices. We will also need a State of Emergency by Year end, once unemployment goes past 3 MILLION, people are angry, very angry......... if we reach 4 MILLION unemployed then God Help us ALL. We have to come to tertms with the stark facts that Western standards of living will never be the same and we are going to have to make do with LESS in the future NOT MORE. A dose of realism may bring back old fashioned values, although I doubt it.

  • Comment number 37.

    We have 2 choices. Either we all get scared and run around under a cloud of doom and gloom. The economic situation gets worse and worse, more and more people are made unemployed, front-line services are cut dramatically or disappear, etc. etc. Remember The Specials track Ghost Town? "This town is comin like a ghost town" and "people getting angry"?. There is little anybody can do to prevent this depression from plaing itself out.

    OR

    We rejoice. We finally have both the opportunity to and the need to completely re-look at what (as a people) want for and from our society - after all economics is merely a reflection of society's actions. There are no laws of macro-economics only rules and views. Both of these can be changed if we so wish. So the REAL need is for some fresh thinking. Callenging the 'given' and creating a new reality in to which thepeople can buy and not be shoehorned.

    Why should capitalism, in its present form continue? It has claimed to have promoted great increases in lifestyle but at what cost and could those same increases have been achieved in another way? Marxist Communism failed so why do we assume that capitalism will succeed? It is only our unwillingness that prevents us from thinking the first new thought.

  • Comment number 38.

    foredeckdave (#37) "Marxist Communism failed so why do we assume that capitalism will succeed?"

    Perhaps you have a different conception of 'Marxist communism' to me, but the reason why China nearly went to war with the USSR was because the PRC thought the USSR was revisionist after Stalin's death in 1953. In other words, the PRC was more Stalinist (as reflected in its constitution). Today it has a population of 10x that of Russia and it still has an economy which is growing.

    Whilst I know that you don't like being corrected, someone has to run the gauntlt in doing so in the interest of preserving the truth. So, please don't respond to this with ego-defensive responses, just try to learn from what is meant to be a helpful correction.

  • Comment number 39.

    I think that whilst Gordon & Alastair did not create this crisis, for men of apparent high financial intelect and experience they never seriously questioned the mechanisms and industries that were the mainstay of the seemingly endless good times. Similarly, since many of us were wondering how house prices could continue rising by 20% a year when salaries only rose by about 3% and the ever increasing multiples of salary allowed in mortgages, why didn't the government see this?
    Well in reality I suspect they did - however as the good times rolled along and tax revenues streamed in there was nervousness but little in the way of action. To a point, the housing and easy credit boom was a good thing, but about 3-4 years ago there were significant signs it was getting out of control. Spiralling levels of personal debt and massive mortgages were becomming commonplace. The government could have acted at this point to regulate things a little, limit the mortgage multiple and gently calm the pace, but they did nothing of this. Instead I recall Gordon saying that this was just the beginning of the good times and things would get much better for all of us in the years to come.
    In a nutshell, greed and over optimism became the order of the day, the British government along with many others turned a blind eye to the risks and took great solace in the fact that everyone seemed happy living beyond their means. So no its not just Gordon, but he is one of the main players who chose not to act and limit the excesses when he had the opportunity.
    I do agree that this is the dawn of a new economic reality. The notion of the economy returning to that of 4 years ago is both unrealistic and undesirable. I think that the economic situation will however get much worse before it gets better, that is the way of a recessive cycle. Like an oil tanker it cannot change direction quickly whatever Alastair Darling may say. I do however agree that we should not wallow in doom but look to what has to be done, 'work the problem' as our American counterparts would say.
    There is a war of rhetoric on this right now - notice how much more vague government reponses have become on questions of the basis for their forecast economic recovery later this year. Thay have to look at the most optimistic forcast they can find which is exactly what they have done, despite it lacking any concrete support from the city. Basically they need us to beleive that recovery is just round the corner and start to spend again, the basis for this however is more hope than fact.

  • Comment number 40.

    Stephanie wrote

    "...probably not since the Great Depression."

    I think if you consider carefully you will find it more appropriately fits the facts to say "probably not even the Great Depression".

    Many informed and reasonably well read economic historians see a far greater similarity with the start of the Long Depression of the 1870's (Stephanie look it up!) [UK 1873 to 1896]

    The Long Depression (1870s) started with the need to reprice overpriced assets (simplification) just like our present problems. The Great Depression (1930s) started in the stock market (simplification). [Both depressions being related by the debt mountains associated with these activities.] The difference between each scenario is that stocks are a liquid asset whilst assets are not. This aspect I believe is critical to the proper selection of a model for the present problems.

    Fooling ourselves that this will not be a long hard slog is just silly and counter-productive. Your economics education either deliberately ignored the Long Depression or considered the Great Depression more important - however the kind of depression is I believe quite(!) important as a method of deciding on which action and polices are appropriate and which are not.

    Th present bunch of 'wise-men' seem only to be able to think of reflating the busted property bubble as a way out of the recession when in truth reflating the property bubble will prolong the depression (because the depression we are not starting is like the 1870s not the 1930s).

    They are intent on destroying money and this must stop too - interest rates must go up to a sensible long term level (again because we are in an 1870s rather than a 1930s situation).

    etc.

  • Comment number 41.

    #39

    "In other words, the PRC was more Stalinist (as reflected in its constitution). Today it has a population of 10x that of Russia and it still has an economy which is growing."

    So JJ you are saying that China's population growth and economic growth are a relection of its dogged adherence to Stalinist principles?

  • Comment number 42.

    There is one sector of the UK economy which I understand to be very strong and growing - the UK 'black economy' - I would be interested to see how the Chancellor addressed it in his budget in terms of assessing GDP.

    Being a natural critic (some say cynical with my previous 'Goondog Trillionaire Brown' contributions') I am wondering if the UK GDP figures used in the budget make a realistic estimate of the 'black economy'.

    Perhaps the 'black economy' and all those taxi drivers and others claiming government benefits is the governments' secret growth factor to 'balance the books?' Oo Sorry, I'm being a bit cynical again!

    Can anyone guess how the so called black economy is now worth to the UK and should it include services income from tax dodging?

    The other related issue is how much does tax avoidance/evasion cost the UK taxpayer and if it is significant why didn't the Chancellor take firm action in the budget and have the figures been manipulated by this ? sector?

    Is someone daft enough to say that UK tax avoidance/evasion actually benefits the UK tax payer - try telling that to the battered UK PAYE rank and file.

    There is something that is most disturbing about UK tax and that is that so much UK taxation is still to be paid out of net income after PAYE and NI contributions - when are we going to get a fair system?

    It would be interesting to see net taxation per capita/per country against average income levels adjusted for currency - let's see who is paying most tax - I think the UK are one of if not the highest taxed countries in the EEC?

    Needless to say - I don't trust the UK government budget debt forecasting
    and I think there are some interesting variables in it which are waiting to be 'unearthed'.

    Anyone got some info? Try not to be cynical - after all our politicians are sensitive to reasonable enquiry and constructive reasoning

  • Comment number 43.

    We are now at the point that was all too predictable. Gordon Brown has the economic grasp of a child. If only he had kept the lid on government spending over the last 10 years we could confidently look to a prosperous future. We will have to reduce public spending to the level it was at when Labour came to power, or less.
    The labour party should never be allowed to control the economy ever again, why would the country allow economic incompetents and non-business people loose with their taxes? They were granted a golden legacy and it has been squandered

  • Comment number 44.

    not a single mention of manufacture/manufacturing (in this blog) -- says it all!

  • Comment number 45.

    #7 WestOfEaling_Tiger
    #16 solidshot

    This can be easily deduced. Lord is the name. All these politicians would sell their own country to become a Lord. Once the title is captured they'd never be able to relinquish it. So who is it? Why it's MANDELSON.

    Enough to put one off reading this blog. Yes?

  • Comment number 46.

    LordGreenShoots (Full-time CivilServant?) 3.00pm

    That is complete rubbish, and you know it.
    Or, if you don't, God help you - and us !


  • Comment number 47.

    foredeckdave (#41)

    "So JJ you are saying that China's population growth and economic growth are a relection of its dogged adherence to Stalinist principles?"

    I did warn you not to do that, i.e not take what I wrote and then write something ego-defensive/narcissistically imputing it to me when I did not write any such thing. (you'll search in vain for 'doggedly'). Once again you have gone intensional after being warned of the irrational consequences of people doing so. Now I have to correct you again, which I know you are not going to like, but in pursuit of truth I suppose must ;-).

    Do not tell other people that they are saying things (or ask if they are) unless they say them or what you say is logically deducable from what they have written. If you do so you 'put words in their mouth', i.e you create something and mistakenly make out that they have said it, or inferred it. If they have inferred it, it's redundant, as deductive inference is just saying what is already implicit.

    China is communist, or at least, some way towards it. It has a socialist economy. China has a Stalinist-Leninist constitution. The government is Democratic-Centralist. It is a dictatorship of the people, and thus the people have to comply with the decisions made by those whom they elect. That is what Democratic-Centralism is about. That is the 'dictatorship' bit. Evil isn't it? It's understandably hated by anarchists/neocons because Democratic-Centralists regulate a lot to protect people. It also (like ours really), essentially a one-party system. Except they don't much like people ripping people off, calling it financial 'services' etc. Such business practices are deemed 'crimes against the people' (whilst here, until very recently, this was considered fair-game as here, miraculously, all people are equal and caveat emptor magically prevails).

    The Chinese save a lot, unlike in the USA where they consume a lot. China now holds a lot of USA debt and the USA like the UK is an a dysgenic and economic mess. The Chinese economy is still growing (ours is not). Even the USSR experimented economically. They are doing something right we have been doing something wrong (especially in financial/business services etc). Can you see that? Try to look at their system in their own terms (it's like reading what other people say in their own terms of reference - e.g. the languages of science).

    Seriously, look up the Quine-Davidson Principle of Charity.

  • Comment number 48.

    jr4412 You obviously haven't been visiting over the last few days as a number of us have been talking about manufacturing and the future.

    CleverHooper90 "The labour party should never be allowed to control the economy ever again, why would the country allow economic incompetents and non-business people loose with their taxes? They were granted a golden legacy and it has been squandered" Well then that rules out both the Conservative and Liberal-Democrats as well - thy too are stuffed with non-business people. BTW looks like a great number of 'business people' also made incompetent decisions judging by the level of business failure - or didn' they see it coming too?

  • Comment number 49.

    foredeckdave #48.

    my mistake, instead of writing 'in this blog' I should have written in the debate on "Reversion to the extreme" thus far.

  • Comment number 50.

    Having worked in the U.S.A and Canada etc one of the things that I still find shocking is the way most people in the U.K don't have any substantial savings, even the people who have been in very well paid employment. Most people seem to spend all their income every month on there every day living exspenses renting or buying there homes and running there cars etc and Holidays god forbid if they don't get at Least 2 a year, and if they get a promotion or rise in there income, Its lets buy a bigger car or build a new conservatory its all spend spend.
    This is ok until they have a drop in income or lose there employment, then they find they have no money to fall back on, until they can restore there income result disaster,

    Basically they do not seem to understand how the Capitalist system works it has always been a succession of booms and busts I fear a lot of people will learn the hard way, that they should have put something away for the rainy days.

    The Government does not set a very good example either.

  • Comment number 51.

    As an aside for post 46 ...I think LordGreenshoots at 3.00pm was affecting a spirit of satire, not without success....

    Leaving the economists and the econonomic theories to one side--- they're busted as mechanisms for enabling understanding or effecting remedies....History shows the great empires built on expansion... Persia, Greece, Rome, Mongols, Russia, Us, French (Their's isn't great but lets be generous) -- Then in the 20th century it changes from expansion ....Germany and Japan having determinedly proved the point that their isn't anywhere left to expand into (at least safely--- and with profit) .....to exploitation of the environment--- USA, USSR, China.

    All that 30 years of debt stuff we are hearing IS important...but the ending of the era of cheap energy will probably impact more...Though we'll see which is more relevant a factor in the next 20 or 30 years...or at least those of us young enough will...

    On an entirely different matter... the paragraph from a BBC story below...Can anyone identify what is wrong with it...obviously the sub-editor (or the online programme or whatever the BBC use now) couldn't!!

    -------"The brief clip for Alberta, in Canada, shows a young boy and girl laughing as they run along a beach later confirmed to be either Bamburgh or Beadnell."-------------


    And finally;after years (decades) focussing on the 'vision' thing ..it's old fashioned ability to DO that is so shockingly absent at present...To see a Govt paralysed by the problems resembles the Chamberlain administration in the late 30's and early 40's... nice people, working with conviction...just out of their depth.

  • Comment number 52.

    LordGreenShoots is on the ball. We should all watch QE redefine asset values so that the housing market can return to its former role as an engine for growth.
    The corresponding hike in wages in devalued pounds will balance the equation but generate inflation. Here on Planet Simple we are already beginning to panic.

  • Comment number 53.

    "What really annoyed me was seeing the very people who participated in the creation of this mess shedding tears on CNBC for the creation of the new 50% tax band."

    So would that be all the people who bought over valued houses at 7 times their salary with a 110% loan? Or who took out umpteen credit cards to fund their lifestyle? Or yes, the bankers who faciliated the loans? Or the government who didn't just stand by and watch it happen but who proactively created the environment to make sure it happened, just so we could all feel good about ourselves in our false bubble. The blame is very much three way here. And no I'm not a banker and I don't earn 150k.

  • Comment number 54.

    e2toe4 #51.

    "..but the ending of the era of cheap energy will probably impact more.."

    ironically, it is the current big industry style of energy generation/distribution which prevents people from enjoying "cheap", or near enough free, energy. why is it that we do not see gov't initiatives (backed by real funding) for renewables, for micro-generation?

    "..nice people, working with conviction.."

    IMO this is the most charitable way of looking at it.

  • Comment number 55.

    #47 JadedJean. You do make me laugh. It seems like only yesterday that you were busy making all kinds of statements of your own and then immediately attributing them to me.

    ...and now what do I see? Why nothing less than you complaining about exactly the same thing, and using oh so many words to back up your complaint. Try a simple homily "Pot calling kettle black."





  • Comment number 56.

    24. tufftimes
    This is the standard reply from industry insiders, who cannot see the wood for the trees.
    World oil production has been stagnating since May 2005 after several decades of 3-4% growth.
    Petroleum Review statistics point to reduction from 2010 onwards.
    Given that it takes some 10 years to bring a new oil field on line, referring to possible new fields does not advance the argument.
    In fact discoveries of oil fields peaked in 1962 (47 years ago!) and nowadays we are using some FIVE barrels of oil for every ONE barrel discovered.
    And finally, why do you think that oil prices in 2008 skyrocketed to $147/barrel if there is as much capacity available as you suggest.

    No, shortage of oil and thus high price will mean that there will be NO RECOVERY, ever. At some 3-4% depletion rates we shall get down to a quarter of our current consumption in about 30-40 years time, which is as much as renewables can supply. With enough investment in renewables the depression will recover then. See www.TransitionNC.org for more information and personal/ community solutions.

  • Comment number 57.


    The main issue with the PRC is the fact they have cheap labour. Simple as that. I agree they have a centralised planning and forced implementation which also give, err, operational advantages but the key thing is cheap labour. BTW they are already seeing manufacturing moving to Vietnam and Cambodia because it is cheaper there. It isnt unreasonable to suggest that problems may well be just around the corner for the PRC as affluence there grows.

    The problem here is we have a high labour cost relatively, and have not invested in a technical edge. We have also opted for high welfare costs.

    I note there is a reference somewhere to the fact that there is percieved convergence in the political parties, which off nad on comments have been made on by quite few people. That is because the UK population in general seem to want a centralist government so all parties seek the central ground. It is inevitable. If one party moves to the left or righ the other seeks to be centrist and take the vacated ground.

    There is also an aging population and just perhaps the wealth and welfare provision of the older end of the population is no accident, it is politically driven policy, directly or indirectly, trying to take care of a economically inactive but electorally important group. If too small a proportion of the population end up being the wealth creation sector, that has to create problems in the political process because the rest, the majority, are piggy backing that wealth creation of the minority but voting for policies that favour themselves, ie public sector expenditure. There are a number of correcting mechanisms, and one is in process now, the money has run out. The imbalance is too big. This problem is not going to go away, it can't. Those wanting high public expenditure are due a hard lesson. Taxation at too high a level results in a loss of international competitiveness, economic inefficency, industries leaving, and the young bright professionals and valued tradespeople emigrating.

  • Comment number 58.

    46 cybertomnorton

    Look up troll, baiting, flame war, lurking and newbie.

  • Comment number 59.

    jr4412... post 54

    I agree there's micro generation... nuclear ...renewables...and carbon capture coal (solar, and even hydro---I am 'long' on Scotland more for Hydro than for wind power etc etc...but compared to pumping it up and burning it 1790-1970..it will be more expensive...nearly everything in America was built in that period(!!) And it just about covers the American Era....

    REf the 'charitable view' I just wish they were in some terrible secret (not-so-secret) interconnection with the financiers and bankers... but they are nice people working with conviction--- always behind the curve, touchingly hoping 'something will happen to avert the flood tide of events; busily, nicely and quietly fiddling their expenses------

    You can't match up Tony McNulty's 2nd home episode and the deplorable treatment of the Gurkhas.....

    Actually... you have convinced me(or prompted me to convince myself).... they're not nice at all...!

    PS I am not a political activist, or aligned to any party...the idea that because of the 'reality' of depression, there is suddenly 'clear water' between the parties is NOT one I buy into-- the only difference between the Tories and Liberals; and the labour Party ,is the Ts and Ls aren't running things.

    Bleak...I know...but what can you say...??

    Right now it's a little like living through one of those periods in History... say Rome in the fourth century...(USSR in the eighties??) when the energy has dimmed for some reason and the nation seems to lose the will...or even ability ...to influence events and control them -----and the people are left to simply suffer events happening --and hope rather than act

  • Comment number 60.

    55 Mr Times

    transference.

  • Comment number 61.

    armagediontimes (#55) "JadedJean. You do make me laugh.

    Jolly good, maybe that will shake some of those great clouds of fog (which you mistake for ideas) out of your brain. ;-)

  • Comment number 62.

    glanafon (#57) "I note there is a reference somewhere to the fact that there is percieved convergence in the political parties, which off nad on comments have been made on by quite few people. That is because the UK population in general seem to want a centralist government so all parties seek the central ground."

    They're just variants on the same basic anarchistic idea. Can you really not see that? You have been seduced into splitting hairs if you can't.

  • Comment number 63.

    e2toe4 #59.

    I agree that it feels a little like sliding into one "..of those periods in History..", and with "Bleak", too. ;-(

    re. costs: there's always a layout required when infrastructure needs building but I think it gets more expensive if the decisions are delayed; given that a number of nations (Denmark, Spain, Germany) already generate good percentages of their consumption through wind (and solar), I can't see why the UK Gov't doesn't put more (legislation & cash) in.

    I listened to an interview with Van Jones, "green energy tzar" of the Obama administration, the US has at least a vision and, apparently, the political will to turn things around, while here we're being sold new technology (pipeline from King's North to bury CO2) which hasn't been tried large-scale in order to continue running on coal.

    another advantage of creating new infrastructure is new jobs, we could do with that too.

    re. Lab/Tory/Lib: I've lived 25 years now in the UK, in all that time I haven't heard many people taking the Liberals seriously, I most often hear 'yes but they will never get in' (to form the government). never understood that until I heard about gerrymandering. sucks, really.

  • Comment number 64.

    #61 JadedJean. No, I was not expressing any ideas, merely referring to an evidential fact. For you to mistake the two and to contemporaneously suggest that my brain is shrouded in fog compels me to restate my previous homily: "pot calling kettle black"

    I am not an expert in your subject matter but is it not the case that your hero Quine suggested that all the knowledge of the world could be expressed by interchanging a "." and a "-"? If so, this may explain a lot, although not why you habitually resort to so many long words.

  • Comment number 65.

    JJ

    "I did warn you not to do that, i.e not take what I wrote and then write something ego-defensive/narcissistically imputing it to me when I did not write any such thing. (you'll search in vain for 'doggedly'). Once again you have gone intensional after being warned of the irrational consequences of people doing so. Now I have to correct you again, which I know you are not going to like, but in pursuit of truth I suppose must"

    I ASKED a question nothing more and nothing less! Perhaps your "ego-defensive/narcissistic" tendancies are showing through.

    Your view of Chinese politics is static whereas the truth is that China is in as much change as say the UK. The centralist leadership has recognised that elements of the community had to be freed in order for econommic and social progress to be made. If that were not so then there would have been no reason for the leadership to change their approach from that of Mao Tse Tung. Where these changes will ultimately lead neither they, you or I know. History has shown us that centralised administrations tend not to survive when 'freedoms' are granted and then demanded.

    The debate concerning democracy and a one party state will continue. A choice of one is really no choice at all. You have argued that the UK has developed into a one party state in effect. I would counter that by saying that coalescence is a transitory state. If, as would appear to be the case, this depression deepens and the social strains grow then either the coalescence will break or the centralist parties will be overtaken by new parties of either the extreeme right or left. The changes in the UK will be different from those in China but change will take place in both countries.

    That both the USA and the UK have got themselves into this mess by concentrating upon consumption and the development of debt as a fuel for that consumption is beyond question. How long China can continue to grow their economy via internal development is a total unknown. That the USA faces serious problems due to the level of China's debt holding is also very true. The US strategic options are severely limited by it.

    How China chooses to play the game from here in will be very interesting.

  • Comment number 66.

    #30 "If you can't see this, maybe you are too "financial" then look at it from another angle : Imagine if we had a new Financial asset boom - say tulips : People and Corporations bought Tulips at ever higher prices for the next 20 years - if this happens you are in no doubt that we could afford all the schools and hospitals we want and loads of people would be driving round in big flashy cars. Well if we can physically do this then that is what I mean by us being in reality physically rich"

    What you mean is that there are always fools willing to part with their money at the slightest excuse !! P. T. Barnum said, "There is a sucker born every minute !" And the Great Ponzi, himself, based his scheme on this very "principle" !! Therefore, you are suggesting that we get rich by cheating others of their wealth !! The Great Philosophy of the barrow-boys and investment bankers !! Perhaps that is why snake-oil salesmen are an extinct species; they can't compete with these characters !!

    I'm sure Bernie Madoff will be very proud of you !!

  • Comment number 67.

    #32 "If you want to direct your anger and make it personal, please aim at those people who championed and participated in the 'greed is good' philosophy, those people who believe that awarding themselves ever-increasing amounts of money, while paying ever-decreasing amounts of taxes is a sane way to run ana economy."

    Do you mean the MPs, quangos and such like ?? Pigs at the public trough ??

  • Comment number 68.

    #36 "I would bring our Troops home from foreign fields and War in Afganistan, then scrap Trident, scrap ID cards and scrap any further silly schemes such as New Aircraft Carriers too."

    Hold on !! We might need those aircraft carriers if we have to fight a war with Moldovia !! I know it's landlocked but think of the 1000s of jobs created to build them. And maybe, just maybe, the seas will rise sufficiently for them to sail into Moldovia !! Then again, it might rain for 40 days and 40 nights !!

    Oh and don't worry about Northern Ireland having high unemployment and are a bit desperate, just build them in Scotland !!

  • Comment number 69.

    #38 "Perhaps you have a different conception of 'Marxist communism' to me, but the reason why China nearly went to war with the USSR was because the PRC thought the USSR was revisionist after Stalin's death in 1953."

    Actually, if you look deeper into recent Chinese history, they had just "won" the Korean War and were feeling good, so Stalinist Russia (plus/minus Stalin himself) decided that there should be only one top dog in the Communist pantheon and that's not the Chinese. They withdrew loads of their investments and loans from the Chinese leading to that disastrous decision by Mao to forge steel in backyard forges and that led to the Cultural Revolution and destroyed a generation of the Chinese hopes for the future. To distract the people, Mao decided an external war was necessary so incidences were reported/manufactured along the Amur River, the border between Russia and China !!

    Both sides were saved when the Americans helpfully started a war in Vietnam which focused the Chinese and Russian attention on them instead of each other !!

  • Comment number 70.

    62 JadedJean

    '' '...percieved convergence in the political parties...'

    They're just variants on the same basic anarchistic idea. Can you really not see that? You have been seduced into splitting hairs if you can't.''

    Your previously stated position is liberal democracies have failed. Your position - identifiable from your statements - is existing western democaries are anarchistic. You have an essentially political agenda, but talk technical to justify it. Facts are selectively presented. You have stated previously that you do not post on here for debate, that you are not interested in debate. You have to accept the constraints of your position.

    My point of view is in the UK that the political parties are positioning themselves by appealing to the electorate majority. That the electorate is largely centrist. That in the UK governments lose an election, not oppositions win them. That the probablility is the incumbents have to move off centre and pull the opposition centre. That appears to be in process. I have pointed out previously that an increased two way communication would in all probability enable the democratic mechanism to work more effectively and BO's activitiy in this area in the US are worth watching. I cannot see any near horizon in democracy disappearing in this country, a disappearance which presumably at least one person would favour.

  • Comment number 71.

    #40 Spot on !! The sooner we get out of the will we/won't we scenario and get on with something more concrete like letting lame ducks fail and putting *that* money into new sunrise industries, the sooner we can get out of this depression.

    "Th present bunch of 'wise-men' seem only to be able to think of reflating the busted property bubble as a way out of the recession when in truth reflating the property bubble will prolong the depression"

    He, who does not learn from history, is doomed to repeat its fatal errors. Many countries tried to reflate the dot.com bubble, to no avail. And now, they try to reflate the housing price bubble. Will they ever learn ??

  • Comment number 72.

    #38 Addendum to my earlier post - "Perhaps you have a different conception of 'Marxist communism' to me, but the reason why China nearly went to war with the USSR was because the PRC thought the USSR was revisionist after Stalin's death in 1953. In other words, the PRC was more Stalinist (as reflected in its constitution). Today it has a population of 10x that of Russia and it still has an economy which is growing."

    China's population is about 1.3 billion. If it is 10x that of Russia, then the Russian population is about 130 million, or just over that of Germany and far less than that of Indonesia. I strongly suspect the figure may be nearer 5x than 10x, i.e. Russia's population is nearer 260 million and falling !!

    Furthermore, it looks to me like you have not visited the very Marxist-communist Shanghai in the last 10 years !! It's surprising what Marxist-communism did there !! The world's fastest commercially operational railway, for a start - Pudong airport to Shanghai city centre !! 430+ kph !! Eurostar merely dreams of that and salivate !!

  • Comment number 73.

    One thing I have understood from this crisis - economic and political policies have very little bearing on what has happened. Very diffrent countries and sysytems like Germany and Japan have ended in the same position. We keep hearing that things are worse in The UK but without the recovery of UK and the US there is unlikely to be recovery in Germany and Europe. 2000 euros may have increased the demand for this year in Germany this year but without the UK market recovery the sustained demand will not occur. What does concern me is what will drive the recovery?

  • Comment number 74.

    #42 "Anyone got some info? Try not to be cynical - after all our politicians are sensitive to reasonable enquiry and constructive reasoning"

    They might send the gestapo, oops sorry, I mean the anti-terrorist squads to search your office and home and take away anything they fancy !! No warrants necessary !!

  • Comment number 75.

    #51 "French (Their's isn't great but lets be generous)"

    I have a few friends across the ditch that will dispute that statement vigorously but, then again, they always did !! :-)

  • Comment number 76.

    #58 "46 cybertomnorton

    Look up troll, baiting, flame war, lurking and newbie."

    In addition, may I suggest that he looks up Lord Haw Haw !! This "esteemed gentleman" was part of the Nazi propaganda machinery during WW2 !! Both sound similar - a distinct aversion to reality for their own purposes !!

  • Comment number 77.

    #73 "2000 euros may have increased the demand for this year in Germany this year but without the UK market recovery the sustained demand will not occur. What does concern me is what will drive the recovery?"

    That's a very UK-centric statement !! The world does not start and end in the UK only.

    Re. the 430+ kph railway in China - it's simply bleeding edge German technology and the Germans are very happy to sell them more of the same !! Quite a few billion Euros involved, I believe. That should keep a few Germans in their beer money, at least !! *And* the Chinese pay cash, not quantitatively eased funny money !!

    Is it any wonder that the hotels in Beijing, Shanghai and Guangzhou have loads of affluent-looking German, French and other European businessmen, all vying for more Chinese business ?? Britannia no longer have enough ships to rule the seas around it, let alone the waves. We should give our Continental comrades a bit more credit and a little less sneering. We may really need them one day !!

  • Comment number 78.

    "(...) already the political economy of Britain has been turned on its head." Quite so.

    Good morning, chaps and chapesses. How are you charming subjects of Her Gracious Majesty coping with the news that poor old England is confidently expected to be the first country in Europe to go under in the present historic cataclysm, which will doubtless be known to respected historians as the final chapter in the decline and fall of what remains of your global empire of blessed memory? When a "great country" finally collapses in disarray, it is a sad spectacle, and so one cannot help feeling sorry for you even though you do have an unfortunate tendency to bite one's head off, as it were, for taking a charitable interest in your welfare.

    This latest bombshell must have come as quite a blow, one supposes, on the day when you had the news broken to you that the UK economy contracted by no less than 1.9 per cent in the first quarter of this year, which is a rate of contraction which, if maintained throughout the year, would, alas, give you an even more catastrophic economic decline for 2009 than the International Monetary Fund has been predicting for dear old Blighty. Mind you, the contraction of 4.1 per cent that it is forecasting for you for the year still puts you in a very deep hole compared to other economies, the IMF prediction for the global economy being a contraction of only 1.3 per cent for this period, making the Labour UK government's claim that Blighty is better placed in the recession than other economies look rather feeble, frankly . . . unless, of course, they were thinking of Zimbabwe or something of that nature.

    One trusts that you will not prove to be too feeble to swallow some of that infamous Britannic pride that makes you so difficult to live with and face up to the lamentable fact that your Chancer of the Chequer Board really has told you that Blighty's deficit is a record 175 billion of your English pounds - whatever they may be worth this morning, depending, one supposes, in part on how many your empty Treasury has been printing this week - and that the prospect of your Gross National Debt reaching, according to the latest most optimistic predictions, no less than 79 per cent of Gross Domestic Product in 2014 has not depressed you so much that you have lost your jolly English sense of humour.

    You are probably not aware that the director of the European Investment Bank, Philippe Maystadt, declared on French radio this week that he expects that the UK will be forced to apply to the IMF in the hope of saving itself from utter disaster. As you may remember, your "great country" had to hold out the begging bowl to the IMF in 1976 in order to save your currency, which has lost a quarter of its value over the past year, one is given to understand, and still has nothing much to stop it falling further. The Labour Party was in office at that time too, of course. Was brave Caledonia also blamed for that embarrassment? Or has blaming and defaming that admirable nation only become fashionable since it got its parliament back? You do realize, one trusts, that you are playing with fire there. But I am digressing.

    It is being said on the European mainland, rather ominously, that, if poor old Blighty is in danger of going under, there is nothing much that the IMF can do to save it on this occasion, as, despite the additional billions that were accorded to it at your reviled Caledonian PM's G20 summit in London earlier this month, it does not have the means to rescue such a "great country", its resources stretching really only so far as to stave off disaster for little feeble ones or developing countries such as used to belong to your global empire. Some of the 'anciens riches' are, in the regrettable economic circumstances now prevailing, simply ineluctably going to become the 'nouveaux pauvres', or so it would appear. Fortunately for the "feeble little country" to the north of England, on the other hand, it has existing North Sea oil wealth and fresh abundance of oil resources to look forward to in the Hatton-Rockall Basin in the Atlantic, together with a potentially huge renewable-energy industry, inter alia, if it determines that its essential national interests require it to go independent, which looks increasingly likely in view of the continuing rise in popularity of the governing Scottish National Party, as revealed by the very latest Scottish opinion polls, which doubtless you will not have neglected to study attentively.

    In such an eventuality England, which, as it is being expressed, sold its soul to the financial-services industry in the Anglo-American cowboy-capitalism era, will be faced with the somewhat uncomfortable fact that it has allowed its industrial base to be eroded. Apart from a few remnants of your aeronautical industry - and one hears, alas that even your participation in the Eurofighter project is having to be reviewed - there is very little left of primary and secondary industry on your side of the Channel. In exposing the UK cruelly to the worst of the recession, chronic mismanagement of its economy, of which the subject peoples have evidently just about had enough, appears to be bringing down the curtain on the UK as presently constituted, with even Plaid Cymru returning to the theme of independence for feeble little Wales.

    Understandably, this is upsetting, but blaming one component of the British Union for this and subjecting it to gratuitous vilification will only make matters worse for you. Those who live beyond their means are eventually brought down to earth. Since the beginning of the current year even UK personal debt has been about 170 per cent of GDP compared with an average of 100 per cent of GDP in the eurozone. You are addicted to living beyond your feeble means, frankly, both as a "great country" and as individuals.

    Now you pay, on a truly historic scale, as any decent historian will tell you. Ho hum.

    Have a nice day, dear ones.

  • Comment number 79.

    In the papers this week there were the normal "how the budget affects you" tables, showing the numbers of pounds per year up or down based on whether you were single, had children etc. And interviews with samples from the population.

    I've never seen such "head in the sands" reporting in my life! The budget reported we will be borrowing at least 175 billion just to balance the books this year. And with similar borrowing figures for future years even with the tiny measures announced like 50% tax changes coming into effect.

    What is the relevance of knowing I'll be 60 pounds better off this year if in 2-3 years time I will be:
    1) Paying 15p to 30p a litre more for petrol
    2) Twice as much for a prescription
    3) 20 pounds to visit a GP
    4) 200 pounds a month more council tax
    5) 5 to 10 pounds toll to drive up the M6 or M1
    6) 20 percent VAT

    And those measures will probably just be 20 per cent of what will be needed to start to plug the gap in the budget.

  • Comment number 80.

    "our debt level was fairly low, and stable, and tax revenues were pouring in."

    This is bull.

    The state debt level was relatively low. Personal and commercial debt levels were soaring in an uncontrolled fashion.

  • Comment number 81.

    22. At 4:13pm on 24 Apr 2009, TransitionPaul wrote:

    That will drive a 30 or 40 year spiral of decline across the world, which may only stop when our energy consumption is forcibly reduced to some 25% of current energy consumption - a level capable of being supplied from renewables.


    This would require a similar reduction in population, and is a "doomer" position. I don't agree. Energy is energy, we currently waste 60+% of energy produced, and oil is certainly not the final form of energy. Nuclear is probably going to have to take up the slack, though perhaps with newer generations of plant than are currently being planned. France gets around 80% of their energy from Nuclear and that is without specifically designed breeder reactors.

  • Comment number 82.

    ishkandar (#72) "China's population is about 1.3 billion. If it is 10x that of Russia, then the Russian population is about 130 million, or just over that of Germany and far less than that of Indonesia. I strongly suspect the figure may be nearer 5x than 10x, i.e. Russia's population is nearer 260 million and falling !!"

    Russia - 140,702,096 (July 2008 est., USA).

    The population is definitely falling. It has a low TFR like the rest of East Europe. These demographic changes are very important economically.

    Are you sure you are not missing the main point? Don't just argue for argument's sake - please.

  • Comment number 83.

    78 frankly_francophone

    Give back Calais, that what I say. Thats when the rot started King Ed III letting it all go to pot. One duff leader. And now you are posting on a Flanders blog. Never mind you can't win them all. : )

  • Comment number 84.

    armagediontimes (#64) "I am not an expert in your subject matter but is it not the case that your hero Quine suggested that all the knowledge of the world could be expressed by interchanging a "." and a "-"? If so, this may explain a lot, although not why you habitually resort to so many long words."

    Because most humans have a hard time with binary? Everything you post is, in fact, in binary believe it or not ;-). Computer logic runs on NAND or NOR transistor gates. Quine made a big contribution there.

  • Comment number 85.

    foredeckdave (#65) "Your view of Chinese politics is static whereas the truth is that China is in as much change as say the UK."

    After all my helpful instruction you go and do it again. Please analyse the above sentence to appreciate how ;-).

    "The centralist leadership has recognised that elements of the community had to be freed in order for econommic and social progress to be made. If that were not so then there would have been no reason for the leadership to change their approach from that of Mao Tse Tung."

    Not so, Mao himself said otherwise to Nixon/Kissinger. Please read the consitutioncarefully. It is an evolving system. With a mean IQ of 105, China is an socio-economic juggernaught in the making.

    From the constitition:

    "The basic task of the nation in the years to come is to concentrate its effort on socialist modernization. Under the leadership of the Communist Party of China and the guidance of Marxism- Leninism and Mao ZedongThought, the Chinese people of all nationalities will continue to adhere to the people's democratic dictatorship and follow the socialist road, steadily improve socialist institutions, develop socialist democracy, improve the socialist legal system and work hard and self-reliantly to modernize industry, agriculture, national defence and science and technology step by step to turn China into a socialist country with a high level of culture and democracy. The exploiting classes as such have been eliminated in our country. However, class struggle will continue to exist within certain limits for a long time to come. The Chinese people must fight against those forces and elements, both at home and abroad, that are hostile to China's socialist system and try to undermine it."

    "How China chooses to play the game from here in will be very interesting."

    Agreed. A lot of people will look to her to deliver on her principles. From what I have seen, she isn't doing too badly at all.

  • Comment number 86.

    Re 56

    Your arguments are dismal.

    Firstly the price of oil in 2008 was 147USD, now the price of oil is around 50USD. Therefore if oil price is linked solely to capacity, either we're producing a lot more oil now, or we're using a lot less. In fact the reality is neither, despite the economic contraction. The increase in oil prices was caused by speculation, and the decrease is caused largely by the speculative bubble bursting, although clearly the global recession has had some impact as the demand for oil has declined slightly.

    Secondly, and probably more importantly, as it forms the core of your argument, growth in economic activity is not linked to the production or availability of oil, but the availabilty of energy. The two are different.

    I liken scare stories over oil to those of the millenium bug. There is no doubt that oil is a finite resource. There is no doubt that at some point in the future our energy generation will shift away from oil to other methods, both on capacity and enviromental grounds. But to say that future energy generating capacity will only be 25% of todays capacity solely because of the reduction in the availability of oil is simply wrong.

    You say my views are the views of an industry insider (I'm not). I'd argue your views are the views of someone who has a vested interest in selling people renewable technology.

    Trying to ramp up your wind turbine business ?

  • Comment number 87.

    glanafon (#70) "I cannot see any near horizon in democracy disappearing in this country, a disappearance which presumably at least one person would favour."

    You persist in demonstrating that a) you do not understand what I post and b) you have a somewhat limited conception of the nature of democracy (despite my efforts to enlighten you - cf. the PRC constitution)

    This is evidence of a) your 'Liberal-Democratic' (anarchistic) political conditioning and b) your resistance to further education.

    That makes debate almost impossible does it not? ;-)

  • Comment number 88.

    In response to Stephs Blog Post, and inspired by my disappointment with the quality of recent News Reporting:

    This graph of GDP growth should not be presented as news unless it improves the knowledge and intelligence levels of its audience!

    As a graph, it is mathematically as basic as something that would be taught to 10 year olds.

    There are fundamental questions in Economics that have to be re-examined. The BBC is screaming with a foghorn about every limp-wristed statistical collection and economic prediction brought out by every attention/status/funding-seeking Economics organisation (the CBI, the IMF, and the endless queue of 3 man bands that demand a living for throwing together a cheap graph on a spreadsheet).

    1. Who defines what gets measured as GDP?
    2. How often does this get re-assessed, and when last was it done?
    3. Why should so much attention be focussed on GDP, when indeed even Economists know that their statistics are a complete waste of time at predicting anything even 6 months ahead?

    GDP exists as an Economic measure of MINIMAL evidence. It does not, should not, and never should have represented the be-all and end-all of either individual or collective human economic management. It is not a target that should be aimed at without wondering why you are aiming at it, and understanding what you are aiming at!

    Example: If Britain had been part of a global economy where over the last decade it existed purely by growing BANANAS, but these BANANAS never got eaten (they were being grown because they look pretty?), our Economists would still find a way to count this production as part of GDP. Why?

    Get serious, Economists (Don't take it personally, Stephanie, or BBC). We're not fed up with bankers. We're fed up with the ignorance propagated and perpetuated by Economists whose only aim is to keep their own jobs. Economists have been flogging a system of Economics that depends on endless growth. Why? Because when an economic system assimilates more parts of our globe, the savings made through specialisations, industrialisations, and economies of scale justify the jobs of Economists.

    No Growth? No jobs for Economists?

    What we need is some serious pruning in the World of Economics, in every university, and in every institution that uses Economists. Get rid of the dead wood.

  • Comment number 89.

    87 jj

    As you have previously , repeatedly I believe, that you are not interested in debate - that readers should educate themselves with your words and links, yes, debate is impossible, by definition. Ta ra.

  • Comment number 90.

    #78 Should the Scots Nats wish to become independent, we'd gladly let them get on with it. In fact, we'll even give them back what is their due, e.g. the debts owed by the "great Scottish banks like HBOS and RBS". That should reduce the national deficit somewhat !!

    Of course, right minded persons know that we have to hang together or, surely, we'll be hanged separately !!

  • Comment number 91.

    #83 "Give back Calais, that what I say. Thats when the rot started King Ed III letting it all go to pot. One duff leader. And now you are posting on a Flanders blog. Never mind you can't win them all. : )"

    Not forgetting Normandy, where it all started and Aquitaine (where all that lovely wine comes from) !! They can keep Corsica and their maggoty cheese !! :-)

  • Comment number 92.

    #79 "What is the relevance of knowing I'll be 60 pounds better off this year if in 2-3 years time I will be:
    1) Paying 15p to 30p a litre more for petrol
    2) Twice as much for a prescription
    3) 20 pounds to visit a GP
    4) 200 pounds a month more council tax
    5) 5 to 10 pounds toll to drive up the M6 or M1
    6) 20 percent VAT"

    The Lord giveth and the government taketh away !! :-)

  • Comment number 93.

    #84 "Computer logic runs on NAND or NOR transistor gates."

    Strange as it may seem, computer logic also uses AND, OR and XOR as well.

  • Comment number 94.

    glanafon (#89) "As you have previously , repeatedly I believe, that you are not interested in debate - that readers should educate themselves with your words and links, yes, debate is impossible, by definition. Ta ra."

    And with a flounce, she was off.

    I suggest you take a close look at what was written rather than relying upon what you recall, believe, think, or (even) read - all of which is sadly intensional and thus prone to distortion/fabrication.

    Like many others (instantiated most recently by the posts of foredecdave but also seen in esteemed politicans and even journalists), you confabulate ie. blend what others write with what you think yourself. This ends up confusing you as you can no longer tell whether you are arguing with your own inner 'voices' or with what others have alerted you to.

    It is never a good idea to argue with empirical evidence by the way. Argument on the other hand is a strictly logical, deductive, mechanical (computational) process.

    As you neither present empirical evidence, or know how to validly argue, this makes rational discussion with you difficult if not impossible.

    Is that fair, clear and helpful?

  • Comment number 95.

    Ah yes, strictly logical, hmm like your juxtaposition of democracy and anarchistic. I believe it was agreed there could be no anarchistic collective by definition, but a democracy is a collective view by definition. Strange bedfellows. Your conspiracy theory wears a bit thin after so many repeats. And you really must stop this transference you indulge in. Now I have to go because I am working. If you don't like ta ra, then goodbye.

  • Comment number 96.

    ishkandar (#93) You miss the point (as usual)- the other logical connectives can be built out of NAND or NOR gates (see MOSFETS and CMOS). This is basic mathematical logic and computing. See also Quine–McCluskey algorithm.

  • Comment number 97.

    glanafon (#95) "democracy and anarchistic. I believe it was agreed there could be no anarchistic collective by definition, but a democracy is a collective view by definition. Strange bedfellows. Your conspiracy theory wears a bit thin after so many repeats."

    LIBERAL-democracy is anarchistic.

    Neither the Conservatives nor New Labour need to have a collective set of policies if their purpose is just to REDUCE government alredy here (that's the Civil Service by the way, they run the country), i.e to break up (Balkanize) the state in order to privatise it (noticed Scotland, Wales, NI, and the Regional Development Agencies?). You clearly have no idea what has been going on have you?

    Did you listen to one of the Teacher Unions thismorning talking about the Tory Academies programme and Primary Schools? What did she say? It is not a 'conspiracy' (it's legal). These are anarchists (without government) at work. See Anarcho-Capitalism and the Austrian School. Why did these people flee their own country? Why did Old Labour become unelectable in the 80s? Where did the Trot groups go? What do the Tories and New Labour (and Lib-Dems) do other than sell off the state?

  • Comment number 98.

    #90 ishkandar

    "Right-minded persons"? I only ever use that term as a joke.

    As for the rest of your post, nothing new there, I am afraid, or, with respect, worth taking seriously, except in so far as it induces me to remark for your benefit that the view is gaining ground in brave Caledonia, whether that is appreciated elsewhere or not, that hanging together with the English is where Scotland has been going wrong, for reasons which are not far to seek.

  • Comment number 99.

    addendum (#97) I suggest the reason so many New Labour people are 'internationalists' is because their lot wreck nation states built up by others to service the people's needs. That some parties appear to be more nationalist (e.g. the Tories) is solely down to their not wanting foreign anarchists competing with their sponsors as the latter hack away at (i.e. asset-strip) the state/country.

  • Comment number 100.

    97 jj

    No I did not listen to some primary teachers conference. I wonder why.

    I am not surprised to hear you think the answer is the civil service, you have referred to this before. Could you be from this sector.

    My experience of the civil service is it is at times brain dead in the way it acts in implementing rules based on very selective interpretation of the law. Short bulletins issued periodically from on high, no feedback loop. When contested by somebody who goes to the trouble of reading the case law they just plain do not know what to do. In one case they complained they could not meet the legal costs incurred in their botched case, they had no budget, could we meet the costs, guess what, no that is not the way it works. And you go on about intelligence. In another case with a different deptmt I had to refer them to their own legal department before they would believe they had to make provision for maladministration, as I advise I would sue, if they did not implement the law including case law. There is no point in implementing statute, you have to implement statute as amended by case law, case law generally regarded as being 90 percent of law. Doh. They backed off but not before there was a thick file. Both cases regional and national level management. Doh. The public are so difficult when they ask you to work to the law.

    Or how about finding at a lower local level action being taken for a LA bill paid in full. When you ask what is going on its just - clerical error, no apology. People who pay your bills are just such a nuisance dont you think. Only time the moved was when I advised the case would be filed with the ombudsman unless they sorted it.

    Strange don't you think that the British Empire could be run with a fraction of the civil servants we have now. So you are not covering yourself with glory here with any of this arguement.

    Furthermore if the civil service is the answer and you are from this sector, why on earth is there a problem, unless you have failed to convince with your arguements. Now how could that be.

 

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