Anni, don’t worry about it being “too complicated” you’re not doing so badly because it’s obvious that you’ve grasped the essentials of what is happening. I was talking to my mate Steve yesterday, he started me off on all this by teaching me about Inter-War history. I said that I was doing S32 (The specialised, year-long inter-war history course) all over again and that if I went back to do the exam again I would do well. He said that I did a pretty good exam paper anyway and it wouldn’t improve much if I did it again because I would never finish in the time because I now know too much! I can see what he means. However, the more I read, the more I understand and it still holds my interest. (Steve’s been in this position for 40 years and he’s still reading!) The key to basic understanding is to keep it simple.

The banks are a case in point. The basic need is to separate the casino banking from the core main street banking business and tax and regulate them separately because they are entirely different beasts.

As for the management of the national economy, again, it is dead simple. The country has a certain disposable annual income. The political decision is to set the priorities for how it should be used and direct the Treasury to do the sums, produce a budget and this is what is presented to Parliament for ratification. It is the setting of priorities which is the problem. In an ideal society the first priorities would be the alleviation of suffering whatever the cause and the maintenance of the classes of society who add value, create the wealth and fuel the economy by consumption. (It’s important to recognise that wealth can only be created by adding value to the economy by work. The argument is often made that the casino banks make money by complicated deals. Not so, they simply move it round. The only service banks provide which aids the adding of value is by providing loan capital at reasonable interest to fuel the enterprises that are adding the value.)

It makes economic sense to service these first priorities before anything else is addressed because they are the source of the national income. Therefore any cuts to balance the budget will come from lower down in the priority list. Dead simple and makes economic sense, so where did it go wrong?

In the early stages of industrialisation labour was regarded as an unlimited resource which miraculously reproduced itself year on year and did not need any maintenance beyond the minimum reward necessary to maintain the breeding rate. By the end of the 19^th century it had been realised that a certain amount of investment had to be made in this resource because it was being eroded by disease caused by poverty. Eventually labour gained a voice and started the long struggle for better conditions. It was a long battle and we haven’t reached a perfect society yet, perhaps we never will, the great break-through occurred during WW2 when the nation needed labour to survive, after the war the great reformation of society began and we saw better housing, the NHS and many other social benefits. The tide ebbed and flowed throughout the 20^th century but basically things improved.

What is happening now is that the failure of the unregulated market and banking system has plunged us into debt and the people who are setting the priorities are not motivated by the greatest good for the greatest number but protection of vested interests. The system is further hampered by a tribal system of politics rooted in the early industrialisation period and not fit for purpose in today’s world.

The result is that investment in the value-adding capacity of the nation is being savagely cut for short-term gain. Public services, education, the maintenance of health and the capacity for research and development are suffering. All this will have a result in the long term.

That’s the ‘dead simple version’ Anni, you’re right it’s far more complicated than that. But these are the basics and you are obviously well down the track of understanding them.

Stanley Challenger Graham




Barlick View
stanley at barnoldswick.freeserve.co.uk