Category Archives: Economics

Re-reading the final section of my previous post, I imagine a reasonable person could make an obvious riposte to my comments on public sector pensions. This person would work in the private sector, he doesn’t have an occupational pension scheme, and the personal private pension he is paying into each month is building a pension pot that, at current rates, will pay him an annuity on retirement which will just about cover the daily costs of a cup-a-soup and a small bottle of supermarket own-brand cola. He has little time for my whining, and with fair cause. After all…

“Why should my taxes rise to help pay for your gilt-edged pension, when I can’t afford to pay for a decent pension for myself?”

It’s a good point, I say, and I don’t think your taxes should rise for that reason. If there is a shortfall in public sector pensions then that should be met by the employees, or by employers within existing budgets, but it would certainly be unfair for you or others to pay more to ensure I have a good pension. As it is, whether or not public sector pensions are unaffordable is, I think, more arguable than the media often allows. That is when they aren’t just complaining that public sector pensions should be cut for the sake of it, because they are usually better than most private sector pensions.

“Ah, right,” he says, seeing me on the back foot, “but they are usually better than private sector pensions aren’t they, and that isn’t fair, is it? Why should I pay into your pension at all, when you don’t pay into mine?”

Well, it’s true that my pension may well be better than yours and you may not consider that fair. On the other hand, your pay may well be better than mine; is that also unfair? Perhaps you get a company car; why can’t I have one? We both have our pay and benefits and a good pension is one of my benefits; it doesn’t seem reasonable to me to cherry pick one area where my benefits may be better than yours and decide to reduce it for reasons of fairness, while leaving untouched other areas where your benefits may be superior to mine.

“But I don’t care if your pay or benefits are better than mine. I care that I’m paying for them. And not just me; millions of people in the private sector are paying a premium in taxes so that those in the public sector can have better pensions than we can ourselves afford.”

And millions of public sector workers pay for goods and services in the private sector, and so we pay into your wages and benefits, including into your pensions, or into the wages that you then invest in pension funds. Have a word with your employer if they choose not to provide as good a pension as my employer does. But if you must reduce things to this simplistic public sector versus private sector argument, as if both are just opposing homogeneous blocks, then whilst it’s true that you pay my wages, it’s truer to say that we all pay each other’s wages. And while your taxes do help pay for my pension, your consumption spending is also going to help pay for the occupational pension schemes of private sector workers whose pensions may similarly be better than the one you are able to afford. What’s the difference?

“Oh come on! The difference is that they are private companies and can do what they like with their revenue. That’s completely different to what government agencies do with public money. Our money.”

But it’s your money that private companies receive, just by a different method, through your discretionary spending rather than through taxation; it’s different, yes, but not, I think, completely different. Put it another way; you complain that public sector pensions are better than yours, and you are paying a premium on your taxes in order to pay for them. But many private sector occupational pensions schemes are also better than yours, because the employer pays into the pension scheme. In effect aren’t you therefore paying a premium when you buy their goods, paying a premium for their workers to have a better pension than you can have? And that premium is your money too, your money that you have had to pay on top of the price of the goods to pay for someone else’s pension. Should private sector companies also cut their occupational pension schemes in some great levelling down, simply because the benefits of such schemes are better than your own?

“No. But. That really is different. I can’t choose whether or not to pay taxes; I have to. I don’t just decide to pay my council tax, I am forced to by law, and some of that money gets paid into pensions whether I like it or not. With private sector companies I can choose who I give my money too, and so I’m not forced to pay into someone else’s pension if I don’t want to. I can always take my custom elsewhere.”

But would you?

“Eh?”

Would you?

“Would I what?”

Would you take your custom elsewhere in order to avoid paying into a private company’s staff pension scheme? It seems to me that we have reached a point where your main objection to public sector pensions being more generous than your own is because you have to pay for their services and so pay into their pensions schemes regardless; but you don’t seem to mind some private sector schemes being more generous than your own because you can simply avoid paying into such schemes by avoiding using their goods and services. So the question is, would you? Would you avoid using a private sector company solely because it means paying into a decent pension scheme? Would you ever consider not shopping at Tesco if you were to discover that some of their turnover goes into paying for a staff pension scheme that is better than your own? Would your hunt for an alternative supermarket be in any way influenced by whether or not another supermarket pays into an occupational pension scheme for their staff? Would you really object if they did? If not, and so the provision or otherwise of a staff pension scheme by a private employer plays no part in how you choose to spend your money, then surely the fact that you are able to take your custom elsewhere is not relevant to this discussion, and so should have no bearing on the provision or otherwise of a staff pensions scheme by a public sector employer to whom you have to pay your taxes. And indeed you could extrapolate this concept further; whenever you hear of something that occurs in the public sector that you think is outrageous and yet you have to pay for, consider what you would think if you heard of the same thing happening at a private sector firm you patronise, and whether you would still object to the extent that you would exercise your freedom to choose not to pay for it by taking your custom elsewhere. And if you wouldn’t, and if you would still cheerily pay for a private firm to do the self same thing that you find so objectionable in the public sector, consider that perhaps you’re not really viewing these things equally.

“”

I realise, then, that somewhere during my last paragraph, my conversation partner had disappeared. Perhaps I had flummoxed him with logic and reason? Perhaps he had tired of feeding me prepared lines to which I could deliver my prepared responses. Perhaps my mention of Tesco reminded him that he needs to pop out for some milk. Perhaps he’ll return in a few minutes with a crew to make me shut the fuck up. But perhaps, just perhaps…he didn’t exist at all, and was just a compliant FIGMENT OF MY IMAGINATION!

That would mean that I’ve been talking to myself, all this time. “What’s new, on this blog,” you may very well think; that is if, indeed, you exist. But this feels different. I’m tired, so very, very tired. Time to splash myself with cold water and go out for some fresh air.

By now you’ll know that twenty esteemed economists wrote a letter to the Sunday Times yesterday, calling on the government to start the tricky business of cutting the budget deficit earlier than some have advocated. You may be wondering why they didn’t instead write to the Chancellor-of-the-exchequer, since News International’s power over the government’s budget is minimal? Well, today The Obscurer can exclusively reveal that the eminent score indeed did contact HM Treasury direct, emailing the contents of their letter on Saturday evening. Furthermore, and inexplicably, The Obscurer was copied into the Treasury’s reply! So here, exclusively, is the government’s considered response to that Sunday Times bombshell.

to: #Group:Emminent_Economists
cc: The Obscurer

re: UK economy cries out for credible rescue plan

Dear All,

Thank you for your latest letter concerning how to deal with the UK budget deficit. As many of you will know this is indeed a priority for the Treasury at the moment, and we are taking a large number of soundings and looking at all the options available to us regarding exactly how and when we should deal with the current situation, and we do indeed value your input. Thank you for spending the time on coming up with your own considered solutions.

Sadly, you appear to have omitted the attachment in which you detail how exactly you would go about cutting the structural deficit in the timeline you propose, and all we have received is the covering preamble which, while of interest, merely makes some bland and somewhat meaningless pronouncements. Still, they do whet the appetite for the meaty specifics to follow and we eagerly anticipate seeing your full proposals, so please forward them with some haste.

In particular, we note that you say that

• “In the absence of a credible plan, there is a risk that a loss of confidence in the UK’s economic policy framework will contribute to higher long-term interest rates and/or currency instability, which could undermine the recovery.” We agree, but admit that we are having some difficulty in drawing together our various strands of thought into one credible plan. As such we are excited to learn that you must have completed your own plan on how to deal with this matter. We look forward to receiving it so we can see how it moves us forward.
• “The exact timing of measures should be sensitive to developments in the economy … and there is a compelling case, all else being equal, for the first measures beginning to take effect in the 2010-11 fiscal year.” We are, however, (and also ceterus parabus!), struggling to pin down that exact time, as we are uncertain when the economy will have recovered sufficiently. You appear to have less uncertainly than ourselves and so we would welcome you own precise proposals regarding timing (something that, being a small detail, we are surprised you omitted from the email we received, but which we look forward to seeing once we have your complete correspondence in front of us).
• “The bulk of this fiscal consolidation should be borne by reductions in government spending, but that process should be mindful of its impact on society’s more vulnerable groups.” Aye, there’s the rub. The problem here is that while it is a commonly held view that the public sector is stuffed full of non-workers fulfilling non-jobs, according to a recent report by Reform – a think-tank you would expect to be sympathetic to that view of the public sector – any cuts to the government’s workforce would soon “hit bone” and affect frontline services. Cuts will have to be made and we are working on them right now, but we have found that it is far easier to propose cuts in government spending than it is to define where these cuts will be made; therefore it is gratifying that you have done the heavy lifting here and we look forward to your own specific plans on which departments to close and who should be made redundant.

Everyone here at HM Treasury is tremendously excited that you must have already managed to produce just the credible plan that you require of us, and which is currently eluding us; we are only disappointed by the regrettable delay that has been caused in your oversight in not including this plan in your email. However, we are sure that this can be speedily remedied, and together we can crack on with the vital work of restoring the nation’s finances to balance.

Yours faithfully etc.

That was two days ago, and sadly I have not been copied into the economists’ reply. I can only assume that someone noticed the error, and when forwarding their detailed plan for economic recovery they also ensured that I was removed from the cc. field. Well, I assume that is the case, and I assume that these foremost economists have produced and forwarded on their own detailed plan. Haven’t they? That can’t be it, surely? I can’t imagine that such an illustrious band of experts-in-their-field would make such a wishy-washy list of statements and requests from others without something of their own to back it up, would they? Why, because if they would then that would make their letter to the Sunday Times appear to be just an empty gesture, a substance-free waste of time? It would suggest that writing the letter was a mere vanity-stunt and a exercise in self-importance, with about as much value as some bloke on Grumpy Old Men – Richard Madeley, say – sounding off about something he doesn’t really understand and which he has no solution for?

No. That can’t be it at all.

Yesterday’s Newsnight was predictably devoted to the Pre-Budget Report – or Autumn Statement, as I sometimes inaccurately refer to it – wherein Paul Mason reported that he had spoken to some bankers in the City of London and they were livid about the announced plan to tax any discretionary bonus of theirs worth over £25,000 to the tune of 50%; some, apparently, were even considering legal action. Could you be bothered? I’d have thought that their time would be better spent picking over the cornucopia of avoidance measures that will be springing up and agonising over which one to plump for. I’m similarly puzzled at the angry claim that this will hurt our competitiveness and drive bankers abroad; not by the claim, just by the anger. Why get yourself worked up, huffing and puffing about the injustices of the world, if you can simply hop on a flight to a more friendly environ?

The thing is that, unless you are a bingo-playing pensioner who receives child benefit, there is something for everyone to grouse about from the PBR, and the bankers shouldn’t think themselves anything special. As a public sector worker I’m hardly overjoyed about the forthcoming 1% cap on pay, or the reduction in employer’s pensions contributions; but you know what? Despite the fact that my area of government can hardly be blamed for the more-than-doubling of the national debt that we are going to see, we are where we are and we all need to do our bit to get that debt down, eventually. Others have suffered far worse in this recession. “We’re all in this together,” as someone once said.

The banking sector, I would humbly suggest, bears a somewhat larger responsibility for that ballooning national debt, whether you agree that it was the cause of the crisis, or merely the meek recipient of astonishing sums of public money to prop up its ailing industry, or a bit of both. They have more of an obligation to do their bit, you could argue? And yet what are those City bankers supposed to be moaning about? Will their pay rises be capped at 1%? I doubt it. Have their pension plans just been thrown into doubt? Shouldn’t have. No, they’re apparently complaining that if their bonus – and it is just a bonus, mind, not their salary; and not even their contractual bonus, but rather any discretionary bonus they may receive on top – is greater than the median annual wage in the UK, then their employers will have to stump up a bit more tax. Well my heart bleeds.

Now, I’ve a pretty easy-come-easy-go attitude towards bonuses myself; perhaps it’s because I’ve never come to expect one, the most I ever received amounted to a little more than a couple of a hundred quid, and even then I never felt I especially deserved it. I guess I could see things differently if I relied on my bonus to enable be to buy a Maserati outright, with a discount for cash. But as it is I actually feel somewhat ambivalent on the whole subject of City bonuses. Others, however, are more forthright, and make what do seem to me to be valid criticisms; Chris states that City bonuses are a form of legal extortion, while Duncan claims that in fact the performance of RBS bankers, for example, has in fact been far from stellar. Me, I guess that if bonuses are a problem – and being manifestly unfair may not the same thing as being a problem – then regulation is a better way to deal with them than to impose a quirky, one-off novelty tax to coincide with an impending General Election, and which can probably be easily flirted in any case. In the meantime, though, my searing analysis of the situation is that if that “talent” in the City really is up in arms about something as ephemeral as their bonuses being taxed while others have lost jobs, had their hours reduced or received pay cuts, then those brightest-of-the-bright must be a bunch of utter twonks.

In these tough economic times, of plummeting GDP and ballooning public debt, it is only right that all organisations, in both the public and private sector, look to cut costs wherever possible. Actually identifying such elusive efficiency savings is a notoriously tricky business; but if there is one place that can easily trim some unnecessary fat it must surely be the TaxPayers’ Alliance. For whenever a request is made for someone to spout some nonsense to a journalist from a moron-sheet, the TPA always seems able to find some spare part at a loose end just hanging around, killing time, busy doing nothing; or at least nothing so productive that they can’t drop everything and break off to chuck out a paragraph or two of blather for free.

A case in point is this article from yesterday’s Sunday Express entitled “Brown’s £1,200 Tax Bombshell”, which warns that “families face a £1,200-a-year tax bombshell after the next election if Labour win to meet Gordon Brown’s pledge to maintain lavish public spending levels”. The story is based upon figures calculated by the respected Institute for Fiscal Studies. One response, from Matthew Elliott of the (somewhat less respected) TaxPayers’ Alliance, reads

The Government must accept the urgent need for spending cuts.

People are heavily overtaxed already, and there is no way that anyone could afford tax rises equivalent to a whole new council tax every year. It is absolutely clear that massive savings could be made by ditching misguided policies, trimming bloated quangos and bringing the efficiency of the public sector up to the standard of the private sector.

The Government’s spending binge is totally unsustainable and must be killed off. The country cannot afford tax rises on this scale.

I’m certainly not going to argue with the idea that we should try to improve the efficiency of the public sector, and to trim any quango that is indeed bloated. But is it really true that “there is no way that anyone could afford tax rises equivalent to a whole new council tax every year”? What, not anyone? Not John Terry? Not Fred Goodwin? Not even Gordon Brown? Even closer to home, I’m far from flush but I reckon I could find an extra £100 a month if I absolutely had to. Of course, whether I should have to, or whether it is a good idea that I do, is another matter entirely. It is also something that the TaxPayers’ Alliance itself makes no real effort to answer, having decided long ago that any tax rise, ever, is just wrong.

But the problem with discounting fiscal measures on the basis that anyone could struggle to afford the consequences is that it leaves us pretty hamstrung when looking for ways to pay down our national debt. The TaxPayers’ Alliance thinks we should make public spending cuts; but what kind of cuts? If no one can afford a tax rise, can anyone in the public sector afford a pay cut, or even a pay freeze? Is there anyone in the public sector who can afford to be made redundant, even if they are only a Diversity, 5-a-day and LGBT Outreach Executive employed by OfTosh? If we are unable to countenance any action on the basis that it could make anyone worse off then it really does cut down the number of things that we can do.

Now, you may feel that all I am doing here is unfairly picking up on the clumsy use of the word “anyone” in the TPA’s statement. And perhaps I am. But the TaxPayers’ Alliance is not made up of stupid people, despite often giving that impression. For one thing, they gleefully reprinted the Express article in full on their website without correction or clarification. For another, when a recent report of theirs criticised the amounts of money that Local Authorities pay into their employees’ pension schemes on the grounds that the overall figure is equivalent to 21% of Council Tax receipts, they didn’t do so out if ignorance, unaware that Council Tax forms but a part of any council’s income; no, they did so in order to knowingly twist the facts, to make it seem as if councils are spending a fifth of their revenue on staff pensions, when they in fact pay in a far more modest sum. So, I can well believe that Matthew Elliott’s use of the word “anyone”, rather than being a slip of the tongue of an idiot, was a deliberate act to give his statement a more dramatic impact, and in preference to saying something more accurate, coherent, truthful; such as, for example, saying that he “feels” that it “appears” to him that “many” or at least “some” people “may” be unable to afford such a tax rise (you know, the sort of woolly back-covering that I often pepper my posts with). In deciding to go with the more striking – but bollocks – use of “anyone”, the TaxPayers’ Alliance has again shown itself up to be a lobby group of ideological zealots trying to make a political point, rather than a genuine pressure group working to look out for the taxpayer and to ensure we enjoy efficient public services.

Which brings us back to the start of this post, and the efficiency savings that all parts of the economy must look to make. Yes, let’s trim those bloated quangos, let’s; but while we’re at it, why not include wasteful think tanks in on the cull? Because speaking as a taxpayer myself, I don’t think that we’re getting value for money from the TaxPayers’ Alliance. Sure, it isn’t publicly funded, and one could reasonably argue that it is solely a matter for its paymasters to decide whether or not it is fulfilling its remit in a cost-effective manner. But the TPA does at least claim to speak for me, and while I may not directly contribute to its upkeep its funding still has to come from somewhere, and each pound that is blown on a staff member who could easily be replaced by a random quote generator represents an opportunity cost; a pound that could be more effectively invested somewhere – anywhere – else. And I don’t see how anyone genuinely interested in economic efficiency could possibly fail to agree.

The more it
Snows-tiddely-pom
The more it
Goes-tiddely-pom
The more it
Goes-tiddely-pom
On
Snowing.

“Tiddely what?” you may well ask, and were you to do so you then would be joining a long and illustrious list consisting of Piglet, Dorothy Parker and myself among others. But this week’s snow has drawn a predictable response from our brainless media whining and opining about how unfair it is that the world isn’t perfect, or at least our rain sodden scrap of it. The Daily Mail, for example, reported that the authorities inability to prepare for the snowfall had cost the UK economy £1.2 billion on Monday, and their article contained some interviews with angry business leaders bemoaning the situation.

I don’t know how accurate these figures are – we are talking about the Daily Mail here after all – but I’m interested in that paper’s take on the issue, for in an editorial at the weekend (that I can’t appear to find online) the Mail discussed the current economic pressures on the private sector, and in doing so it fell into the common practice of pointedly referring to the private sector as the “productive, wealth-creating” part of the economy as if they are in some way synonymous, and presumably as opposed to the public sector which neither creates wealth nor is productive but which instead imposes only costs and creates a burden.

It’s a popular enough use of language but one that has long puzzled me; for in the planned economy of the Soviet Union didn’t those state-controlled industries produce things – albeit mainly tractors – and create wealth, even if they did so relatively inefficiently and in a manner I don’t wish to replicate? And if we take just one means of creating wealth – the manufacture of steel – and consider the method of taking worthless iron ore stuck in the ground and, by a process of digging, smelting, galvanising and whatever-else-it-is-you-do-to-it ending up with valuable steel, then this was a process that in the UK was at one time done by British Steel, a part of the public sector. Is it plausible to argue that UK steel manufacturing only became part of the wealth creating part of the economy once it was privatised? But fair enough; British Steel was privatised, the work of its successor, Corus, is now the preserve of the private sector, and so if we are talking about the British economy now and handing out prizes then the private sector should get the credit for that particular method of creating wealth.

But let’s return to the snow and the economic consequences of inadequately preparing for it, something that the Mail claims cost the economy £1.2 billion in a day. This is perhaps a further damning indictment on the failing public sector and the costs it imposes on business. But hold on; if failing to grit the roads can be said to have cost the economy £1.2 billion, couldn’t it also be said that when successfully gritting the roads – something that happens most of the time – the local authorities and the Highways Agency actually contribute £1.2 billion to the economy? After all, unless you consider salted and snow-free roads to be the natural order of things with which only the clumsy interventions of the state can interfere with, then whenever the snow falls and the gritters and snow-ploughs successfully swing into action the public sector is actively participating in the creation of that wealth.

And what of those roads in the first place, that are built and maintained by the public sector, whatever the weather; don’t they help to create wealth? And what about universal access to education, and health care, and the rule of law? Surely the public provision of these goods is not merely a burden but a contribution to the economy as a whole, and to the wealth creation that both the private and public sectors participate in? And while it could be argued that the private sector could make a better fist of providing these services, such work is currently the preserve of the public sector, and so if we are talking about the British economy now and handing out prizes then the public sector should get the credit for these particular methods of creating wealth.

To refer to the private sector as the wealth-creating sector is misleading at best, and there is much more to be said about the very simplistic way the term “wealth creation” is misused and bandied about; but that can wait for another day. Come on now, this is only my third post in the past two-and-a-half months, and this will do for the time being.

I’ve largely kept out of discussions about the current financial crisis, and in a bit I may well wish I had maintained that position. I try not to talk about issues I don’t really understand, and international finance is certainly one of those issues. On the rare occasions when my eyes don’t glaze over at the merest mention of short selling and hedge funds my grasp of the subject itself is at best tenuous. Still, that doesn’t stop opinions from bubbling up within me from time to time in need of release, and this blog seems the obvious place to do that very thing.

And I like The Economist, I do, although I often skip the Finance section. I’ve subscribed to it for a number of years and I intend to continue. But good God does it have its faults. Don Paskini, for example, wasn’t far of the mark when he said

I’ve heard people say [The Economist] is very good because of its international coverage. On closer inspection, its international coverage turns out to be articles from round the world about the need to cut taxes, privatise services and deregulate in [insert country here].

And I have nothing against cutting taxes, privatising services and pruning regulation myself, but The Economist tends to hold so dogmatically to these ideas, laughably so at times, and so it can be easy to dismiss a paragraph here or an article there as simply lazy space filling plucked from the ideological section of their style guide, where the “public sector” anywhere is always “bloated” – or at the very least “inefficient” – and so to blame for whatever failure is imagined, even if the failure appears to be of the market rather than of government.

So to this week’s Economist leader, discussing, of course, the recent financial problems. And it’s fine stuff in the main, much I agree with. But then, towards the end, we read

Regulation is necessary… But naive faith in regulators’ powers creates ruinous false security. Financiers know more than regulators and their voices carry more weight in a boom. Banks can exploit the regulations’ inevitable blind spots: assets hidden off their balance sheets, or insurance (such as that provided by AIG) which enables them to profit by sliding out of the capital requirements the regulators set. It is no accident that both schemes were at the heart of the crisis.

And that’s fair enough in the main. Of course a naive faith in the regulator is wrong. But is that any worse than the naive faith that financiers “know more than regulators”? It is touching that The Economist still feels emboldened to make such a bald assertion in these times, but haven’t bankers pissed away any unquestioning faith that once went their way? I’ve never met a generalisation I didn’t hate (even if I issue as many as anyone) and this simple comment crystallises the bugbear I have with some of the recent comments on the financial crisis. I mean, if financiers are that much better than the regulators then they have done a good job of hiding it recently, especially considering their risks. After all, bankers have a far greater incentive than regulators not to fuck up royally, so what is their excuse? It is gratifying, in a way, to find out that those described by some as the very cream of the global market for “talent” can be quite as inept in their field of expertise as I am in mine. (And not just inept. In an article I read somewhere last week one particularly brainy employee from the UK arm of Lehman Bros. complained about the better treatment the US employees were receiving and so vowed never to work for an American company again. What a clot.)

The credit crunch can appear at times to be a canvas on which one can project whatever opinions one already holds; or at least that seems to be the case judging by some newspaper opinion pieces and from within the echo chambers of the blogosphere where sober analysis is at a premium. Perhaps the only change in some has been a new found acknowledgement that government can be good for something (ie. good for $700bn.)

On the one hand those opponents of capitalism, markets and globalisation have been handed their ammunition on a plate; but the joyful conclusions drawn, that rapacious capitalism is fucked and global finance cracked beyond repair, are simplistic and flawed. At least I hope they are, as does the manager of my pension fund. In reality we will get through this; there will be changes to regulation, lessons will be learned, and then we will carry on again in our own sweet way until the next financial crisis, when it will be realised that we overlooked something else again.

It is the opposing views that interest me more however since they seem more perverse; the defensive glossing-over and scapegoating that has gone on, the search for blame that fits in with existing prejudices. Hence in some we see the pointed criticism of the regulators given more weight than the grudging criticism of the financiers, reminiscent of the way voices complaining about the failures of a social worker can drown out those criticising the parents of an abused child; how for some it is the police rather than the murderer that is are more to blame when they fail to prevent a stabbing, or it is in fact the terrorists’ fault when the police feel forced to mistakenly gun down an innocent. It is to be expected, no doubt, but it drives me up the wall. So we hear this bleating that the regulators have failed, which they have to an extent; but it is a second degree failing let’s not forget. We are then warned repeatedly that if there are to be any regulatory changes we should ensure that they are appropriate and not of the knee-jerk variety, that there is a danger in bad regulation, or too much regulation. Do we need such statements of the bleeding obvious? To those I sense are still instinctively opposed to regulation then it seems the answer is “yes we do”. But an excess of anything is bad, and to voice such a truism adds nothing of any real value to the debate. We know that water is essential to human life, but also that drinking too much of it or drinking it badly can be fatal; we don’t need to be told this, and I would suspect anyone who felt the need to state something so basic to be either a simpleton or to be trying to diverting attention from something. Look, a bird! Obviously we need regulation that is as “just right” as Baby Bear’s porridge, but we can take that as read. We know all this. And we also know that Goldilocks is a fairy tale.

Some critics go further, however, and blame regulators and central banks for not only failing to prevent the current crisis but for helping to create it, which can seem like just another bit of blame shifting to me. So the argument is made that existing regulation is bad because it made banks look for weaknesses in the regulators’ armour, to hide items off balance books and away from regulators’ prying eyes, to surreptitiously duck capital requirements and to be forced into a lack of transparency which is where much of the damage was done. They just couldn’t help it, bless them. But isn’t it the height of naivety to believe that if there wasn’t such regulation the banks’ actions would all be honest, above board, adequately insured and funded? Isn’t this like blaming the number of dogs killed in illicit dog fights on the law banning dog fighting in the first place; to then draw the conclusion that this problem would never have occurred at all if dog fighting hadn’t been made illegal, so forcing it to operate underground; and to then warn against any tougher enforcement of the existing law as that may exacerbate the problem? Well, that makes about as much sense to me.

As for central banks, there is a general belief that Alan Greenspan helped create our predicament by cutting US interest rates too low and holding them down for too long in response to earlier crises; but how comforting to be so wise after the fact. Sure, these criticisms of Greenspan were always there, and kudos to the people who have held onto this opinion through thick and thin, but this was always a miniscule minority view, barely audible when he retired from the Fed to almost universal acclaim. Now this complaint is pretty much the consensus position, and other central banks have also shared in the blame for having too loose a monetary policy (but with less justification as far as I can tell.) The impression given is that keeping interest rates higher during, say, the dot com boom, would have been the obvious cost-free policy solution without any further consequences; and it may have been. But it also may have tipped the world into recession there and then, we just don’t know. Gordon Brown’s announcement of no return to boom and bust was always a hostage to fortune, but in all fairness developed countries have seen more of a period of sustained growth rather than a boom over recent times (asset prices notwithstanding) and higher interest rates could have put that at risk. It is easy to suggest different policy decisions in hindsight knowing they cannot be enacted and that no ill can befall the economy as a result.

Which is not to say that central banks didn’t make mistakes and perhaps did keep interest rates too low for too long, but even then surely this can only lay the groundwork and create the conditions that allowed the banks to chase illusionary pay days and to lose sight of their own risk management; there was no compulsion, no one put a gun to the financiers’ head. I’m not seeking to have a go at the banks here, or to seek to deny the important work they do, it’s just that they are at the heart of the storm and those that failed should take the bulk of the blame regardless of whatever else was going on around them; the fact that others were at fault should be an aside, not the set-piece soliloquy that some have sought to make it. After all, do we blame the proprietor of the All-You-Can-Eat Chinese Buffet when we pig ourselves sick? Do we say that it is Wetherspoon’s fault that their cheap beer leads some people to empty their stomach’s contents in a taxi at four in the morning? Some may, but they’re dicks. Whatever happened to personal responsibility?

I’ll go now as I have wittered on for too long and I now appear to be drowning in a sea of weak analogies. All I will add is that in common with most people my opinion hasn’t shifted with events. I believe in a mixed economy, in the power of the market and in the necessity of government; they both have their role, they both have their faults, and I don’t like seeing people trying to shift the blame from one to the other, not when it doesn’t seem deserved and not when it looks like a transparent attempt to deflect attention and to defensively bolster one’s own ideology.