The Cameron speech was - in my opinion at the time - so vacuous and
lacking in content that I only gave a brief mention in my "Cut
spending say public but not politicians, + Friday round-up
30.1.09)". It would seem I was wrong. The speech was dangerous ,
shallow and designed to appeal to the unthinking, those with a mass
of ingrained prejudices.
I am glad therefore, that Heffer has pulled it to pieces. His style
is often not to the taste of many, especially to those who don't like
controversy, but here it is measured and important.
It would seem that we will be asked to choose at van election between
two parties - one that has wrecked our economy and one that proposes
to wreck what's left of it! What a choice! You can see why people
flirt with the extreme BNP - it's desperation.
Following this and also today Irwin Steltzer deals with the same
choice but from a more 'nuts-and-bolts' and immediate standpoint. It
is a pity that he fails to come to any conclusion!
Either way I come more and more to the conclusion that the answer to
my question yesterday -"THE FUTURE. Do we have one?" is NO!
xxxxxx cs
===================
TELEGRAPH 4.2.09
1. David Cameron's 'moral' capitalism is no better than socialism
The Tory leader has revealed his true colours - he misunderstands the
market, argues Simon Heffer.
Because of the disaster Gordon Brown has made of our economy,
ensuring that we (according to the International Monetary Fund) have
the worst recession of any developed country, it may now be difficult
for him to win an election. Therefore interest turns to what the
Conservative Party might do were it in power. Let us mark one thing:
that a Conservative victory some time in the next 16 months will have
nothing to do with the alternative that party offers to the
electorate, other than the specific alternative of its not being the
Labour Party.
In case you think I am merely being beastly to Mr Cameron again,
please do me one courtesy. Go to the internet and type "Cameron moral
capitalism" into Google. Within moments you will read the text of a
speech the putative next prime minister gave at Davos last week to an
audience of people who, unlike him, must make serious and informed
decisions about the use of capital every day.
I understate my case to say that it is one of the most shallow
speeches by a supposedly serious politician that I have ever read. It
should also terrify anyone who might feel he or she should vote
Conservative at the next election, because it promises that what we
should get would in most respects be little better than what we have.
My first thought was the quizzical one about Mr Cameron's speaking on
this subject in the first place. In pure terms it is a tautology.
Capitalism is deeply moral and hardly needs the adjective to qualify
it. It is moral because it is about the exercise of free will between
buyers and sellers: and few things can be more moral than allowing
someone to be free. Capitalism is about the link between effort and
reward. It is about the creation of wealth according to the quality
of one's enterprise. Without wealth creation there is no scope for
the taxation that enables the functions society deems moral: a
welfare state, the defence of the realm, the maintenance of law and
order. So anybody who feels he needs to make a speech about
capitalism while qualifying it in this way at once raises the
suspicion that he is being in some degree specious.
I hope you have read the speech, but if not I shall try to give a
fair summary of it. Mr Cameron argued that the "old orthodoxy"
appeared to have failed; and though it had its good aspects, it
manifestly also had bad ones. In the ideal world that he, but few
actual capitalists, inhabit, it would be desirable to remove the bad
aspects (the activities of something he calls "the global corporate
juggernaut") and have only the good ones ("vibrant local economies",
whatever the hell that means).
It is a typical, all-things-to-all-men, Cameron speech. He claims he
supports business: and then suggests an operation of "capitalism"
that would make it impossible for business as conventional capitalism
understands it to function effectively. I can only construe from his
words that this is a world where, for example, there are more corner
shops and fewer Tescos. But why is Tesco so powerful? Because its
customers, exercising their free will, have made it so. We clearly
need to bring an end to that.
Given his lack of intellectualism, Mr Cameron may not have read Atlas
Shrugged, the epic novel by the American philosopher Ayn Rand in
which a man discovers the secret of perpetual motion and becomes
excessively rich by putting many of his less intelligent competitors
out of business. The newly poor - poor because they failed to give
the public what they wanted at a price they were prepared to pay -
demand a Fair Shares Law, whereby they are compensated for their lack
of brains and risk-taking by the enterprises who do make money. And,
lo, Mr Cameron complains about our capitalism having been "winner
takes all", an assertion that is fundamentally untrue (for capitalism
has enriched almost everyone in the free world to some degree) but
would not be immoral even if it were. After all, those who take the
risks and have the superior judgment should have the rewards:
anything else is communism.
"People are angry with capitalism," he says, showing again that what
drives him is not an attachment to principle but an obsession with
focus groups. "We've got a lot of capital but not many capitalists
and people rightly think that isn't fair." For pity's sake, has he
actually thought about what those words mean? Not only are they not
what most people would understand as "Conservative"; they are some
way to the left of Mr Brown.
He complains about the "absence of a moral framework" from
capitalism. It shows his profound misunderstanding of the term
"capitalism"; it echoes the misunderstanding that he and his
decerebrated shadow chancellor have had of this crisis ever since it
began to develop.
All he wants is for the state to regulate capitalism more or less out
of existence: and it won't do to say that he is pro-business, because
everything else he says contradicts that.
"Markets are a means to an end, not an end in themselves," he says,
in one of the clichés that pepper this speech and reveal the
collection of small minds that were at work on it ("the stakes are
high" and "the devil is in the details" are two more depressing
examples).
But markets are the place in which the exercise of the free will of
buyers and sellers takes place. How else would Mr Cameron have it? It
can only be that free will should be restrained by some means or
other; and how will that make us happier, when it will make us, in
the end, a socialist-style wealth-limiting, freedom-starved command
economy?
The Davos speech terrifies for what it says about the Tories'
approach to the government in which they may quite soon find
themselves. Yet it is also meaningless, for the obtuse and infantile
understanding Mr Cameron and his friends appear to have of the
operation of capitalism would soon be corrected by global realities.
I just wish he would work out why this crisis has happened, but he
still hasn't. There was a massive expansion of the money supply in
western economies and in the developing ones too, whether China,
India or Brazil. This expansion, which was the fault of governments
because it is they who control the money supply, put trillions of
dollars of cheap money at the disposal of bankers and other
institutions who make a living by buying cheap - in this case buying
money cheap - and selling dear.
Hundreds of millions of mortgagors, entrepreneurs and other consumers
then took individual decisions about exercising their free will to
borrow this money from those institutions. The institutions
frequently made the mistake (and capitalism is, as much as any risk-
taking activity, about the right to make a mistake) of lending to
people who couldn't pay it back. This does not mean that capitalism
itself is bad: it means that many who practise it are reckless
(though they have learnt a lesson now), and that those who control
money supplies and regulate banks were reckless too.
Sovietising capitalism out of existence, as Mr Cameron proposes, is
nowhere near the answer. Until he works out what the answer might be,
he would do us all, but especially himself, a great favour by
resuming his period of embarrassed silence.
=====================
Unfortunately, the economic evidence favours the Tory pessimists,
says Irwin Stelzer.
Irwin Stelzer
Recessions make strange bedfellows. On the Left we have the team of
Gordon Brown, Vladimir Putin, and Wen Jiabao, the leaders of the UK,
Russia and China. None has been elected to his job by his nation's
electorate; all preside over troubled economies; all are united
behind the proposition that their own peerless leadership could not
offset the bungling and greed of the Americans.
Never mind that Putin has scared off investment from abroad by
confiscating foreign capital, threatening foreign executives and
generally condoning an atmosphere of threat and lawlessness.
Economists rarely agree on very much, but they do agree that without
the rule of law and private property rights, no economy can prosper.
Forget that Wen presides over an economy heavily dependent on his
manipulation of the currency to keep it below market value. That has
caused distortions in trade flows that contributed to too-low
interest rates in the West.
Then there is Gordon Brown, who after a decade running the UK economy
now contends his leadership was flawless - avert your eyes from the
huge increase in private and public debt and the swollen welfare
state that has created entire regions in Britain that depend on the
state for more than 70 per cent of their economic activity. Nothing
to do with him, all the fault of American bankers, who somehow forced
UK banks to acquire toxic assets under Brown's very nose. Brown has
rediscovered an earlier hero, John Maynard Keynes, an advocate of
government spending during recessions - and, less cited by Brown,
budget surpluses during boom times.
So much for the statist trio. On the Right we have the unlikely
alliance of David Cameron and George Osborne with Ken Clarke. Cameron
and Osborne think Brown might be forced to follow in the footsteps of
Jim Callaghan, who in 1976 called in the International Monetary Fund
to bail out the UK. If forced to concede that he could not save
Britain, much less the world, Brown would contend that the experience
proves he was right all along. After all, hasn't he been saying that
the solution to Britain's ills requires action by international bodies?
Clarke, famous for his unwillingness to do the hard work required to
master any issue, has contradicted his more cerebral shadow cabinet
colleagues: his intuition tells him that the British economy is not
in such dire straits as Cameron and Osborne believe. The Tories are
paying a high price for Cameron's decision that a touch of blokeyness
is a necessary offset to the Etonian tone of the shadow cabinet.
The fact is that Cameron and Osborne are more likely to be right than
are Brown and Clarke. The pound has fallen by 30 per cent since the
crisis started, as much as before Callaghan called in the IMF. The
deficit is headed towards 10 per cent of GDP.
Worse still, three factors support the gloomy view of the thoughtful
segment of the shadow cabinet. First is confidence, or its lack. Jim
Rogers, dismissed by Brown as a "self-interested speculator", is
instead a well-regarded investor and the former partner of George
Soros. When Rogers talks, people listen. "I would urge you to sell
any sterling you might have. It's [Britain is] finished. I hate to
say it, but I would not put any money in the UK." Confidence is so
shaky that these words caused the largest one-day drop in the pound
since the Wednesday in 1992 when sterling was expelled from the
European Exchange Rate Mechanism.
Second, an increasing number of experts agree with the IMF that
Britain's recession will be more severe and prolonged than those of
most other industrialised countries. As David Cameron pointed out in
Davos: "As the OECD, the IMF, and the ECB have all said, if your
country can't afford it, a fiscal stimulus is a very bad idea." And
Britain can't afford it, largely because of the high level of
government spending and debt in the fat years.
Cameron could have cited two other authorities. Chancellor Alistair
Darling concedes that Britain has a harder row to hoe than other
countries because of its greater reliance on the decimated financial
sector. And Ken Rogoff, the respected Harvard economist, says: "The
banking sector is not stable. The hole is too big and it is not
sustainable."
Third, the Government seems unable to develop a credible anti-
recession policy. A whirlwind of prime ministerial activity is no
substitute for a coherent policy. Brown had it right at the beginning
when he focused on the banks. But he added bail-outs of the car
industry, the broadbanding of Britain, a derisory and expensive cut
in VAT, a ministerial group to shepherd the pharmaceutical industry -
all adding to a soaring deficit. Being rational, consumers have
reined in their spending in preparation for the inevitable rainy,
taxing day.
Gordon Brown's reason for dismissing these warnings is obvious: he
will soon, finally, have to face the voters. Ken Clarke comes to the
same conclusion as the data-heavy Prime Minister, but relying on his
intuition. Meanwhile, the markets seem to be saying that all roads
lead to the IMF. Fortunately, recent experience suggests that markets
at times overreact to downswings as well as upswings. If Brown is
lucky, this will be one of those occasions.
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