11 Feb 2009
The Perils of an Economy Based on Bricks and Boutiques. Colin Hines speaks in Totnes.
Last week, Colin Hines spoke at St. John’s Church in Bridgetown as part of an evening event called ‘Money, Money, Money’. Colin is the convenor of the Green New Deal, advisor to Caroline Lucas MEP and author of ‘Localisation: a global manifesto‘. In spite of it being a foul night, cold, wet and wild, and it being an evening about economics, over 80 people turned up. I present here a record of his talk, compiled from my scrawled notes. Any mistakes here are entirely due to my never having learned shorthand as a child.
“This is the best of times, and it is the worst of times. For some sections of our society it is already becoming the worst of times, with people losing their homes and being deeply worried as things becoming more and more dire and insecure. It is the best of times in that dramatic change only comes at times of economic instability.
The problems we are seeing now accelarated with the election of Margaret Thatcher. She and Ronald Reagan brought a brusque and efficient idea, that of leaving everything to the market. The private sector, so the thinking went, is clever, the public sector is nice but essentially stupid, whereas the private sector is brave and bold and can take risks, and can lead us to a bright new uplands.
Initially this was seen as nonsense, but over time it became commonplace, due, in part, to Thatcher’s most corrosive legacy, ‘TINA’, or ‘There Is No Alternative’. This mantra got into people’s brains so much that people actually started to believe it. It became the commonly held belief that the role of governments is to get out of the way of the masterful and wonderful private sectors, the wizards of the Universe, so that they could create credit to enable everyone to feel fantastically good.
It was considered a great idea to open our markets, foreign stuff was, after all, cheaper! The consumer is king, and everything has to be cheap, cheap, cheap. And to be cheap, there has to be competition. Nigel Lawson when he was Chancellor, basically said that manufacturing is actually rather old fashioned, be far better if we just let the Chinese do it. What we British are good at, the logic went, is bricks and boutiques. We invented the idea that we should invest in our houses, which will increase in value forever, and that we should see them as being cash machines. “I’ll borrow £30,000 for a new car, put it on the house!” Also, we are a nation of shoppers, we’re great at it. It employs a lot of people, seeing as we don’t actually make anything any more. We therefore needed to create more debt in order to build all these new houses and to enable shopping. Luckily British bankers are very bright, and this adds the third ‘B’, banking.
Government, in essence, gave in to the bankers. They decided that we’d be ‘flexible’, in other words cheapest, and be ‘open to trade’. This carried on for some time, and then the bankers cooked up a huge scam, easy given that Government had given up governing and had stepped out of the way. Banks racked up huge debts. I remember hearing about 2 retired teachers in Britain who owned their houses and got a small profit from that, who got into buy to let and ended up owning 1000 houses! Our newspapers and television became filled ‘property porn’, telling people how to do up their homes to make as much money as possible.
Then came what Anne Pettifor calls ‘debtornation day’, in August 2007, when it all started to unravel. The banks had lent so much money on so little ability to repay, the house of cards of debt started to fall. A handful of us who had seen it coming, Jeremy Leggett, Ann Pettifor, Larry Elliot and others, realised that we were heading for 1929 again, that like 1929, the financiers were uncaged and the greed, theft, corruption among bankers, gullibility among the public, and cowardice among government were rife. In 1929 people had started to invest in stocks and shares in the belief that their value could rise indefinitely. They started to borrow money in order to buy shares. If we now cross out shares and insert houses, the situation is almost identical.
President Roosevelt’s response was his New Deal. He recaged the bankers, invested public money into infrastructure projects, soil conservation and so on. That worked to a degree, leading to the huge public works systems during World War 2. It led to a rich economy, and was built on an agreement between left and right, one in which business can operate but within certain rules, until Reagan and Thatcher came along and discarded those rules.
Now money is being thrown at the banks in order to get them to lend money, but to lend money for what? The UK government just before Christmas threw money at a VAT cut, which was very successful as we saw, business boomed, even Woolworths did very well from it (!) All of this is based on the idea that this is a detour, a temporary inconvenience, with its resultant embarrasing need to nationalise banks and so on. It will not be OK. People are scared and they should be. In times like this, people will stop spending and save, and this is how it should be. The idea that we will spend our way out of this will not happen.
The good side of this is that if we really learn from Roosevelt and put our money into generating jobs and business opportunities through renewable energy, transport, food, labour intensive industries then there is hope. Roosevelt had to use public money. We have already used some money to get the banks working again, based on the idea of the need for some money upfront to save money in the longer term. We need to use it to put in public transport, a sustainable food system, renewables and so on, there is a huge potential there for jobs.
There are many places that have done some small parts of this, the problem facing the government is how to deal with a rapidly downward spiralling economy. The way is to get us off fossil fuels, which offers a huge and wonderful potential. It would re-energise and diversify the economy. The great thing is at the moment that nobody has a better idea! Economists are so stupid. “People are saving.. how unpatriotic!” People will continue to save, and we need to harness that. In Birmingham, the Council is trying to reintroduce ‘Brummie Bonds’, as an investment model to raise money for local projects. These bonds are guaranteed, and in a time when people want a safe haven to invest in, what are they going to choose? Office blocks? New houses? There are safe returns to be had on a Green New Deal.
People have had a sharp taste of what is going on, but there is now a huge potential. We need to create labour intensive labour opportunities, the opportunity now exists to turn Transition Initiatives into bigger saviours than they are at present. Obama is now talking of ‘green collar jobs’, a concept that seems much harder for the gutless midgets running our government, who seem terrified of action and lack the nouse to be able to do it. Thank you.