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Diary Note /0027
Friday 22 February 2002
Hooray! At 2.00 pm on 22-02-2002 my hit-counter hit 100! That's 100 hits in 28 days - the hit-counter was installed on Friday 25 January (not freeware: I pay £15 pa for the service, 'tis excellent) - thanks to you all for your continuing interest - rwe for yesterday's thoughts
Still only 59 years of age – Treasury Forecaster 1993-96 – Economist, Malawi Ministry of Finance 1967 – one of Thatcher’s favourite gurus – Transfer to Cardiff 1997 – committed roving centre-half - still guessing?
The answer? Professor Patrick Minford, that’s who. A real dyed-in-the-wool right-wing economist. Writing this week in The Daily Telegraph, he lambasts other commentators (notably The Economist, and The Financial Times) for complaining about the excessive “strength of the £” and the “strength of the $”. Minford claims says that these rates are now determined by market forces, and that there is nothing wrong with them. “For the past five years, the £ has been at or around today’s levels… What we are observing in the exchange market is an exchange rate and a competitiveness quite close to its equilibrium. The economy is growing at 2%-3%, inflation is around its 2.5% target, and public finances are still comfortably in surplus”.
Now for my guilty secret. It derives, I suspect, from my strange history, as a socialist Managing Director. But I agree with Minford. There, I’ve come clean, my dark secret is out. I accept his conceptual model of a trading economy. Is that so bad? No doubt we are both heavily influenced by classical economics and the concepts of “equilibrium” which dominated them. I studied my economics at Cambridge (and LSE) in 1959/61, he studied his at Oxford (and LSE) a few years later. I recognise the mindset, and I find the analysis convincing.
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[More on Minford] I do not of course accept his rejection of any welfare intervention which interferes with market forces. That is what made him a darling of the Thatcher entourage. For my part, I consider that the challenge to the Left is to pursue greater equality, greater substantive freedom, and greater political democracy in the knowledge that market forces will deliver none of those objectives. But I do accept that wherever possible public intervention should avoid damaging the responsiveness of market trading systems. That element of classical economics has, in my view, stood the test of time. And Patrick Minford is a consistent exponent of that school.
The key to competitive survival in global markets is responsiveness to external change, at all levels, community, city region, province, nation – and company. The continental economies are performing less well than we are precisely because their tax levels are much higher, and their particular forms of social intervention are more obtrusive, generating greater trading rigidities. The challenge facing the Left is to achieve its objectives without any avoidable sacrifice of trading flexibility.
The old age pension is firmly back in the headlines. The issue surfaced last week, and I commented then Pensions issue will not go away . This week, on Wednesday, I was interviewed by Radio Wales for a programme to be broadcast on 6 March, designated a public lobbying-day by Help the Aged.. Radio Wales had picked up, from the cuttings, my Long March in November 2000, when I walked 220 miles to London from Swansea, to mark my 65th birthday Walk against Ageism Labour has so far fiddled about at the edges, with old age pensions. Many actual pensioners of today have been helped, albeit by means of extended means-testing. But the Government has failed to resolve the other dilemma of pensions policy, namely how to boost the confidence of today’s young that they will not face impoverishment in old age. That is a matter of maintaining consumer confidence in the wider economy. Stakeholder pensions, much trumpeted, are simply not working. At the same time, public confidence in long-term private investment is at a low ebb, and unlikely to revive in the short term. Equitable Life, Enron, low investment returns, prospects of greater global economic turbulence – these all erode public confidence. Urgent calls have even been heard this week for the Government to intervene in the crumbling world of company pension funds. The threat to the economy lies not in the cost of delivering actual pensions, but in the growing fear of impoverishment
among the middle-aged. That could eventually undermine consumer confidence, in the Japanese mannter. A storm is brewing up.
Labour now has its opportunity for real, historic greatness. Just as the record of the Attlee Government was graced by the NHS, the Blair Government could be graced by the New Age Pension, designed to meet 21st Century requirements. Labour would capture the hearts of the people, as well as their heads. If the New Age Pension were to be payable at age 67, we could certainly afford it: let nobody persuade you to the contrary. It could be financed without interfering with labour market flexibility (meeting the Minford Test, above). It could be financed at the equivalent of £150 per week for every person who had served a 40+year contributions period. In current terms, that would be 25% of the average wage. And, as the world’s fourth strongest economy, we could afford to peg pensions to that level in future, to ensure pensioners’ participation in rising living-standards.
And Labour’s Third Term would be assured, even if Blair decided to leave the implementation to David Blunkett. Or Gordon Brown, Or Peter Hain.
Those operating the capitalist smoke-screen machine are working overtime. Brokers are being blamed for giving negligent advice on the state of the company, and legal actions planned. Auditors are being blamed, for failing to alert the body politic about the impending disaster. Enron executives are being blamed, for exploiting the situation for their own personal advantage. Everyone is being blamed, except You and Me.
Yet we (and our passive American counterparts) are the ones responsible. For we, through our representatives, have failed to close any of the obvious loopholes staring us in the face. We have failed to blow any whistles We have failed to pressurise our legislators to change the iniquitous and deceptive company laws which regulate business enterprise. Could Enron happen here? Of course it could. It does, in a thousand small ways. I am certainly guilty, although I am doing my best to gather support for radical company law reform.
And you are guilty, too.