The second biggest problem - my opinion - is the class / education system in the UK suppressed the possibility of the type of talent you need in upper and middle management to enable companies to scale. You need professionals that worked their way up on the basis of merit and ability and are used to self-learning and growth. Unfortunately a degree from Oxford or Cambridge was (is still?) pre-requisite for many forms of success in the UK, from business to entertainment. For UK manufacturing this led to a situation of “amateur entrepreneurs” at the top of companies and could get a company off the ground but would eventually fail to make the business sustainable, as they lacked professional support to guide them.
Ultimately he ended up with George Kosmetzky, the dean of the business school, as a board member, so I guess there were no long-term hard feelings. But still, this episode showed where the school's priorities really were.
Should the business school give preference to applicants who say they have a real business in their hands?
Yes, when the student's business grosses $73 million in its first year of operation and he come backs to you, hat in hand, asking for more training, that should count for something.
The business school, like the rest of UT, is there to serve the public interest. If a former student needs help with a fast-growing company that would eventually spend 25 years on the Fortune 500 list, the matter of his previous grades could have been overlooked, and should have been. Finding a way to accommodate him would have been the right thing to do.
I still remember all the trade shows with vendors on Food Export. Is not that we don't want to buy British Food, it is simply the Pound make it uncompetitive, ( Not to mention their inexperience with export makes things 10x more difficult ). But ever since the pound drop ( after the announcement of Brexit ), the British brand and flag makes suddenly makes things interesting, at least it had a fighting chance on the International Market. Cheddar Cheese were constantly sold out, and Diary are now a possibility. ( Still a some way off from NZ and Australian though ).
I asked if Brexit had any impact on them and if they would rise price in the near future, and all the answer I had is that they don't see any part of the business being dependent on import, unless there is a huge spike in salary they could even sign a contract for two years, so to speak.
Does this inevitably lead to less domestic manufacturing? I think that's the outcome, yes.
This is the case for a global reserve currency that isn't controlled by any single country.
As Botswanna’s economy expands, it needs to print more money to conduct all the transactions and take advantage of the increased resources provided by an increasingly-skilled workforce. As that country’s central bank prints more money, it tries to acquire more GBP or UK treasury bills to hold in reserve. In order to do that, Botswana spends its own currency in Britain. Britons can trade this Botswanan currency in exchange for the right to receive some amount of goods/services from the people of Botswana. So britons have gained some goods as a result of Botswana’s economic expansion.
... in exchange for the possibility of needing to give someone goods whenever GBP stops being a reserve currency.
Or have I completely misunderstood international monetary policy interactions?
If you are a net exporter, you are essentially giving away your own output to a foreign nation in exchange for bits of paper. The reason you can't spend that paper is that it would destroy your exports (your own currency would go sky high as the system tried to eliminate the imbalance) and you'd have to find something else for the people working in exports to do, or you'd get a Dutch Disease problem internally (and likely end up in a situation like Venezuela)
So Botswana sells its natural assets to the US in exchange for US dollars. Those US dollars find their way into the bowels of the financial system and are discounted into the local currency. Either directly - like the Chinese do, or indirectly via some fancy financial system (normally a Sovereign Wealth fund, or Pension schemes with compulsory contributions). They then sit there (the Norwegian fund for example cannot spend anything - ever) - largely to avoid a Dutch disease in the country and to stop the local currency appreciating against the export target.
The result is that the rich countries get stuff essentially for free from the poorer countries so that the poorer countries can issue their own money without people getting agitated.
The whole thing is a conjuring trick. The poorer country would be better putting people to work creating domestic infrastructure straight away and only exporting what is necessary to get needed goods and services required to create that infrastructure. But to do that requires you to operate the central bank in a way that appears 'wrong'. You have to issue liabilities against 'Other Assets' rather than 'US Treasuries' and that upsets people who don't understand how banks actually work.
The GBP/USD gets 'locked' in the financial system. Because it is being used to discount to the scrip used locally you can never get rid of it. To do so would reveal the central bank illusion and explain how the trick is done. Then people might start asking question like: why don't we use our own money in our own circulation to ensure everybody has a job and solve unemployment permanently and forever? And that would never do ;-)
The poor countries more or less have to spend the dollars because they need to buy fuel and high tech. It's the rare exceptions that stockpile it, China and Norway, and they can afford to do that because they're oil-producing.
> The poorer country would be better putting people to work creating domestic infrastructure straight away and only exporting what is necessary to get needed goods and services required to create that infrastructure
Generally true, but harder to achieve than it sounds. Worked in east Asian countries, but not in Africa, largely due to corruption. And the amount that has to be imported is high.
> You have to issue liabilities against 'Other Assets' rather than 'US Treasuries'
I can't even work out what this is referring to.
You have to GIVE a currency value. What that means is that you must give people a reason to use that currency. Now internally in a country this is done through taxes and the bank system. Externally however this has to be done differently. It must be "guaranteed" to be exchangeable ... to the global reserve currency (so that anyone can buy what they want with it). How do you guarantee that exchange rate ? By having an instrument that's guaranteed to be exchangeable for the reserve currency. A lot of US treasuries, a little gold, a little EU sovereign bonds, ...
So instead you'd have to issue currency and make it exchangeable for local assets. So you'd loan that to local people to build roads, harbors, bridges, buildings, ... That doesn't work, because sovereignty means that you can't exchange those things for the global reserve currency anywhere near as well as you can US treasuries. Because investors are acutely aware that the government could just immediately impound their money (and there's lot of historical precedent of that actually happening), whether it's local currency or local assets. Investors would have to accept that they can bring money in, but not take it out. And good luck with that one.
1. The US never has to produce anything to buy oil. They can just print dollars and import oil. Another country, say Bostwana, has to produce something else, sell it to another country in exchange for USD and then they can buy oil. This is a significant crutch
2. The US will never have a shortage of oil before other countries do
3. The US can import anything it wants, whenever it wants. Say a year with bad weather caused low corn production. That will not take down companies dependent on corn. US can always print USD and buy corn from somewhere. Compare that to Brazil, who would just have to suck it up since they don't have enough USD in reserves to go import corn.
Not only does the US get to print the currency that oil is traded in willy-nilly. US also gets to export the resulting inflation (from excessive printing) to the rest of the world.
Please note that I am not taking any position, I just want to get more informed about the internal EU problems.
The facts show that GB had way more rights and power to decide than Germany (exlusions from certain EU rules everyone else accepted etc.)
Germany is also by far the single biggest financial contributer to the EU.
The GB politicians used to blame the EU for all their own problems. There will be a hard awakening coming at the end of the year, but I‘m sure the EU will still be their scapegoat somehow.
Seriously, nobody in Britain, Remainer or Brexiteer, is arguing for us to join the Euro. That argument is not currently live.
The ECB does not have to balance interests. It‘s independent and it‘s job is monetary stability, not economic interests.
It‘s also not widely accepted that it‘s in Germanys interest. In fact it is against it. Germans hold most of their wealth in cash. They received interest for it. That‘s hundereds of billions now gone. Germans are poorer than most other Europeans (even than Spaniards and Italians)
At the same time the southern countries have so high debt loads that they would be bankrupt without QE.
The Euro is too weak for North Europe and to strong for the South.
That's the version one would teach to high schoolers, not the real political/historical truth by any margin. In fact it's so naive I don't even know where to start addressing it.
You can follow the power plays in the ECB in all kinds of outlets, if leftist ones are not your thing, even Le Monde, Die Zeit, Frankfurter Allgemeine Zeitung, Corriere della sera, The Economist and co will do.
>It‘s also not widely accepted that it‘s in Germanys interest. In fact it is against it. Germans hold most of their wealth in cash. They received interest for it. That‘s hundereds of billions now gone.
When Germany has control over EU/ECB policies, it could not give less ducks about the German people. It's about German banks and elites doing good.
er, citation needed? Or is this due to the former DDR?
It's describing the median wealth based on a Credit Suisse Wealth Report
You can also find these results in the ING research ("Surprising differences between countries", page 14ff):
"When dividing the Eurozone into a group of countries often labeled as ‘core’11and a group of Southern-European12countries, it turns out that Southern-European households are more capable of keeping up their standard of living compared with those living in the core countries (see figure 18)"
"It is striking that German households have fewer assets than Eurozone households have on average. They not only own relatively little real estate(see figure 20)but also hold less financial assets than is common in the Eurozone(see figure 21)."
You get to read some things here that you don't know whether to laugh or cry.
Median wealth (USD) per adult:
#13 Spain 87,188
#15 Italy 79,239
#29 Germany 35,169
#30 Slovenia 34,043
"poor" is simply a generic term, personally I think it's income what defines if you live a poor's life or a rich's life.
Wealth is worth much more than income.
Historical experience, including recent historical experience. Naively, most discussions of EU power balances resolve in the nominal voting system, and the vote count allotted to each country. Germany uses its economic and political might to push around smaller nation states, secure satellite votes, and do as it pleases within the EU, far more than its allotted voting power (besides a lot of the serious decisions are taken in backroom deals, and informal bodies like the "Eurogroup", through raw power, bypassing voting altogether).
Here's a good take: https://www.opendemocracy.net/en/can-europe-make-it/germany-...
Even this Spiegel article simultaneously downplays and confirms that Germany runs Europe:
"When Angela Merkel travels to Brussels, she does so as the leader of by far the strongest economy in the euro zone. Policies she doesn't agree with don't get passed. Power as such isn't a bad thing when those that have it use it wisely. But do they? There is a new tone in Germany. It is one that no longer abides by the noble customs of diplomacy. Whispering, suggesting and hinting have been replaced by ranting and blustering. (...) The economically powerful Germany got its way. In order to put the struggling countries on the right track -- on the German track, that is -- Merkel brought in the International Monetary Fund so as to free Germany from having to play the strict overseer. Still, it has not escaped notice that Berlin is in charge. (...) German sociologist Ulrich Beck, who has since passed away, referred to the pressure being exerted on Europe from Berlin as "Merkiavellismus." 
As a matter of fact, one of the stated goals of the bureaucrats that created EEC was (and remains) to contain Germany.
"The German question produced the Europe of today, as well as the
transatlantic relationship of the past seven-plus decades. Germany’s
unification in 1871 created a new nation in the heart of Europe that was
too large, too populous, too rich, and too powerful to be effectively
balanced by the other European powers, including the United Kingdom. The
breakdown of the European balance of power helped produce two world wars
and brought more than ten million U.S. soldiers across the Atlantic to
fight and die in those wars. Americans and Europeans established NATO
after World War II at least as much to settle the German problem as to
meet the Soviet challenge, a fact now forgotten by today’s realists—to
“keep the Soviet Union out, the Americans in, and the Germans down,” as
Lord Ismay, the alliance’s first secretary-general, put it. This was also
the purpose of the series of integrative European institutions, beginning
with the European Steel and Coal Community, that eventually became the
European Union. As the diplomat George Kennan put it, some form of
European unification was “the only conceivable solution for the problem of
Germany’s relation to the rest of Europe,”
First, I didn't say it would be better if Britain was in control of Euro. Obviously it would be better if the Euro was controlled to the interests of all the Eurozone, not particular to the interests of some top-dog states. Which might even need a "two/three zone" currency.
Second, if you ask whether it be better for Britain to control its own currency, that's a given. EU aside, that's what any economist will tell you: a country is better off when it controls its own currency. Denying that is as kooky as being an anti-vaxxer.
So in essence it was taking money from Northern taxpayers to give to Northern banks to save them from illiquidity.
People in the South and their country budgets haven't seen a cent of these money.
1) QE did not transfer money with any caveat to pay bondholders. QE is not like giving cash to a country. The ECB buys up bonds on the open market (thus mostly from banks, which supports your point).
2) The buying up of bonds drastically reduces interest rates, because artifical demand is created.
3) The South can now borrow money for pretty low interest rates on high debt-loads. Italy wouldn't be able to afford high interest rates very long.
4) Northern banks holding higher paying bonds in their portfolio profited because the high-coupon bonds values increase.
I'll give you a BIG counterexample: China
Strengthening Yuan makes little difference to manufacturers:
1. Say a factory imports $100 components for widgets
2. Adds $10 value in logistics and labour
3. Exports the widget at still competitive price of $120
That does rather sum up 1970s industrial relations. Can you imagine managers like that implementing the Toyota Production System? Or anything else where the workers have an individual autonomous contribution? Of course not. So that's why the remaining large car factories are foreign-owned.
What has survived and flourished is the small high tech manufacturing industry - McLaren, satellites, etc.
After the Economist Intelligence Unit described it as the most productive car plant in Europe it was pointed out that what had changed compared to other UK plants was not workforce but the management.
I'm not convinced that what you apparently feel is a fair outcome, is an actual logical consequence. Where did manufacturing go? To SE Asia. What is the industrial relations and individual autonomous contribution like in a SE Asian sweatshop?
I don't know about "fair", but Nissan Sunderland being Japanese-run is not a bad outcome compared with the other possibilities of the 60s and 70s labour relations problem which included fears of both left and right wing coups. In the end we got moderate state violence and mass unemployment. That does need to be put right, but we can't go back to the 70s.
Much of what we now import from China did not exist in the 1950s and was developed as a technology in America, so it's not so much "went to China" as "failed to develop here". And there we do need to have a discussion about business and tech development in the UK.
(Textiles also worth considering, but that was always a sweatshop from industrialisation onwards. The brief attempt to run it with SE Asian (Bangladeshi largely) workers in Britain didn't stave off the flight to cheapest.)
The problem with “tax the rich” is that the numbers of truly rich are tiny and you could swallow their entire fortunes and they’ll be gone in a week. Exercise for the reader, how long would Richard Branson’s entire wealth run the NHS for?
The NHS spent 140 billion pounds in 2017 , so you would cover 4.5% of the NHS budget just with this wealth tax. That's not insignificant, and we're just looking at billionaires here.
UK millionaires own 6.5 trillion pounds . With just a 3% wealth tax, we raise 195 billion pounds, which is a lot more than the NHS budget.
So yes, since Richard Branson is not the only rich person, you can tax the rich, let their fortunes still increase by 1% per year, and fund the entire NHS and more.
What a smart and novel idea. Taxing wealthy business owners has worked so well all over the world for years. Let's hope they will never find out about ways to move/split their assets and tax residence.
Billionaires and multi-millionaires can just up and leave to more tax friendly destinations.
There are actually tax advantaged schemes (EIS and VCT) in the UK to try and funnel money into emerging tech and new businesses. However you would only invest in them if you were extremely wealthy do too the risks involved.
Paper assets require a supportive legal framework to transfer them usefully. Imagine creating a blacklist of tax evaders with the sort of teeth we see with, say, the sanctions on Iran/Venezuela/the DPRK. Shut down their economic life until they'll yield a useful cut.
Physical assets can't easily be schlepped across national borders without anyone noticing.
Anyway, I agree with your idea about the south east. As the article points out, Thatcher's policies focused on the south east and ignored the "North" (part of the problem being no one can agree where the North starts or ends). Ideas like HS2 pushed by the new Tories are also just making it possible to live in the north and yet still work in London, not solving any problem.
I would also argue that it allows businesses and industry to operate in the north without the location penalty. In other words, it effectively brings the areas served closer together. I won't argue whether it is the best solution, but it isn't as harebrained as some of the detractors try to imply.
Well, you can do that anytime you like. Just make a donation to your local hospital, they’ll be more than happy to accept it.
The most basic start would be to have a proper non-capped property tax. Let's copy socialist New Jersey and charge people 1.89% of their property value a year.
Do I pay that tax on the amount I have currently returned to the bank or on the full property?
Reminds me of something a popular 2020 candidate says regularly about retraining failures as automation arrives to suck up jobs.
UK might need a Yang like $1000 pound/month citizen's dividend.
Which ones are the those, the unreliable McLarens, or the unreliable (but at least beautiful) Aston Martins?
I personally think that the UK has outsourced manufacturing without investing sufficiently into STEM to make up for it.
EDIT: here it is, from 2012. I saw it again in 2016 when it was brought up to explain Trump's election, by way of reminding American elites just how bad "deindustrialization" and globalization really had been for the heartland:
"Moreover, at least some of the productivity gains shown in U.S. computer manufacturing reflect the increasing power and decreasing prices that come with innovation. When a computer chip doubles in efficiency, that can turn up in a doubling of output and productivity in computer manufacturing. But that is not what is ordinarily thought of as manufacturing efficiency.
“It is innovation that makes it look like they’re manufacturing a whole lot more in the U.S. than they really are,” Atkinson said."
Units? Weight? Volume? Dollar Value?
Manufacturing's share of GDP falls in all OECD countries. Services grow faster. Even manufacturers get more and more income from services.
Ray Dalio on the matter:
There rise is not a fluke, this is an inevitability of the planet we live on, India is next and it will outperform China by the end of this century (like it did in the past, pre-British invasion).
General ignorance of world history in the West will make this transition harder than it needs to be for Western populations.
If you're going to pin this on the west, then pin it on Rousseau, not (say) Adam Smith.
To fully understand China's economic path, you would at least need to study the economic terrain/decisions/outcomes starting in the 1750s-1800s.
So at that point China was already decades behind Japan. After this came the Chinese civil war between Kuomingtang and the Communists, interrupted by Japan attacking again.
After the Communists won it spent the next 40 years shooting itself in the foot, again delaying its rise.
Comparable places like ROC (Taiwan) and South Korea have taken off like rockets economically, and are now great places in relation to their populations. China will be the biggest superpower if it reaches same production per capita as their non communist counterparts in Taiwan.
China mostly shot itself in the foot repeatedly. First Qing dynasty then commies, pushing them back over a hundred years.
Starting in the 20th century? Skipping the first 100 years of Western criminality in China is like talking about the Titanic sinking and ignoring the iceberg it hit.
Western powers collapsed Chinese/Indian/African trade routes. An industrial revolution is great, but it works even better if you murder/colonize/enslave all the competition.
Western powers engaged in industrial espionage and stole trade secrets (Ex. Notice the countries with tea industries (the most consumed beverage on the planet)? Almost all didn't exist before this UK crime in the 1800s). In fact Chinese leadership even offered tons of free tea (one of the most valuable commodities at the time) to the UK if they could just stop producing poison (opium) around the world. The UK ended up stealing tea production secrets from China instead of accepting this offer.
Western power's "opium as a way to avoid trade deficits" policy not only led to countless murders and abuses but also led to 30% of the under 25 population being addicted to opium in China. Even worse, when this turned into an epidemic, Christian missionaries then started giving opium addicts morphine and promoting it as a cure (not a doctor but quite sure that is adding gas to a fire).
Western powers (primarily US) gave the Japanese authorization to expand West into Asia in 1905, after all the drugging they did for the better part of a century (Teddy Roosevelt was a douchebag and his wealth was mostly inherited drug money, unpopular historical fact). If you don't know why Pearl Harbor happened, it is because we reneged on this secret treaty with Japan and assisted China in the 2nd Sino-Japanese war.
The problem with popularized historical narratives (very true in the US especially) is they can be manipulated and mischaracterized for propagandizing effect. Economic history, on the other hand, cannot be played with the same way and what originally was characterized as exceptionalism now we can see is just criminality on an unprecedented scale. We can track most of the opium money, domestic and international trade flows, and economic outcomes of these countries during this period more accurately and thoroughly than using any other set of data points, like political speeches/rhetoric etc...
I wouldn't say the financial industry sucks up the best. In my experience it sucks up the most qualified and pays them too much. But none of the smartest people I know stayed in finance for long.
The Guardian has good journalism, but it is not a useful place to get interesting or insightful discussions of such topics. You are either already in the choir it is preaching to, or outside the church and completely bewildered that people can believe in such a strange world view.
As to whether Britain has been socialist, my preferred measure is the fraction of govt 'control' to GDP. The 'control' means normal govt spending plus the production of nationalized (hence often also unionized) industries. Just looking at govt spending to GDP shows the chaotic socialist 1970s, the Blair-Brown escalation early this century, and the inexorable growth of welfare spending:
Any country where the govt controls ~40% of national production is certainly socialist. Obviously countries like France are much worse, where direct govt spending is >55% plus all their ownership shares in industries, including railways, utilities, banks, engineering and newspapers: