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Sunday, 17 December 2017

Some surprises on the Western front

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  • Peters 475px June 2014

At home with the retired brigadiers and farmers of the West Country.

IT APPEARS TO be but a small step from visionary sage to grumpy old git. Had I not known this all long along, then my summer holiday trip to the South West of England would certainly have reminded me.

Away from the hustle and bustle of London and staying with friends – some long retired, some recently retired and some not retired at all – I found myself again and again quizzed as to what I thought of the state of the economy and what I expected to happen next. It is always nice to talk to people for whom the “long term” means years rather than just next Wednesday.

Perhaps the most interesting of characters was a farmer I met at a lunch party (given, of course, by a retired brigadier general) and who had been at the sharp end of the heavy floods that inundated the Somerset Levels in March. Far from complaining, the gentleman in question accepted that nature does its thing and I soon found myself in a wide-ranging conversation with him which, almost inevitably, focused in on the economy, the recession, the banking crisis and bankers themselves. I was astonished to find that he, not unlike myself, saw bankers as bit-part players in the wider context of a society that has come to expect too much of itself and that is led by politicians who are not capable of tackling the issue.

As far back as 2008 I saw that it was “Game Over” for many of the goodies that governments in Europe provide on borrowed money. But the perceived wisdom was that if they were withdrawn – and the government expenditure suit was cut to match the fiscal revenue cloth – then disaster would follow. Thus it became currency to fight the after-effects of chronic over-indebtedness with more and more debt.

Other than lots of austerity rhetoric, not much has happened

I RECALL HOW we watched the explosion in government deficits and debt during and in the aftermath of the GFC but we justified that as shifting private sector debt on to the public sector balance sheet. I suppose we assumed that once the storm had abated, it would either be paid off – how, we did not know – or it would eventually be transferred back to a chastened and humbled private sector. So far, nothing has happened in that direction.

In fact, other than lots of austerity rhetoric, not much has happened. The “make do and mend” idea ran out of steam very quickly. The original problem that led to the crisis, namely the “need” to live to a standard that we cannot afford, remains largely untouched. Spending is not the solution. French President Francois Hollande has found this out to his detriment, as has Japanese Prime Minister Shinzo Abe. Here in the UK the talk is all about savings but when push comes to shove, little has been saved and the government is hoping and praying that fiscal revenues will grow faster than expenditure, which would be unutterably helpful when it comes to meeting the voters.

HOLLANDE’S CONTRETEMPS WITH his now former minister for the economy, Arnaud Montebourg, turned on an argument about how to grow an economy while exercising austerity. Montebourg was in his own way not wrong. Squaring that circle is not really possible; spending what you don’t have and believing that sustainable GDP growth will thrive upon a pile of debt doesn’t stack up. Following Keynes and supporting the economy through the lows of the economic cycle, only to repay when things improve is one thing, but running both cyclical and structural deficits, irrespective of where you are in the cycle isn’t a good long-term idea.

France missed the opportunities taken by the likes of the UK and Germany to restructure itself in better times and now it finds itself faced with the harsh realities of living beyond its means as well as with a citizenship that has been led to believe that better public services arrived because the French model was better rather than because it closed its eyes to developing changes. The failure of the system is now frequently blamed on some nebulous but fundamentally evil conspiracy led by Anglo-Saxon bankers and German balanced-budget idiots.

I RELATED SUCH thoughts and observations to my new-found friends in the West and found fertile ground among those whose houses have not quadrupled in value in the past 10 years. I discovered members of a rural middle class which, on one hand, was despondent when it came to expectations of what politicians thought they could achieve, but on the other also felt to be far enough away from London to be able to live life at their own pace while leaving the lunatics in Westminster to play in their own sandpit. Perhaps there is an element of frustration with the political class in the aftermath of the floods and the way in which they abrogate almost all responsibility for failings while always being happy to bask in the warm rays of success.

It may be due to the passage of time that bankers are now seen as being guilty in a contributory rather than sole fashion. Perhaps it is because people in the country feel they have been let down by the all-promising politicians, which makes them wonder whether the received version of responsibility for the financial crisis might not be quite as clear cut as it once appeared.

Whatever it was, it was nice to be able to admit to being a banker and becoming a person of interest rather than having to fear being hanged from the closest oak tree. Funny that, as I happened to spend one night on my tour with friends who now own the former home of the famous hanging judge, George Jefferies (1645–1689), whose old court room they inherited as an indoor badminton court. Above all, these people did not perceive me as simply a grumpy old git. A nice change.

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