"Save the City" pleads The Economist in the recent issue's leader. "Finance—the funnelling of savings to their best use—is a vital industry. Britain is very good at it, leading the world in various financial markets, including foreign exchange and over-the-counter derivatives."
The British financial industry would have collapsed back in 2008, had it not been rescued by the taxpayers. Had it happened it would have brought down the entire British economy. It may still do so and The Economist seems to be determined to facilitate this process.
The Economist's circulation is some 1.5 million globally and around 200,000 in the UK alone. How are such articles read in countries like China, India or Brazil? The Germans, Brazilians, Argentinians, Italians, the Dutch must have the same smirk of disbelief when they hear comments that England has the best football team in the world. But to be fair to the English football fans, for some years this has been said with a pinch of cynical self-indulgence and more like a distant dream. Britain is very good in finance? Is The Economist really serious? It sounds like a serious death-wish: British economy was nearly killed altogether by the financial industry.
Interestingly, but unsurprisingly, whilst presenting the value of the City to the British economy, The Economist leader does not even account for trillions of pounds (in hundreds or more) the City has received and is still receiving in explicit and implicit subsidies from the taxpayer. For example an implicit insurance against collapse resulting from "too big to fail" phenomenon. One may wonder whether anybody in The Economist can actually understand this, let alone have an expertise to calculate its value competently in the actuarial terms. It is not that difficult after all.
It may all sound a bit unsporting but after all, hey, we have democracy and free press, don't we?
The British financial industry would have collapsed back in 2008, had it not been rescued by the taxpayers. Had it happened it would have brought down the entire British economy. It may still do so and The Economist seems to be determined to facilitate this process.
The Economist's circulation is some 1.5 million globally and around 200,000 in the UK alone. How are such articles read in countries like China, India or Brazil? The Germans, Brazilians, Argentinians, Italians, the Dutch must have the same smirk of disbelief when they hear comments that England has the best football team in the world. But to be fair to the English football fans, for some years this has been said with a pinch of cynical self-indulgence and more like a distant dream. Britain is very good in finance? Is The Economist really serious? It sounds like a serious death-wish: British economy was nearly killed altogether by the financial industry.
Interestingly, but unsurprisingly, whilst presenting the value of the City to the British economy, The Economist leader does not even account for trillions of pounds (in hundreds or more) the City has received and is still receiving in explicit and implicit subsidies from the taxpayer. For example an implicit insurance against collapse resulting from "too big to fail" phenomenon. One may wonder whether anybody in The Economist can actually understand this, let alone have an expertise to calculate its value competently in the actuarial terms. It is not that difficult after all.
It may all sound a bit unsporting but after all, hey, we have democracy and free press, don't we?
Well Greg - With great respect and not really disagreeing with anything you say here.
ReplyDeleteI have no axe to grind as far as the UK finance sector is concerned, except that I would like to keep what small amount of savings I have fairly safe.
BUT you are beginning to sound like a one club golfer. We all know and agree that finance has been the problem, but we still need it to supply us with some GDP and tax money (15 to 20% of the whole depending on how you measure it).
If what you are suggesting is that the UK seeks to generate GDP elsewhere - perhaps by boosting the manufacturing sector decimated by the strong pound of a few years ago (hysterical laughter) then I am with you all the way
BUT until such time
It just seems to me now that we need to get past this blockage and just support finance, in the hope that
a. We can get some of the cash actually spent back
b. That we are never called upon to supply the insurance guarantees you talk of.
It might suit your political leanings ( I don't know) to hope the UK remains a basket case, but it doesn't suit mine. I have children and grandchildren who will need to make their way here once I have gone. I also believe that I can recognise my own nose and wish to keep on my face.
ALL of the countries you mention have been basket cases in the last 100 years. It will not do us any better to admit our faults - nobody else does -do they?
I see you have posted above on the Costa Concordia and your remarks on the parallels with the Eurozone are very pertinent. But what you are suggesting in this post about the Economist (of which I am no great fan) is that we should spend the next few years sorting out who is at fault for the sinking and prosecute them, before we allow anyone off the ship.
Time to move on and do the best we can. It won't be enough but there it is.
Dear RetiredDave
ReplyDeleteI think you did not take into account the costs to the UK taxpayer of subsidising the City. What they have been getting in implicit and explicit subsidies is far greater than tax receipts they generate. (By basic example: if you give me 100K a year I will be happy to pay you in taxes 40K a year back. And I can carry like that forever. Like the City. Would you consider me as a great source of your tax money? This is what the City is all about.)
As far as my political leanings I am a conservative, pro free market, laissez faire, and I do not like the idea of the taxpayers subsidising private businesses like the City. For example why is the state prepared to pay the banks for their toxic waste and the state would not spend money on buying the junk from my garage (half empty tins of paint and things like that) to help with my personal liquidity?
Best, Greg
My comment from experience in China. The UK economy, The Economist, both mean nothing there. Politically and socially, its irrelevant. Economically its minute! There is a strong acknowledgement of the role of the UK as a global colonial power, and subsequently financial power but also a clear sense that the economic power base has shifted. Equally there is a massive sense of history and public awareness that China was once the global superpower, and they are coming back
ReplyDeleteHi lamb
ReplyDeleteThanks for your comment. From my experience I could not agree more. I spoke to a number of Chinese for whom Opium Wars were not history at all but the reality from which they are recovering now. Give it some time and I will not be surprised if the Chinese diplomacy brings this matter into discussion with the British government (of course expecting a suitable compensation).
Best, Greg