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  • Lord Copper

The Magic Money Tree

There’s a general election coming up in the UK in a couple of weeks’ time, so I hope non-UK readers will forgive me writing a bit about that; back to normality next week.  There was a televised debate last week, billed for the ‘Challenger’ parties – that is, for those not currently part of the government, to allow them to put their opposition cases. (Incidentally, that didn’t stop universal name-calling directed at the leaders of the government parties, who were not there. “It’s a disgrace they’re not here”, was the strident cry. Umm, the clue was in the name, boys and girls – ‘Challenger’; still, why let simple fact get in the way of the chance to abuse an opponent.)

Anyway, there they were, five party leaders, one of whom would be Prime Minister and the other four who would be part of a coalition propping up somebody else. All, in other words, aspiring to power in one form or another. That some of them actually have a snowball’s chance in hell doesn’t change the desire. So this was their chance, with a ‘carefully selected’ audience of 100-odd in the Methodist Hall in Westminster and a wider TV audience of many millions, to tell those they would have vote for them what they would do. A good opportunity, you would have thought. A chance to make a case, to convince voters that you would be a better custodian of the national interest than your rivals.

So what did we see? A rational exposition of policies? A vision of how the future could be (realistic or not, it was an opportunity to show it)? No, we saw a bunch of people squabbling at the foot of the magic money tree, all shouting about how they could pick its fruit. All they wanted to talk about was spending – some more, some a bit less, but all about spending money. Now the thing with this is that governments don’t have any money, really. They take money from their citizens in the form of taxes and they borrow it from domestic and international markets, where they pay interest (in reality, also paid by the taxpayers). They are the custodians of that money; it’s not theirs. It was unbelievably depressing that those aspiring political leaders barely spoke about wealth creation, which is what underpins all the money they want to spend. Just a few passing words about businessmen/women, entrepreneurs, traders – the ones who are needed to make the engine run. Instead, we were treated to a list of how these people would spend more and more – because the only thing they think the voters care about is the free stuff they can give them. So shake that magic money tree, because that’s the only way you can pay for it.

Let’s not forget where the current economic position came from. There was a ‘global financial crisis,’ precipitated by an unholy alliance of inadequate supervision of financial institutions, egregious greed within those same institutions and politicians who didn’t understand the effects of their own policies. So the debt burden got too big and things went bang. But they didn’t go bang at the same rate everywhere. The UK was particularly badly hit because of the specific policies its government had been pursuing. Those included selling assets – particularly, gold reserves – at a time and in such a way as to pass billions of dollars of profit directly into the hands of the investment banks and funds who traded gold. This was a state-owned asset, sustained as a reserve over years and years; the market couldn’t believe its fortune. Remember, one of the aides to the Chancellor of the Exchequer who made that decision was standing on that stage last week, promoting himself as a putative Prime Minister. On top of that error, that government then went on a borrowing and spending spree – the cynical would say in a bid to buy votes – that meant that a previously strong economy was in the worst possible (well, almost) position to withstand the blast from the financial crisis. Of course, there’s nothing inherently wrong in borrowing – after all, our capitalist system couldn’t function without it – and we all do it: think of the mortgage. But it’s a bit like a carousel. While it’s running at the same speed, everything is in equilibrium and comfortable. Change the speed, though, and that gyroscopic equilibrium is lost, bumping everything around. And then think of the carousel in the final scenes of the film ‘Strangers on a Train’, where it’s wound up to maximum speed and then the brake is slammed on. The destruction that causes is a picture of what happened to the UK economy. Yes, there was an international problem, with several causes, but the UK was hit particularly badly because of specific, unsustainable policies. And we want to go there again? Oh, but don’t worry; we’re fiscally responsible, now. We won’t spend too much; but please, don’t actually add up the free stuff we’ve promised – take our word that the bankers and the non-doms and the other hate figures we’ll conjure up if we need them can pay for it all. (Incidentally, this is the same man who recently seemed proud of the fact that he’d put political party before family. That’s a profoundly depressing philosophy; that way leads to the NKVD, Gestapo and Stasi. Think about it for a moment; you may agree with me. Or read George Orwell’s ‘1984’ again; there’s the triumph of political party over family.)

Anyway, I’m not going to analyse each one of them; they all stood there, merrily talking about the extra billions they were going to spend here, the increased bill for whatever that they were going to meet there, and not one of them paid even lip service to where that money might actually have to be earned (well, to be scrupulously fair, one of them did try to push the debate that way, but none of the others were interested). Would it have been different if the two parties of government had been there as well? Not really, I don’t think. They’re rushing out giveaways, as well. 

They are all happy to talk about who will pay the taxes, but conveniently seem to forget that before the tax can be paid, somebody has to do something to generate it; that’s the bit that seems to be missing from the discussion. The theme seems to be that just making the rich poorer will make the poor richer; but it doesn’t work like that. Once you’ve redistributed it, it’s gone. And if you haven’t grasped how it came to be in the first place, you’re not going to be able to recreate it, to use again. Every regime that has based itself purely on a redistributive model has failed. Politicians who don’t pay at least as much attention to how wealth is created as they do to how they will distribute it in the form of vote-buying are a danger to all of us. We can argue about the level of ‘fairness’ – and there will certainly be different views – but the important point is not to kill the golden goose. That’s why I would have liked to see a different emphasis in that debate last week.

Sadly, I don’t see this changing in the immediate future. It’s probably a reflection of the way we now have a political class who see politics as a ‘career path’.  A bunch of people whose own livelihood comes (and always has come) straight from the public purse. Do they genuinely not have an idea of how the money they want to spend is generated? I fear that may be the case. 

So that magic money tree will need to spawn a whole orchard, the way the promises are being made. Still, who ever believed a politician’s promise? 




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