It is helpful to say that England in Dickens’s time had the highest real wages ever known by this or most other countries. (It’s a mixed picture as this paper is good at discussing.) Awful things happened, and especially to poor people. Indeed, our own times are a walk in the park compared: but then our own times are pleasanter (at least in material terms) for nearly everyone, nearly all the time, than they have ever been.

It is frankly absurd to say that the material well-being of our times bears comparison with that of Victorian England.

Ian Hislop’s thesis was a muddle. He had the bold premise that Victorian bankers were morally superior to our own. There’s something to be said for the seriousness and moral purpose Victorians showed (and my own interest in a professional renaissance is based on that sort of thought). But he ran out of steam quite quickly: as he pointed out, there were bankruptcies, pure greed, nastiness, and instability in the Victorian financial world, and indeed they had greater and worse consequences than the venalities of some of our own capitalists. Hislop’s ending was about right: we could do with more of the best of the Victorian spirit.

And of course, the big problem of Hislop’s thesis is that the modern affluent pay far, far rates of tax than ever the Victorians gave away in philanthropy. And it is of course a problem of socialism that it makes virtue compulsory and that runs contradictory risks. On the one hand, compulsion robs virtue of its moral quality. On the other, compulsion makes virtue invisible.

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So far as I can see, since the late 2000′s the UK’s GDP has slipped several percent from its historic high. It is now somewhere around its 2005 level, and slightly rising again. If in the decade 2009-2019 it rises back to where it was in 2009 (say), it would only be true that we had lost a decade of growth. But – and surely this means something – at no time in that process were we worse off than we had been in 2005 – and that was an historically affluent year which itself followed many years of amazing trend growth, itself only sometimes interrupted by periods of faltering or sagging growth.

Of course, if the “wealth” we enjoyed in 2005-2009 was largely phoney, immoral, or debt, then in some sense we haven’t lost affleunce as lost the delusion of it.

We are supposed to be enduring a “lost decade” in output and that this is not going to be recoverable. But what does this mean? On the face of it, it is hard to believe we won’t one day produce as much as we did in 2009, or whatever.  We are perhaps supposed to believe that we are losing productive capacity and can’t get it back. Is this anything like the destruction of British factories wrought by Hitler’s bombers, and if so – surely we rebuilt then and could again? Indeed, Germany’s post-war industrial success is sometimes attributed to the fresh start they had as they recovered from the RAF’s depradations.

It is of course peculiar that we have less equality than we are used to (though that picture is quite complicated). It is interesting how hard it is to see solutions to that problem, if it is one.

It is true that the plight of un- and under-employed young people is sad. But I think it may be wrong to think they have lost a decade or are a lost generation. For one thing, they presumably have the means to continue their education, including self-education. Even at a virtual level, they have resources which no previous generation in history can imagine. It won’t be the fault of the capitalist hegemony if this generation fails to produce mountaineers, poets, musicians, linguists, philosophers, mathematicians and even entrepreneurs out of a period of enforced leisure.

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The protestors are asking The City to explain itself, and (so far as this dedicated reader of the Financial Times can see) there’s been no reply. Where is The City’s answer to the question: Does The City do a good job?

The Big Question for The City
There are dozens of compelling questions, but we can cut our way through them by stressing that the overwhelming – the prior – question is: does The City produce sustainable finance?

This question is urgent, but also searching. The financial system has no merit – no chance of doing good, or of reform – if it collapses, is too volatile or can say little about the future.

So I agree that the Long Finance initiative is on the money when it asks: “When would we know our financial system is working?” The question has the merit both of ordering and of challenging subsidiary questions.

So the question is not whether The City is good for more obviously exciting things such as:

• equity
• the environment
• resource sustainability
• climate change
• the Third World
• work/life balance
• gender equality
• manufacturing vs services
• philanthropy
• its employees
• fast growth.

People who ask The City about such questions have to prove their relevance to reliability. It’s that way round.

Getting a response from The City
The City is the trade association for the totality of its trades and professions. But is it one brand and one business? For all I know, different sectors of The City have profoundly differing interests. Some may thrive on financial catastrophe, for instance.

Even so, I long to see some body – Gresham College, Long Finance, the City’s Corporation, or anyone – making coherent arguments about what The City does, what its benefits – and yes, its tensions – are, and what it seeks from government. It can’t make those cases without first of all saying what it does well enough to need to be left alone, or encouraged, to do. Come to that, it will need to be clear about where it fails, and where it needs to be regulated.

The City cannot merely say it has been part of Britain’s economic success. Its history now includes its recent history which shows dramatic failure to be good at its job.

I can see that there is an argument for The City’s saying very little, for fear of exposing profound conflicts, uncertainties and even sheer nastiness. Better to muddle through and hope for the best.

I can see that some players may not like to make an issue about the incompetence or wickedness of the Square Mile for fear of its revenge.

If those gloomy thoughts are true, then what follows is wishful thinking.

I am, though, inclined to argue that The City’s Corporation is in some sense a professional body whose business is to align the pro bono with the capitalist.

This is importantly a matter of character: if The City was a person, what sort should it be? I imagine it should be ambitious, greedy, reliable, honest, frank. Such a person would seek the advantage of himself; his firm; his firm’s owners and investors and also – in some limited but limiting sense – society and even the future. Some of these are mutually exclusive or at least in tension, and some are unquantifiable.

But such a person would begin where Long Finance begins. He or she would ask: Am I stressing and exploring the importance of The City delivering returns for the longer term? The answer might be: I am contributing to the future by being short-termist. Or: I am contributing to sustainability by being a shark.

The point is: the question must be asked and answered by each City person and The City as a whole. And the proper replies and proper actions will only come from people of character: those prepared to be awkwardly decent and awkwardly frank.

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Here’s my brief to myself.

I think the document Of Equal Value: Poverty and Inequality in the United Kingdom makes some important mistakes, and in particular it makes the mistakes common to the leftish poverty campaigning of the socialists and the churches.

Here’s a core statement from it:
“It is entirely uncontroversial that being at the bottom end of a highly unequal society is much worse than being at the bottom end of a more equal society, ie that equality is better for the poor.”

This is claptrap. It rehashes The Spirit Level argument which is wrong in several ways. (And which I reviewed at the Social Affairs Unit site.)

Try this test: Pakistan and Australia are about as unequal as each other. Bangladesh is a little less unequal than the UK. China is a little less unequal than the US. So we are supposed to be indifferent whether we are poor Pakistan or Australia and positively to prefer to be poor in Bangladesh or China than in the UK or the US. Right. Tell that to the poor people who long to emigrate to the unequal Anglosphere West. (See below for a link to the CIA Factbook evidence.)

I agree that most very unequal societies are horrible: many are in Africa. I agree that some equal societies are very nice: but some of them are in Scandinavia. I wouldn’t want to live in either class of society.

Do not be blinded by the happiness of the egalitarian Nordics and Scandinavians. They are fairly cheerful because they are rich, not because they are equal. They do pride themselves on their equality, but they are losing some of it and anyway take far more tranquilisers than the apparently uncheerful Brits. (See below RDN mini-essays which over some of this.)

The document assumes that poverty is bad and that inequality must be bad because it increases poverty. I think there is the additional thought that inequality is bad because it is a sign of the indifference of the rich toward the poor.

Actually, in Western societies poverty is not necessarily all that awful since it is defined (as the document notes) as having less than 60 percent of the median wage. When the median wage rises, lots more poor people may be created, but these “new poor” are no worse off materially than they ever were.

The document makes what is surely the mistake of linking poverty and inequality without spelling out the terms of the link. There is certainly a correlation between inequality and poverty in some Western countries. But that there is a causal link is way less sure and certainly not proved. I mean: the link is not remotely proved. We have no evidence whatever that increasing inequality increases poverty in any real way. Indeed, the poor generally benefit from economic growth, and if inequality is a stimulus to growth, then the poor may well benefit from it.

It is generally assumed by the left (and the document) that a very unequal society ought to be balanced up so the rich get less rich and the poor get more, generally in a straight swap. But it is already the case that the rich pay a hugely disproportionate of the nation’s tax and it is not clear how wise it would be to tax them more, even from the point of view of the poor.

It’s worth noting that in the UK the top 10 per cent earn 15 times as much as the bottom 10 per cent. But after tax and benefits are taken into account, that shrinks to about a five times difference.

It is sometimes argued that there is less social mobility in unequal societies, almost by definition. This seems absurd. The US was once the capital both of inequality and social mobility. This was always much more true of England than the left likes to admit. Nowadays, the US and the UK are famous for becoming less socially mobile.

This may be the case, in the sense that we may have lost the key to educating and motivating the working class and especially the underclass to success. This may have many causes: liberal education has made schools pretty hopeless as launching pads; the cream has already floated out of the lower classes; modern job demands are far greater than they were; benefit dependency has lead to what amounts to a moral erosion; deteriorating parental skills and standards have become endemics; and so on. (There’s a very good account of  these processes – more PC than mine – in the New Statesman, under the title “It’s not all bad news on social mobility.”)

It is important to stress that the modern world has made social mobility demanding: not policy; not the malevolence of the rich and their class interests. Anybody, from anywhere, can acquire the skills and get the luck the modern world needs. Indeed, people from good and bad backgrounds probably share about the same amount, but not type, of advantages.

I am struck by the poverty of policy recommendations made in the document. It’s more about soup kitchens than about motivating the poor to rise above their circumstances. I think this flows from an attitude which is more old-left than spiritual, or religious. It risks casting the poor as victims; as not spiritually the equal of the better-off.

I should perhaps add that the right is not necessarily indifferent to human suffering, but it is committed to the view that the state is not likely to do much good when it tries to do good. So there are tense and interesting issues for the right in all this.

Useful resources:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html
http://www.ifs.org.uk/comms/comm118.pdf
http://www.ifs.org.uk/projects/347
which leads us to:
http://www.ifs.org.uk/budgets/gb2011/11chap12.pdf
http://richarddnorth.com/2010/03/rdn-on-affluence-and-envy-on-bbc-news-channel/

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The funny thing is, thirty years ago black mothers were appalled at what was happening to their children. One day, as I waited for my own young at the school gate, I asked some of them why they didn’t complain about the school’s free and easy approach to education. They said that white liberal school-teachers wouldn’t listen to them and that it was I, a middle class white, who should take up the cause. I replied that as a right-winger I was a red rag to a bull to the liberal teachers. I added that it was only black mothers who could command respect and attention.

Anyway, the upshot was that a great tradition was lost. Those Caribbean mothers were the last generation of English working class people to experience old-style schooling, though they did so as colonial subjects, and whilst in a colonial backwater. The white working class had always been pretty uninterested in improving itself so for them liberal education merely made a bad situation worse.

You may say that the young underclass are exposed to plenty of other bad influences other than a non-education. They suffer by being at the sharp end of the war on drugs, rap music, video games, a recession, shows like The Wire, and maybe the classic immigrant disaffection with the parent culture, and you can perhaps think of others. Still, they are chronically ill-equipped to fight back, and that was a two-generation educational failure. Let’s hope there won’t be a third.

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Curiously, it matters what we end up believing about George Osborne. Conservative political commentators are deeply opposed as to wether Osborne is a right-wing small state Tory (Peter Oborne said he was on the Today Programme, 23 October 2010) or a pragmatic centrist with Big Society overtones (Matthew D’Ancona, same show). One clear conclusion from this disagreement is that Osborne is opaque. He talks about his regrets at the present cuts, but is often described as thinking them sound on permanent ideological grounds as well as temporary fiscal ones (see, for instance a column by Bruce Anderson in the FT at the time of the 2010 conference). 

It seems fair to concluded that if we can’t make our minds what Osborne thinks or wants, then we are in the same boat about Cameron. After all, the men are supposed to be in close agreement.

I think there is a way through these issues. Sunder Katwala  of the Fabian Society said on The Week In Westminster (23 October 2010)that Cameron is a One Nation, pragmatic, High Tory who wants to govern but “may be more ideological than he thinks he is”. Katwala thinks Cameron has a creed which embraces “sound finances”, which is a more ideological stance than those who hold it suppose.

In the same conversation, Ian Birrell, a Tory speechwriter, seemed to agree with Katwala’s analysis, but added that Cameron does definitely believe in the Big Society.

Steve Richard didn’t press the point, but wondered if the Tories were just scared of saying what they want. Catching the presenter’s drift, Katwala noted (crucially I think) that if Cameron is “successful as presenting himself as a pragmatist he may get to be a revolutionary”.

I think this is the point of the Good Society mantra and that it has to be infuriatingly vague because it is cover for some as yet undefined post-state activity which horrifies many of the public. That’s to say that the state may use redistributional taxation to fund access to welfare services for some citizens, but it will own none of them. The guilty secret is that commerce of many different sorts will be doing a high percentage of the work we now think of as the province of the state. “Big Society” is designed to cover that.

“Big Society” is obviously also cover and code for progress toward more people paying for more welfare by direct payment and insurance, some of the latter perhaps compulsory. “Sound finance” is code for that too: what can’t be paid for by state borrowing will more likely come from citizen’s own spending. 

I am tolerably sure that Cameron and Osborne are determined not to “waste the crisis” of the fiscal deficit but are absolutely sure that almost nothing can be said directly. “Sound finance” is for some reason the sort of tough talk the British like. Out of it will flow the beginnings of reform to the welfare system which are a far harder sell. 

Cameron and Oborne have had to design a language which works electorally but which disguises their real goal without being egregiously dishonest with the public. They have just about pulled it off. I think it is fair to say, as I have elsewhere, that this is a “Tory Coup” and that the strategy is an affront to the Tory leaders’ declared intention to govern openly and steadily.  But at least we are nearer to having a decent theory as what they’re up to.

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[This piece ought to be read with this pinch of salt: Nick Clegg told CNN (26 September, 2010) that the Coalition would end up with a tax-take of about 41 percent rather than Evan Davis's 37 percent. If he's right, the tax-take will be about that inherited by Labour from the Tories in 1997, and which they promised they would maintain for a couple of years.]

The dreaded Mrs T never achieved that (36 per cent) level of take, let alone the rate of reduction implied. (That is what I take from two salient documents, one from the IFS and the other the IEA.) In short, the Coalition is headed toward American tax assumptions and miles away from Franco-German, let alone Scandinavian, ones.

I would be even more thrilled if it weren’t for my anxiety that such matters ought to be discussed or at least pre-announced, as a matter of democratic accountability. I do of course see that the Coalition has probably just been learning the lessons readily to be gleaned from Tony Blair’s Journey (subtitle: A handbook to post-modern political reality): (1) Don’t waste your honeymoon; (2) don’t consult, lead. But these are lessons by which to bamboozle suckers, not build consensus and be transparent, which is supposed to be the New Tory mantra much more than it is mine.

It is additionally odd, you might say, that taxation is so popular, as Evan also let us know with the Comres poll conducted for the show. This suggests that redistribution of national wealth may be quite a sellable proposition.

That seems like a proposition to comfort the left. High taxes, big welfare state etc.

 But we need to remind ourselves that the state does not have to spend or control whatever level of redistributed wealth we go for, even if it forces the exchange through taxation. That was the lesson that John Major started proving with his reforms of the welfare state, and which Tony Blair began to sell as he fought to find words for the new State-Lite assumptions he thought were becoming the modern thing.

The Comres data also suggests that the poor really don’t get it. They of all people resist the thought that they do quite well out of the benefits that taxation brings. That may – just – be because they see the damage that Welfare Dependency brings them, though I doubt it. It’s more likely that they have an exaggerated view of their Welfare Entitlement. The core of this problem is the “Social Justice” mantra by which the middle class socialists constructed a language by which the poor are not allowed to be grateful to their benefactors. To put that more coolly: the poor were robbed of any sense of obligation, and that really did scupper them.

If we put all this together, I think we see a future in which there mey be a good deal of state redistribution which funds the poor (and maybe even wider society) to have the benefit of social services which aren’t owned or even controlled by the state. So, yes, it’s socialism, and Big Society, and volunteerism, and market provision.

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(1) The caveat.  

The next months of severe weather may produce horrible new auguries. We’ll see. If the Macondo spill is or causes or triggers an unparalleled ecological disaster all bets are off. However, even if the Gulf suffers quite severe effects, there will be a colossal argument as to how much of the damage is from the present spill. It may be that the conclusion settles down to this: the Gulf has needed better care for several decades, and there is a limit to how much BP should made to pay for historic damage which its accident has worsened.

(2) It is likely that BP was in the process of becoming, under Tony Hayward, more of an engineering company. The next few months will reveal the degree to which this was true, and if, and then why, this message failed to reach the Macondo operation. It doesn’t seem very likely that BP was very far from being as technically competent and as safety-conscious as other majors. 

(3) It is likely that all oil companies will have to prove themselves increasingly safety-aware, just as all regulators will have to show themselves cleverer at their work. This will impose new costs on exploration and much else. But these won’t be transformative, surely?

(4) If BP loses its current CEO and Chairman, or either one, as sacrifical lambs, that may slightly effect the company for better or worse, but in itself wouldn’t be a transformation.

(5) As BP cashes in some assets to fund its liabilities in the Macondo aftermath, that may improve rather than damage its financial prospects (make it a more coherent or profitable firm, for instance). It may not amount to a transformation so much as a valuable readjustment.   

(6) In the bigger picture I can’t see how the Macondo spill will hugely change the logic of the USA’s desire to shift from a 60-odd percent oil import dependency and back to the historic 30 percent dependency. The foreign sources of oil and gas are not getting notably more secure or agreeable as the years pass. The spill won’t much dent the US’s appetite for home-sourced oil.

(7) People who want the US to embrace high-cost fossil fuels as a response to climate change have latched onto the Macondo spill though damage to the Gulf Coast is not related to climate change (or not much, yet). Even if the link was made, and the US citizen accepted a tax-hike to European levels (none of which is immediately probable), demand for oil would be high, and demand for Gulf oil (including deep-sea Gulf oil) would surely be barely dented.

(8) Taxing fuel is a tense political business. The UK adds about 70 percent in taxes to oil prices and the US about 25 percent. So notionally there’s room for manoeuvre in the US. But politicians usually set taxes at levels which maximise revenue, or at least optimise it. Very few dare set taxes at levels which change behaviour, not least because such levels would be punitively high in political terms. And there is a further dimension: if “carbon” taxes were very high, income and employment taxes would have to be reduced, so people would feel rich and maybe rich enough to pay quite a lot of carbon tax.

(9) All in all, it isn’t clear that the Macondo spill will bring about or even much encourage the political drivers for radical transformation in the US or global oil business. BP may change hugely, but that’s far from ceratin. The accident will encourage better safety measures, maybe produce a leaner and cleverer BP, maybe spur a new health regime for the Gulf coast, maybe promote more discussion and awareness of the wider risks of the oil economy, including climate change.

(10) Meanwhile, it’s important remember the men who died in the initial explosion. More generally, I should say that I write all the above with the feeling that I hate scapegoating and grandstanding, and have a strongly believe that things do getter better almost all the time, especially in the West, and especially because we take risks and learn from our mistakes.

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(1) Reforming the Welfare State

It’s a long old argument, and Tories have done well by ducking it, but how are we really to get the state to have an optimal (minimalist but efficient) role in guaranteeing rather than providing welfare? Maybe this country really does want and will insist on a state-heavy approach, but I doubt it.

(2) Living with global capitalism

It seems likely that this country faces a long hard economic future in which its appetite for public and private spending is challenged by its difficulty in competing with increasingly successful and aggressive countries all around the world.

(3) Being a world hub of capitalism

It seems very likely that a large measure of this country’s economic success will depend on its being one of the HQs of world capitalism. That will mean that it remains highly unequal and has to be extraordinarily clever in its treatment of financial regulation.

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