That Michael Meacher program

It’s the Bennite program without the wit or intelligence.

The banks remain largely unreformed and still mainly invest in property, overseas speculation, tax avoidance and financial derivatives rather than in UK industry. There has been no manufacturing revival and last year imports of traded goods exceeded exports by £106bn which is simply unsustainable.

Yes, and at least part of that traded goods deficit is paid for by the services exports of The City in overseas speculation and serving the financial needs of foreigners.

This can be paid for without any increase in public spending at all. Either a new round of quantitative easing could be targeted not at the banks, but directly into industrial investment, in consultation with business leaders and service providers.

You can see the baleful ideas of Ritchie here.

Or the mega-rich – just 1,000 richest British individuals have increased their wealth in the last 4 years by a staggering £190 billions according to the Rich List – could be charged capital gains tax on the increased value of their assets, which would be enough to generate more than a million jobs in two years.

And that’s particularly good. So we’re going to tax the people who have profited from employing people in order to encourage people to employ people?

I have a feeling that incentives don’t work in quite that manner.

The basis of the British economy remains highly dysfunctional, with an over-dominant City finance sector counterpoised by a shrivelled manufacturing sector.

The City is about 4% of the UK economy. Manufacturing is 12% or so. Eh?

The control of the money supply and hence of the direction of economic development, which has been franchised to the big five private banks over the past 30 years, needs to be brought back into public policy to ensure that primacy is given to manufacturing and exports over consumption.

That’s the MMT nutters like Anne Pettifor (and Ritchie of course).

Yet the only long-term sustainable future for the British economy is through a major expansion of hi-tech manufacturing tapping into the creative skills and inventiveness at which this country excels.

But he’s been talking about creating jobs! And the one thing we know about high tech manufacturing is that it doesn’t produce many jobs. There’s another point here as well. Manufacturing what in this high tech manner? We’ve the brightest minds of our generation all sitting over in Silicon Valley and trying to work out what should be that next high tech manufacture. They become billionaires if they get it right too. Most of them still get it wrong of course. And so who is to decide what will be manufactured here? In this wondrously high tech manner? Ann, Michael and Ritchie are going to knock up a few product designs over the herbal tea are they?

The man’s acting as fly paper for every bad idea about economic planning doing the rounds.

30 thoughts on “That Michael Meacher program”

  1. QE “direct to industry”. Isn’t QE the purchase of ‘troubled’ assets by the central bank? What assets will industry be selling? Or is it just printing money to ‘invest’ in industry? Five minutes after that cash arrives every union in the country will be screaming about “fat cats” and clamouring for 30% pay increases. Welcome back to the 1970s.

  2. ” So we’re going to tax the people who have profited from employing people in order to encourage people to employ people?”

    where do you get that idea? here some alternative sources of wealth for these rich people, other than “employing people”: firing people, owning land and other assets.

    some of them might have amassed their fortunes by hiring people

  3. Luis,

    1) I didn’t know owning property and hiring people was mutually exclusive

    2) in order to fire you have to first hire

  4. I agree with your general thrust, Tim, but MMTers don’t advocate central economic planning ideas like inducing banks to lend to manufacturing rather than property. It’s Positive Money and the New Economics Foundation that go in for that sort of thing.

  5. Charging capital gains on assets, one way to both scare people away from the UK and at the same time bankrupt the ones who are here. Give someone with assets a big capital gains bill the main way to pay it will likely be to cash in some assets. Who will buy when they will also be risking being taxed? So fire sale of assets and encourage rich people to live elsewhere – and while they are at it, spend their money elsewhere.

  6. Actually MMT preaches that ONLY the State can drive growth, so only the State can have debt – in fact must have debt, so the State must have TOTAL control over the economy.
    If this wasn’t nuts enough there are some MMTers who believe commercial banks actually create money “out of thin air”. This is best summed up by Ritchie, who else? He tells us this week that Paul Krugman’s criticisms of MMT et all prove he doesn’t understand money. That’s right folks, Ritchie tells us that Paul Krugman is an idiot. Just for good measure, his Nobel award is proof he knows not to bite the habd that feeds.

  7. I don’t expect Mr Meacher would be very keen on paying CGT on the unrealised capital gains from a date set at the bottom of the market on his property empire.

    So why does he think this is fair for anyone else just because they are richer than him ? Sure charge CGT on realised gains. But we do that already.

    There’s an odd meme on the Left that thinks the super rich have done well out of the crisis because the Sunday Times Rich List shows £100bn gains. Without ever mentioning that yjis is merely a recovery from the 50% collapse in asset prices back in 2008/09.

    And the collapse of sterling has made all these super rich foreigners overseas assets 20–30% more valuable in sterling terms.

  8. Luis>

    If those activities are profitable, then what you’re actually doing is helping more people find profitable employment. If you come into a company and make money by firing people, it’s because the company was wasting money on employees. That wasted money can now be used to do something more economically efficient, creating profits and thereby more jobs than were originally cut.

  9. I get that you can fire people you’ve not hired if you take over a company, but how does that make you richer?

    If the people fired aren’t doing anything useful, then sure, but then that’s how market economics works to direct people into doing the most useful things – thus ultimately making us all richer, at least in aggregate.

    If the people you fired were doing something useful, then your company output shrinks, and usually that makes it worth less.

  10. Dave,

    no. there is no rule that reducing waste and increasing profits will increase employment. Efficiency and real profits increase over time but unemployment has not vanished. You might think increasing profits is good for other reasons, but the claim people who have gotten rich did so via employing people is, in general, wrong.

  11. “By far the best way to cut debt is by expanding the economy – sustainably, not by short-term fixes – to get the jobless off benefits and into work”
    Er – how about letting work pay more than benefits? “ommigodno” – that would mean rolling back all of Brown’s changes and admitting he was wrong.

  12. Cannot recall any UK government who have expanded the economy sustainably, not by short term fixes. Businesses can and do, cannot recall government. Unsustainably government have managed of course – invading countries and sending treasure & resources back to blighty, bit of official piracy and so on.

  13. @ Luis Enrique
    “the claim people who have gotten rich did so via employing people is, in general, wrong.”
    So Harry Oppenheimer dug all the gold out of the ground by himself? and Rhodes dug out his diamonds? Bill Gates wrote every program? Most of Buffet’s money comes from continuing profitability businesses he bought long ago, not from the deals he does. Crassus needed his fire-extinguishing crew to be standing by while he haggled with the distraught property-owner. Sir Richard (“Dick”) Whittington could not have spent three years (even non-consecutive ones) as Lord Mayor of London if he lacked trustworthy employees to run his business during his virtual absence. Branson got his start by hiring someone to market Mike Oldfield. That’s the tip of the iceberg. Virtually no-one becomes rich without employing people – David Beckham’s agent generated over 90% of his income by exploiting his talent and good nature in a way the latter would have prevented him doing himself. Even Cheri Blair has to hire a Clerk of Chambers to negotiate appointments and fees.

  14. Ironman,

    You are totally clueless as to what MMT consists of. Please stop mouthing off on the subject.

    Just one example of your ignorance: you say “If this wasn’t nuts enough there are some MMTers who believe commercial banks actually create money “out of thin air”.

    Well Mervyn King said “When banks extend loans to their customers, they create money by crediting their customers’ accounts.” I’d guess King knows more about this than you.

    And if you want, I can produce a series of quotes from others, including Martin Wolf, saying the same as King.

  15. Ralph Musgrave
    Oh how delightful, you’ve saved me the trouble of needing to write out the lunacy of MMT for myself. Yes you can find a thousand quotes, none of which you understand. A quick trip to Wikipedia would explain to anyone else what I’d meant by banks creating money. But don’t you bother yourself; you and the other MMT loons stepped through the Looking Glass long ago.
    So let’s look at your idea: a commercial bank can issue a loan simply by crediting the same amount to another account (is it another, or is it the same? Are you sure you’re not mixing up account with facilty? Does the customer have access to this credited sum or is it fictitious?) And then everything balances and money is created and pigs fly!
    Well yes, but then at 4pm, because that’s what those pesky rules say, the bank either needs to show it had made the loan from deposits it has already received or it goes and borrows from other banks (LIBOR anyone?)
    If it didn’t need to do that, then what: when the loan goes bad (sub-prime?) does the bank just write down the amount it has credited to the customer’s a/c, thereby reducing the money supply? If so, then why did we have Northern Rock, RBS, Lehman Bros? How can a bank ever be in trouble if all it needs to do is credit the same amount it has just loaned out and vice versa?
    You’re dead right about one thing; Mervyn King has forgotten more than I will ever know. I, however, have at least attempted to understand what he means.

  16. I’m with Luis on this (and with what Tim normally says, that jobs are a cost). Tim starts by saying that Meacher will discourage those who have made money by employing people (the famous “job creators”) then goes on to say that high tech manufacturing doesn’t employ many people.

    Plenty of people have become rich by finding ways to employ less people (or less skilled/expensive people). See the Industrial Revolution (or Direct Line, where Peter Wood found how to use computers so any fool could underwrite insurance risks).

    None of this is to support Meacher. Just to say getting rich does not always involve creating jobs.

  17. If someone produces wealth without employing large numbers of people, that still means that a wealthier society can employ more people doing all sorts of jobs that the society would previously been too poor to support.

  18. Hands up who wants a job in a factory?

    It’s funny. About the only thing the left love more than complaining about the evils of factory work is complaining about the lack of factory work.

  19. Judging by the size of manufacturing in our economy, factory work still exists – just not perhaps like it used to be when one was the main employer of the town and a drop in orders hit the town especially hard. May still be some towns with large factory employment but not as big as it once was.

  20. @ Martin Davies
    Well allowing the private sector to increase total GDP per head by 2.3% or 3% pa compound through capital investment. In the so-called “thirteen wasted years” Real GDP grew at 3% pa enough to double it within 25 years.
    Thatcher wasn’t quite as good – Wikipedia (I haven’t time to dig out ONS data to answer a troll) says “Real gross domestic product had grown by 26.8% over 1979–89 in the United Kingdom as against 24.3% for the EC-12 average”.
    There is no such thing as a long-term fix that will maintain real growth past the second successive Labour Party general election “win”, but I decline any claim that ten-year growth of more than 25% is a “sort-term fix”. Unemployment rose under Thatcher because BR stopped employing firemen to shovel coal on diesels and, preparatory to privatisation National Power sacked the one-third of their workforce who had been redundant for years while increasing output and BT started to demand that their employees actually did their job: the famous case when the CWU persuaded a High Court Judge that allowing C&W to compete in the UK market would be a threat to their members proved that the overstaffing in BT exceeded the number of staff who might be less efficiently employed by a competitor.
    Is that enough? There are no statistics on “quality of life” dating back to the 1940s and 1950s but the improvement in the 1950s was so massive that youngsters don’t understand. In 1951 most of the boys at school wore patched shorts, many wore patched shirts but the patches were less obvious.

  21. @ Ironman
    Thanks, but 90+% didn’t need any research apart from my memory: Attlee’s rationing is unforgettable for those who experienced it.

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