Boris is a bigger threat than Dave, say Labour supporters – But Miliband’s position is stronger than ever

Well said Konrad, the conversation is always polarised depending on the political affiliation of site that you’re on. Such a large % of the conversation amongst the commentators on LL is geared to whether your Blairite, Purnell lover etc. we miss the need for solutions. At the moment we are drastically short of anybody with any answers to the problems the country faces that the electorate trust. Where are the policies? The people dont want I’m a better manager than you.

Re: “great intellect and… courtesy”: in my case I think you are being far too generous but I am certainly not too proud to thank you for such a kind compliment nonetheless.

However the debate pans out, I have no pretensions to compete in the popularity stakes against  @PeterBarnard:disqus : indeed at time of writing I note that I already trail 5-1 in this threads “likes”.

If only this were Big Brother we could vote the bugg*rs out.

I confess that asking for a calculation of this cost was a deliberately provocative question after I recalled a recent post you made in discussion with @google-285908a073bfe41d26f162a0d9780abd:disqus on Labour’s last 10 years’ budget “current account overspend” implying (if I recall correctly) that if you can’t measure it then it must be nonsense (or words to that effect).  But that is a (slightly cheeky) digression.

While I think it is absolutely right to question the validity of the publicly stated view of any single person (especially an MP, and even more especially the Chancellor of the Exchequer, who has many roles to try and fulfil with any such pronouncements), on this matter I think we can violently agree with one another that the recession does indeed have roots in the finance sector.  Many would also suggest that these roots also extend further into government and regulators and largely centre on US, though the UK certainly cannot avoid a share of this.  Overall, however, we will probably both agree that “banksters” are the publicly visible face of this failure, and that mob justice (of which politicians are usually chief ringleaders) demands a scapegoat (and they are hardly going to blame themselves, after all…).

However, there is a wider point here (and this is the core of this comment): in the same way that the recession has its roots in the finance sector, so too does global prosperity over the last 30 years (and more specifically the enormous growth of speculative “venture capital” that has allowed, amongst other things, the tech startups and high-risk ventures like Google and Amazon to go from nothing to multi-billion dollar industries).

It is, I believe, a fairly well regarding economic truism that the higher the heights, the lower the depths of any economic cycle: or more specifically: bubbles always burst painfully, and the bigger the bubble, the louder the bang.  It appears, on sober reflection, that we are currently reaping the cyclical downturn of the longest ever peacetime-prosperity (as Gordon Brown was often saying) because, far from being based on prudent and sustainable foundations as (in fairness) everyone thought, this growth was in fact built on a bubble of liquidity based on the whims of millions of investors, who are now behaving like any other swarm does once it is spooked and have withdrawn this support, leaving us trying to deal with a situation people collectively did not think likely and for which we were woefully unprepared.

In this sense, the banks have indeed been the architects of our current situation, but I would argue they have a role that is more like that of a Bingo Caller than “Shylock”: during the good times we all behaved like happy winners, buying the Caller (and each other) a round of drinks whenever our numbers came up: now having called “Eyes Down” it turns out there are no numbers left in the drum and we are blaming the Caller for this, and asking for him to be taken out and shot.

If this blame is appropriately placed (clearly my argument is that it is not) then there is an argument I can see that the banks have done very well over the last 30 years in bonuses and now times are tough should be suffering an equal and opposite “negative bonus” to mitigate this, but this argument is simplistic as it ignores the fact that most of those who have done well have already taken their money out of the system, and those who remain (and particularly those who are suffering the reduced income) are too junior to have had any say in what went before them.

Sadly @92688d2f0ce17f45d39852ba0e3bab2a:disqus by 2008 the sign posts were all saying “I wouldn’t start from here”…

=end of UK banking industry and goodbye tax revenues and employment.

I suppose I could also add Microsoft, Oracle, Cisco, and many of the other “grandfathers ” of the current tech age, given my (admittedly somewhat arbitrary) 30 year timeframe…  Doesn’t time fly?

Thanks for your response Peter.

I think this analysis
is accurate but slightly loses sight of the bigger picture: that life has continually and consistently become easier for even those at the “bottom” of the (Western) pyramid
compared with 80 years ago, and that trend has at its heart the consumerism we
enjoy, but that has been underpinned by a number of “core” productivity enhancements, (which have proven harder to replicate in more recent years) and a plethora of “minor” productivity improvements.

By the way this is a huge point on which books can (and have) been written: I will be as brief as I can.

I think you underplay the importance of finance in the former (mass production/improvements of the public forms of transportation could hardly have happened without financial backing, and let’s not forget the huge amounts of public debt the government used/required to create housing, the NHS and many of the other “big changes” that occurred in the post-war era) but the reason for finance apparently becoming more prevalent in recent years is, I would argue, because individual impacts of such “epic” changes (of which email is probably the most recent, I would argue) has relatively decreased.

To make that point in more detail: clearly we are not, as human beings, continually evolving to
become more efficient, but our productivity (which GDP offers only a very crude
measure: it also measures “laziness” but I’ll come back to that) is
dramatically impacted by both our educational levels and the productivity tools we have
available.

As you know the number of people in an example typical office to achieve a certain role has dramatically reduced: 80 years
ago there may have been the need for a compser of a letter, a typing pool, a filing office, a
franking team, and so on; 30 years ago that same letter writer would only have needed their personal computer (and possibly a secretary), a fax machine and only the filing
team; today email typically reduces all of those requirements to the letter
writer alone.  Setting aside the arguments about productivity offsets (i.e. that the letter writer is no longer as efficient so you might need two to retain a similar amount of correspondence, due to the requirements of checking ones own email and typing one own letters), but those are a
level of detail that this comment box cannot contain, and do not affect the
thrust of the point.  To achieve further gains of that scale will be difficult short of removing the need for a person altogether.  In the meantime a range of software, management “best practices” and other miscellaneous educational and high-tech improvements are providing cumulative benefits.

So these productivity enhancements, which have dramatically reduced the number of people needed in the office, have increased individual capacity for productivity, and also hugely contributed to inequality: with a vast reduction in the “high-brow menial” tasks (typing, filing etc.), such that we are in a position where people compete for the “creative” roles (i.e. the letter/email writer).  We have managed as a society to offset this by creating ever-greater numbers of such roles, but clearly there is a limit: not everyone can be a chieftain – we still need braves.

This also means that the cost of an office has
dropped to a fraction of it’s original value, and the cost of a “unit” output has consequently fallen in line with this: this has brought the cost of consumer items and
services into the realms of affordability for “normal” people, and
with a growing trend for ease of life and greater free time, people have been increasingly motivated to spend money on services that improve their lifestyle (hence GDP,
which captures this in a roundabout way, measures this trend as I mention
above).

 
So while productivity enhances, goods get cheaper, GDP rises and lifestyle increases.

All of these are dependent on those productivity enhancements, so returning to my core point, and I particularly focus on the technological
trends here: these innovations were (and are) all financed by banks: whether
that be directly (loans, although that is a relatively small proportion, I would argue) or indirectly
(“matching” risk with investor appetite as a portfolio – e.g. some
venture funds, asset leasing) the impact of finance should not be simply
swept under the carpet with an argument along the lines of “well they
only give us money to keep us spending”.

I appreciate your reply, David, “odd formatting” an’ all.

As I said, a book could be written about this and I’m not about to start one. This thread could turn out to be like watching tennis, as the ball goes backwards and forwards.

Thank you again.

David : plus,  the boxes are getting miniscule.

“See you around.”

The interaction between share prices and banking is probably one of the most common misunderstandings when people think about “finance”, as I’m afraid this post exemplifies.

“Bankers” rarely influence share prices directly, and I would estimate that 90% of bankers’ bonuses are not  in any way related to the share performance of a company (although since many bonuses are physically paid in shares, they are often impacted far more heavily than “normal” people in a downturn).

When you think of traders (Nick Leeson et al) they are typically dealing in commodities (Oil, Gold) or hedges (interest rate, forex).  Again, these are not shares.

The main people who deal in shares are pension funds, which leads to your last paragraph: some banks offer pension funds, but not all pension funds are banks.  In any event it is the fund manager who charges the fees, regardless of whether they are a bank or not: if you pay the fund directly the bank doesn’t have a look in, and the only “skimming” of fees/returns on those pots will be the tax put in place by Brown as Chancellor.

Thank you for your warm words, Mr C.

I’m not so sure that a “changing the goal-posts” attitude is confined to the finance sector, which seems to operate (or did operate) more on bonuses based on this year’s profits.

FTSE-100 directors, however, are pretty adept at changing the rules regarding their remuneration and it’s a scandal, especially so in the electricity, gas and water industries, where output hasn’t gone up by much more than population increase but directors’ wages? Jeez, I think is the appropriate reaction.

Electricity, gas and water are (i) natural monopolies, and (ii) strategic utilities, and there’s only one answer : nationalisation.