There’s a lot of chatter presently that Europe is headed into a “double-dip” recession that will take Britain with it. The Conservative-led government of David Cameron must stand firm; the alternative is a disaster of — well, frankly, of European proportions.
It’s been a little while since we’ve had a video clip here at The Red And The Blue to lead into an article; we have one tonight, however.
Watch this, especially from 1:30 in (it’s pivotal to the basis of my argument, the pivot of which will become clearer as we go), and then let’s talk about it.
If you’re British (as many people close to me are) — or if you’re a devotee of British politics (as I am) — then two worlds are about to collide; indeed, this “collision” has been brewing for decades.
And there’s no romanticism, in either the classic or contemporary sense, about it.
We all know Europe is in a complete mess right now; Greece and Italy and Ireland are all on the brink of collapse, and there are whiffs of decay about a number of the other so-called “Eurozone” countries as well — and not least that France and Germany might be starting to stagger, too.
If France and Germany are beginning to stagger, it isn’t much of a surprise; after all, those with money can only bail out those with none for so long.
But all of them — all of them — are up to their eyeballs in sovereign debt.
The Germans and the French because they’ve funded the bailout programs; and the rest of “Europe” because they were stupid enough to join the single currency project in the first place, which was cooked up by…yes, the Germans and the French.
I have opined previously that the Euro was the single greatest act of economic lunacy of the 20th century, and it was; after the rapid appreciation of member-state currencies to qualify for Euro membership, and the subsequent ceding of various fiscal policy levers to a central bureaucracy in Brussels, borrowing money has been the only way poorer European countries have been able to keep their economies afloat.
Now, that equation has reached critical mass.
The “borrowers” have bankrupted their countries; and the countries publicly listed in the “borrower and broke” column is set to be augmented in coming months with at least two and perhaps as many as six others who are faced with sovereign default.
And the “creditors” — namely, France and Germany — are staggering under the weight of a series of monetary bailouts to their “European partners” which, inevitably, has seen both countries borrow heavily abroad to fund their lavish commitments to their “European partners.”
Even so, the rights and wrongs of the goings-on in financial circles in Europe are of limited concern to me; yes, I would like to see all countries involved sort the quagmire out, and no, I don’t actually want to see Europe — collectively or on a country-by-country basis — slip back into recession.
But my primary concern, I have to say, is for Britain.
If anyone failed to click at the beginning of the article, now’s the time to watch this: especially from the 1:30 mark…
When the Labour Party finally got its fangs into the UK — after 18 deserved years in the political wilderness — Britain was booming, thanks to the economic legacies of Margaret Thatcher’s policies, executed by Chancellors of the Exchequer Sir Geoffrey Howe and Nigel Lawson, and later, through the revolutionary economic stewardship of John Major’s last Chancellor, Ken Clarke.
The bit in the middle was Britain joining the ERM in 1992 under Chancellor Norman Lamont, then leaving in late 1992 as the alleged exchange-rate mechanism failed to protect Sterling from the effects of a falling US dollar.
This led to the Bank of England raising interest rates by five percentage points in one day, and in turn led to the UK’s involuntary departure from the ERM; Lamont’s second and last budget in 1993 featured massive hikes in taxation to fix the damage and to right the government’s finances.
Lamont was sacked seven weeks after delivering the 1993 budget; his successor, Ken Clarke, presided over the healthiest manifestation of the British economy in decades.
But there had been a warning: Europe, and in particular anything to do with monetary collaboration, was a disaster looking for a place to strike, which is likely the reason both Margaret Thatcher and her first Chancellor, the unabashedly Europhile Howe, steered so far clear if it.
In the early years of Tony Blair’s government, which was elected in a landslide in 1997, Britain continued to boom.
It is noteworthy that Blair was not elected on the back of any perception of Tory party incompetence on the economy.
Rather, he won as a result of the “It’s Time” factor, a general perception that Britons were comfortable, an anti-sleaze campaign by the Major government that blew up in its face when the peccadilloes of some of its less professional ministers came to light, and the ubiquitous sloganeering and rhetoric typical of Labour parties the world over.
For the first few years, it worked; but even then, public sector borrowing in Britain was rocketing; so-called “New Labour” was delivering spending on social programs it claimed delivered a social dividend whilst maintaining economic rigour.
Blair’s Chancellor, and eventual successor, Gordon Brown, threw buckets — no, shitloads — of money at anything that moved and that was deemed to be in need of spending.
And it was all borrowed money.
Together, Blair, Brown and the Labour cabinet actively flirted with dumping Sterling and joining the Euro; public outcry, and noisy opposition from the Conservative Party, tempered these activities, but they still went so far as to set up “Euro trading zones” in selected parts of Britain.
Cutting a long story short, having taken government in 1997 with a robust bull economy and negligible public debt, the Blair/Brown government was thrown from office in 2010 having amassed £1,300 billion in government borrowings — a complete indictment on any elected government anywhere in the world.
And what of that hubris-laden, headily rhetorical speech from Neil Kinnock? Britain dodged a bullet in 1992; and although it eventually took one five years later, Kinnock would have been worse than Blair.
Obsessed with socialism and the European project as Labour was in 1992, and beholden to such pledges as a 50p in the pound tax rate on anyone earning more than £50,000 per year, what eventually happened under Blair and Brown would have been far worse under Kinnock.
But Kinnock showed, if nothing else, what was to come; alas, very few people recognised the truth behind his words in the longer run.
The smug, glib, prematurely triumphant little display Kinnock put on a week out from the 1992 election masked something far more sinister, and far more menacing.
Today, the Conservative Party is again at the helm of government in Britain, hobbled as it is by the useless presence of the Liberal Democrats, who choose to abstain from or to oppose anything painful that might actually help fix Britain, but who are always present for anything that might advance the political cause of their own contemptible specimen of a political organisation.
It is in this context that I make my point.
Prime Minister David Cameron’s Chancellor of the Exchequer, George Osborne, has implemented budget cuts of £81 billion over five years (AUD $125 billion) as part of an overall program to haul in the deficit in the British budget and to begin to repay the UK’s historically colossal owings to its international partners.
This public sector debt — incurred in peacetime — is unprecedented.
On one level, these cuts (and the attendant tax rises accompanying them, such as increasing VAT from 17.5% to 20%) are measures simply aimed at slowly undoing the unquestionable damage that 13 years of Labour mismanagement inflicted on those splendid islands.
On another level, however, it is also unquestionable that world economic circumstances are grim to say the least, and especially so where Europe and, by extension, the UK is concerned.
It’s come to pass in the last few weeks that Europe wants Britain to pay €31 billion (AUD $40 billion, or £26 billion) to bail out the Euro.
I’d say that it’s perfectly reasonable for Britain to take the view that having avoided the Euro and the ERM almost entirely, it should not be at all obliged to pay a penny to prop up and prolong what was always a colossal mistake.
More to the point, as things stand with the EU generally (and despite the deal Margaret Thatcher famously struck in 1980, generating much odium toward the UK for its daring to fight Brussels), Britain still pays the single largest annual contribution towards Europe of the lot of them.
And most of all, there isn’t much point in Cameron, Osborne and the Conservative Party stripping £15-£20 billion per year of profligate waste out of the UK economy, just to piss those savings back up against a post in bailing out countries too stupid to realise the Euro is and was a bad deal, and too stupid to know when to call the whole thing off.
My sense is the British public will reluctantly put up with Cameron and Osborne cutting out expenditures that ought never have been incurred, but that there would be a near-bloody insurrection at the prospect of the monies saved being sent across the Channel to fill the coffers of those too inept to see what Britain (with the exception of its last, loathsome Labour government) saw — that the Euro is just a ruse, and that France and Germany might have money, but they can’t rule the world with it.
Drachmas, Francs, Deutsche Marks, Lira…much more sensible; and with the wisdom of hindsight, better soil to grow a community from, as opposed to simply insisting everyone be the same.
Will Britain sink back into recession? I don’t know.
I don’t think so, but at the minimum, I certainly hope not.
But whether it does or not, Cameron and Osborne are fixing the British economy in the same way Thatcher and Howe were forced to do 30 years ago, having taken office in 1979 from another Labour government that had all but bankrupted Britain.
The Euro is a red herring that has been a distraction in Britain for too long.
The Liberal Democrats are likely to pay, literally, with their electoral life for trying to frustrate Cameron’s attempts to fix Britain.
And following Cameron’s recent veto of a treaty to bind European nations closer economically, the Tory Party’s vote in all reputable opinion polls has been rising in the past fortnight: not yet far enough to win an election outright, without the accursed Lib-Dems, but it’s getting close.
Call on a fresh election, and voters will zero in on Labour: it might be the place to park protest votes in the polls, but with its ineffectual leader, ineffective front bench, confused messages and shrinking membership, I’d wager a Conservative landslide if such an election were to be pulled on any time soon.
Cameron and his Conservatives must stay the course on economic reform. Double-dip or no, the benefits will materialise in the mid-term. Yes, the Tory Party will rightly reap an electoral dividend for them. But they were elected to fix Britain, and thus ought not be distracted by the pox of the Liberal Democrats and Labour to their left, or by the odious entity that is Europe and the Euro on its flank.