Thursday, 11 August 2011

The UK Riots

Disaffected Youth or Common Criminals?
Whilst the buildings are still smouldering, politicians have been condemning the rioters and looters as common criminals! Of course they are! Arson is a criminal act which endangers lives and looting is just criminal. Many of those involved will be brought to justice, whilst others will enjoy their looted goods unmolested. But such condemnation by politicians is unhelpful because it gets us nowhere.

We have seen riots without the excuse of a political objective in London before, but never primarily by the young so why now? Is it that they see no future for themselves? Do they just burn cars, buildings and smash windows because they feel like it or are there significant underlying social problems? Can they imagine themselves having a steady job in a prosperous country in ten years time? Or do they look at industries relocating to cheaper countries, and workers from Eastern Europe flooding in and think, “What the hell am I going to do when I want a job?”

In my view, whether they articulate their fears or not, there is, behind their actions, a strong element of discontent about their future prospects. They feel that they have nothing to lose, or look forward to, so why not get out on the streets?

Apart from policing deployments what can we do?

Teach children their responsibilities
The decades old emphasis on children’s rights should be rebalanced with a few practical lessons about children’s responsibilities. We have transferred too much power to the young and I challenge educationalists to begin to redress the balance.

Support parental discipline
Parents also have a critical role and we should promote initiatives to reverse the trend towards reduction of parental authority. For many years now, following expert advice, it has been the fashion for parents to negotiate with their children rather than impose control over them. There are some things that are moral absolutes, which should not be met with explanation or mild disapproval and this starts with the very young. Parents need to be told that they can and should apply discipline and that their children will most likely be better off because of it.

But these measures do not address underlying economic issues so what else can we do about it?

Forgive me for starting with a history lesson!

Beginning in the seventies but gathering pace in the 1990’s western governments were persuaded that great benefits would flow to western economies from freeing up world trade by reducing tariffs and trade barriers generally. At the beginning this seemed to be true, but quite quickly it was obvious that manufacturing industries in the developed world were re-locating to countries with lower costs and cheaper labour. We were exporting our jobs! In return we were able to buy goods of the same quality, or better than before, but at much lower prices.

If you are an economic liberal then, theoretically, fair competition from the East should have stimulated productivity in the West, and enabled us to continue to sell our goods at similar prices, but it’s not a fair and perfect market. How can you compete with 12 hour working days and very low pay in countries like China? In addition, there is a fundamentally unfair imbalance due to a deliberately undervalued Yuan, which reduces China’s selling prices and increases the cost of western goods and services in China.

At around the same time the de-regulation of financial markets and the reduction of control over banks were also supposed to give enormous advantages to western economies. Again for nearly two decades this seemed to be true, as debt fuelled economies forged ahead, until the credit crunch of 2008 showed everyone just how false this was. Meanwhile personal debt had gone through the roof, because whenever you wanted to borrow money to buy goods manufactured in the East you could! Then government debts went the same way as money was pumped into western economies to avoid a recession caused by bank collapses and credit shortages.

Payback Time
Eventually debt has to be repaid and that’s where we are now. The credit-worthiness of many Western nations is doubtful and borrowing will cost more in future. Governments must reduce their spending and increase taxes to repay debt and this will lead to a recession. Some countries, like the USA, have been very reluctant to do so. Others have done too little too late and are trapped in a continuing round of new budget cutback announcements and financial rescues. France is the latest to come under pressure and risks going the same way. It will need to cut spending or raise taxes in a very public way and I think that we can look forward to more protests on the streets this Autumn!

The UK acted decisively and, soon after the new coalition government came to power in May 2010, it announced huge cutbacks. Again for a while it seemed that they had done the right thing and that the pain would be accepted. Then the riots started and no amount of political rhetoric will undo the damage. Worse still, there may be further consequences if the riots continue sporadically and the rating agencies consider that the UK is no longer an AAA risk due to the economic effects of civil unrest.

Here are a few diverse ideas about what the US and the EU could do.

Reassess Globalisation
They should put some pressure on Far Eastern economies, particularly China, to float their currencies or risk selective tariff increases.

They should make it a legal requirement for European companies to impose contractually binding Health and Safety rules on Far Eastern subcontractors and suppliers.

Re-regulate banks
They should tighten up still further the financial regulation of banks and investment companies.

They should impose a tax on financial transactions to discourage program trading.

The Mafiosi Banksters will scream but they always do. This time we aren’t listening! They have more than demonstrated that they are incapable of self-regulation and are toxically dangerous when left un-regulated!

More power to politicians with a longer term view
Typically politicians can see no further than the next election, and governments (certainly in France and the US) often avoid taking difficult decisions if they think it will harm their election prospects.

In the UK, the second chamber of Parliament needs to be strengthened constitutionally, so that it can exert real powers when a government is refusing to act, or is taking questionable short term decisions. The members of the second chamber need to be active but less Party-political. That won’t stop most of the bad decisions being taken but it might be able to intervene and make a difference occasionally.

Start looking for the next job creating technology
In order to create new jobs and wealth in western economies innovation is critical. It’s still an area, in which western countries have an advantage as a result of their educational and research infrastructure, although that advantage is being eroded rapidly. So we need to keep ourselves at the forefront.

How about a strategy for concentrating on green energy industries and power from thorium during this decade? Then in the next decade we could move on to nano-technology and bio-technology.

This will need considerable investment in research projects, and a more open minded attitude than we currently have, but it’s a screamingly urgent priority and money must be found, not just for solid reliable and conventional projects but for some “blue sky” things as well!


Post a Comment