Who is to Blame?


Landscape of Big Ben and Palace of Westminster with Bridge and T5th May 2012

Who is to Blame? 

The analogy of Bob Burnett titled – The Two Meltdowns – Fukushima and The US Economy – “That Japans’ nuclear catastrophe and Americas’ economic crisis followed the same tragic pattern whereby naive populations have been seduced by cults which had abandoned common sense with the result of a meltdown and an aftermath of confused electorates not understanding what had happened and who continue to accept bad advice and that with no change the way would then be paved for yet further meltdowns” sums up very well how our politicians cannot see they are sinking in the quagmire of doctrinaire policies and they do not know that they possess very little understanding as to the real causes of the economic crisis. They remain aloof and arrogant whilst they are consumed by their megalomaniac tendencies which fuel their self belief that they are chosen people destined to carry out hard but great deeds. They do not seem to realise they are walking a well worn path treaded by others also blighted by the same psychotic tendencies. As crises deepen they will be quick to blame others for the worsening situation rather than face up to their own inadequacies.

This naivety and seduction, together with the inability to accept blame, was amply exemplified in the attention given to Mervyn King (the headmaster) by the BBC inviting him to give a talk in a recent Radio Today Lecture. He asserted that there are now signs of a recovery in the UK, though, acknowledging it would be patchy for some time to come! This is the same Mervyn King who has been consistently wrong with all of his predictions since becoming Governor of the Bank of England in 2003. In his talk he accepted no blame for the crisis. He prattled on with his usual analysis of the past and the reasons why his forecasts proved to be so wrong. He made constant references as to how things could have been different with the benefit of hindsight. Not once did he admit that his many predictions over the years had been wrong.  Having said he did not wish to blame anyone he then demonstrated a rare moment of cognitive flair and said the crisis was caused “by a failure of the system!” He then proceeded to blame everyone. He blamed the recklessness of banks; he blamed a collective ‘failure of imagination’ to see that the banks’ huge increase in lending was the mother of all dangerous bubbles waiting to burst; he blamed the last Labour government for stripping the Bank of England in 1997 of its direct powers to regulate banks. Yet this headmaster could not grasp what most first year students studying economics would have no difficulty to perceive – that  there had been massive increases in bank lending, from about 100% of GDP to 600% of GDP over the past 20 years or so; that there had been a trebling in house prices in the 10 years before 2007; that consumer spending had been growing faster than the economy and had been fuelled by borrowing in the 15 years before the crash; and that the UK had been importing more than it exports every year since 1983, not earning its way in the world. These undeniable facts were referred to as “trends” by the headmaster who described these “trends” as “imbalances”. He conceded that these “imbalances” would help to explain the UK’s current difficulties!!

History will not be kind to him as he approaches the end of his decade as arguably the most ineffectual and calamitous figure presiding over the UK economy. Questions no doubt will also be asked about those who appointed him and the credibility and nous of those who believed him; including the posh sixth formers Messrs Cameron, Clegg and Osborne.

The damage this trio are doing to the economy, with the confirmation that the UK has now re-entered a double dip recession, is now becoming apparent to the electorate, as evidenced by the results of the Council and Municipal elections. Clegg suffered his second meltdown at the polls. The losses of the Con/Dems seem to be more a reflection that the coalition policies are seen not to be working rather than Labour having the answers. It might also be a sign that the seduction of the electorate is no longer working. Like Mervyn King this trio are quick to blame others for the crisis. Their continual reference to the legacy they inherited from Labour, citing ten years of Labour mismanagement appears now to be falling on deaf ears with a growing realisation that they are not without blame. People now realise that the economic crisis is not just a UK problem but affects most of Europe and the USA. Why were the voices of the Headmaster and this trio of sixth-formers silent over the past decade? They all should have been aware of the “imbalances” and “trends”. The plain truth probably is that they did not understand the workings of our economic model then and, what is more worrying, it is quite clear that they still do not understand it now.

There does seem to be some glimmer of hope. Serious questions are now being raised about the damage the severe austerity measures are doing to our economies. The International Labour Organisation (ILO) has said that austerity measures, especially in advanced economies, were hurting job creation. The ILO said the situation was likely to get worse amid slowing global growth and more people entering the workforce. “High unemployment has been a concern in the US and other major economies and has hurt the global economic recovery. It is unlikely that the world economy will grow at a sufficient pace over the next couple of years to both close the existing jobs deficit and provide employment for the more than 80 million people expected to enter the labour market during this period,” the agency said in its latest report “Austerity on its own doesn’t work,” the lead author of the report, Raymond Torres, told BBC News. “It is counter-productive. Instead of promoting growth and confidence, it reduces confidence and growth. Instead of reducing deficits, it keeps deficits high all the time. What is needed is a growth and employment strategy. This is what successful countries like Austria, Australia, Uruguay has done.”

And at the European Central Bank its’ head, Mario Draghi, has recently said “We have to put growth back at the centre of the agenda.

The outcome of the forthcoming elections in Greece and the French Presidential election, together with the elections later on in the year in Holland, Spain and Ireland, may yet pave the way for the abandonment of the present idiotic policy in Europe of sticking the existing disastrous economic system together and herald in a new dawn seeking a change to our economic model by putting manufacturing and innovation at the heart of the economy, curbing greed and dealing with the unacceptable excesses of globalisation which ignore both the national interest and the security of supply of essential resources.

Let us hope that changes will take place that will pave the way to avoid future meltdowns and the need to ask “Who is to Blame”?


Duncan Leadbetter