MARKET MUMBO-JUMBO

Some politicians still hold grimly to the notion that Free Markets are a force for good and all will come right in the end.

Despite the painful lessons of the 2007-? Crash and the overwhelming evidence that unregulated markets are a disaster for society, many politicians still hold to an almost medieval faith in the efficacy of free markets.
In this, they prove the definition of faith as beliefs not borne out by evidence. In the case of market fundamentalists, their faith assumes the proportions of a cult or religion.
Particularly subject to this possibly fatal condition have been the current British government and the European Union.
In both cases, this statement needs to be qualified. The EU believes that "Austerity" to please the Markets is a suitable remedy for the spending excesses of some southern European countries that ought not to have been in the Euro in the first place.
In Britain, only the right wing of the UK Conservative party which dominates the current coalition is still clinging grimly to a set of beliefs which are outlined below and raise the question whether those who hold them ought to be allowed to run a government.

"Markets": Some Dotty Dogma from Britain

Fantasy: The finance sector and private industry will lead the country out of the financial doldrums.
Common Sense: Despite (or because of) having the largest finance sector in Europe, Britain has invested less in the long-term future of science and technology than most developed countries. This was especially true in the boom years for finance, when £billions were wasted on useless speculation.

Fantasy: Britain will be led out of recession by "The March of the Makers".
Common sense: Since this sound-bite was minted by the Chancellor of the Exchequer, Britain has continued to lose manufacturing and technology capacity despite substantial foreign investment. UK-based investment has remained at very low levels. The Government even managed to ruin UK railway building by failing to back a Canadian company manufacturing trains in Britain, favouring a German company manufacturing in Germany. This is truly bizarre behaviour.

Fantasy: The financial markets will save Britain.
Common sense: Despite its sad decline, the manufacturing and technology sector is still the largest UK exporter. The growth in finance and service sector exports has not managed to keep up with the pace of long-term manufacturing decline, resulting in a permanent Balance of Payments deficit, which has to be paid for by borrowing.

Fantasy: The market will ensure the rebalancing of the UK economy, if only public sector influence and spending can be rigorously cut. This will stop the public sector "crowding out" private investment.
Common sense: There is no successful economy in the world - ever- that has developed a successful industrial base without close partnership between government and the private sector. This includes Britain in the Eighteenth century, America in the nineteenth and Twentieth Centuries and all the growing economies of South East and South Asia today. And of course, the vast US spending on defense provides a huge hidden subsidy for US technology industries. To hope for a sudden modern day miracle in Britain is fatuous.

Fantasy: The UK National Health Service is seriously under-performing. It needs radical reform which will be aided by an infusion of competition with private sector customer service and efficiency.
Common sense: Every international observer including the OECD rates the NHS as one of the very top public health providers, producing world class outcomes in nearly every branch of medicine at the least overall cost. The UK right-wing model, the US healthcare sector costs at least twice as much for very inferior health outcomes that trail nearly every European country. The US system at its heart is a first-rate system for treating the ailments of the rich.
As all authorities on public health and the entire medical profession in Britain have said, fragmenting and privatising the NHS will be a national disaster.

Fantasy: UK universities and research institutions can continue to produce the same volume of world class research despite huge cut-backs in investment.
Common sense: The UK university sector is up in arms at the reduction in UK government support at a time when all other advanced economies are increasing investment. Some universities will continue to do well from private and overseas sources but others will languish. The witch hunt initiated by the current government to satisfy the ignorant public outcry about immigration will seriously reduce the number of foreign students and diminish funds still further.

Finally, to round it all up: Fantasy of Fantasies: By cutting all kinds of expenditure, including long-term investment, Britain can create a platform for investment-led growth
Common sense: If this was not a serious proposition, it would be laughable. Why?
Because over the next twenty years or so, it will take several £trillions of investment in technology and knowledge-based industries to maintain UK international competitiveness and reconstruct the economy. This cannot conceivably be achieved without a serious national industrial strategy, involving government, industry and the financial markets. Particularly necessary is a national investment bank that is not subject to the short term speculation typical of the investment markets.


How free market economies got it wrong - and what to do about it
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