The Wilted Rose

Towards a Definition of Brownomics or Brownian (dis)economics

A phrase used frequently on this blog is Brownian (dis)economics.

It is derived from the economic theory of “diseconomies of scale”, i.e. as Wikipedia defines it,

the forces that cause larger firms to produce goods and services at increased per-unit costs. They are less well known than what economists have long understood as “economies of scale“, the forces which enable larger firms to produce goods and services at reduced per-unit costs.

Brownian economic policy is, in effect, a (dis)economic policy because the aim of this policy is to facilitate sustainable economic growth through a debt-fuelled boom.  Alas, what Brown’s policies have, in effect, created is a medium-termist (10-year) boom – with schlerotic rises in taxation and public sector expenditure, zero improvements in health service and state educational efficiency – followed by what is looking like a long Depression (or mega-bust) resulting from the unsustainable policy of “nudging”, in contemporary policy parlance, the population into borrowing beyond their means, or ability to pay back. Brownian economic policy = (dis)economics because they have had the opposite effect to what was intended, thanks to the trusty law of unintended consequences.

The Culprits — and Victims

The Government, the Regulators, the Banks and other financiers (e.g. those offering interest-free credit to buy cars), the Estate Agents, the Construction Sector, and even the Retailers, colluded in this collosal piece of economic stupidity. The banks, retailers, and automotive companies have been devastated by their own over-expansion or “excessive risks”.  Risks are uninsurable and unknown outcomes and, as Nassim Nicholas Taleb argues in his seminal “Black Swan”, risk cannot be computed or mathematically modelled. Because it is unknown.

So those who colluded in Brownian (dis)economics, or the Brown boom (and bust), have themselves been victims of the Labour Depression, as have many people who borrowed and took mortgages out.  Many are being repossessed or bankrupted while some of the culprits are being bailed out. Retail and car workers are losing their jobs because of the bust.

Phillip Blond, potentially Cameron’s Keith Joseph (given that Blair’s, Giddens, was quite wrong about the ‘Third Way’; and Joseph clearly did not grasp the social implications of Thatcherism), has a fine analysis of the current socio-economic “turmoil”, from a radical Tory perspective, suggesting that, for example,

Conservatives should not accept that their “society of ownership” could be undermined by monopoly speculation at the global level. Instead, decentred local systems of finance (through public private partnerships, enhanced credit unions or indeed building societies) could secure the poor in their housing without securitising their debt, or indeed subjecting them to hidden usurious rates of interest.

Of course, this is only part of the answer, and any such micro-approach requires re-envisaging the macro-economic environment. There all parties, including the Conservatives, have to rethink the entire economic paradigm; the offshore, off-balance sheet, tax-avoiding economy has successfully evaded all the half-hearted attempts at capital and leverage regulation. But it is always the onshore, tax-paying public that has to meet the bills.

There is really only one alternative, under the auspices of a new international settlement: disaggregate the global network back to the countries and nations that generate the wealth and end up paying the bill. After all, that is just Conservative emphasis on localism applied at the global level.

The Ringleader

Simply put, Gordon Brown stoked up an economic boom – which many of us thought we benefited from, with rising house prices and illusive prosperity – and then a bust.

The illusion of prosperity sent property prices into orbit and now back down on terra firma (or terra cotta as John Prescott once called it).  Until last year, people were buying loads of furniture, largely “on the never never”, for their new houses that they bought at 5 times their earnings – and which they believed would double in price.

Now people aren’t buying houses.  Brownian (dis)economics is the “Labour boom and bust” that Brown said many times would not happen on his watch.  Well, it has again, thousands of firms will tragically fail this year – and at least a million will lose their jobs.

The Solution

Here are a few policy solutions to the problems created by Brownian (dis)economics:

1. (Updated Aug 09) A new form of socio-economic settlement, such as that expounded by Phillip Blond in his influential essay, “The Civic State”, as he describes it, “a deep and profound critique of the pre-existing extremes and a restoration of something close to the real heart of Britain: and organic conservatism that cares for all”. As a co-author of a Government funded report on business-led regeneration in deprived areas and much other recent research, I can attest to the need for a new and more compassionate and realistic approach to socio-economic policy, rather than just empty Brownian rhetoric about “Enterprise for All” etc.

2. No Government intervention to “nudge” people to borrow unsustainable mortgages or other loans, whilst eliminating once and for all the parasitic loan sharks, whether unregistered or operating as legitimate firms, that scurge deprived areas. Local banks, as there are in Finland (hat tip: my colleague Aki Koponen of Turku School of Economics), could help solve the market failure in banking.

3. Lower taxation to ease people’s financial pain and to incentivise them to work or to start a business. The Laffer Curve works.

4. Welfare reform: not heartless and authoritarian diktats, but rather something that enables people to fulfil their potential and enhance the quality of their lives.

5. A fair immigration policy,

which (4 & 5) together would encourage British residents (whether white, black, Indian, Pakistani, Chinese, etc) to become employed, self-employed, whether in the private, public, or voluntary sector.

6. Putting families, and the welfare or emotional wellbeing of children, at the heart of Government policy. A “Crimes against Children” act that ensures a ‘Child Protection Imperative’ for all Government policies, i.e. that policies and governmental actions are ‘child-proofed’. We should never forget the plight of miners’ children, or other kids who have suffered in the socio-economic turmoil of the 70s, 80s, 90s and the current decade (particularly now – e.g. boys and girls whose family homes are repossessed). The model below is espoused by social care workers and could form the basis for an assessment of how children are treated by all policy areas, whether housing, social work, education, employment etc. After all, the Nordic model emphasises respect for children, whereas the UK is one of the most child-unfriendly countries. We must never forget Baby P, the brutally murdered 18-month-old Peter Connelly.

Figure 1: Child Safeguarding and Promoting Welfare Assessment Framework

Source: Article by Cleaver & Walker (2004)

7. Public service reform to revolutionise health and education, all linked to the above, and which George Osborne argued in his August speech to Demos can lead to progressive outcomes which further social and economic progress, while dealing with the UK’s huge debt burden.

8. Academic selection in education to bring back (as Janet Daley rightly says in the Telegraph on 12.01.09) the social mobility that grammar schools once facilitated. Again, we can learn from Finland (which is not to preclude Swedish-style free schools, as advocated by Michael Gove), in which children change from lower- to upper-school at 13, which is less daunting than 11; and where there is an option to engage in more vocational education, leading to a choice between Vocational and Academic education at 16 and beyond. Although Finnish schools do not academically select, they do not have the social and economic problems and polarisation into “bad areas”/sink schools, middling areas/mixed schools, and “good areas”/good schools, plus the private/independent school system, that we have. You’ll not find much dystopia in a country like Finland which has social cohesion and outstanding educational outcomes; and where equality is important, so that kids who are brilliant with their hands can achieve vocational excellence, rather than being labelled as academic failures. There aren’t 1 in 6 of Finnish 18-24 year olds out of work, not being educated or trained.

9. A fundamental change in the UK-EU relationship (as the Taxpayers’ Alliance and Global Vision recommends) to free the British economy.

10. Reform of business support services, along the lines which the Conservative Party-commissioned Richard Report suggested, to encourage firms to start up grow sustainably. Leading to a new era of entrepreneurship (to follow the creative destruction of the Brown bust) to create the firms and jobs that are necessary to bring the British economy back to its former glory.

Enter a Revolutionary? Though “We Don’t Need Another Hero”

To effect social change, as many historians, anthropologists, sociologists and political scientists (like Yvonne Hirdman) will tell you, you need a revolutionary. And who has the guts to start the revolution? Ultimately, it will be the electorate.

Who could achieve this?  Not Labour, but it is important for all our futures that such policies are implemented to reverse 12 years of Brownian (dis)economics.

The United Kingdom is no longer the world’s 4th largest economy, and it is slipping down the competitiveness league table too, and to stop us becoming another basketcase like Spain, another failed former imperial power, we need a new social and economic revolution. Only radically innovative progressive policies, like those which Phillip Blond is arguing for, can help us turn the tide.

Let us hope that our next Prime Minister, Mr Cameron, is up to the task. After all, let’s take, for example, our “lost generation” of youngsters of 18-24; they “don’t need another hero” (like Churchill was, and Thatcher and Blair were for a fleeting moment and yet missed great opportunities), but they need “life beyond” what is on offer at the moment. That revolutionary change, through progressive radically innovative policies, will restore a country that was once great. We cannot let a substantial portion of our youth, our future, swim while we wallow on the beach.

BROWN’S ROLL OF SHAME

Here we reveal the trail of devastation left by Gordon Brown, with this rolling list (with hyperlinks) of some of the companies that have either gone into administration or have shed many jobs (whether 1,000s or 100) that have been highlighted on the Wilted Rose. This Roll of Shame (hardly a Hall of Fame for ’saving the whirled’ [sic]) has been updated until March, and it is hoped will be renewed as soon as possible:

MARCH 2009 (3 so far)

07/03/09: 2,300 jobs under threat at Principles

05/03/09:  Interest rates 0.5 per cent

02/03/09: 140,000 factory jobs could go this year

FEBRUARY 2009 - The Gloom Deepens (39)

27/02/09: RBS £24b and HBOS £10b loss

26/02/09: Barratt made a £600m loss in Q2 2008

26/02/09: Wrightbus to shed 235 jobs

26/02/09: Royal Sun Insurance to shed 1,200 jobs

26/02/09: Part-privatising the Royal Mail? Digging its grave? Lessons not learned?

24/02/09: Vodafone to axe 500 jobs23/02/09: Is LDV Unite’s plant in danger?

23/02/09: Brown’s new £500b ‘gamble’ … But then it’s not his money

23/02/09: Brown – ‘Banks should be servants.’ – Maybe, but the Government certainly should.

21/02/09: Time to repeal EU “Free Movement of Labour”?

21/02/09: 6,000 jobs at threat in UK car plant

20/02/09: Repossessions up 50% to 40,000

19/02/09: Public finances dented by Labour policies and the recession

19/02/09: JJB and GKN to cut 1,002 jobs

19/02/09: Printing money : now look where Labour has got us

18/02/09: As manufacturing collapses, Labour to bail banks out further…

17/02/09: Mr Bean defends Sterling collapse

16/02/09:  850 jobs to go at Mini in Cowley

14/02/09: Lloyds shares down 32.5 per cent

13/02/09: Trains, wheels and jobs: What is it about Labour and ‘No British Need Apply’?

13/02/09: Lindsey: Labour activists out of touch too

12/02/09: FSA warned about HBOS … and failed.

12/02/09: Brown says he was right to appoint Crosby

12/02/09: 15% ‘real’ unemployment … Unemployment: 1.97m + 3m on the sick

11/02/09: Time to “scale back” the Dept for Business, Enterprise & Regulatory Reform - TPA

11/02/09: Sir James Crosby: Failed Banker, now Regulator

10/02/09: RBS to shed 2,300 jobs – to pay for bonuses

10/02/09: “This is becoming the most serious global recession for over 100 years” – Ed Balls.

10/02/09: If Ed Balls knew his history…

09/02/09: Nissan to shed 20,000 jobs worldwide

09/02/09: Bonuses: the biggest rewards for failure are PM’s and Ministers’ salaries

07/02/09: ‘If you have a bowler hat they’ll help you; a hard hat, they’re not interested’ – Bob Crowe

06/02/09: Silly Economics: Interest rates 1%, house prices up 1.9%; what next?

05/02/09: Brown’s ‘depression’ Freudian slip

03/02/09: The Labour Government’s epitaph will be “British workers need not apply”

03/02/09:It’s time for a General Strike

02/02/09: Vaz calls Lindsey strikers fascists

02/02/09: Lindsey Man to Brown: It is Labour and EU policy that’s indefensible

JANUARY 2009 - Post Christmas Blues (47)

31/01/09: So much for BJfBW

28/01/09: Jiabao and Putin ‘tell it as it is’ at Depression Davos

27/01/09:As Labour melts down, more economic illiteracy from Lord Mandy

26/01/09: Barratts and PriceLess into administration

26/01/09: 2,500 jobs to go at Corus

24/01/09: Lord Myners should admit Brown is to blame too

23/01/09: Brown really did Talk Down the banks!

23/01/09: “A weak currency arises from a weak economy which in turn is the result of a weak Government” – Gordon Brown.

23/01/09: Today we are officially Recessionary

22/01/09: Mortgages down 30% in 2008

21/01/09: 190 jobs to go at Eddie Stobart

21/01/09: TT Electronics to shed 700 jobs

20/01/09: Lloyds Banking Group shares loses 30% of value

20/01/09: Burberry to close factory & shed 540 jobs

19/01/09: Prof Dylan J-E on the economy

19/01/09: A bit like Brown steering the economy?

19/01/09: RBS shares lose 67% of value

19/01/09: 1 trillion pounds for useless bank measures

17/01/09: Hertz to shed 4,000 jobs

16/01/09: Barclays shares lose quarter of value

16/01/09: Honda to extend shutdown of Swindon plant

16/01/09: Bad bank is a bad idea

15/01/09: Brown weeds rather than green shoots

14/01:09: 1,000 jobs to go at Grattan

14/01/09: And Jaguar Land Rover to axe 450 posts

14/01/09: 4,200 Barclays jobs to go

14/01/09: JCB shedding 700 jobs

14/01/09: Now socialist Labour is going to nationalise small firms

14/01/09: Wincanton shedding 1,000 posts

14/01/09: Economy stats: an indictment of Brown’s policies

13/01/09:  Barclays axes 2,100 investment jobs (see update)

13/01/09: Brownian (dis)economics

13/01/09: 23 Jan – end of the ‘downturn’ lie

12/01/09: Land of Leather suspends its shares

12/01/09: Labour to bail out profitable Tata and others

12/01/09: Brownian summit: more a trough than a peak

09/01/09: UK manufacturing output collapses

08/01/09: 600 jobs to go at Aston Martin

08/01/09: 1,200 redundancies at Nissan in Sunderland

07/01/09: Viyella, founded 1784, goes under

07/01/09: Headland Foods sheds 95 jobs

06/01/09: Marks & Spencer to cut 1,000 jobs

05/01/09: Wedgwood goes under

03/01/09: And the VAT cut has failed too

03/01/09: Another Brownian bank bailout on the way

02/01/09: You’re too late on immigration, Hazel

01/01/09: Worst year for the FTSE

DECEMBER 2008 - The Fall of the Retailers (27)

31/12/08: Suspend the National Minimum Wage? NO.

30/12/08: Fear Brownian Style: The housing crisis

30/12/08: Shopping surge: but still retail pain [esp. for women]

30/12/08: Brownian (dis)economics: £1 Stg = 1 Euro

29/12/08: USC goes under

29/12/08: It’s awfully quiet in the shops today…

29/12/08: Now even Basil Brush may go bust

28/12/08: Adams going under

27/12/08: Who will be next ?

26/12/08: What next for retailers?

24/12/08: Merry Christmas to all (except Ebenezer Brown, of course)

24/12/08: Greedy Banks cutting borrowers’ throats

24/12/08: Recession bites deeper

24/12/08: Zavvi into administration

23/12/08: Officers Club taken over

23/12/08: Whittard of Chelsea going under

22/12/08: Varley apologised. Will Brown ever?

22/12/08: Bank wasn’t alone in not understanding credit crisis

21/12/08: UK auto bailout: £667m taxpayers’ money

20/12/08: Shops busy but new year fears…

20/12/08: Labour kills aspiration and commerce

19/12/08: MFI closes, 1,400 jobs lost

19/12/08: Tax : the raw truth

19/12/08: Brown wouldn’t know a ‘can do attitude’ if it bit him…

18/12/08: Labour killed Jaguar, fiscally speaking

18/12/08: Jaguar bailout – more Labour socialism and SEXISM

17/12/08: 807 Woolworths stores to shut & 27,000 jobs to go

The following were posted before this Roll of Shame commenced but here they are…

17/12/08: Isn’t McNutty the Unemployment Minister?

17/12/08: Only a few months in the job and Mandy provokes a Resignation

17/12/08: Unemployment up again – 3m by 2010

17/12/08: Brownian Bank Bailout failure

16/12/08: Part privatising the Royal Mail? Whatever next?

15/12/08: Brown’s managed decline of the car industry : the UK to become the sick man of the world ?

15/12/08: Thirty per cent: an indictment of Brownian economic policy

12/12/08: Miliband’s big lie on German policy

12/12/08: A failure of Labour policy? Ja.

11/12/08: Sterling near parity with Euro – thanks, Gordon

11/12/08: Shipyard jobs fear as Labour cuts defence budget

10/12/08: Woolworth’s closing down sale

10/12/08: Brown ’saved the world’ … NOT

10/12/08: Labour’s cynical welfare reform non-policy

06/12/08: Labour’s monetary policy in a nutshell

06/12/08: Recessionary divorces

04/12/08: Labour’s 2% rate gamble

NOVEMBER 2008 - The Second Brown Bounce (14):*

26/11/08: Under Labour — even Woolworths has gone under.

26/11/08: The only people who’ve fallen for Brown’s tax con are 35-54 year old C2 men in Labour heartlands (Rab and Onslow)

25/11/08: Without the wealthy, no one would have any shoes

25/11/08: A debate on the PBR (really a Budget) at last!

25/11/08: Who said this Government was against taking “excessive risks”?

24/11/08: And Darling insults pensioners too

24/11/08: The Devil’s in the detail? No, the Devil’s Labour.

24/11/08: The PBR, an indictment on Brown

24/11/08: Another victim of the recession…

24/11/08: 45p? Is this the new 10p?

22/11/08: Tax credits and ‘pauperisation’

21/11/08: Is Labour spinning that there’s no recession?

14/11/08: It’s society, stupid

12/11/08: First it was boom and bust – now 4 million unemployed. Well done, Gordon.

10/11/08: At least he won’t be smiling on Election Night 2010

10/11/08: Just cut taxes…

* This was the month before Brownian (dis)economics contaminated the real economy. Before that, The Wilted Rose largely focused on social issues, crime, road-killers, etc, apart from the occasional post on taxation.

OCTOBER 2008 - Brown Saves the World (19):

30/10/08: Labour fails on wage equality for women

28/10/08: Co-payment, borrowing, interest rates, recession, depression… It’s low taxes we need

23/10/08: One simple way to ease the pain – cut taxes

20/10/08: No laughing matter, but…

20/10/08: Clinton started the credit crunch – Labour will make it worse

20/10/08: Darling is like a ‘welfare mom’ with credit cards

17/10/08: Browned off still: socialism and authoritarianism reigns

15/10/08: Inflation and unemployment: new Labour delivers

14/10/08: Watch out – Mandelson’s spinning

13/10/08: It’s not bank heads that should roll – it’s Brown

09/10/08: Brown’s “Thatcher” moment

08/10/08: £50 billion. You’ve got to be kidding.

07/10/08: Nationalisation of the banks: Labour returns to its roots

07/10/08: What will be the outcome of the Crunch Meeting?

07/10/08: Darling’s glee at nationalising banks

06/10/08: As shares plummet in London, a bit of common sense from its Mayor

06/10/08: To the Three Stooges: Time for action, not panic

04/10/08: DBERR Peer: Brown doesn’t care for democracy

03/10/08: Lord Mandleson of North Greenwich? Whatever next?

SEPTEMBER 2008 - the Root of the Problem (7):

30/09/08: As the stock market plunges, more Labour lies revealed

25/09/08: The Brown bounce will be followed by another bust

24/09/08: Brownbeating his rivals, but phoney

20/09/08: Brown thinks the economic crisis is a joke

18/09/08: Labour’s employment shame

16/09/08: Why tax cuts are morally right: are the Tories listening?

15/09/08: Whatever happened to the Brown Bounce?

JUNE 2008 - A Year of Brown & the Civil Liberties Crisis (12)

25/06/08: Labour ‘plays the race card’ in desperate attempt to claw back the white working-class

25/06/08: Inflation: It’s the money supply, stupid

24/06/08: Gordon Brown : one year on

24/06/08: £6.50 an hour is hardly ’social justice’

24/06/08: No, Brown, it was Labour’s abolition of grammar schools that caused social immobility

21/06/08: Where have we heard this before?

20/06/08: Labour’s Claws 4 Moment?

Oh that’s easy to explain. Our Leader is utterly useless. If you asked him which of the two doors from this room he was going to exit from he would be incapable of choosing. And if someone else chose the door for him he wouldn’t be able to make his way there.

A Cabinet Minister

19/06/08: The case for new grammar schools – and not just in Bucks

19/06/08: Tax cuts are essential for combating social breakdown

16/06/08: ‘It’s time for brown people to switch to Tory’ – Sunny Hundal

14/06/08: Let’s not forget it was Davis who started the Tory recovery: time for a promotion

11/06/08: Pensioner poverty – a national scandal

02/06/08: Why Labour is losing its “core vote”

MAY 2008 - Local elections, Boris, 10p and Crewe & Nantwich (17)

30/05/08: End game, Brown

29/05/08: Darling, the tax-cutter? No. It’s Brown, the Sub-Prime Minister

28/05/08: Yes, fix the economy, but please fix society too

27/05/08: Labour split on tax: MacShane is right on tax and spend, but Brown isn’t the person to implement it

23/05/08: Now, Mr Brown, will you listen?

21/05/08: In a nutshell, why Labour has lost the confidence of the country

21/05/08: Are anti-Brownite saboteurs running the Crewe & Nantwich by-election?

19/05/08: Labour won’t admit Brown isn’t an “asset on the doorstep”

19/05/08: When is a safe seat not a safe seat?

16/05/08: Labour are well and truly Crewed

14/05/08: Labour grassroots’ lowest ranked ministers … Darling and Brown

14/05/08: Inflation and house price woe looms

13/05/08: Labour’s £120 a year still leaves 1.1 million people worse off

12/05/08: Now Labour ACTIVISTS wish Brown to go!

12/05/08: The Brown/Balls Axis has the gall to attack Frank Field – but who will attack Brown next?

09/05/08: As Tories storm to 26 point lead in polls and a 19 point lead in the North, roll on Crewe & Nantwich!

05/05/08: ‘Decapitated’ Labour even loses Wolverhampton

Earlier posts may be added to this archive when I find the time…

And, of course, there are many more … too many more to mention.  But it is an Economic Hall of Shame that Gordon Brown, through his Brownian (dis)economics, should be ashamed of.