24 SERVES YOU RIGHT TO SUFFER
Dry thoughts for not so dry times, some economic history. Ralf Rangnick has come clean. The football team that the not unlikeable and fast ageing German manages is either known as Manchester United, just United, Man U or, as it is known by Liverpool fans, Man Ure. The straight talking Ralf has admitted to probing journalists that his football team is not very good and it will be years rather than months before it can compete with its high achieving rivals. Yet Manchester United this season will make more money than any other football club in the world.
During the last Covid disrupted season Manchester City were the only club that declared a profit but, well, no one believes their figures. The lawyers at Manchester City offer the interesting notion that their accounts should be kept secret from governing bodies. The so-they-say income of Manchester City includes sponsorship from an awful lot of very generous companies that are based in the United Arab Emirates. Sheikh Mansour is the name of the Manchester City owner and he is an oil rich bigwig in the United Arab Emirates. His full name is Mansour bin Sultan bin Zayed bin Khalifa Al Nahyan. Not the best way to start an introduction on a first date perhaps but one can get used to anything when there is the promise of billions. Sheikh Mansour is chairman of the Ministerial Development Council, the Emirates Investment Authority and the Emirates Racing Authority. Sheikh Mansour may not be known for his humility but neither does he always insist on being chairman. He merely sits on the Supreme Petroleum Council and the Supreme Council for Financial and Economic Affairs. He also is a member of the boards of, anyway, there is a lot. But despite all this pull no one earns as much money as Manchester United, and this is happening even though the club has not won a Premiership title since 2013 or during what Liverpool fans like to call a decade. The reason why Manchester United continues to make so much money is simple, it has history. Around the globe United fans spend money to watch their favourite team and buy Manchester United products because this is what they have done for as long as they can remember.
Britain has the sixth largest economy in the world. This has not happened because Britain in 2022 has a competitive economy. The decline in the competitiveness of British industry began in 1876 when it was overtaken by the German and USA economies. An imperial legacy softened the blow but that was lost when after the second world war ended the Americans put pressure on Britain to lose its empire. Because the Americans wanted to establish one of their own, this had to be done fast. Under pressure Churchill buckled and did what he was told.
Wealth, though, has persistently accrued within the British islands since the Industrial Revolution. All these pennies have helped Britain to survive because of its large retail economy. And industrial production, although much reduced, has not disappeared. London also has money making casinos that include the Stock Exchange, banks, hedge funds and the rest. Money from people like the Russian oligarchs passed through the turnstiles of the country because money and people were here already. Britain, though, has never regained the competitiveness it had in the nineteenth century. Public school privilege and a class system that nurtured confident overseers in the colonies have been less effective at producing effective face to face supervision. Lessons were learnt from Japanese bosses that were willing to socialise with their workers but short termism within the British stock exchange has undermined the modest gains made by British management. Britain has a terrible record in investing in research and development. But the British wealthy continue to make money from money. So who cares? Not those who prosper, and certainly not Pfeffel who has declared his undying loyalty to British banks. All of this is why the workers in Britain are paid low wages. Like Manchester United, the economy of the UK has history.
The relationship of wealth, affluence and low productivity is confirmed by visits to the provinces. It is possible to enjoy civilised days in leafy towns buttressed by long lasting wealth that continues to generate consumer demand. The citizens of these leafy towns do not produce very much or at least when compared to competitive neighbours in other countries. Yet the size of the British retail economy and the permanence of the affluent mean a leafy town can have residents living very comfortable lives. Elsewhere in Britain there are industrial towns where, because of the lack of residual wealth to support the economy, the locals struggle to get by. The coast land of Britain contains a weird rural Disneyworld that shortchanges both tourists and residents while elsewhere there are pockets of real deprivation.
The support for the economic Spring statement by Rishi Sunak showed that there are an awful lot of Tory MPs, like their Chancellor, who are not too concerned about the present plight of ordinary people suffering the cost of living crisis. Sunak has been described as a fiscal conservative but his wife is a grasping non-dom that pays no tax. Within billionaires that own twelve to eighteen houses there usually lurk devotees of flat tax rates Sunak enjoys his wealth, and that is possible because he feels no responsibility to the less affluent. His parsimonious Spring statement confirmed an increase in taxation in the middle of a cost of living crisis and restricted help with astronomical fuel bills to a £200 loan. But if this government has ambitions to make the British tax system as regressive as possible, it is prepared to tolerate what is, by world standards, a high minimum wage. This is not because the Tories have hearts and compassion. Without a minimum wage set at 60% of the median wage the country would have had workers toiling for starvation wages and lacking the strength to support the economy. All of this has happened because Britain has an economic history that guarantees a high GDP but poor wages. GDP expenditure is swelled by the spending of those with wealth, and their wealth makes for them more wealth. The wages are low because Britain has failed to produce a competitive and productive economy. A shortage of skilled labour exists because of this unbalanced and dysfunctional economy and not because of full employment. Britain has underemployment. Part-time jobs and zero hour jobs are plentiful, jobs that guarantee a working week less so. Only blinkered neoliberal accountants that call themselves economists will at this point be not adding two and two and making four. What might be inflation in other countries is a cost of living crisis for Britain.
The common jibe from Tories is that Labour would have taken Britain back to the stagflation of the 1970s. Well here we are back with stagflation or falling supply and rising prices or what some economists call cost inflation. This time the workers are burdened not just by OPEC increasing the cost of oil as it did back in the 1970s. Now housing costs average at about 30% of income and for the poor are often as high as 50% of their wages. Neither are there powerful unions that can negotiate wage increases to compensate for the increase in prices although Sharon Graham at Unite appears determined to recreate herself as Rosa Luxemburg. The British welfare state is also nowhere as supportive as it used to be. Richard Murphy is an economist that advocates modern monetary theory. Murphy and others argue that taxation does nothing more than control the rate of inflation. Thinking of it as income that pays for government expenditure is an error especially in a country like Britain that can trade in its own currency and has financial autonomy. Murphy believes that £50bn can be pumped into the economy especially as Sunak and Treasury have £30bn to hand because tax receipts are above previous estimates.
This will not happen because this is not how Sunak and the Tories think. There are even members of the this government that somehow believe it is excess demand that is causing the cost of living crisis. The problems are on the supply side, increasing costs that have been amplified by the impact of Brexit and Covid. All of this is ironic because the Thatcher revolution was inspired by supply side economists. Blasé about the demand side of the equation they argued that we need not worry about the balance of payments or unemployment. That only left controlling inflation and creating efficient and low cost suppliers. It has not worked out well. For people and tax avoiders like Jacob Rees-Mogg it is different. Muck goes to muck, and his wealth grows.
Neither is it all bleak for Pfeffel. It is a comfort to him that he and the increasingly vacant leader of the opposition are baffled by economics and are immune to the suffering of others. Both have careers and destinies to fulfil. And partygate is leaving echoes rather than persistent rage although Rees-Mogg unwittingly has fanned the flames by suggesting a European war somehow puts law breaking by the members of the government into perspective. His next move might be to claim that wife beating in Britain is not important because there is wholesale raping and torture by Russian soldiers. Pfeffel now has a war in Ukraine, a cause to champion and monsters to condemn. No doubt the war is keeping Pfeffel at a safe distance from what is an economic calamity for the British economy. It has not, though, improved his stature. Pfeffel is an optimistic warrior which is no surprise because he is optimistic about everything else. We might, though, be down to the dregs of his steadfast optimism. Fast forward military triumph may be beyond Putin in Ukraine but he will still flatten the buildings to rubble. He did this in Syria and he has, as the poker players say, a lot less skin in the game in the Middle East. Perhaps this is why Pfeffel appears to be a reduced figure. Without a happy ending his warrior speeches consist of clichés rather than memorable soundbites. Rufling a mop of blonde hair has not had the impact of the cigars and the V sign of Churchill. There must be real agony amongst his advisors. There are only so many types of hard hats a man can wear and, as Benny Hill understood, the face of an overweight man under an army helmet is only comic.
Howard Jackson has had thirteen books published by Red Rattle Books including novels, short stories, travel books and collections of film criticism. His latest book Long After This is now available here.