Thursday, October 20, 2022

What The New UK PM Might Want To Do About This Elephant In The Room #1

Posted by Peter Quennell

See 10,000-plus comments here

Context

Remarkably frank and useful Financial Times report.

Very timely too! Perhaps sensing that PM candidates could be busy listing their promises as soon as today.

Consider this stark warning above all in the report.

In most economies, something like 75% of all the economic value is created by only around 25% of the capacity. Typically the majority of that 25% will consist of innovating and expansive smaller enterprises.

All economies really, really need those guys. Absent them, corrupting large enterprises with stale low-value technologies will dominate, and growth will drop by at least half. 

This Financial Times report shows how, courtesy of all the new barriers, their vast destruction is really gathering steam. Broken systems (including our main interest: legal systems) are the direct cause, and a decade of zero growth is in the cards.

Supply-side or trickle-down “economics” which Liz Truss initially tried (with no mandate) to impose is exactly the worst policy to turn this vast systems problem of the UK’s small enterprises around.

It puts vast sums in precisely the wrong hands: those of wealthy people who, in a world economy where TRILLIONS of dollars are already available for any good new systems that appear, already have all the capital they can possibly put to good use.

Innovation - risk-taking - is not any longer their thing. So the tax-cuts all end up in a bank offshore. Or in another economy already at its peak.

And if they are heading mature enterprises, they have very possibly been promoting cost CUTTING and job LAYOFFS for years (that is how vulture capitalist Rishi Sunak made his mint: in the name of “efficiency” he destroyed jobs, innovation, and long-term growth.)

In fact, this is not an incentives problem at all. Whichever PM candidate has a sense of the vital need for enhancing systems on a grand scale (systems klutz Boris Johnson would be at the bottom of any such list) could make some long-overdue right moves.

Perhaps networked with the systems-smart Irish and the Swiss? Their GDPs per capita are each now TWICE that of the UK.

Posted by Peter Quennell on 10/20/22 at 10:25 AM in

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A quick note on where we are. Soon nothing except Meredith’s case will show here,  after Dr Mignini’s book comes out and we move on press releases on the true facts of the case and how so much of the US & UK media led the public astray.

General systems posts like this will be moved to our new general systems page, see the link already at top left, along with the posts on other cases with similarities. Additions to the impressive Wiki and more translations might go on for years.

Posted by Peter Quennell on 10/20/22 at 11:39 AM | #

Sardonic comment in the Washington Post on Truss & trickle-down. “Where do you think she got the idea?”.

I’d suggest: Thatcher 1979 > Reagan 1981 > Bush 2001 > financial meltdown 2008-09 (huge factor, courtesy of us here in NY) > Cameron & Osbourne 2010 > Truss etc book “Britannia Unchained” 2012 > referendum 2016 > Boris & Brexit 2019.

All heavily driven by oceans of dark money including probably some Russian & Chinese. Of course the UK population never voted to leave the EU. Only 23% of eligible voters did.

Posted by Peter Quennell on 10/21/22 at 10:11 AM | #

Zero tax cuts in the UK could be the best idea. They are a terrible Job #1.

Consider that much of any tax-cuts for the wealthy would head straight for the US because the dollar is so strong.

The current market vote against the pound would actually speed it on its way here. Of zero benefit to the little guys in the UK.

Their need is the mending of millions of broken systems, as the FT video drives home. How does UK money sitting here help that?

It would of course help Rishi Sunak’s investments. He would make added millions as the little enterprises and thus the UK goes down.

Posted by Peter Quennell on 10/22/22 at 10:09 AM | #

All the MPs who voted for Truss and for Sunak now will know how they too can make huge gains as the UK goes down. Their arms of the Conservative Party are now essentially criminal gangs.

So whither Boris? Will he get behind Penny Mordaunt as Sunak is the one who brought him down? Her book falls far short of state-of-the-art knowhow in systems-driven growth but her instinct is right.

And whither Keir Starmer? Three months ago, nervous of the 1/3 of the Labor Party who had voted in 2016 to leave, he was saying he could make Brexit work.

https://tinyurl.com/4ajfyba3

Really? How? His only way back to growth, no ifs or buts, is one way or another to fix those millions of broken systems.

With the help of this FT video, he could get the entire country behind that.

Maybe the whole of the EU too. Systems replacement & enhancement across the entire EU badly needs a sharp shove.

If the UK economy leads that, it could really roar.

Posted by Peter Quennell on 10/22/22 at 10:57 AM | #

You are bit unkind to Rishi- he can certainly manage to change things but only if he wants to.

I am no economist but import-export is the only arm where you can forecast growth. Even a modest increase in this side can improve the internal circulation considerably.

I used to think that the rich have so much that they are no more interested in more and more but I am mostly wrong!

Indians work best under pressure and Rishi will be no exception. Failure will not be an option for him. But who knows?

He is no Adani or Ambani: he may be out of touch with the common man but he knows one when he sees one. But nothing succeeds like success.

I have not been to the UK for quite some time: do you think that the color of the skin is an interesting factor?

Posted by chami on 10/22/22 at 09:54 PM | #

Hi there Chami. Good questions.

First, as far as I can see from here, national origin is no encumbrance to being elected in the UK these days, there are many members not originally of UK origin in the House Of Commons and some in recent years in Cabinet. Generally they are popular, several remarkably so.

Sunak surfaced in UK cabinet circles only quite recently, and his main plus was a COVID relief program. He has listed anti-inflation measures from the sidelines but they were standard no-brainers which were also recommended by the governor of the Bank of England. 

If anything I may have downplayed his potential negatives in a general election (now being chewed over in London) which make him not the most popular among Conservative party members (Liz Truss beat him in all recent PM voting) or the entirety of the UK electorate.

Negative #1: He has had years to point out that the six year old BREXIT has no executing plan or arrangement on the lines I talked about above, and if he has put forward even the hint of one I have missed it.

Negative #2. You are not alone in being ambivalent about Sunak’s wealth (just shy of a billion pounds, he is the wealthiest guy in parliament) and its murky origin. His and his wife’s tax and nationality statuses and ownership of four multi-million-pound houses have been in the UK news recently, not in a good way.

Negative #3: His skill set is essentially that of financial manipulation, none of the hedge funds in his career have had the reputation of building good systems or adding true value. They are chasing huge returns in an economy growing a mere 2-3 percent (as here in NYC) and those returns leave the rest of the population impoverished.

Negative #4: The murky think-tanks in Tufton Street behind Sunak, Liz Truss, etc, and the huge sums of dark money that they assemble that does not have to have its origin identified. Their huge pro-BREXIT push in 2016 happened exactly when Brussels was envisaging more financial sector oversight in all member countries.

Some of a faction of the Conservative party’s dark-money contributors were at a champagne party with Liz Truss’s Chancellor and knew that he had naively just tanked the pound and two at least referred to him after he left as a “useful idiot”.

Is Sunak also seen as one? Best to keep our powder dry! Executing BREXIT now is going to be a ton of trouble, as the Financial Times video hammers home. If a broad bottom-up coalition of systems enhancement nodes is to be evolved belatedly, Sunak would not seem the best choice to guide it, even if he has a reputation for hard work.

Posted by Peter Quennell on 10/23/22 at 02:40 AM | #

PS Chami

A word further if I may on billionaires & BREXIT type situations which applies equally to the UK, India and the US.

1. There are two broad kinds of billionaire: those that made it themselves, and those who inherited it.

2. The self-made billionaires can be divided in turn into two groups: those who made it through the invention of systems, and those who made it through financial manipulation.

3. Self-made billionaires through systems invention include Bill Gates of Microsoft, Jeff Bezos of Amazon, the Google guys, the Facebook guy, Indian-born Hinduja in England, all 10 top Indian billionaires, and Sunak’s own father-in-law Murthy.

4. Self-made billionaires through financial manipulation include Sunak, and Berlusconi, and dozens of hedge-fund managers. They include Ray Dalio in India, but the high tax burden generally acts against hedge funds there, and it seems Sunak could not have made his fortune there.

5. Self-made billionaire through systems invention Michael Bloomberg is today worth $77 billion. He was mayor of New York from 2002 to 2013, and because he KNEW systems he really moved the entire city onto a higher plane. 

Bloomberg could make BREXIT work, but Sunak? He really is the wrong horse for the course, and I think his adventure will not end happily, either for himself or the UK.

Disproof of all of this re Sunak? It would come if the pound sterling (down 30%  this year) makes a serious 10% or so jump in coming weeks against the US dollar and the Euro.

The PM race could be over in about 24 hours. Sunak has the edge at the moment as the only one to have the 100 votes needed to remain in the race. But so far… the rates of the pound are fluttering. It was DOWN a further 3% against the US dollar at one point. No net gain, so far.

https://tinyurl.com/ywamtv57

Posted by Peter Quennell on 10/23/22 at 10:11 AM | #

Sorry UK! The news gets even worse. 

There are good progressives, and good conservatives… and then there are the trickle-down supply-siders.

Their totally unneccesary “austerity” has infected British politics and “economic” management like a cancer since 2011.

This created the environment for BREXIT via middle-class impoverishment.

This also caused the UK to rocket to the #2 spot in wealth disparity among “advanced” large economies in the whole world.

(The US is in the #1 spot, put there through numerous supply-side breaks for the super-wealthy by Reagan, George W Bush, and Trump. The national debt rocketed and real GDP growth slumped under each of them.)

Meanwhile the REAL growth rate of the UK became the worst of all the economies in the European Union.

It has just been displaced as the 5th largest economy by… India! In terms of GDP per-capita it is only about 20th.

Posted by Peter Quennell on 10/23/22 at 11:38 AM | #

Monday near noon. Hard to watch BBC American right now. Such pain (perfectly avoidable pain, see the comment directly above) in their reports.

The bitter fruits of not getting systems right.

Mordaunt pulled out of the race (she may possibly have done a deal) leaving Sunak in charge of the show. But not a very promising show.

(1) A really tough new budget is due next Monday with expected service cuts and tax increase.

(2) See this alarming list of things that must be addressed - that does not include any of the measures to fix the millions of systems BREXIT broke (see video at top).

https://tinyurl.com/maakyx9b

(3) Experts and citizens on British streets are already saying Actions (1) and (2) above have no legitimacy - no popular mandate - because not even the 200,000 in the Conservative Party voted Sunak in, let alone the entire UK electorate.

(4) And the pound sterling and London stockmarket do not seem too thrilled.

https://tinyurl.com/yvh9y77y

Did Penny Mordaunt dodge a bullet here? Maybe. Maybe quite soon we will see yet another PM as desperate Conservative MPs try to hang on to their seats.

(A tip mentioned in previous comments is that Keynesian progressives in the US and UK have consistently been better in the past 30 years than the supply-siders at creating growth by non-crooked means.)

Posted by Peter Quennell on 10/24/22 at 11:25 AM | #

Peter,

Call me a commie, but I have little faith in the market driven exchange rates. Markets are very easily and directly manipulated. Particularly when you are big. See China.

But I agree with you about the billionaires who only manipulated the markets. But when you become big you anyway control the markets. Yes, I too have great respect for his (Sunak’s) dad-in-law who really made a good business. With blood and sweat, I would say. But you forget George Soros.

I do not agree with your “all 10 Indian billionaires”- couple of them in the list are perhaps suspect - you guessed it- government aided market manipulation.

But why you are silent about the Italian PM? We need to talk more about ... what is happening there. Italy can upset the EU apple cart. My Italian friends do not want to talk about it.

And Rishi can manage the country like a hedge fund but we know the British- they would not grumble. With some help from luck, Rishi can do really well.

No, I do not think democracy means just having elections. You can manipulate people just like markets. Believe me, I have seen enough of elections.

Posted by chami on 10/25/22 at 03:03 AM | #

Tks again for the insights Chami. To me anything from India is to be taken seriously because it is the western outlier of the East Asian Miracle of the past 30 years.

1. Re you & billionaires. As you already say, even the “good” billionaires who got there through system invention tend eventually to enter a corrupting phase with heavy government lobbying and scorched earth trampling of little enterprises designed to preserve their monopolies. They need more whacking.

2. Re you & markets. The stockmarkets and currency markets are forward-looking, forecasting devices and they TRY to puzzle out shifts in value in financial terms. Stockmarket analysts TRY to read the strengths and potentials of systems. But they have weak methodologies in our terms, and companies do a lot to keep their systems pictures private. Way forward: better systems analysis and change tools on lines we chat about.

3. Re you & supply side & Sunak. Liz Truss and the the other useful idiots of the shady supply-side puppet-masters may have taken a big enough knock that (as the BBC just said) they “could be out of power for a generation”. Sunak may secretly wish to give oligarchs like himself more huge tax breaks but politically he would get nailed. So any dreams he may have are pretty hamstrung and though growth will stagnate under him, he may be safely “chained” if that is the opposite of the supply-siders’ “unchained”. In effect, the useful idiot of the moderate centrists.

4. Re you & Italy. The good news is that the Brexit train-wreck and the UK supply-side train-wreck have already scared the rest of Europe silly as ways to go. So in recent months there has been a noticeable silencing of European extremists, and the new Italian government has already in effect admitted that it is a paper tiger.

5. Re you & elections. One vote on a party every four or five years is proving NOT ENOUGH. Increasingly nobody feels that is enough. Social media is enlightening & empowering absolutely everyone, and they can actually now vote on millions of things. So more & more feel bold enough to stand up against the useful idiots of the oligarchs. Just wait till everyone takes the next step, which is to open their eyes to the issues of systems that the Financial Times video at the top graphically illustrates. That will be super-empowering.

This systems stuff is actually pretty simple. “Thanks” to economists and the useful idiots of oligarchs etc, it is just not yet obvious. A huge role for universities is coming up. Universities unchained, that may amuse you!

Posted by Peter Quennell on 10/25/22 at 12:50 PM | #

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