The hypocrisy of politicians is simply breath taking. Here is the latest sample from German chancellor Angela Merkel. “The world hasn’t sufficiently learned the lessons of the devastating 2008 financial crisis… Never again can we allow irresponsibility like back then to happen. In a social market economy, the state is the guardian of order – and that is something people should be able to count on.”
Merkel has form here. Back in 2010 she argued for a re-establishment of the “primacy of politics over markets”. As investors, who rely upon the judgment of markets and the value of money, we can only hope that this never happens. If ever there were a case of the pot calling the kettle black, it is politicians accusing financial market operators of irresponsibility.
I will accept that the sub-prime lending boom was not the bankers’ finest hour, and you will know that I avoid all creations of the financial services industry if at all possible. But as politicians like to say, “let us be absolutely clear about this”: in respect of the global economy the three most irresponsible acts of recent years are all due to the politicians.
Three diabolical mistakes by politicians
First off, the introduction of the euro in 1999 without a properly integrated European economy was an accident waiting to happen. The euro crisis, the high rates of unemployment and the devastating hardship that has caused a number of violent riots to break out in a number of European cities is entirely because, in Merkel’s phrase, European leaders chose “the primacy of politics over markets”.
The second act of irresponsibility was the failure of bank regulation. Gordon Brown is in the dock here for passing this from the Bank of England to the Financial Services Authority (FSA), but it is a global failure. We pay our politicians to do things that we cannot do ourselves and making sure that banks are safe and sound is one of them.
Our political leaders have failed dismally in this respect, they have let us all down and in true political fashion are now keen to blame others.
But the biggest failure of the lot has been the failure to balance national budgets. If business leaders and investors have lost confidence, it is no wonder. Outdated Keynesian economic theories of pump-priming, left-wing social policy and persistently over optimistic economic forecasting are all failures of the political class that have reduced us to this present mess.
When will politicians and others realise that you cannot have things that you cannot pay for? All that markets do is assess the financial reality and when they ‘provoke’ a crisis, by, for example, dumping Greek bonds or Northern Rock shares, it is because they can see the plain facts that politicians choose to ignore.
Those blind wishy-washy socialists
I am fed up with hearing people demand something for nothing. The other day I heard a ridiculous journalist called Bea Campbell arguing that old people were “entitled to be looked after by the state”. What utter nonsense.
There is no such thing as an “entitlement” to be looked after, and even if there was, the plain fact is that the state simply cannot afford to keep the swelling ranks of the aged in the fields of clover that Campbell and other wishy-washy socialists believe is their right.
All the time I hear people claiming that they are entitled to things for which they have not paid. Take teachers’ pensions. Teachers argue that they were promised retirement at 65 and a certain level of pension. They say that because teachers cannot cope when they are old, because teaching is a low-paid profession and because they have served their country (in a job from which nobody ever gets fired) that they should now be able to shuffle off into retirement. But at whose expense?
A lesson from the Chinese
Life expectancy is way higher than it was when those pension arrangements were made. The pension contributions that teachers have made nowhere near cover their pension liability. The money is not available and it cannot be simply conjured out of thin air. You would think that teachers would have the brains to understand.
For years successive governments, mostly of a socialist persuasion, have mollycoddled the population with money borrowed from our children and grandchildren. Sometimes it is cruel to be kind. Have politicians not noticed that the world’s most successful economy, China, is one where people have to look after their own fortunes and their own future?
The Chinese understand the value of money, the link between education, hard work and material rewards, and the satisfaction of achievement. In our socialist utopia we have lost all of this.