In These New Times

A new paradigm for a post-imperial world

Posts Tagged ‘bankrupt Britain’

The left on the horns of a Chinese dilemma

Posted by seumasach on October 4, 2015

Cailean Bochanan

4th October, 2015

I had the impression that Osborne’s recent and startling announcement of various deals with China, including the integration of our financial markets, no less, had been met by a stunned silence. But John McDonnell, the new Shadow Chancellor made this reference to them in his speech to the Labour Party Conference:

“I found the Conservatives’ rant against Jeremy’s proposal to bring rail back into public ownership ironic when George Osborne was touring China selling off to the Chinese state bank any British asset he could lay his hands on.”

“Ironic” is putting it mildly: The Chancellor has essentially admitted the failure of the Thatcher revolution and called in the state to rescue Britain. Only it’s not the British state, which no longer knows how to run anything unless it’s into the ground. You might have thought the left would be enjoying this “irony” a bit more than they appear to be. More, for example, than William Keegan writing in the Guardian who is dismayed that Osborne is “kowtowing to a communist Chinese government” and denounces his “cloying approach to a regime notorious for its abuse of human rights”. Keegan is something of a soft left neo-keynesian and , therefore, those criticisms could be largely expected. What about the hard left?
In an article in Socialist Worker Alex Callinicos gives us the line. He is, of course, scrupulously politically correct:

“The problem here isn’t that the companies are foreign-owned.”

Why shouldn’t foreign companies take the place over? Don’t they have rights too? The problem lies elsewhere. Callinicos points out that Chinese companies are “still subject to considerable state control” and that capital “is still not allowed to flow freely in and out of the country” However, Callinicos insinuates this is changing and China is embracing the free movement of capital.
So we have two major threads in this leftist discourse: on the one hand, dealing with China is wrong because China is communist and , on the other , it is wrong because China is no longer communist.
Callinicos goes on to denounce the fact that Chinese investment will be centered on the the City of London at the expense of the “national base of companies operating in Britain.” Callinicos’ thinking in all this is particularly fuzzy. Capital exported from China can still be and is controlled by the Chinese leadership for all their rhetoric about free markets. This is particularly true of the banks. As Dend Xaoping himself used to say:”Whatever you do keep control of the financial system!” In addition, I don’t believe the behavior of Chinese banks will merely replicate that of our own: riding high on bubbles and carry trades, manipulating rates and prices and laundering funds of dubious origin. If they did China certainly wouldn’t be in the position it is today. Anyway, as Osborne announced, there is already large scale Chinese investment in the real economy, largely in infrastructure and housing. There is every reason to believe that this would increase with funding available from Chinese banks operating in the City. The principles of Chinese finance contradict completely those the City of London. We are, therefore, looking at systemic change in the British financial system.
The British left desperately need to get to grips with this issue and quickly. This is because they have essentially abandoned their neo-Keynesian perspectives and accepted the need to balance budgets. But how can they reconcile this with their claim to be anti-austerity. Balanced budgets imply genocidal austerity unless there is some countervailing tendency. That tendency is incoming investment something which, seemingly unbeknown to the left, we have been beneficiaries of for decades. All that is happening,as Osborne’s policy shows, is that the form this investment takes is changing.
For a long time China was obliged to accept fiat pounds to cover its massive trade surplus with Britain and reinvest these pounds in UK government bonds. This was win/win for Britain and largely explains the surprising prosperity of post-Thatcherite Britain. The bankruptcy of the City and its subsequent bailout changed all that. China ceased to buy new UK government bonds (note that, in addition to its massive trade deficit, Britain no longer has a current account surplus not including trade) although they agreed not to divest from existing bonds, sinking sterling. Instead, they wanted to reinvest the surplus funds in the UK. So, on the one hand, we can no longer fund our deficit with Chinese bond purchases and on the other we have the prospect of hundreds of billions worth of inward investment. So balanced budgets and Osborne’s policy are two sides of the same coin. It would be truly reckless to embrace balanced budgets without wholeheartedly welcoming the incoming investment which will render the outcome far less austere. The left are caught in a dilemma which they must resolve if they don’t want to be outflanked by the Tories.

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Britain’s fragile finances are a political no-go area

Posted by seumasach on May 3, 2015

Liam Halligan


2nd May, 2015

Aren’t financial assets “simply pumped up by printed money?” Don’t share prices “need to adjust downward by something like 50pc?” Is it “really the case that if Greece leaves monetary union, other countries won’t follow?” It must “surely be wrong to try solving a debt problem by taking on even more debt?”

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Crippling PFI deals leave Britain £222bn in debt

Posted by seumasach on April 12, 2015


12th April, 2015

Every man, woman and child in Britain is more than £3,400 in debt – without knowing it and without borrowing a single penny – thanks to the proliferation of controversial deals used to pay for infrastructure such as schools and hospitals.

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Prince William meets China’s president Xi Jinping

Posted by seumasach on March 2, 2015

as he invites Queen to visit Beijing

The meeting, by far the most heavyweight diplomatic mission the Duke has ever attempted, not only heralded a new beginning for relations between China and the Royal family, but also symbolised the extent to which Britain is desperate to court what will soon be the world’s biggest economy.


2nd March, 2015

His father the Prince of Wales famously referred to China’s leaders as “appalling old waxworks”, and has never been back to the country since.

But his son the Duke of Cambridge pulled off something of a diplomatic coup, and a major thawing of relations between Beijing and the Royal family, by gaining an unexpected audience with President Xi Jinping.

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RBS posts seventh straight annual loss

Posted by seumasach on February 26, 2015

“The performance was better than expected, comparing to a £9bn loss in 2013, in a boost to the Treasury’s hope of selling off part of its stake at some point.”


26th February, 2015

Royal Bank of Scotland lost £3.5bn last year, its seventh-consecutive year without a profit, meaning the bank has lost around £50bn in total since 2008, when it was bailed out.

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UK energy firms go under as oil price tumbles

Posted by seumasach on December 16, 2014


15th December, 2014

The tumbling oil price has led to a trebling of insolvencies among UK oil and gas services companies so far this year, while £55bn of further oil projects reportedly under threat.


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PFI will ultimately cost £300bn

Posted by seumasach on December 8, 2014

“We’re sitting on a PFI debt time bomb, and the sheer scale of the burden paints a seriously grim picture for the future of our public services.”


5th July, 2012

The cost of Britain’s controversial private finance initiative will continue to soar for another five years and end up costing taxpayers more than £300bn, according to a Guardian analysis of contracts that were sanctioned by the Treasury.

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UK: Independent reveals extent of foreign takeover

Posted by seumasach on November 22, 2014

This is a tendency that can only intensify as Britain devolves control of finance. This effectively means we’re giving up our credit card since no regional or devolved administration is sovereign and will not be able to issue sovereign bonds as before. Nor will the UK government itself since it no longer controls its tax base. The SNP has already  pointed out that Scottish government borrowing will be within a context of a balanced budget rather than the traditional rolling over of debt and coverage of interest charges only. This end of  Keynesianism is accompanied, logically, by the demise of the Labour Party and the left.The UK is and has been for  years totally dependent on capital inflows. However, the form these take is changing: rather than going into government bonds they are going into direct investment and purchase of assets.

Revealed: How the world gets rich – from privatising British public services


20th November, 2014

Foreign governments are making hundreds of millions of pounds a year running British public services, according to an Independent investigation highlighting how privatisation is benefiting overseas – rather than UK – taxpayers.

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The Scottish referendum and the decentralization of Britain

Posted by seumasach on September 28, 2014

The election result yesterday reinforces my analysis, below, of the 2014 referendum campaign. So, after having won an election on the basis of opposing “the break-up of Britain”, David Cameron can proceed with the break-up of Britain. It took some deft maneuvering to get to this point but the coup de grace was delivered, with an air of complete innocence, by Ms Sturgeon in the form of her pledge to keep the Tories out by allying with Labour. This was a red rag to a John Bull and provoked massive tactical voting against Labour in England. It also helped top up the SNP vote in Scotland as many fell under the spell of this mythical “progressive coalition”. And so the Tory/SNP axis has come into being and it will indeed dominate British politics for years to come, or, at least, until 2020 which is a very long way away in political terms.

Cameron’s first move will be to shore up the position of the SNP by bringing  substantial devolution, greater, he claims, than that existing anywhere in the world, which presumably will mean full fiscal autonomy for Scotland. This will in turn trigger English devolution including restrictions on SNP voting on English affairs. England will be divided into “city/regions” after the pattern already established with the Greater Manchester Combined Authority. Cameron has pledged to renew Trident and hold a referendum on European Union membership. Both proposals are unrealistic oand destructive. The SNP opposes both and has suggested that a “no” vote on Europe would justify a new referendum on Scottish independence. Could they help Cameron get off the hook on counter-productive electoral pledges?

Far from being “anti austerity” as the Scottish electorate have been led to believe, devolved power will end forever neo-Keynesian deficit financing and inaugurate a period of structural austerity- local  or regional bodies lack the credibility for deficit financing, hardly surprising since central government already does too, hence quantitative easing. Despite the SNP’s clear commitment to balanced budgets, a policy once associated with the likes of Newt Gingrich, they were very generously given a free run on a completely imaginary “progressive, anti-austerity” agenda by the media and their rivals. On the other hand, their very positive programme of bringing foreign, mainly Chinese investment into Scotland was not , to my knowledge, given a mention. They will be betting that the ensuing economic growth will save their skins when the reality of devolution sinks in.

I see no grounds for dismay in this outcome- there is everything to play for. The Tories have always showed themselves capable of adapting to new global realities and despite the reappointment of hotheads like Hammond and Fallon and the consequent torrents of hot air and bluff and bluster, they know that Britain is no longer in a position to dictate to Russia or anyone else. The  bottom lines are that Britain must remain in Europe (for the sake of incoming investment), Trident must be scrapped since, amongst other things it is unaffordable and the people, already suffering under perpetual austerity must unite to defend basic, decent living standards for all, especially the most vulnerable.

Cailean Bochanan

28th September, 2014

When Nicola Sturgeon spoke back in January of the inevitability of change whatever the outcome of the referendum and appealed to the “No” campaign to come forward with their proposals for further devolution to Scotland she must have known that a response would be forthcoming. All political parties had been focused for some time on the issue of the decentralization of the British state and the referendum was to be the cue for these ideas to come to the fore. However, from the point of views of both campaigns this issue was to become the elephant in the room that no one wanted to see. The “Yes” campaign , notwithstanding Sturgeon’s remarks, continued to insist that it was all or nothing for Scotland, that not only was further devolution not on the agenda but that a “No” vote would see the rollback of devolution already conceded. The “No” campaign evoked the enduring stability of the union and an era of innocence in which good old Great Britain was not about to be eviscerated. As a result, it was only when “panicked” representatives of the leading UK parties came to Scotland late in the campaign, following polls suggestive of a “Yes” vote, that it became evident to all that further devolution was indeed on the agenda. The “panicked” UK leaders, far from making up policy on the hoof, were, however, merely putting forward what they had always intended in an opportune manner which would give themselves credit post-referendum. They were also shoring up the position of Alex Salmond and the SNP post-referendum who could claim that their campaign and a surge in support had forced the hand of the Westminster establishment.
That major constitutional change was on the cards was made clear in a speech in April by Labour leader, Ed Milliband, a speech which was studiously ignored by everyone. In it he blamed overcentralisation for all Britain’s ills and promised to devolve power and spending to English cities and regions. He also revealed the real point behind this “bringing of power to the people” as the Tories like to call it:
“With power of this sort comes responsibility.
These changes will only bring new jobs, greater prosperity, if the towns and cities are willing to put the private sector at the heart of decision making.”
Welsh Conservative leader Stephen Crabb was to pick up on the same theme as he launched the pre-panic, Tory devolution response in July,:
“I am very comfortable with the way devolution is developing. It is quite an exciting landscape that is emerging for devolution. So fiscal devolution I see as particularly important because of strengthening accountability for devolved government.”
This, he thought, would help to “challenge socialist orthodoxy” citing the influence of leading Thatcherite ideologue,Lord Brian Griffiths, in his conversion to devolution.

Any doubts about major constitutional change were dispelled in Cameron’s speech following the announcement of the referendum result. He called for English votes on English issues, effectively a call for English devolution. It also launched the 2015 election campaign with a shot across the bows of the Labour as Cameron sensed blood and seized the moment when the Labour/Tory duopoly gives way to a Tory/SNP axis which could dominate Britain for a long time to come. Labour’s hesitancy regarding English devolution doesn’t mean they won’t support it: they have no choice, but they wish to delay it beyond the next election. If Milliband has written their suicide note in the above mentioned speech they can be forgiven for pacing the room in a state of high agitation before finally putting the bullet through their head.
The British ruling class have embarked upon a major transformation of Britain. Milliband’s speech gives an indication of what they have in mind. The essence of this change is more easily grasped within the context of US politics and the politics of the Republican right. The goal is the end of Big Government. As Britain heads towards another crisis resembling that of 2008 it will face similar dilemmas to those they faced then. In 2008 they bailed out the banks without taking control of them. This time overwhelming popular pressure could force their hand and result in nationalization. Similar pressures could lead to renationalization of the utilities and even land and the housing stock. These measures are unacceptable and dangerous to the post-Thatcherite oligarchy. By devolving spending and tax raising powers to the regions they are vetoing that particularly noxious, in their view, outcome. Admittedly, the state is bankrupt anyway but they will not be presiding over the bankruptcy of Britain with the tax-payer as the priority creditor, the state taking on our assets and our debt to our international partners being resolved through intergovernmental negotiation as I have been proposing for some time. Instead, they will proceed through “the market”.
It could be objected that there is little left to privatize. But Britain’s privatization programme is really just a corporate welfare scheme whereby public funds are transferred to private companies. The companies would not otherwise be making money. This process is inordinately expensive to the British state and is not sustainable. The British state will then withdraw its largesse and as it does so foreign states or their agencies will take its place. This process is already well underway as James Meek has documented and is about to accelerate dramatically. The British oligarchy instead of going down for a very, very long time have opted to be bought out by the Chinese and retired to the Cayman Islands.
It is a great irony that the “yes” campaign regard further devolution as a well earned consolation prize and continue to shout betrayal in the form of its non-implimentation. They have been joining in the fun too, dancing on the the grave of the Labour Party but it is also the grave containing the corpse of their neo-Keynesian spending strategies. The active component of the “yes” campaign is basically on the left, contemptuous of Scotland’s national status except when referring to it, hilariously, as “one of the richest nations on earth”, and these heady days have been like the last faint echo of Blair’s, 1997 “Things can only get better” surge, before we finally sink into the abyss. So they’re celebrating their own demise too: it’s just one internal contradiction too far.
That the coming crisis of Western imperialism will have a neo-liberal solution is at first sight dismaying but it has its logic. I was a struck by the insistence of a Chinese academic, speaking at at Glasgow University’s Confucius Institute, on the resolution of Britain’s debt and current account deficit with China via the market. What, I thought, did we have to sell back to them. Not much, but we can let them relocate factories which produce for our market to Britain. That way, they don’t have to accept sterling fiat money in payment and we can start to correct our trade deficit. That is definitely win-win. They can also facilitate this by taking control of our utilities and building other essential infrastructure. Finally, they can take over our banking system, after its major shareholders and creditors have taken the hit,opening up control of a significant portion of Britain’s land and real estate for re-industrialization. The British government has already taken us some way down this path and we have signed a formal strategic partnership with China and are now proud issuers of Renminbi-denominated UK government bonds. Other sovereign wealth funds will, of course, participate. Just as free-market ideology furnished us with a cover for imperialism in the 18th and 19th century, so it now provides a cover for a policy for end of empire. This is anxiously sought by the Chinese and the Global South and their investments will not be just about profit but drawing the sting out of Anglo-American imperialism. In exchange for life-saving inward investment Britain will de facto renounce its imperial or hegemonic project and become a neutral, demilitarized state. Perhaps Scotland could become a Chinese concession just as we once had concessions in China. That would be poetic justice and leave us staring survival in the face.
The constitutional transformation will go through and it will also be as many have pointed out a dog’s dinner. But the goal is purely negative from the point of view of the British oligarchy: to veto Big Government. However, it contains other potentialities as Gerry Adams, leader of Sinn Fein was quick to grasp when he pointed out that, despite the “no” vote, “the British state is not static”. Britain is not suitable for federalisation and the regionalization of England is a completely synthetic agenda which is being foisted on a reluctant people. Hence another irony: the “No” vote may be the real “break up of Britain” agenda. The constitutional agenda compromises Britain’s sovereignty and at a certain point when all the wars and tumult of empire are a fading memory that issue of sovereignty will return and, in all likelihood, resolve itself as four sovereign nations in these islands.

Posted in Constitutional change in Britain | Tagged: , , , | Leave a Comment »

UK banks ‘still vulnerable to global shocks’

Posted by seumasach on June 13, 2014

The idea of bailing out the banks in perpetuity is totally devoid of realism. Neither the pound sterling nor the British people would survive such a policy. The only answer is to allow the banks to fail, to put them through bankruptcy.


Britain’s financial sector remains vulnerable to further global shocks and the Bank of England must be ready to rescue banks that run short of funds, Threadneedle Street warned on Thursday.

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China’s poorest beat our best pupils

Posted by seumasach on February 18, 2014

The terrible truth about educational levels  is another aspect of contemporary Britain which we refuse to confront along with the real state of our banks, our infrastructure, our industrial base, our public health and so on.


17th february, 2014

British schoolchildren are lagging so far behind their peers in the Far East that even pupils from wealthy backgrounds are now performing worse in exams than the poorest students in China, an international study shows.

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