ConDem debt Democracy politics society

Malaise afoot

There is malaise foot, people sense it, and without sensible alternatives they will increasingly gravitate to the simplest and most self-protective options that are available. This political malaise has a short horizon, even if any one of a dozen potential powder-kegs does not go off to shorten it further (a debt crisis in next 3 years being the most likely).
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Living life, private or public, off debt is an instinctively unstable position, and we are all aware of our deep financial, social, and environmental debt Рfor which we have no repayment plan. Individuals in this situation commonly, and understandably, abscond, turn criminal, and rage against the system. For individuals in a decent society we have the rule of law to provide a way out of such situations, for whole societies there is no such rail to lean against. This is the story of the evolution of human societies, and the unfit pass into history.

Without the appearance of a practical, credible and safe path forward, today’s advanced societies are pressing into a breach left open by the failure of both centre-left and centre-right politics to apprehend the dire need for such a path.

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UK policy: trapped behind the yield curve

If you want to understand why all of the major UK political parties are committing to essentially the same fiscal strategy, i.e. reducing borrowing to zero by the end of the next parliament, then you’re going to have to understand what the “yield curve” is.

yield curveThe “yield curve” is a line drawn on a graph connecting the different interest rates that the government has to pay to borrow money over different periods of time. For the UK this is quite a steep curve, because our short-term interest rates are much lower than our long-term interest rates. To borrow money for two years at a time we pay about 0.5% a year, but to borrow money for 10 years we would have to pay around 2.8% per year. That means we have to pay five times more in interest if we want to borrow money that we will repay in 10 years from now, compared to money that we borrow and say will we will repay in 2 years from now.

Fairly obviously, as a result of this steep yield curve, the UK Treasury benefits from shifting its borrowing to much shorter term “gilts” (average gilt maturity has shortened by 5 years in the last 4 years, from 14 years in 2010¬†to 9 years today – see table below), because it is so much cheaper to borrow money over the shorter period. The logic is that if we are unable to repay that debt at the end of the shorter term, then we simply issue new short-term debt (gilts) and use that money to pay off the previous gilts.

Understanding2So why are the U.K.’s interest rates to borrow money over the short term so much lower than they are over the long term? The reason is because, over a two year time horizon, lenders have a fairly high degree of certainty that the existing government policy will be enacted, and budgets met. But given the size of the overall fiscal problems for the UK government (we have a very high ratio of debt to GDP, and we have a higher level of annual borrowing to meet current spending, at about 6% of GDP, which is twice the limit set on Eurozone countries’ maximum borrowing), lenders have a much lower degree of confidence about how the UK is going to eventually bring its fiscal situation under control.

When lending money to the UK for just two years, lenders only have to evaluate whether the current set of tinkering measures will or will not be implemented, and they don’t have to care about whether the long term situation will be resolved or not.

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Snakes can’t jump

Snakes can’t jump – why voting Labour in the next election won’t make any difference

“Lemmings, left!” ~ heard from the back of the pack as they hurtled towards the cliff.

Across the industrialised or ‘advanced’ world there is a dearth of new ideas and a consequent absence of solutions for, and discussions about, the real problems facing us.

Our demographics are approaching post-industrial new normals. Our economies are still dependent on exploitation of resources or labour, or both. Our societies are structured to combat the scourge of parochial narrow-mindedness, but not take advantage of inter-connected communities.

The existing political parties are devoid of brilliant thinking in the face of enormous challenges, offering 20th C, or even 19th C, solutions for our 21st C problems. Neither “growth” on a finite planet (with increasing competition for resources), nor simply paying ourselves more, nor the white knights of private enterprise are 21st C ideas let alone solutions, and the general public knows this.

We stand before the chasm of the next financial calamity, dressed only in our grandfathers’ long johns. We need fresh thinking that leverages the modern world and all of the opportunities that can only be ours in the 21st C because we have the benefits of the industrial, technological and information revolutions behind us.

We cannot afford to go into the next election like we are now.

Central to our legacy political parties’ internal problems and the disconnect between their policies and reality is their failure to grasp the true nature of human society, and our evolution in the continuum of this planet.

“Business” is a classic example of this disconnect. Neither left nor right places this vital human function in its appropriate context. The left has traditionally seen the economy in terms of objective components to be arranged on a chessboard, but not understood in any meaningful way. New Labour was simply a capitulation to the traditional right-wing perspective, which recognises the “animal spirits” inherent in business activity and in the economy, but does nothing to understand context.

Pushed to the limits of their policy framework, confronted with its evident failures, both sides tends towards the notion that businesses can be seduced or encouraged into fulfilling a social responsibility. This is a fundamental misunderstanding what business is, it is the equivalent to suggesting that snakes can jump. (Indicative of this problem was the response I received once to a posting in a comments section where I suggested that snakes couldn’t jump, in which the responder said that snakes could jump, and that they did have legs, and that our responsibility was to help snakes understand that they did have legs.)

A decent and functional understanding of the true nature of life recognises that “business” is a term we used to refer to a perfectly natural set of behaviours that are related to living in a resource and time constrained world with many various needs. And as a natural set of behaviours the correct approach is to understand their context and function, rather than trying to suggest that they should be redirected in some other direction. Once a set of behaviours has been understood in its context, then one can determine if those behaviours become inappropriate because they have left their natural context. This understanding is completely absent from both left and right, without that understanding both of our legacy parties employ, deploy and allow business to operate outside of its context, with negative results for our entire society.

These parties, whose foundation for policy is so pathetically absent of real understanding, are completely useless at developing solutions to our problems. The Conservatives will attempt to deploy snakes everywhere, and when confronted with its failures, they will suggest that they are training a new subset of the species that has legs. Labour will draw lines in the sand, and tell the snakes that they are only allowed in certain areas, and that there are certain of the lines over which they must jump. It’s madness either way. 

And this is but one example of where our legacy parties are completely failing to grasp the real issues. Frankly, it doesn’t make any difference which one of them you vote for, none of them is actually going to solve any of the problems.

Choose LIFE!