Tuesday, February 03, 2009

Conservatives would ‘control house price rises’

Actually, they would give the Bank of England new powers to do so, but it amounts to the same thing. Except that the Conservative Party would be able to blame the MPC for any deficiencies in government policy by concealing its fiscal failures beneath the corpses of a succession of governors of the Bank of England. Shadow Chancellor George Osborne says on the one hand that ‘government should manage the overall level of debt in an economy’, and on the other he intends ‘to put the Bank of England in charge of that task’.

Government by bankers.

Perhaps nothing new in that.

But under a Cameron premiership, it appears that the Conservative Party would return to the sort of Conservatism last practised in by Edward Heath in 1972 when he introduced his Industry Act which afforded considerable potential for intervention in industry, and the government found itself managing prices and incomes. This is antithetical to the monetarist liberal economic thinking of Margaret Thatcher and Keith Joseph. Perhaps someone ought to inform George Osborne that it did not work in 1972, and it will not work now. And if this is part of David Cameron’s ‘Moral Capitalism’ – which is, in any case, a tautology – or ‘Capitalism with a conscience’ (which, again, is intrinsic), it is really nothing but the pursuit of a Blairite ‘Third Way’.

David Cameron wishes to divest himself of the ‘old free market orthodoxy’ – that constructed on the Protestant ethic which gave us the open markets and free enterprise which yielded health, wealth and happiness – and pursue an ecumenical Capitalism – otherwise known as Catholic corporatism - which has mired so much of Europe in regulatory red tape, high unemployment and chronically low economic growth. It would be a strange kind of ‘Eurosceptic’ Conservative who opted to burden the United Kingdom with the very Catholic Social Doctrine with which the Europhiles are so enamoured, considering it somehow more ‘moral’, when it has so manifestly failed the poorest since its inception.

Mr Osbourne believes it to be more moral to give the Bank of England the power ‘to deflate "bubbles" in the housing market’. This, he believes, would abolish the ‘boom and bust’ which Gordon Brown tried so desperately to abolish.

Perhaps Mr Osborne never blew bubbles as a little boy, but Cranmer learnt very early on that one cannot deflate bubbles without bursting them.

It is also a bit rich to accuse Gordon Brown of ‘fuelling an unsustainable growth in house prices by overseeing lax credit rules’ when it was a Conservative administration which liberated lending and positively encouraged the very home ownership which has contributed to spiraling prices. The Shadow Chancellor wishes to see ‘more restrained lending', such that when the Bank of England judges that house prices are rising too quickly, they would have the power order commercial banks to restrict their lending to individuals and companies, thus slowing down the housing market.

He ought to heed the lesson of Margaret Thatcher, who was famously of the opinion that ‘you can’t buck the market’. You can only control house prices if you intervene before breakfast, before lunch and before dinner.

Mr Osborne has not specified what ‘rising too quickly’ may mean. And neither has he specified the extent of his ‘restriction’. He has not said by what means he would discern which companies would receive the credit they need to survive and which companies would be abandoned by the State because they are somehow socially undesirable. The imposition of a ‘moral framework’ for Capitalism is the very opposite of the Protestant notion of liberty – which is itself moral - under which it has been developed throughout the Anglo-Saxon economies of the world. On much of the Continent, that framework is Catholic; in parts of the Middle East, the framework is Shari’a. They may ‘work’, but they do so only to the extent to which the peoples are content to be denied their liberties and are content for the State to direct their affairs.

The Protestant framework has succeeded precisely because it has liberated individuals to pursue their objectives irrespective of religion or morality. This does not render it immoral, and neither is it amoral, adhering, as it does, to some of the core Conservative principles such as the rule of law and the right to private property. But Mr Cameron is persuaded that when people look at this brand of Capitalism, they perceive ‘Markets without morality. Globalisation without competition. And wealth without fairness’. “It all adds up,” he says, “to Capitalism without a conscience and we’ve got to put it right.”

And to put it right, he advocates moving into the realm of the dirigiste, pro-EU, anti-State, anti-individualist, ‘Third Way’ federalist Catholic ecumenical Socialism.

It is a strange Conservatism which lets in Socialism through the back door.

The Protestant ethic in the spirit of Capitalism accords with every principle of natural law, but it may be corrupted by the human heart, which is egocentric, selfish and greedy. State Capitalism will not eradicate that, for it is the human condition, and one cannot change hearts through the imposition of legislation. The Protestant ethic which has dominated the world’s economic order for three centuries has encouraged individual philanthropy and an altruistic pursuit of the common good. David Cameron appears to be persuaded that it is the State which knows best how the fruits of our labours ought to be spent, and it is the State which ought to determine the social order and decide who loses and who wins, who’s in and who’s out. And it is the State which will determine the new 'moral framwork' under which the economy will operate.

It appears that the Leader of the Conservative Party is not such a Whig after all. One ought to pray that the ‘Moral Capitalism’ we end up with under a Cameron-led government is neither Catholic nor Shari’a. And not even a Via Media.

Except, of course, for the Anglican variety.


Blogger McKenzie said...

Capitalism can seem to directly favour those who seem to have the means of control, ie the capital. But I agree with what you say about how everyone really benefits as a capitalist society develops. There has to be some form of 'moral framework' though, for the very reason you stated, the flawed nature of the human heart.

No one can deny that the effects for our present dilemma have been mainly due to over exaggerated house prices and wild and loose policies about lending. A visit to an average council estate would highlight the perverse situation when you see executive vehicles parked outside of shabby and ill maintained, privately owned former social housing. It was too easy for people to re-mortgage their properties in order to fund a ridiculously self indulgent orgy of materialistic display of decadent ignorance and debauchery.

Capitalism in this sense has failed, and this is why we are where we are. The moralistic framework that has been the adhesion for high standards in the past collapsed by degrees (the selfish man). We have written out the Almighty from the equation and this is the firm root of what has gone wrong.

It would take pages and pages of essay witting to produce a sound argument on this subject. A historical tracing of the roots of capitalism and the evident progress which has benefited us all. We really do need to go back to basics, but this has been a slogan used before, and it was hi-jacked and given spurious meaning, which is why it failed.

So maybe it is not too difficult to see the reasoning behind this new plan. We will have to start somewhere if we are to turn this whole sad and sorry state of affairs around and regain some dignity for all that has been achieved in the past (which we have so disastrously squandered).

3 February 2009 at 11:19  
Anonymous Anonymous said...


Typically slippery of you Cranmer. An egg-bound whine about the state of things, but no real solutions offered.

How very Anglican. ;)


3 February 2009 at 11:53  
Anonymous Anonymous said...

Free market capitalism?

Would his Grace care to hazard a guess what proportion of UK GNP can be attributed to this principle? The public sector component of GNP, alone, accounts for almost half the economy (this year it will be much greater). In the 'private sector' there are a myriad of government related laws, regulations and purchasing contracts which control business practices in many markets. Strip out these parts and what is left? I would hazard a guess that perhaps only a quarter of UK GNP is created by the 'free market capitalism' that Adam Smith might have recognised. Indeed, I would not be surprised if it was only half of that. Anyone else care to make a better informed guess?

3 February 2009 at 11:54  
Blogger ProudGeordie said...

The problem is in the first paragraph or two. The words "power" and "control". The current political Cabal have little or no understanding of market forces so instead of going with them, attempt to force them to do what they want, which is all they understand.

That is not how it works!!

A governments aim should be to attain "office". To manage the diverse portfolio of national income and expenditure to best serve the nation. National infrastructure has been sold off because:
a)Politicians didnt understand it and it was too much hard work
b)The World Bank/IMF/Central Bank/Federal Reserve called in their 70's loan and our infrastructure had to be sold to service the debt.

We need a government that will allow people to live their lives and make sure essentials such as food, energy and transport are provided WITHOUT meddling in every single aspect. Markets fluctuate, they always will. Boom and bust is as natural as summer and winter. We need to have an adaptive society, with diversified interests so when one thing is busting another is booming to compensate.

It is strange that Labour promote diversified cultures that don't work and ignore diversified income portfolio's that do. It is damning evidence that they are conducting a social experiment rather than good governance

3 February 2009 at 12:41  
Anonymous Alexandrian said...

"But under a Cameron premiership, it appears that the Conservative Party would return to the sort of Conservatism last practised in by Edward Heath in 1972"

I thought that your grace was going to say "the sort of Conservativism last practised by Leonid Brezhnev in the 1980s".

3 February 2009 at 12:43  
Blogger McKenzie said...

Adam Smith is famous for supposedly favouring laissez-faire (a term that appears nowhere in his writing) and allegedly trusting the 'invisible hand' of capitalist progress. But Smith knew the hand could grasp: "People of the same trade seldom meet together....but the conversation ends in conspiracy against the public".

Smith realised that a broadly prosperous consumer-orientated economy would not change human nature: "The pride of man makes him love to domineer, and nothing mortifies him so much as to be obliged to condescend to persuade his inferiors".

Smith did believe free markets could better the world. He once said, in a paper delivered to a learned society, that progress required "little else....but peace, easy taxes, and a tolerable administration of justice". But those three things were then, and are now, the three hardest things in the world to find.

As Adam Smith himself declared in Moral Sentiments, "We may often fulfill all the rules of justice by sitting still and doing nothing". Adam Smith begins Moral Sentiments with the riddle upon which all our well-being depends: "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it....People have the creative talent to put themselves in another person's place and to suppose what that other person is feeling".

However, even very shallow and frivolous people have this creative talent. We call them actors.

3 February 2009 at 13:08  
Blogger Dave said...

I don't understand the Conservatives. They should be part of the solution but instead are part of the problem.

They suffer from the lack of life experience and working in the real world, the same as Labour.
Cameron may have the ability to speak without an autocue and look good at conferences, but so what?

Charisma does not make the man. Look at Bliar. Look at Clinton. Look at Dubya. Look at Obama. Look at Berluscino. Look at Sarkozy. You get the idea? All image and no substance.

Read Isaiah 53 v2b
"He had no beauty or majesty to attract us to him, nothing in his appearance that we should desire him."

Look at Jesus. All substance and no image.
Look at Paul. All substance and no image.
Look at Cromwell. All substance and no image. (Warts and all)
Look at Churchill.

Look at Cameron and Osborne. On second thoughts don't bother.

Unless they get a grip and elect a LEADER, the Tories are doomed.
I fear a lurch to the extremes. The BNP will clean up in the Labour heartlands and it will only take a genuine war hero to run for the extreme right for them to break through.

Centrist policies. Forget it. The electorate have. They took one look and announced that they are all as bad as each other

3 February 2009 at 13:15  
Anonymous oiznop said...

So, Dave, Margaret Beckett for PM?

John Prescott?

Let's just pick the ugly one's with no charisma and no oratorical skills.

3 February 2009 at 13:21  
Blogger haddock said...

There is a tenuous religious link to that photograph, surely that is Harvey Baines from "Waiting for God".
I can see now why Cameron's policies don't make much sense.

Diana or Tom would have been better choices.

3 February 2009 at 14:58  
Anonymous Adrian P said...

We have not had true Capitalism, True Capitalism would be self correcting and would require very light touch regulation, what we have had is manipulation designed expressly to bring about what we have, Total control of the oney supply by a Few Elites.

Take the complete fraud that are Pensions.
The Pensions Scam

3 February 2009 at 15:39  
Blogger Forlornehope said...

I don't quite see the moral difference between controlling retail price inflation and capital asset price inflation. Both are due to an excessive supply of money in the economy. The proposition seems to be identifying a technical change in policy as a philosophical change.

On a separate point, German Christian Democracy, which unites both confessional traditions, is more or less aligned to Roman Catholic social teaching. This has hardly mired the German people in poverty. Over the last sixty years the Federal republic has been the most consistently successful economy in Europe.

3 February 2009 at 17:07  
Blogger McKenzie said...

This comment has been removed by a blog administrator.

3 February 2009 at 17:43  
Blogger ZZMike said...

Adiran: I would have sworn they were talking about the US Social Security System.

In our case, it's even better. They take money from people in the work-force and give it straight away to people in retirement. When I retire, I'll be getting money put in by people just starting out.

There's a name for this kind of plan, when implemented by a private entity. Can't think of it offhand, but it usually gets the praticioners a jail sentence.

What if we - on both sides of the pond - let people invest their money as they see fit (even in a tax-deferred system), and at the same time put courses in finance and economics in schools?

"Anonymous" faults our gracious host for not providing the instant solution. I suggest that anyone can see a problem - if a wheel falls off a carriage, anybody can see that - but not everybody knows where to get new wheels or how to put them on.

And complex problems do not admit of simple solutions.

3 February 2009 at 18:24  
Anonymous not a machine said...

well if the conservatives are looking at it , then it must be an idea for our time .

markets do offer creative solutions , and if managed properly offer more personal freedom than any state concept and are more efficient and less corrupt.

however a house is for most people the biggest personal investment they will ever make , the cruelity of this bubble is that there is no fast way out of it , so a lot of peoples dreams have been damaged some irrecovably in that they have bought at an artificial price in the bubble.

cranking the market with media spin and jolly investor bon amee with footballers interior design aspirations means very little if its your families home .

creating an illiuson of wealth and then further fuelling the problem by allowing borrowing against possibly your most precious asset as though it was fashionable and risk free is down to this labour government and its political vanity .

owning your own home fosters a more responsible culture and is an important part of being free .

it deserves a seperate treatment from markets , which have bubbles both man made and natural in a shorter time span than a house.

given that the basic worker in there 20s cannot afford to buy a basic home let alone the tax burden post purchase , suggests somthing is wrong and immoral .

the market has/is adjusting but to the tears of many who have bought into the curve .

creating a very stable property market requires a fixing of prices and will mean less churn and speculation.

never the less in a free society it should be an ecnomic scarosanct understanding by governements .

however wreckelss spending and unusutainable wage increases have to also be the new understanding .

goverment owned property is not the real solution to progress , it only covers the failiure of the government to look after its people interests .

3 February 2009 at 20:19  
Anonymous Shaven-headed tattooed knuckledragger said...

Apologies for O/T, but is Your Grace aware that a second attempt is to be made to show FITNA in the House of Lords in defiance of 'Lord' Ahmed and his 10,000 enraged savages?


3 February 2009 at 22:30  
Blogger Atlas Shrugged said...

Government by bankers.

Perhaps nothing new in that.


Always the master of the simply enormous understatement.

4 February 2009 at 01:36  
Blogger Atlas Shrugged said...

It is a reasonable idea to make the governor of the Bank of England in charge of setting the money supply in the best interests of the common people. So long as if he buggers it up. The punishment should not be a massive bonus promotion to the Bank of International Settlements and a knighthood from the establishment.

It should include full confiscation of his personal funds. Public castration, followed by life imprisonment without the remotest possibility of parole.

A better idea would be a root and branch reform of the International Banking system. ie its complete and utter destruction. Followed by a RETURN to national currencies free from interest. Interest rates could simply be set to encourage private savings from the PUBLIC and also used to raise funds for public services. This rate should be set at constitutionally set minimum and maximum rate of no less then 3% and no more then 5%.

We should also remove the monopoly rights to issue currency from the Bank of England. If my business has to function without monopoly power why should the banking business continue to be the largest most powerful and highly profitable PRIVATE monopoly ever created by mankind?

Yes I know the BofE was supposed to have been nationalized many years ago, but surly no one really believes it effectively was do they?

4 February 2009 at 01:52  
Anonymous non mouse said...

They're all too young - assumption of gravitas is obviously beyond them. Anyway, they shouldn't try-it affects their beauty, and then who'll vote for them?

Better if they were to tackle problems like: "Will they catch on and nationalize the place where I keep MY money...?" "Then I wouldn't be able to afford a facelift..."

OT - but btw, Atlas, your punishments are fascinating, though I couldn't to withstand further detail. Perhaps what you have in mind for the Lad from the Manse is unpublishable....

4 February 2009 at 05:55  
Blogger ProudGeordie said...

In reply to ZZmike...

I think you are thinking of a Ponzi scheme, where old investors are given the money of new investors creating the illusion of profit. If you search YouTube for a series of videos entitled 'money as debt' you will see that the world financial market is a huge Ponzi scheme maintained by mortgages and personal loans, so called 'big ticket' items. Just like Madoff's scheme collapsed, so is the federal reserve/world bank/ IMF scheme collapsing.

There is nothing behind money but debt, more debt pays the old debt and interest makes sure the cycle never ends, in theory. All illusions are just illusions though and just like in the laws of physics you can't make something out of nothing and you cannot get out more than you put in. Eventually mirrors break and smoke clears

5 February 2009 at 10:20  
Anonymous E.C.S said...

Dave and Others,

Haven't you realised yet? We are in the Age of Aquarius. A water sign which is feminine. We are in the age where appearance and emotions are valued more than facts and empirical evidence.

This plays directly into the hands of those who seek to control. We are fed our daily bread by the nannies on the telly and in the press.

There is no other way to explain the total passivity of what was once a free people.

It is time for us masculine types (Like Margaret Thatcher) to wrest back the reins of power.

Get out there on the streets, on the soap box, in the pubs, and create a stink. A non-violent stink, but nevertheless a STINK!

7 February 2009 at 17:04  

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