The Party's Over: How the West Went Bust

The Party's Over: How the West Went Bust: http://www.bbc.co.uk/iplayer/episode/b017znzt/The_Partys_Over_How_the_West_Went_Bust_Episode_1/

Anyone else watch the first of this Robert Peston 2 part series yesterday evening? I thought it was the best explanation I've heard to-date as to how we've got to where we are today. Recommended viewing IMHO.

"In the teeth of the worst financial crisis in living memory, BBC business editor Robert Peston examines how the world got to this point and how the collossal imbalances in the global economy have left the UK in need of a radical economic overhaul.

In this first of two programmes Peston examines how, thirty years ago, momentous decisions were taken which shaped the world we live in today. In China, Deng Xiao Ping opened up the country to foreign capitalists; in Britain and America, the free market revolution was unleashed by Margaret Thatcher and Ronald Reagan. The Party's Over compares the lives of workers in a Chinese company with their co-workers in Britain.

Robert Peston interviews bankers, politicians and economists, and concludes that the boom we enjoyed before the crash was based on an illusion, and that the world's economy is now so unbalanced that in the West we face a sobering wake-up call."

I'm bloody glad my mortgage will be paid off in two years time.

Thing is Trousers, everyone knows (well apart from a few dinosaurs) that the world is screwed and the old ways have got us in this mess.

Thing is though I ain't seen ANYONE coming up with new ways forwards.

Which means - everyone for themselves, cos that's what those in power or wealth will be doing and THAT ain't gonna be pretty either

Thing is Trousers, everyone knows (well apart from a few dinosaurs) that the world is screwed and the old ways have got us in this mess.

 

Thing is though I ain't seen ANYONE coming up with new ways forwards.

 

Which means - everyone for themselves, cos that's what those in power or wealth will be doing and THAT ain't gonna be pretty either

There are loads of people questioning the status quo and coming up with solutions, Phil. They're just not widely reported.

The US treatment of Ron Paul is a case in point. Nearly everything that man says is sensible. He wants to reform the federal reserve, stop the policy of pre-emptive war, end extra-judicial killings by the state.

Despite pulling impressive numbers in the primaries, this man finds the oxygen of publicity almost impossible to achieve.

To a lesser extent, look at the UK's treatment of Nigel Farage. Someone else going against the grain, providing solutions to problems and almost totally ignored.

Then perhaps look at Professor David Nutt, former advisor on drugs policy. He suggested that we decriminalise a load of drugs and that the "War on Drugs" was a complete waste of time and money.

So let's not pretend that there aren't people out there who have suggested alternatives to the crazy way we live our lives. The problem is that politicians are only interested in perpetuating this broken free market fantasy. Until they get out of this mindset, all they're really doing is rearranging deckchairs on the Titanic.

Peston was putting forward the assertion that we can trace the current crisis back as far as "a thousand years ago" when the Chinese embarked on a "disastrous" communism led economic policy.

I guess it's somewhat ironic that it was the realisation that a communism led economy in the Far East had failed which ultimately led to an equally failed capitalist led economy in the West.

Western countries simply couldn't compete with a China that started embracing capitalist economic principles in the late 70s and early 80s. China was able to start producing goods at ridiculously low prices and the likes of Thatcher saw the service industry as a way of generating wealth when it was obvious we couldn't compete with China's manufacturing industry.

At the time that must have seemed a logical thing to do and, looking back, I can't see how we could have propped up our manufacturing industry, which by the late 70s was beset with crippling wage demands and productivity levels far below what could be achieved in China.

China produced cheap goods and we bought them using cheap money borrowed from....erm....the Chinese.

That's one hell of a vicious circle to escape from....

Peston was putting forward the assertion that we can trace the current crisis back as far as "a thousand years ago" when the Chinese embarked on a "disastrous" communism driven economic policy.

 

I guess it's somewhat ironic that it was the realisation that a communism led economy had failed which ultimately led to an equally failed capitalist led economy.

 

Western countries simply couldn't compete with a China that started embracing capitalist principles in the late 70s and eraly 80s. China was able to start producing goods at ridiculously low prices and the likes of Thatcher saw the service industry as a way of generating wealth when it was obvious we couldn't compete with China's manufacturing industry.

 

At the time that must have seemed a logical thing to do and, looking back, I can't see how we could have propped up our manufacturing industry, which by the late 70s was beset with cripling wage demands and productivity levels far below what could be achieved in China.

 

China produced cheap goods and we bought them on cheap money borrowed from....erm....the Chinese.

 

That's one hell of a vicious circle to escape from....

Yup. Capitalism worked fine when there was a clash of ideologies involved. Back during the days of the Cold War, capitalism was almost synonymous with freedom. That's clearly not the case with China, who have managed to marry up and authoritarian regime with the free market and have done very well out of it.

Of course, the big problem is that when we talk about competition, we're really talking about the company that can deliver the goods for the lowest cost. No-one in the West can compete on lowest cost anymore.

The real problem is that piliticians, naturally enough, only act on what looks good or makes sense on a here and now.

Places like Norway, which maybe because its smaller, folloows a more consensus driven apporach. They know rtheir oil and gas is a temporary windfall, so they invest it and and only spend the interest. We of course, Thatcher excepted, blow whatever comes our way as soon as its in the bank.

The real problem is that piliticians, naturally enough, only act on what looks good or makes sense on a here and now.

 

Places like Norway, which maybe because its smaller, folloows a more consensus driven apporach. They know rtheir oil and gas is a temporary windfall, so they invest it and and only spend the interest. We of course, Thatcher excepted, blow whatever comes our way as soon as its in the bank.

Agree that the rather transient nature of Parliaments promotes a lot of short-term thinking. The problem is that short-termism won't help get us to out of the mess we're in.

I haven't watched the programme, may sit down and do so later.

In my working lifetime there have been a couple of things that have led us to where we are IMO.

The first is the ease of credit. When I first started working, mortgages were hard to come by. You had to save a deposit and then the Building Society would consider lending you some of their investment funds. This all changed when they were allowed to borrow money on the wholesale money markets. Unleashed by Mrs Thatcher, the Building Societies became more like banks and at the same time council house sales gave equity to people who never really had it before (not saying that was a bad thing). The demutualization of the building societies with the bribe of "free" money, created the monsters we have today. In the early 80's you could only remortgage or have a further advance for house improvements. Receipts had to be provided and it was tightly regulated. For the past 25 years people have been able to realease equity for any reason and houses became "investments" for everyday people. At the same time house prices were rising and credit cards, bank loans and store cards became the normal wasy of paying for stuff, rather than saving. If my mum and Dad wanted a holiday, they saved X amount each week, until they had enough to go on holiday. If in the meantime they're washing machine, or boiler broke, the money for a new one would come out of the holiday fund, delaying the holiday. Nowadays, I'd stick it on my card.

The ease of credit was not just confined to households, but Govt's as well. Politicans seemed to think growth would be never ending, and if there was a recession, it would be a 80's recession, where we came out quickly and growth took off again. Brown was quite clearly the major follower of this, remember "no more boom and bust". So his spending policies were all made around continued boom. He was like the householders of this country, spending all our wages, without a thought for the future because we'd always have jobs and we'd always have easy credit.

The problem as I see it, is that we can never go back to my parents time of saving . People (myself included) seem to be unwilling to go without stuff because we cant really afford it. And the problem is, that if we did, then that would hit demand and hit the economy.

The truth of the matter is that we are in a situation that no politican can control. Had we followed Darling's plan, we would still be having the same conversation.

Agree with a lot of that LD, and it's a shame that such an apolitical opinion is so rare these days as so many people seek to lay the blame at the door of one particular party or PM.