← The Peter McCormack Show
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- [00:00]
A
I don't think that people necessarily have the sense that they should have how much poor water we've got since 2008. In the first quarter of 2008, UK GDP per capita was higher than that in the US. You might well see the kind of thing that we saw in the 70s, two or three years of 25, 20, 25% inflation. We've done all of this stuff to ourselves. It's not some natural forces beyond anybody's control. Argentina is an interesting illustration that just because you're a rich developed country doesn't mean you're entitled to stay a rich developed country. Just because you're politically stable doesn't mean you're entitled to stay politically stable. These things have happened before and they could happen to us.
- [00:41]
B
Is there an optimistic path out of this? This show is brought to you by my lead sponsor, Aaron the AI Cloud for the Next Big Thing. Aaron builds and operates next generation data centers and delivers cutting edge GPU infrastructure, all powered by renewable energy. Now if you need access to scalable GPU clusters or are simply curious about who is powering the future of AI, check out iren.com to learn more, which is Irene.com Andrew hi, how are you?
- [01:16]
A
Not too bad, thank you.
- [01:18]
B
You've talked about the economic situation in our country and the boiling frog. There's a reckoning coming. How severe do you believe things are? How far away from that reckoning are we and what will it look like?
- [01:32]
A
I think that on the path that we're on, we would be quite likely to face a significant fiscal crisis probably within about the next 10 years. The most likely scenario for that, I would say, is if there were to be a reform government elected and then it was unable to deliver serious cuts, if it was politically unable to deliver things, perhaps even worse than just serious cuts, if it were seen as politically unable to deliver altogether so that more radical alternatives of either the left or right were then chosen, I think there would be quite a significant loss of confidence in lending to the UK and we could get into very serious problems at that point. So I don't think it's, I don't buy the stories that say, oh, it's going to happen next year or the year after. Now I don't buy those stories on the basis of things of, as it were, business as usual, but I do think that we're one bad shock away from it. So if there were to be something that were to cause a 2008, 09 Great Recession style scenario or something that were to cause a Covid style scenario, then we could be getting into the crisis quicker, but we'll get into the crisis anyway within about 10 years if we just through normal politics.
- [02:48]
B
And that is a big crisis like an 08 style crisis, a big shock.
- [02:53]
A
The type of crisis, sorry, you're talking about. I'm saying there, if there were to be that kind of crisis, an 08 style crisis, we would end up with a significant fiscal crisis in the uk. And that would take the form, there's different forms that fiscal crises can take. So it could be that people are unwilling to lend the UK any money anymore. So that doesn't simply mean that we couldn't run a deficit, but. But it would also mean that we'd be unable to roll over the very significant amounts of previous debt that we've accumulated. So we need to roll those over because those are not infinite term debt. So when they mature, you have to roll them over again unless you're going to pay them off. And that's. So you're talking over the next few years. There's something between one and two trillion dollars that we need to roll over for that. So that's the biggest single item, dwarfs the annual borrowing. But another possibility is that people would just not want to have pounds. So you get a crash in the currency value. Probably those things would go together. And the third possibility, perhaps as a consequence of the other two, would be that you get very, very high inflation. So that you see the kind of 10% inflation that we've had as a bit of a walk in the park. You might well see the kind of thing that we saw in the 70s, two or three years of 25, 20, 25% inflation. Quite serious scenarios where you escaped your problems by effectively defaulting on your debts, by inflating them away is therefore the real crisis.
- [04:19]
B
The fact that we have to live through continual decline until this point. Is this like an acceptance that decline is a part of what we have to live with Now?
- [04:28]
A
I would say that I would prefer there to be some kind of crisis earlier, provided that the crisis took the form of the. A political crisis where you had an overturning of the ways that we've been doing things and an acceptance that the stuff we've been doing has to change. So provided with that form a crisis where you actually ended up defaulting on your debts and so on, I think that that would be more likely to accelerate the process of decline than to terminate it. I mean it might be that you would then start to rebuild, but you'd be rebuilding from a very Low base and it would probably be long past half the time you and I were gone by before we got back to where we'd been.
- [05:10]
B
Yeah, but I do think of the, the youngsters and I was doing an interview before this where I talked about the strange place we're in. We try and we try and live to give our children a better life, leave them with money and opportunity and wisdom, but as a country now, we are for what we want now we're expecting our children to have less in the future and that to me is kind of a shameful position to be in.
- [05:33]
A
I think we've failed to take proper account of young people in the processes for well over 20 years. We've acted repeatedly to avoid house price crashes, as if somehow those were a terribly bad thing. That if housing got cheaper, of course that excludes the younger people from the housing market, means that they delay families. It's part of what's going on with the rapid decline in fertility since the mid 2000s as well. I'm not saying it's the only factor in that that's happened internationally, but I think it's one of the things going on in the UK and it's enormously disruptive. We commit large amounts of fiscal resources through things like the triple lock so that the pensioners are favoured. We have bailouts of all of the older people who have large deposits of the. When we bailed out the banking system at everybody else's expense, overturning economic justice, then we have things like in the period of COVID nobody really cared about the welfare of the younger people at all, did they? And it was just the whole thing was about what mattered most to older people. And so younger people have just been told to go hang repeatedly for 20 years.
- [06:43]
B
So how have we got ourselves in this position? What are we doing wrong?
- [06:47]
A
Well, I think there's a number of things that have gone on. One of the most important is that our establishment has lost its sense of values. And going along with that, our political system has lost its confidence in the high mindedness of voters. So what I mean by those two elements. Let's take the first one first. In any look, if you had a very, very simple society, you could imagine all the key decisions about how the society was organized being done either by some kind of committee of everyone or by say a king. You could have one person who was in charge of everything. But in any complex society, what you have to do is to assign a set of people who are the ones who work out all the key day to Day matters and resolve all of those things. Now sometimes people talk to that as a technocracy. I describe it as an oligarchy, right? That's really the only kind of system to have. And it's not merely that's true from a practical level, but it's also true from a subjective level. Most people don't want to spend their time thinking about clause 4A, subsection B of the Dog Fouling Local Government act, whatever it is. Nobody wants to spend their time doing those things. They want to hire somebody else to do all of that stuff whilst then they can get on with, you know, dating girls and going dancing and watching the footy and doing all the fun things in life. That's all. That kind of managing things stuff is very dull and people don't want to do it even if they could, which they can't spend all of their time doing that. Now when you have that kind of oligarchy system, you then got to wonder, well, amongst the people who are doing that, how does that, how does it hang together, right? Is it just that everybody pursues their own kind of separate agenda within that, are there lots of little hierarchies and kingdoms within it of different sort of influence groups or. I mean, you can do things that way. And if you look back historically, many countries did do things that were a bit like that amongst the technocrats. Or do you try to find some way of giving their, you know, creating a melody so that the whole system can operate in harmony with it. Historically people tried to do that through things like a common religion, for example. But a key aspect of the question is do you have one set of values and goals for that oligarchy or do you have like a competing oligarchy system where you have competing oligarchies so somebody's those in charge and then when you have a change in the regime, then they'll get replaced by a completely different set of people. So just to make those kind of thoughts a little bit less abstract for you, what am I talking about here? I'm saying in some countries what happens is when the government changes, they appoint new politically aligned people to all the key kind of roles in society. A number of continental countries do that. You have that in some parts of the United States. So when the politics changes, when the political party control changes, then they put in people who think the same as them all over the place. In Britain, that's not been the way that we did things. Instead what we did was, particularly since the middle of the 19th century when through the North Trevelyan reforms of the civil Service. We had the idea that you have one set of people who broadly share similar kind of goals. They tend to come from similar backgrounds, Oxford and Cambridge, bit of the military, some people who were sons of boards and that kind of thing. And you meld together this set of people who had fairly similar goals. And it was open, open and meritocratic under the Northcote Trevelyan reports. Smart enough people could enter and become part of the establishment, but that establishment had a shared set of goals and objectives. There were certain sorts of things which they believed in and that they thought in the same way. And they not only were those goals things they believe in. I would call them, in a very broad sense, political liberalism as being a key aspect of it. And I mean by that, obviously there were different flavors. There were more conservative versions, there were more socialist or social democratic versions, but they all kind of sat under that broad banner, a kind of post Christian political liberal way of thinking. And it was also a view that Britain's way of doing those things was. Had something to offer to the world, that we sat in a place, we had some kind of unique heritage. And so we not merely could play a role in the world through force and power, but through a kind of moral suasion and through the value of the example that we set. So we had this establishment idea. Now, when you have an establishment of that sort of in order to make one oligarchy system work, the establishment needs to have a sufficiently common set of values, but also sufficiently broad set of values and coherent that essentially what's happening when you have elections and so on and political parties change is that you've got relatively subtle differences of view from within the same broad set of people. So they say, okay, they want to do things a bit more this way or a bit more that way, but they all share much the same approach. So it's relatively modest points of disagreement. And democracy can be quite useful in that it can give you a sense of what the public actually wants. The establishment might not be agreed on what it is that the public wants, or it could be that the establishment has some fairly, that they're fairly evenly split on some basis for things, and they want the voters as a kind of tiebreaker. I mean, anybody could do it could be the king that was the tiebreaker, but you might as well have the voters be the tiebreaker. If we're in a draw in some disagreement within the establishment. And provided you maintain your broad sense of where you're going, that's all going to work pretty well. What's happened though in the past 20 or 30 years is that our establishment has lost its internal sense as well, lost its faith. It neither shares values internally, it doesn't believe in the kind of post Christian liberalism thing anymore. In the same way it doesn't feel aligned with the interests of the public in pursuing those kinds of things either. And it doesn't believe it has anything unique to sell to the world. It's just lost its faith, by and large. And in losing its internal faith, its belief that it has something to do in its own project, it's lost its coherence. And so everything, different bits of the system work against each other. So some bits say we want to prioritize growth, but other bits do things that come exactly against growth. And some bits say, ah, we believe in economic justice. And other bits just bail everything out, regardless of economic justice, because they claim that's a necessity and the whole thing loses any if you don't have any proper values and goals, you're not going to be willing to sacrifice very much for anything because there's nothing at stake, there's nothing to lose for you. There's no objective that it's worth giving up anything for. So you're not going to make any sacrifices, you're not going to impose sacrifices on the public. You're just going to do what seems easy. And that is reinforced. That process of the establishment losing its internal coherence in the way that I described is reinforced also by the political system coming to lose confidence that the voters themselves have anything other than the narrowest of self interest. So they, people assume that old people are only going to vote for the interests of old people, for example. That's, I think, a key reason why you see it all the time in political discussions. People say you can't possibly trust the triple lock because old people vote in much higher proportions than young people. So if you get rid of the triple lock, then the old people are going to vote against you and you've got no chance. So you say you have to do this or that, you know, bailouts, you have to do. You have to keep the house prices high because the people over 45 all own houses and they vote in high proportions. Everything is geared as if the political system was completely about the interests of the individual, that they don't believe that the that in democracy there is a sense of the common good either national interest and national interest. They don't believe that the voters now what it used to be, it wouldn't, it wasn't that people in the past thought that people weren't interested in their own, you know, what was good for them. I don't mean that. I mean, you know, it's the 80s and 70s, of course voters thought that. But somehow there was the idea that when you added it all together, almost as an emergent, mystical thing, the voters would get it right. That the voters collectively. There used to be a faith amongst politicians, there's still a few who claim these kind of things. You can see, you know, Daniel Hannan claims this all the time, for example, if you're familiar with his things, he believes that the voters somehow get it right. They come up with the right answer almost always. And to the. That sort of perhaps slightly romantic idea that the establishment had about the voters has just been lost. I think they don't really believe that anymore. They're quite cynical about the voters. The political parties are also the members. The MPs are cynical about the members of the political parties. They don't think that the activists necessarily have values which are very well aligned with their own and they have limited trust in the kinds of things they're gonna do. So I think, I mean, a clear example and a fairly early example of this, I would say, but a fairly clear example of this was Michael Portillo being rejected as the leader Amongst the Conservative MPs in the 2001 leadership election for the Conservative party because the MPs assumed that Conservative members would not vote for somebody who had said that he had homosexual experiences. They just assumed that the voters members wouldn't have done that. I think completely with no real foundation at all. I don't think there was any reason for believing that of the Conservative members, they weren't like that. But that was what the MPs assumed. And when you have these different elements go together, you lose. So the system doesn't have anything, any goals that it's prepared to see any sacrifices made for. And it doesn't believe that the voters are going to sacrifice anything for themselves either. Then we add to that the kind of modern we have this. So there's a couple of other things going on. So we have of course, social media and 24 hour news and continuous opinion polls. So all of the time everyone's taking the temperature of exactly where things are going to be. But also associated with the earlier points of no real goals and values, the MPs are by and large they unimpressive. Well, that's true, but the key thing that makes them unimpressive isn't so much, I think Their lack of intellect or things like that. It's that they say a lot of stuff in order to get in which they think other people want to hear, but they don't, deep down believe in any of it. So when push comes to shove, they just want to stay as MPs. There's some element of that. They want it to be them that changes the world and I don't mind that. Right, that's good. I mean, Alex Ferguson always used to like a greedy striker because it would give you the composure to actually kick the ball in the goal under pressure. You know, an mp, there's quite big decisions which are going to affect a lot of people. I like it to be that. MPs want it to be them that takes the decision. That element is fine. But when it's. I just want it to be me that takes a decision and I don't care what the decision is, then everything. You lose any anchor to the system. I don't mind it being an mp. I have something I believe in and then want it to be me that makes the world a better place. But it's. I don't have anything I wanted to believe in. I just want it to be me that's in charge because I kind of think I'll be generally good at it. I think that that is.
- [19:33]
B
So we have a political problem.
- [19:35]
A
Yeah, we've lost. So. And that political problem is associated with a loss of any. So what it means is all of these things together means MPs, even if you had senior politicians who were willing to say, I'm going to do what I think is going to make the world a better place, it's going to be unpopular for a bit amongst voters, but I think that I will be vindicated in two or three years time and come the next election we're going to win. That kind of an idea. I'm going to do something which is going to. You know, some people are going to feel hurt now and I'm going to. But we're going to get to the end and we're going to win because I'm going to seem to have been right. That kind of sort of Thatcher style, 80s vindication. You do your unpopular things at the start of the Parliament and then you're vindicated by the end. And all the people who said it wouldn't work, it's shown to be hopeless. You don't get the chance to do that as a senior politician anymore because the MPs won't let you get that far. They say it's terribly unpopular. The opinion polls have all turned against him. All these people are being hurt. What's the point of any of that? They're all going to vote against us at the next election. We'll just change the policy and help them out. And so everything becomes very short termist. Unanchored from any sense of economic justice, unanchored from any sense of long term goal. There's no real sense of any. There's no faith that you can escape from decline. The whole thing is just on a path of surrender. That's the path that we've taken in the UK for 20 or 30 years.
- [21:05]
B
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- [22:15]
A
Absolutely.
- [22:16]
B
The things that Bastiat warned against redistribution would inverse morality, but eventually lead to decline.
- [22:23]
A
It's all, all those termism, all those critiques that people used to make of democracy, of why democracy wouldn't work, they're all coming home. Because democracy, if you're just exposed. We found a way in the UK to avoid the bad critiques which people made in the 17th and 18th century of democracy by placing this interface between democracy, this, this system, this establishment process, and you strip away or you remove all the potency, vivacity from that by giving it no goals, then you're just exposed to all of those things, yeah, the politicians all think that everything becomes short termist unstable. You shift from one opinion to the other in no time at all. Everything seems unanchored. You see the worst of human nature exposed one way or another in opposite directions.
- [23:18]
B
Are you referring to a lot of an aristocracy that kept things in a certain direction?
- [23:23]
A
I mean, an aristocracy was one form of oligarchy, but over time we shifted from an aristocratic oligarchy to a more meritocratic oligarchy. It was just a class of people, a group of people whose job it was. So I think that there has been two main elements to this thing I call the establishment, I call them the court and the monks. So the court are the people whose job it actually is to devise and create policy. And then the monks are the set of people, as it were. They're from the same families, the same background. Right. But as it were the monks, you'd send the second son off to be a monk after the first son became the lord or whatever, then your. So the monks are the people whose job it is to communicate the ideas of the court to the people and communicate the interests and the concerns and so on of the people back to the court. So they're the people in the media and in the commentariat and certain kinds of backbench MPs who convey concerns, all of that kind of class of people, the communicative and commenting classes. And so you have this division amongst this common group of people. And whilst for a long time, if you maintain enough, when there was enough coherence of them that worked pretty well. Now this also speaks, by the way, to other things like think of a question like bank of England independence. Now there are a number of technical features to bank of England independence. I'm a big opponent of bank of England independence and maybe we can come to exactly why in a bit. But just think of it in these narrow terms. Just to start with. You might think that the obvious thing to do was to say, well, if we only want so much democratic, if we want the point of democracy to be that you hire people to be in charge of making decisions, then maybe you think the natural extension of that, and I think a lot of people do see it this way, is to think that you'd favor technocrats being in charge of the bank of England rather than politicians. But I don't favor that even at the best of times. But I think that in the current circumstances particularly bad. Because what I think we need is for the political system to be part of creating a new Faith for our establishment, for our oligarchy. Either that or maybe we switch to a competing oligarchy system. But even in a two oligarchy system, each of the oligarchies has to have some kind of faith. So the political system has to create some sort of new faith and goal and objectives for where we're going. Otherwise eventually what will happen is that the levels of discontent will be such that people will reach for completely other sorts of things. And we already see it that the politics is getting more extreme as people demand change and the system seems unable to deliver it. And they end up at the moment a lot of them are going to the reform and the Greens. If they don't, if they don't deliver, and they may well not, they'll go even more extreme again and you'll be going to, you know, you'll see the kind of Corbinite things come back or maybe even more extreme than that or the, you know, Tommy Robinson esque things on the other side. People will keep trying. Eventually you'll see the, you know, in some ways reform in particular is like on the edges of. But it's still recognisably part of the same set of people. You know, Nigel Farage would have fairly happily been a kind of anti immigration Thatcher, right back bench MP in the 80s. He wouldn't be out of place as that. So they're almost like the last hurrah of that sort of politics. I would say the reform, the last chance for that kind of mainstream politics. If it can't, if our system can't find a way of creating new, some new goals, then one of the things that democracy does is it gives you a mechanism by which the whole thing can get overturned and you end up with much more radical ways of doing things. We've seen some of that continentally switched to a way where the old, the kind of centre left and centre right parties got entirely annihilated. And we've gone to much more populist parties. Most places in Europe, probably populist right, few places populist left. But it's a whole different set of values. And now if you think that it's necessary for the political process, I think that what you want to do is to take things back into politics which are intrinsic to the democratic process. And things to do with money were why we established a democratic politics in the UK in the first place, which is consent for taxes, for wars politics. Money is the most important element of politics, I would say.
- [28:19]
B
Yeah, sorry to interrupt you there, but so you're Talking a little bit more like the American system, whereby as soon as you have a new president, they start to assign people to run the treasury, et cetera. And here, because we've tried to have independence, you don't actually really ever have independence because the people who are running the bank of England, whoever, have their own political bias and they can actually then work against the government. I think both Liz Truss and Keir Starmer have said they haven't been able to actually govern in the way they wanted to.
- [28:47]
A
They say that they reach for the levers and they find they're not connected to anything. Yes, and I think that that is to a significant extent correct. But one of the things, one of the reasons that's happened is that politicians have felt that there was a loss of faith in politics and that they were not delivering. And the more that there was a loss of faith in them, the more they thought the answer to that was nobody will want us to be taking key decisions, so we'll lay them off onto quangos of various sorts. So we'll let all of these independent institutions which are outside politics, do it. Whereas what people really wanted was for the politicians to take responsibility, make a decision and then get it right or not. And then we kick them out and eventually we find somebody who gets it right and then we keep them. That's the way that the public wanted things to work. I don't think the public, the antipathy, the discontent with politics isn't that you want something instead of politics, it's that you want good politicians. Yeah, that's, that's what the public are after.
- [29:47]
B
And what we've got is some of this quite bland and unimpressive people.
- [29:50]
A
Now we have, we have weak politics, weak politicians created by weak ability to do anything. Not necessarily because of their own failings, but just an inability to do anything. And they make that worse in response all the time by laying off ever more things outside politics. You need to bring, we need to bring, as it were, too much back inside politics and then we can start putting it out again. Once we've got, once we've re established the notion that politicians take responsibility for things, then of course we can nuance and start subcontracting a few things here and there. But in the first instance, you want to repoliticize almost everything.
- [30:33]
B
How does this get even communicated to a vote in public? Because there is discontent. We had quite significant voter apathy in the last election. I think it was 60% turnout. I think when you see the polls, most people say they don't trust politicians, they don't believe in the political system. Yet still we have quite extreme arguments between the left and the right. Feels almost existential. The next election we must go socialist or we must go free market. And so we're kind of in this, I don't know, like political purgatory at the moment. And then there's instant pressure on whenever a party comes in to make instant change. And obviously they've been struggling. They've been struggling. So do we need a complete rethink of how we run politics? Do we almost need a different approach so the public, whether you're from the left or the right, you feel like. I think what I'm trying to say is, do we need a more anti establishment movement?
- [31:29]
A
I think what we need is politicians who say, who, when they say they believe in things, believe in them. So when they come to actually do something, are prepared to do the thing they believe in, even if it's unpopular and even if that gets them voted out and then they win or they don't. That's, I think, what we need.
- [31:51]
B
But how do we get that? I mean, we kind of had that with Nigel Farage for a while, but even it feels like he's become diluted over the last year or so.
- [31:58]
A
He, you know, so he thinks he's going to win.
- [32:00]
B
Yeah, yeah. And, you know, what we're seeing now is political gimmicks, the petrol stations or the free electricity paid for, rather than big, strong ideas. And then what you have, you have the extreme. Zach Polancy's coming as an anti establishment person, have been very successful at growing awareness of the Greens and their popularity. Rupert Lowe again has come out on the right and again sounding more anti establishment, but for some reason it's diluting people when they get near to power.
- [32:31]
A
Well, I think that that's natural because people think that. They think that the voters won't vote for. Most voters won't vote for radical things unless they see them as being in their own narrow interest. And once you go and you can find a narrow set of things to appeal to people for 10% of the electorate, but if you want to get to 30% of the electorate, you can't. There's not going to be any one thing that all of their interests are going to start to clash with each other and that kind of thing. So you start to feel, ah, if I want to break through to the next level, I have to, I can't be as narrowly, I can't appeal in that way, I have to find some More, you know, I can't appeal on the basis of narrow ideology is what I'm trying to say. I have to find a whole set of a suite of different things. So I need to add up. I can appeal to those with this set of things and those with this set of things, and I create a kind of menu of different aspects. And if you're this kind of person, you're going to bias because you like the steak and somebody else is going to like the vegetarian option and somebody else is going to like the soup. And if you can add all those together, then you get to 30%. And of course, I'm then no longer a steak restaurant because I also sell soup and salad. So it's my. The coherence of what you're doing naturally will decline as you tend to go beyond a certain level. Now, I don't think that that's necessarily in itself. You know, I don't buy. What do I want to say? I don't buy that you can't get 40% of the voters by saying something you truly believe in. They may initially be skeptical that you truly believe in it. And that's one of the problems, is that voters have been let down so many times that they may struggle to actually believe that you'll believe in it and do it. And we see that a lot with, like, anything Tories say for the next umpty ump years. Most people are going to say, yeah, but I mean, you've said all these things before. You talk a good game, but are you actually going to do any of it? And so their ability to do that is very broken. I think labor is going to be in much the same position after this government. People are going to just talk about broken promises and broken impressions of what people are going to do. And I think that that does make it difficult. But nonetheless, I kind of feel like I'd rather we tried that, then eventually got forced through some technocratic, you know, foreigners come and tell us what all our policy has to be like in the 1970s. I'd like to believe that we can change things ourselves rather than wait for the catastrophe and then have it all imposed upon us.
- [35:20]
B
But it might take two election cycles, then it might take somebody saying these things openly and honestly, not trying to hit 40% straight away, sticking to their principles, perhaps some strong economic principles, some strong legal principles, lose an election, and then when the next party comes in and says, tries to deliver, and they can't say, I warned you, I told you I was right, I'm sticking to these principles.
- [35:42]
A
Yeah, I think that that may be part of it. I'm not quite so. I agree that. I think that you should approach things as if you were going to need that to be how things worked, but I don't necessarily agree that they will. I think that there's actually. If you say the right thing and you say something you truly believe in, I think the voters will probably come to you fairly quick. They may get disillusioned if you then start to tack. I think that's one of the problems with reform at the moment, for example, is that a lot of voters were prepared to just believe that they would change something. They didn't necessarily think that the reform with the finished article, they're prepared to overlook all kinds of fine. It turns out that some counselor in who knows where, the back area had said something about Hitler or something. Right. They're prepared to overlook all of that sort of stuff. They understand that the whole thing isn't a finished article and they understand that not all of the policies are going to work together. But they just had the impression that reform was going to change things. That's what they want. I think one of the things that's happened recently is reform started to reassure people and people started to worry. So they're not actually going to change things. I think it's part of the reason why reforms dipped down in the polls.
- [36:59]
B
Well, they've agreed to stick with this triple lock, where every economist I've spoken to has said this is one of the things that has to go.
- [37:10]
A
They stuck with the triple lock. They've stuck with bank of England independence, which is the Blairite monetary policy framework. They've stuck with the OBR structure, which is the Cameroon fiscal policy framework. And then they've stuck with the triple law, which is one of the two main anchors on your ability to cut public spending, sort of reform against reform in this sort of. There's not much scope for them to change anything very radical on the macro economy. If they're just going to stick with all the structures that they were there before. And I see them as. I think they're quite naive. You hear them talking about, oh, we need to make sure we get the right people in. That's not how it works. It's not that the wrong people have been in charge of these things. It's not about, oh, we can manage stuff better because we're all from a business background or something, that politicians always want to say that kind of stuff. And it's just that's not how politics Works at all. It's not that there are, There are experts, there are technical experts who are the ones that actually run things. You don't need to know that kind of stuff. That's not what it's all about. But yeah. So who knows though? I mean, maybe they'll. It's a long time for an election and they've got a lot of time to work out more detailed things yet. Similarly, the who knows what a lot of stuff the Greens are saying at the moment seems very mad and getting a certain kind of an appeal. But some of that stuff might get more sane by the time of the next election or even matter. I don't know. It's hard to know which direction things will go. Yeah, it's a long time yet.
- [38:41]
B
What would you do? You've had a long history in economics. If you were put in charge, what are the things you would change? How would you restore some sanity to our economic situation?
- [38:54]
A
One place I would start is by saying, look, we have just about just under 5% of GDP deficit. We a lot of that is because of the way in which public spending rose since 2018 19. It isn't that we have some fundamental long term factors of, you know, aging society and somehow the health and the pensions are all going up. There's a little bit of that, but that's a little bit of creep each year that isn't going up by 6. In 2018, 19, we were spending 39% of GDP. Now we're spending like 45% of GDP. That increase all happened in a very short time. It wasn't something that's gradually happened over decades as the society says it happened through choices. Some of that is an increase in debt interest because of, partly because of borrowing from the COVID extra borrowing, but also because the interest rates went up. So there's a little bit element of that. But 3% or so of GDP of that rise is extra money on overwhelmingly about 3/4 of it is on health and on welfare spending. We need to get the health spending down. We need to get things back to where they were relative to GDP at a time when the economy worked better. What we do is that we compare ourselves in terms of the amount we spend to other countries which are much richer than us. And we say, oh, the Swiss spend this amount. The Swiss have twice the GDP per capita of us. Twice. They're twice as rich as us.
- [40:28]
B
They can afford it.
- [40:29]
A
They can afford it. You can't just say we need to have the idea that the amount that we spend on things is a reflection of how rich we are, not of how much we spend relative to people we wish we were as rich as, but aren't. So a first place that I would go to is to say we should aspire to be cutting the level of public spending back to the level it was in 2018. 19. A very, very limited ambition. But that's 180 billion of public spending. That's, I think just that's a kind of baseline before you start getting Radical. Should be 180 billion. Look at the political parties. The Tories are certainly going to cut just shy of 50 billion of public spending. And people think of that as, ooh, right now they're pushing things a little bit. 180 billion should be your absolute baseline.
- [41:23]
B
That might get us to a small surplus.
- [41:27]
A
That would basically eliminate the deficit.
- [41:29]
B
Yeah,
- [41:31]
A
you'd still be going to be having nearly 100% debt to GDP. Doesn't really get things, doesn't sort things out. Maybe gets you to a very small surplus and a primary surplus. Yes. So over time you would erode if you managed to do that. But a longer term ambition should be to get us back to the kind of level of spending to GDP that we had in the early 2000s and in the mid-80s when the economy was growing solidly. Each of those times about 35% of GDP. So that would be from here, cuts in spending of around 300 billion. Now I'm not saying you do that in the first year or anything like that, but over time that's where we should be seeking to get ourselves back to the level of spending relative to GDP that we had when the economy grew. Well, under both Conservative and Labour governments. It's not just that both of those parties had spending at that level.
- [42:21]
B
And if we can get it back to that, we can maybe cut taxes, cut a bit of bureaucracy, drive more
- [42:27]
A
growth, cut taxes a lot. Right. Relative to where we are now. I mean, okay, when I say a lot, there's a question of how much of the tax rises that are scheduled are actually going to be able to be delivered. But certainly we would have taxes down a lot relative to where they're scheduled to go. 8, 9% of GDP. A lot of that. Certainly one thing to bear in mind about this is if you were spending instead of 45% of GDP, 35% of GDP. The rule of thumb in analysis is each 10% of GDP that you increase your spending by reduces your annual growth rate by a little bit north of 0.1% a year, sorry, 1% a year. Each 10% is around 1% a year. So if we were to be spending. So we now are growing 1% of GDP growth a year. Back in the early 2000s, we were growing 2 1/4% a year. So of that more than half is explicable simply by the massive increase in spending. It's that anchor of the state relative to GDP just drags us. We're dragging along the productive, generating wealth, generating parts of the economy, dragging a bigger anchor, and it slows everything down. The distortions created by taxes, the crowding out of private activity in those spheres, it's all costing us around 1% of GDP relative to the position we were in the mid-80s or the early 2000s. So I think that that should be. You should set that as a goal. In addition to that, though, that's by no means the totality of the story, but it's a start and radical enough in its own terms. I think, that we should also bring the bank of England back under political control and we should set the country an inflation target each year that we actually intend to meet.
- [44:30]
B
And a real target.
- [44:31]
A
A target. We should set ourselves a target each year and we should try to stick to that target. That's the point of a target. What we have is a kind of strange surrealist game. As things stand, most years, since about 2007, the government has set the bank of England a target. Well, I say most years, probably half the years or something. It set the bank of England a target it had no desire whatsoever that they should try to meet because it would have been bonkers. The bank of England then doesn't try to meet the target it set. It ends up with inflation occasionally much lower, usually much higher than the target. And then we have this very strange exchange of letters between the Governor and the Chancellor. And the governor sends the Chancellor saying, I didn't try to meet your target, because that would have just been stupid. And the Chancellor sends back a letter saying, I'm glad you didn't try to meet my target, because that would just crazy. Carry on. And that's the way that. That's what we call the monetary policy framework in the uk. This is. It's absolutely mad. If you. We had an inflation target of 2% in 2022 and 2023 when. When inflation was 10% and nobody did. Did somebody get fired for not meeting it? Was there a huge furore? Were there massive inquiries? I mean, there were some by the House of Lords Economics Committee and so on. There was some scrutiny of exactly what had happened. To lead it to be 10%. But wasn't a big argy about it because nobody really, regardless of what anybody had said formally, nobody really believed that they wanted the bank of England to try to get inflation to 2%. And that's not the only time it happened then. But of course it happened in 2011 and 2008 and so on as well. Multiple years through the time we've had inflation be way above targets. It's been well above 3% for most of the time over the past couple of years as well. Somebody think that that meant the bank of England should be raising rates aggressively to try to get it under target. Nobody really thinks that. Set the bank of England a target you want them to meet. And that target should be the point of inflation targeting is the target for next year. That's the. And you can make it be. I want next year, it's five, and the year after that four, and the year after that. When people first introduced inflation targets, that's exactly how they did things. They said, I want it in this year to be this and the year after it'd be that and the year after this. That was supposed to be the idea. That's why it was an inflation. An annual inflation target. That's why you had the whole process. But we've moved away from that idea to somehow that an inflation target is some kind of vague, you know, this year, next year, sometime never. I'm going to kind of meet it off there, off in the future. A vague aspiration like some sort of motherhood and apple pie kind of a thing. And we don't. And it means that the bank of England doesn't really have any constraint at all.
- [47:31]
B
But is that because we've become so anchored to house prices that there's the fear of interest rates going up too high?
- [47:37]
A
No, not really. I mean, for the first surf, inflation targeting originally came in when we still didn't have bank of England independence. Right. So it came in in 1992. Chancellor said, this is the inflation target. By the end of the Parliament, we'll have inflation within this particular range. For rpix, it was originally. Doesn't really matter what that is. It was a different inflation measure from cpi and it was met. It was in the bottom half of the range it was supposed to be. And that was precisely met by Ken Clark by the time of the 1997 general election. He got 2.5%. It was supposed to be, I think it was in the bottom half of the range of 1.5% to 3.5%, or maybe it was 1 to 4, sorry, bottom half of the range of 1 to 4 was what it was. So we got it 2.5%, smack on. My point about mentioning that is there's nothing intrinsic about having bank of England independence that that's required for having an inflation target. You can have an inflation target and have that. The things are politically controlled. We literally used to do that. Now we did that and we thought that was the idea of inflation targets. And then when you got into the. When Blair comes along and he creates the bank of England independence, which, by the way, was explicitly because of the Maastricht conversion criteria and the goal of joining the euro. So the idea of that. When Blair introduced Bank of England independence, that was because it was one of a number of measures, including switching to CPI as for inflation for the target, because that matched the hicp, the Harmonized Index of Consumer Prices, which they were using in the eu. It was part of preparing us for joining the euro. Nobody thinks we want to be prepared for joining the euro today. So the whole context for bank of England independence originally has all gone away decades ago. Now, the. But. So they had an inflation target and what everybody thought that meant was you have an inflation target of 2% plus or minus 1%. And what people thought that meant was over time they should try to get things to 2%, but they should make sure that it didn't go below 1 or above 3. So you were allowed at a bit of discretion, a range of discretion. You should be trying to get it to two. But it wasn't that. We defined everything as the same sort of category of miss. There was a range within which you were allowed to operate, and for a number of years that was what they did. The bank of England Monetary Policy Committee thought it was their job to make sure that inflation didn't go outside that range. Then in 2007, I think it was March 2007, if I remember correctly, they first missed the target. Now, what should have happened then was people should have asked, because there had been some people who criticized why they hadn't raised rates earlier. It went to 3.1%. Why hadn't you done these things? But the Munchie Policy Committee went around saying, oh, no, it was never our job to keep it between 1 and 3. All that happened was that you had to write a letter, that's all it says under the Framework. And once they did that, and that was accepted as the way things were after that, all the controls went. So you just end up with letters as soon as they missed and there was no consequence of them missing, then they started missing all the time. They didn't think it mattered anymore. They started seeing through inflation spikes. You get all of that language all of the time. So instead of thinking in response to this or that shock, I have to act to keep inflation down, even if there are consequences even past the point of independence was supposed to be, ah, these central bankers, they'll be tough and they'll allow there to be high unemployment or recessions or whatever, just as long as we keep the inflation rate there. They didn't do any of that at all, did they? They're not willing to see almost any level of unemployment or GDP loss in order to keep the inflation target. Whenever there are shocks, they see through them to the other side. You could have seen through the shocks of the mid-1970s, the bank of England, they could argue, oh well, inflation went to 20 something percent in 1979, but that was because we saw through from the 7% inflation of the year before to the, the 3 and a half, 3.8% inflation in 1983, which is just a temporary. It wasn't a failure at all. So it's. They abandoned the framework. That's why, that's why that happened.
- [51:59]
B
I want to talk to you about one of my sponsors, Incogni. And that means we're going to talk about the weird world of spam. And I don't just mean those spam emails that you get day after day from companies you never heard of and companies you've never signed up to. I'm also talking about those spam phone calls you get from those people who seem to know a little bit too much about you, trying to get your bank details. It's all a bit creepy right now. This all comes from the world of data brokerage. There are companies out there collecting your data, building profiles and sending that data to anyone who wants it. Which is why when one of those scammers phoned you up, they seem to know everything about you. Now, I've tried, I've tried myself to get off these lists, try to get off the phone lists, try to get off the email list. I unsubscribe from every one of these emails that comes in this game of Whack a Molecule. It just never ends. And so this is where Incogni comes in. They do all the hard work for you, they reach out to these companies and they will get you legally removed from these lists. And I know because last time they sponsored my show, I signed up and I Didn't take the free option that they offered me. I wanted to pay for it, I wanted to see if you get value for money. And they removed me from 79 data broker lists. And so I've stayed on, I've stayed a subscriber and I have seen a massive decrease in the number of emails and phone calls I've been getting. So it's a great service. I recommend you check it out. If you're sick of this like I was, please head over to incogni.com Peter and sign up. If you use the code Peter, you will get a lovely 60% discount. So that's incogni.com Peter. So is this really the voters to blame for this? And the reason I say the voters to blame is that voters themselves are not living in economic reality. I read this thing this week about considering economics. We should consider it like physics is that you can try and bend the rules as much as you want, but there is an economic reality, the way people operate, behave, make decisions. And so if you're a left leaning socialist type, you really need to understand that to be able to have a good redistribution program, you do need to have a successful prosperous economy. And also at the same time, if you're a hard working person going to work and it's costing 30 pound more to fill up your car and you've got a little bit less money at the end of each month that you should be demanding more from politicians. Or are we just being a bit passive with what's actually happening?
- [54:20]
A
Honestly, I don't think so. I don't really blame the voters. No, I think the voters, by and large they've tended to make the right decisions at these. I'm pretty close to that Daniel Hannan philosophy which I made earlier, saying they've got it right absolutely. Every time. Though occasionally when I thought they got it wrong subsequently, they turned out maybe they were right. Two examples, I think that they were probably right in 2010 and they were almost certainly right in 2017. They would have been bad if May had had an overall majority in 2017. Imagine her trying to getting her EU bills through parliament with a majority instead of a minority. I think that would have been an absolute catastrophe and things would have been a lot worse by now. And I think things actually with the Liberals and so on, not imperfectly, but I'm not confident that David Cameron with a majority would have done that much better than he did with a minority. And of course having the minority forced him into things like promising a referendum on the eu, which is probably the right way to go. With the benefit of hindsight, though, I wasn't a fan of referendums, but so I by and large have faith in the voters. I don't blame them. I think that the politicians are too cynical about the voters and they. And they're too. They're too cynical about the voters. But they also think that it's too important that it's them in charge, which I wouldn't mind if they had something they were gonna do with being in charge. I don't mind them wanting it to be them that changes the world and makes it better. I just don't want them to think it's them to be in charge just for the sake of being in charge.
- [56:08]
B
But if you look at the polls now, like I said, I think as mentioned earlier, if we were to have a vote tomorrow, we could end up with a hung parliament. We seem to have a pretty even split between kind of reform, Greens, Labor, Conservative. I know there's some differences, but there's nobody who's going to get a parliamentary majority. So is that the public getting it right in that we don't actually know the direction to take?
- [56:31]
A
Well, I think that that is partly a natural reflection of the fact that we have the overturning of the old system and it's uncertain how the dice are going to fall. I think that it is the public being right in the sense of presenting reform with a bit of a threat that they might have thought they were going to win fairly easily. And it did look like that for a while. But. But the right answer to that wasn't to start assuming you were going to win and therefore start making assuring noises about how you aren't actually going to change anything. That wasn't what the voters wanted at all.
- [57:04]
B
So they're on notice at the moment?
- [57:05]
A
Yeah, I'd say reform in particular on notice. I think Labour are on notice. Maybe Labour are more than on notice. Maybe they're doomed. And Tories have been performing reasonably well. And I think there's a kind of X factor element when you're away from an election sort of X factor vote. I mean, people vote on the basis of how people were doing that week rather than whose record they're actually going to buy when the record sales come. So when you get to the general election, there's no guarantee that the way that the voters preferences now are going to be the same as they would be come that time. I suspect things will shake out a bit more by then.
- [57:45]
B
But is there an optimistic path out of this.
- [57:59]
A
Okay, so the most optimistic path I think would be probably an early crisis. An early crisis which is not so severe that we have to change things radically, that the markets provide enough discipline that it causes the government. Possibly causes the government to fall a little bit early and people wake up. Warning, shock, kind of Warning, shock.
- [58:30]
B
What would it look like?
- [58:34]
A
I think if you had a. High. Enough. So it wasn't that people became completely unwilling to buy UK government debt, but the cost of it went up enough that it started to seem unviable to be borrowing on these kind of levels. If there were, sorry, what kind of
- [58:53]
B
percentage would that be? Because we've had the bond sale this week. Was it over 4.9% or 15 billion?
- [58:57]
A
It's hard to pick an exact number. But suppose that you're. Suppose your ten years were at seven. Suppose your ten year were at seven. I think people would start to get very, very nervous in the politics, political world at that point.
- [59:10]
B
And how much have we risen over the last five years?
- [59:13]
A
Oh, greatly. I mean like what? Since. Since COVID Yeah. Must be. Must be 5%, 5 percentage points or.5, 5 percentage points. I think. Yes.
- [59:24]
B
Okay, so another on.
- [59:25]
A
On some of those. On the longer term ones. Yeah.
- [59:27]
B
So another 2 percentage points isn't that significant in comparison?
- [59:32]
A
Yeah, there's an element of normalization to those things. So they're at. They're at the kind of level which is pretty much as high. There's already a premium in the UK ones relative to international peers for that. But yeah, it isn't. I don't think we're talking. That's why I'm describing a scenario which I think is enough to be uncomfortable, but not an absolute. We're not talking about 12% and we start defaulting on our bonds and all of that kind of stuff. I'm saying enough that you could still get a bit of debt away. You don't. But you start to feel, you understand that if things go any further then you're going to really get into problems. Maybe the government tries to institute some extra spending cuts, the labor backbenches turn against them. Maybe in a kind of early 30s scenario where the Labour Party tried to cut spending and then there was a national government with the Tories coming in behind them. I'm not saying I want a national government, I'm just saying some scenario where the. Which was short of having stuff imposed because I think that once we started having foreigners tell us how to set our budgets, we're not going to like the answers to that. We're not going to like the things that they cut in the 60s when the IMF lent us some money at that time in the late 60s, that was integral to all of the withdrawal from east of Suez. So it's like all of the abandonment of the military, the British military power in east in Asia, that was a consequence of those sorts of things. I wouldn't guarantee that if foreigners started lending us money, they might say all this nuclear weapon stuff, all a bit of a luxury. You don't need to be spending money on that. We want that gone, that kind of thing. Right.
- [61:17]
B
Like Zach Polanski then.
- [61:19]
A
Yeah. I think there is a chance that you would end up with the priorities that people wouldn't think that you had the right priorities. Things. Stuff hasn't worked. Your aspirations and your sense of where you stand in the world has proved to be wrong and you need to be more humble. And we wouldn't like the process of being humbled by foreigners at all.
- [61:37]
B
Yeah. So right now we really need some more honesty from government about the state of things because we keep getting hoping
- [61:45]
A
for honesty from Keir Starmer's outfits is a little bit hopeless, but yeah, I
- [61:49]
B
almost think from any. I mean, is there anybody out there that you look at, you think we are getting an honest message from?
- [61:55]
A
No, that's the answer to that. None of them. None of them. It's not. I mean, honest and right. Okay. Zach Polanski probably tells you how he thinks of the world by and large. I'm not even sure of that. There's a sort of woke fishing kind of an element to some of those. A lot of those greenies, really, but they're probably the closest. But honest and right. No, nobody's honest and right.
- [62:23]
B
How particularly bad is racial reason, this Labour government? I mean, are they as deluded as I think?
- [62:31]
A
Yeah. I don't have much time for people who are extremely censorious about others and then do the same kind of things themselves. A little bit of hypocrisy of, you know, that's probably the right thing in life that you wear things that you would aspire to be yourself. You then you don't have to match up to what you ask others to do perfectly. But the level of censoriousness which those Labour people took towards Boris Johnson's untruthfulness and various other kind of conduct and that they made about all kinds of other things and then the level at which they just do even worse things themselves, I got not much time for that. So that's a thing which I really don't like at all. I also don't like all of the. They came in saying that they were going to change everything and their idea of changing everything seems to be Sunak, only more so by and large, apart from the completely unimaginative oh, we'll spend more. There's a lot more. There's a lot more sophistication and subtlety to left wing economic philosophy than just public spending has to be higher people. There's people I disagree with but they've got things to say. They've got ideas on the left of how to boost growth. And it's not, it doesn't all just come down to oh, we raise public spending with, you know, higher welfare budget or bigger salaries for the, for the public sector work. It's, it's just so lame. They're so lame and being extremely preachy and going on about how you're going to transform everything and then being mendacious and lame. It's just a very uninspiring combination.
- [64:20]
B
That's the cycle we've had for two, two and a half decades now though of promise of hope and change. Chancellor's saying they're going to fix things and not one single person has.
- [64:33]
A
People have done some things, tweaks. I don't, I think of governments that we've had. If you wanted to have a government that I wasn't, I think, I think Blair, I quite liked some things that Blair did. But I mean certainly Blair 2005 to 2007 wasn't so bad and Cameron from 2013 to 2015. But apart from that, that's four years. Yeah, I think almost everything else has been just abysmal and it's, and that's one of the things I would say about our politics is we've done all of this stuff to ourselves so we should believe we can undo it. It's not some natural forces beyond anybody's control or something from outside. We've not had outside pressures. I don't really believe it's some mendacious plot by somebody or other. This is just things which our system and we collectively have done to ourselves. We can undo it.
- [65:34]
B
So just what requires a bit of courage, accepting a bit of pain for a period of time resets our economic trajectory.
- [65:42]
A
I mean a bit. I think it requires quite a lot. It requires quite a lot of accepting. It requires a lot of accepting that you may fail. It requires trying things and other people sticking with that and accepting we all may fail. All of us group of people who try to do this we're going to do the thing we really believe in and we may be rejected, we may never get as far as doing it, but we're going to try it anyway. And you need multiple sets of people who are all willing to be trying to do that in their own slightly different ways, and maybe working together, collaborating in some situations. But the whole system needs to have that kind of integrity and good intent and a kind of hope that we can make things better. And that stuff is, as you say, in a sense, it's just a bit of extra courage and so on. But we're talking about quite a big flick, big change of mindset, a lot of looking in the mirror and accepting the ways we've been doing things up to now are not right. A lot of accepting that we're a lot poorer than people think of us as being. A lot of other countries have got a lot richer than we have in the past 15, 20 years.
- [66:53]
B
Did you see this thing that came out this week, asked people to predict if the UK was an American state, how rich we are, and people had us about the 7th, and we'd actually be the poorest?
- [67:01]
A
Yep, yep, There was that and there was all this. A load of people think that we've got the same GDP per capita as Switzerland and things like that, Right? Yeah. People have no idea of how. One thing about that is, I don't think that people necessarily have the sense that they should have how much poor water we've got since 2008. In the first quarter of 2008, UK GDP per capita was higher than that in the US. This is a thing which has happened quite recently, this being as much worse off than relative to others. It's a bit like some of the things I was mentioning earlier about the big decline in our birth rate in the UK has happened much more recently than I think people really grasp. The big increase in the public spending has all happened much more recently in people's grasp. These aren't things which have been going on gradually over a long time. They're a series of epic errors that we've made and they've had enduring consequences and people haven't seen because they're relatively recent. People haven't really grasped exactly how bad the consequences of those errors have been so far.
- [68:14]
B
Before we finish. I've been quite attracted to what's been happening in Argentina with Milei, but I'm not an economist, so I don't know if I'm just seeing his own version of propaganda or there's truth in that. But you as an economist, from what you've seen as happening in Argentina, do you believe that he is attacking the economics of that country in the right way? And could we learn anything from him?
- [68:37]
A
Yeah, a lot of what he's doing is not perfect by any means. There are some, some aspects of things which he could have done a little bit differently, particularly with regard to the external sector. But yeah, I mean a lot of it is, a lot of it is important things for Argentina and he's been quite successful at turning a lot of stuff around. One thing to bear in mind is what Argentina was. Was it 1910, something like the 10th richest country in the world. And Argentina had a whole heap of absolutely terrible problems. I really hope we don't have to have 100 something years of ABs, of Argentine level catastrophes and internal coups and you know, military hunters and who knows what before we ended up having the appetite to actually change things.
- [69:22]
B
But that's the sad reality. We might, because it might have to get a lot more painful for people.
- [69:27]
A
Argentina is an interesting illustration that just because you're a rich developed country doesn't mean you're entitled to stay a rich developed country. Just because you're politically stable doesn't mean you're entitled to stay politically stable. These things have happened before and they could happen to us. And we don't want to have to wait 100 years before we're willing to do the radical things. At least I don't. So I would say, yeah, sure, the Argentinians are doing some stuff, but I would mainly learn the negative lesson from the Argentinians that you shouldn't have to wait all that time. Part of the reason the stuff looks so radical that he's doing and in many ways is. And also part of the reason people are willing to accept how radical this is is because of how terrible stuff in Argentina has been for so long. Let's not go down that path.
- [70:18]
B
And what specifically what were their cell phones? What did they do to, to themselves that you risk we do the same? Is it just continual inflation and hyperinflation?
- [70:30]
A
Well, that was part of it. And the abandonment of their political process, of course. But one thing that they did was they became a lot less rich in the world as a consequence of changes in international patterns of trade. The Europeans weren't buying as much of their beef and so on. And after World War and World War II, there was big changes in international patterns of trade. It's happening in other countries as well, like New Zealand in the 60s and 70s when countries don't accept that they've got poorer and cut their cloth, whatever it is, cut their suit to match their cloth. Then the pretense they're just borrowing or the refusal to engage with how things are takes you further down the negative path. Key thing that we need to accept. We need to say we cannot afford to have a health service like the Swiss. We can't afford to have it one that's where we spend as much as they do on these things. Or it's as fancy as that because we're a lot poorer than them. We must stop pretending to ourselves that we can have things which we're not rich enough to have and instead we need to adjust our expectations so that we and the politicians need to stop pretending. We need to adjust our expectations to how rich we are in the world and the politicians need to tell people how rich we are in the world. And that that would, it won't solve everything, but it would reduce the temptation to make things even worse.
- [72:00]
B
It's like that personal reality. Who has it said when you go, you go broke. It's gradually and then suddenly. Is it Hemingway?
- [72:07]
A
Hemingway, yes. Ernest Hemingway. When you go bankrupt.
- [72:10]
B
Yeah, yeah, yeah. And there's a, there's a reality that, that Zach Polanski said we need to stop thinking of our budget like a household budget. And I completely disagree. I think we kind of do need to think of it like a household budget. If we can't afford things, we can't have them. We can't keep living on the credit card.
- [72:26]
A
There's some senses in which is not the same, but not, but not any senses which are very relevant to voters. Decisions about taxes and spending and so on. Of course there are some sensors, you know, if you're talking about macroeconomic management and there's some fancy things where it's not exactly the same, partly because you're collectively as a country borrowing from yourself to some extent. But. Okay. But the point is for most of the relevant, the things that are relevant to voters decisions, it's just like a household budget.
- [72:59]
B
All right, final question. Thank you for coming in. Somebody listened to this feeling frustrated. They're finding life's getting more expensive. They're struggling with their business. I know a lot of people with small to medium sized businesses are struggling, especially in the hospital hospitality sector. What would you say to them? What can they do?
- [73:22]
A
Gosh, well, there's a lot of things that they could do. Of course some. If somebody's. Do you mean what can they do politically?
- [73:32]
B
I mean politically, like I think individually they'll, they'll know instinctively what they need to do to cut their costs and hopefully get by and whatever. But, you know, if we need, I'm. I believe, like you, we need severe economic change. I think we need to massively cut our spending. I think we are much poorer than we say we are and we're living beyond our means. I would support any kind of radical economic reform. But what should the like, what reality does the individual need to be in?
- [74:00]
A
I would say that people need to. Okay. I think people need to not think that when they have challenges, it's somebody else's job to solve them for them. I would say that's perhaps the most fundamental thing that politicians can do. Certain things mainly, they can make stuff a lot worse and they can less make stuff a lot worse if they get things right. And to a small extent, they can help make things better. But you should not. You should make it your normal habit to assume that when you have problems, it's not somebody else's job to solve them. And so you shouldn't assume that. The right politics is that of voting for parties who will promise to solve your problems. To some extent, they're probably misleading you. But even when they aren't misleading you, their attempts to help you will probably make things worse, including for you, than better.
- [75:01]
B
I really appreciate you coming on and talking to me. Thank you for this and thank you everyone for listening. We'll see you soon.
- [75:06]
A
Bye.