A Capitalist Carol, Stave 3

The story so far: Haunted by the ghost of Adam Smith, high-spending, big-government enthusiast Ed Splurge is expecting the first of three more visitations… 


When Splurge awoke, it was dark. Smith’s ghost bothered him exceedingly. It had warned him of a visitation when the bell tolled One – which it now did, with a deep, dull, hollow, melancholy ONE.

Light flashed up in the room upon the instant, and the curtains of his bed were drawn – drawn aside by a hand. Splurge found himself face to face with the unearthly visitor who drew them: as close to it as I am to you now.

It was a strange figure – like a child: yet more like an old man viewed through some supernatural medium, which diminished it to a child’s proportions.

“Are you the spirit, whose coming was retold to me? Asked Splurge.

“I am the Ghost of Freedom Past”

“Long past?” inquired Splurge: observant of its dwarfish stature.

“Your past. Your ideology’s past.”

But the strangest thing about this apparition was, that from the crown of its head there sprung a bright clear jet of light, by which all was visible; and which was doubtless the occasion of its using a great extinguisher of a cap, which it now held under its arm.

Perhaps, Splurge could not have told anybody why, if anybody could have asked him, but he had a special desire to see the spirit in his cap; and begged him to be covered.

“What!” exclaimed the ghost, “would you so soon put out, with worldly hands, the lamp of liberty? For that is the light I give!”

Splurge reverently disclaimed all intention of doing that. He made bold to inquire what business brought him there.

“Your reclamation!” replied the apparition, in a voice soft and gentle. It clasped him by the arm. “Rise! Walk with me!” And it made toward the window.

“I am mortal,” Splurge remonstrated, “and liable to fall.”

“Bear a touch of freedom,” said the spirit, laying his hand upon its heart, “and you shall be upheld in more than this!”

As the words were spoken, they passed through the wall. The city had entirely vanished. It was a clear, cold, winter day, with snow upon the ground.

“Good Heaven!” said Splurge. “I know this place!”

A Capitalist Carol, Stave 2

…It was the living face of Adam Smith. He knew it from that irritating Institute that bore the name. It seemed to emerge, ethereally, from his wallet, and hover before him, a ghostly wig upon its ghostly forehead. But then, as Splurge looked fixedly at this phenomenon, it was a banknote again.

To say that he was not startled, or that his blood was not conscious of a terrible self-doubt to which it had been a stranger from infancy, would be untrue. And though he never took out his own wallet much, it seemed perfectly restored to normality. So he said “Bah! Humbug!” and closed the door with a bang that echoed through the whole lavish apartment.

Lounge, billiards room, private cinema, ensuite bedroom and dressing room. All as they should be. Nobody under the Chippendale sofa or behind the Picassos. An indulgent blaze in the grate. Yet the image of Adam Smith preyed on his mind.

“Humbug!” said Splurge, mentally attributing the apparition to the surfeit of over-ripe Stilton and over-rich port that he had enjoyed at lunch in Claridges. His colour changed, though, when without a pause, the apparition came through the heavy door, and passed into the room before his eyes.

Its body was transparent; so that Splurge, observing him, and looking through his waistcoat, could see the two buttons on his coat behind.

Though he looked the phantom through and through, and saw it standing before him; though he felt the chilling influence of its death-cold economic logic; he was still incredulous. “What do you want from me?”

“Less,” said the spectre. “Much less. Less spending and less bureaucracy. For I created the wealth that you are now squandering.” It raised a cry and rattled the heavy chain that it was carrying.

“You don’t believe in me,” observed the Ghost.

“I don’t,” said Splurge. “Your stony old economics was completely dispelled by the Keynesian revolution.”

“You must,” replied the spirit. “These heavy chains are not mine, but yours. Every politician is doomed to limp through history, loaded down by the weight of the national debt and the burden of regulation that he forged in life. And your chains will be heavier than anyone’s.” It shook the chains and wrung its shadowy hands.

Splurge fell upon his knees, and clasped his hands before his face. “Adam,” said Splurge imploringly. “Speak comfort to me.”

“You will be haunted,” resumed the ghost, “by three spirits.” Expect the first tonight, as the bell tolls One.”

The spirit beckoned Splurge to the window. The air was filled with phantoms – many of them, he could see, former ministers from his own party – wailing under the weight of their own spending promises.

But being, from the emotion he had undergone, or the high-spending fatigues of the day, in much need of repose, he fell asleep upon the instant.

A Capitalist Carol, Stave 1

Capitalism was dead: to begin with. There is no doubt whatever about that. Its utter demise was reported by the BBC coverage of the financial crash, registered by the Occupy Movement, and solemnised on the steps of Downing Street by Ed Splurge himself, a copy of the General Theory and a thirty-seven-point public spending plan in his hand. Capitalism was as dead as a doornail.

How could it be otherwise? Splurge knew capitalism well; they had been adversaries as long as anyone could remember. Splurge’s party had been harping on about the instability of capitalism for seventy years, though nobody else seemed aware of it – certainly not capitalism, which annoyingly went on and on, producing economic growth and prosperity. Even China and India got in on the act, lifting billions out of poverty by entering the global trading network. But Splurge knew that one day, capitalism’s inherent contradictions would strangle it; and at last, inexplicably to his Keynesian advisers but joyously for all that, the day had come.

Oh! But he was a generous hand at the subsidies, Splurge! Soft and proliferous as rabbits, open to any entreaty, always ready to dispense a trifle here, a trifle there, from the public finances. Splurge found it blissfully easy to be generous with other people’s money. And today, the usual band of supplicants – farmers of crops and wind, builders of pointless railways, teachers and doctors – was swelled by new crowds: of bankers, mortgage lenders and insurers, all pleading to him for bail-outs. Before the day was out, he would have nationalized all the latter, with a smile.

“We will need many more public servants,” Splurge told his Downing Street staff, to warm applause. But his press officer, in letting himself out to spread this news, had let two other people in. They were a thin couple, with briefcases and small reading-glasses, who announced that they represented the Office for Budget Responsibility.

“At this stage in the economic cycle,” said one, picking up a pen, it is more than usually desirable that governments should make some provision to balance their books. Many thousands are living on public subsidies. Hundreds of thousands are struggling to pay their taxes. What spending cuts shall I put you down for?”

“Nothing!” Splurge replied. “Are there no presses at the Royal Mint?” he asked. “Are there no work-creation schemes?”

“Plenty of presses,” said one of the representatives, “and running hot as always.” “And countless work-creation schemes,” said the other, “each struggling to create any work at all.”

“Oh! I was afraid, from what you said at first, that something had occurred to stop expansionary policy in its useful course,” said Splurge. “I’m very glad to hear it is still going.”

Seeing clearly that it would be useless to pursue their point, the OBR representatives withdrew. Splurge resumed his labours, signing cheques and issuing public procurement orders with an improved energy. He must have been doing it for hours.

And then, “God save you, uncle!” cried a familiar voice. It was Splurge’s nephew, fresh from his class on Austrian Economics. “Recession to you is but a time for paying bills without money, or at least for borrowing it from the next generation. My classmates and I do not know how we will get by, with all the money that your generation has stolen from us!”

“Bah! Humbug!” said Splurge. “Good afternoon, nephew!”

“I am sorry, with all my heart, to find you so resolute. Like everyone else in the country, I try to keep my books balanced. What is prudence in the conduct of every private family can scarce be folly in that of a great nation!”

“Good afternoon!”

His nephew left the room, without an angry word, but with a look of disappointment about him. The clerk in the outer office involuntarily applauded Splurge’s resolution.

“And you, and your fellow public servants, I suppose, in these difficult times you will be wanting me to raise your pay? Increase your index-linked pensions? Bring in paternity leave? Extend your paid holidays? Recruit more assistants? And cut interest rates?”

“Oh, yes sir!” said the clerk.

“Very well then,” replied Splurge. “We do need to spend to revive the economic system. Have the papers drawn up for my signature tomorrow!”

And with that, spent out by the day’s events, he made his way tired but happy up to his private apartment on the top floor of Downing Street, where a generous supper awaited him.

Now, it is a fact, that there was nothing at all particular about this, in that he dined free at the public expense every day.

So let any man explain to me, if he can, how it happened that Splurge, having this free feast before him, felt a strange need to check his own wallet, and saw on one of the banknotes an eery image of someone he thought he had put out of his mind for good…

Food banks are stepping in where governments have created a mess

Mention the growth of food banks, with nearly a million users this year, and you conjure up a Dickensian image of a country on the breadline, chronically unable to feed its children, and a heartless government that is cutting benefits and quite willing to let them starve. The reality is very different.

First, food banks are a great achievement of private charity. They flourish in the world’s wealthiest countries – like the US, UK, Canada, and New Zealand – precisely because people in rich countries can afford to be charitable.

Second, around 60% of those using food banks in the UK are once-only users. In around 30% of cases, that is because of a hiccup in their social benefits – a sanction imposed because they haven’t turned up to an interview, perhaps, or a delay in benefits starting after someone loses their job. This is not chronic ‘food poverty’ – it is people facing temporary crises, much of it due to the welfare bureaucracy.

Third, the rise in food banks started long before the government started reforming benefits. Nearly all food banks in the UK are run by a single Christian charity, the Trussell Trust. As it gets more experienced and slicker, more care workers have been referring people to them, and more people know about them. So the numbers of users have risen.

Fourth, remember that the UK spends nearly £100bn a year on welfare, around one-seventh of all government spending. Working age welfare costs each family in Britain about £3,000 a year. And since the best form of welfare is actually a paying job, it is good news that unemployment has fallen so quickly in the UK.

Some Church leaders want the government to get involved in the food bank movement. That is a grave mistake. Government money will come with delays and with strings. It will discourage private giving – why should individuals contribute if the government is doing it? And government interventions are most of the problem in the first place. World food prices have risen 25% since 2007, due in part to biuofuel subsidies that have taken land out of food production, and the EU Common Agriculture Policy, which adds 13% to Britain’s household food bills. And family budgets are further squeezed by the 11% surcharge on electricity bills, destined for uneconomic wind turbines.

No, government would do better to get out of the way of private charity. It is only in the last few years that food banks could even advertise their existence. The benefits bureaucracy is notorious – which is why Iain Duncan Smith’s efforts to simplify the system are so important. And we need more realistic food regulation so that shops have a better option than simply throwing out food that is unsold, and so that consumers do not think food is unusable just because it is past its sell-by date.

Once again, private charity is stepping in where governments – of all colours – have created a mess. All strength to them.

Things really are getting better

What are we to make of the UK Autumn Statement? The recovery is stronger than predicted, unemployment has fallen faster than anyone can remember, inflation is lower, interest rates are falling… the government is going into an election with the best economic figures in memory.

All of that, the strong pound, growth in the 2-3% range, earnings up, inflation down – all of that should help the Conservatives, come the general election on May 8th.

The deficit is still a problem…bigger than forecast. But interest rates have been kept low, so borrowing has not been a strain: the bond markets have not been spooked.

As for the next election – and the Autumn Statement is very much a political thing – it looks like a large number of MPS, maybe 80 or more,, will be neither Conservative nor Labour, a big change on previous governments. The worst prospect is for a government with several coalition partners. One coalition partner is manageable – two or three, not so.

An unstable coalition partnership of several parties would be a disaster. The markets would just go into a tailspin. Ho hum. Right now, the government is benefiting from ultra-low interest rates. Again, if that does not last – and how can it – things might look much messier. The Conservatives want to cut public spending to more like 35% of GDP, the lowest it has been in decades. But if there is a complicated coalition arrangement, that is a no-hoper.

The eurozone remains the biggest trhreat to the UK. It is flatlining, going nowhere. That is one reason why the Office for Budget Responsibility has downgraded its growth forecast.

The bad news is that those on low income have seen almost no rise in their earnings since the financial crash. Those on top incomes have seen wages rise 20%. This is not a very even recovery.

Meanwhile, people have been lured off benefits and into jobs, thanks to the rise in tax thresholds that the Adam Smith Institute was promoting long before the Liberal Democrats thought about it – isn’t it crazy that folk on the minimum wage should pay tax at all?

Ho hum, indeed. It’s the economy, stupid. The Tories should have done a lot more to balance the books. But they may have done enough to convince us that things really are getting better.