2012 Year end summary

In the following article, I have made observations and drawn conclusions from a variety of recent reports (that I have provided links to) produced mainly by independent leaders in their own fields.  These reports come from a mix of professions including renowned Global Investment analysts such as Jeremy Grantham of GMO, economists, educators and news reports mainly in UK, Europe or USA.  One thing is for sure – urgent and radical change is essential.

This has been a troubling year for the UK Government with the slow realisation that economic growth is unlikely while consumer confidence in the economy continues to fade in the wake of ongoing spending cuts and inflation and wage constraints that erode disposable incomes causing consumer demand for goods and services to further weaken.  Moreover, as Europe drifts into a double dip recession, the global economy remains weak and shows little sign of recovery from the 2007/8 financial crisis, dashing hopes for substantial growth in exports to emerging overseas markets. 

Debt reduction or elimination becomes the most sensible focus of attention on a personal and national level when credit becomes difficult to obtain in a weakening and shrinking economy already overburdened with debt. 

The consequences of austerity measures are beginning to be felt throughout the nation as welfare budgets are squeezed and the poor and handicapped take on the brunt of austerity.  But, this is just the beginning – there is far more austerity to come as tax revenues continue to steeply decline.  The costs of unemployment benefits are expected to rise with growing unemployment as more people in the public sector are made redundant with continuing cutbacks.  More and more people will find it harder to find permanent employment as the jobs in the private sector are just not there.  Consequently, there will be a growing trend towards under-employment by those managing to only find part-time employment, as well as self-employment and short-time job sharing in order that businesses can keep people in work with much needed skills and experience until the economy picks up.  In the meantime, this is unlikely to fill HM Treasury coffers with sufficient funds for some time to come.

As I have said before, in these circumstances there is no way that the Government can afford to allow cheap foreign labour into UK, whether they be seasonal workers or not, while there are already large numbers of unemployed on taxpayer sponsored Government benefits and the highest ever number of young unemployed in particular that are perfectly capable of doing the work that economic migrants come over here to do.

It is therefore essential that we re-gain control of our borders and prevent further migrations from anywhere in the world and from Eastern Europe in particular where new member nations are shortly due to join the EU, in order that the settled population of UK unemployed have the first opportunity for employment in preference to economic migrants.  To encourage this, benefits should only be available to the settled unemployed on the basis that they are prepared to study, train and re-skill for whatever Government identified work opportunities arise in their neighbourhood.

This calls for a much stronger partnership between local government, local businesses and educators that clearly identify demand led skills required to expand and diversify local sustainable economies for the long term.

This also means that our secondary school system must better prepare students and school leavers for the rapidly changing but practical world of work with much improved career advice and guidance relevant to the skills in demand in their local economy.  This should also include a more scientific approach to assessing student aptitudes and attributes (strengths and weaknesses) followed by a process to match aspirations with the individual’s education and skill capabilities that suit particular career path local opportunities in order to reduce time, effort and money wasted trying to fulfil unrealistic expectations.   Individual career choices must be realistic and achievable from the onset.  A much better understanding of the world of finance and how to manage their life finances must also be an essential part of school curricula.

None of this can succeed without clear national and local government economic strategic direction and support in partnership with local businesses, which should be constantly under review and able to adapt as circumstances change.  This presumably is the role of Local Enterprise Partnerships in recently announced Local Enterprise Zones.  However, it is not yet entirely clear how these organisations will work and what powers they will have to influence or stimulate growth in their localities.

Meanwhile on a global scale, non-renewable resource depletion continues unabated and growing evidence suggests that, based on current consumption rates, we will exhaust these resources well before the end of this century with dire consequences for humanity.

With ongoing drought conditions in North America, the devastation caused by Hurricane Sandy along the Eastern US Seaboard and storms causing widespread flooding throughout UK and Europe in November, Climate Change is very much in evidence.  Reliable scientific analysis suggests that the frequency of extreme weather events is likely to increase causing major economic and social problems as well as possibly insurmountable financial problems within the insurance industry as storm damage compensation claims become unmanageable and property insurance becomes unaffordable for many people living in flood prone regions.

The combined effects of a prolonged economic crisis, Climate Change and accelerating non-renewable resource depletion coupled to population growth, herald growing insecurity and the increasing probability of a catastrophic global food crisis.

With all this in mind, the political preoccupation with perpetual economic growth does not make any sense and looks increasingly short-sighted and foolish.  We will simply use up dwindling and already diluted finite non-renewable resources on this planet that much more quickly and deny future generations any resource heritage thereby ensuring the demise of the human race.

When will common sense prevail and a more ecologically sustainable approach to economics be recognised as the only acceptable way forward?

Strong leadership is required to prevent a tipping point towards catastrophic change and a major step in this direction came with the passing of the Localism Act in November 2011.  However, it will take a few years for authorities and the electorate to adjust to new roles and responsibilities before any results will be apparent. 

Capitalism as we know it in the West must adapt or perish.  This, in conjunction with population growth controls have become the most pressing issues for all governments including that of UK which is an already overcrowded and overpopulated small island nation that cannot feed its current population being entirely dependent on imports to do so. 

Food and energy security will dominate our future in the wake of the impending Euro collapse or downgrading of our own international credit rating.  The risks of this happening are too great to ignore and urgent contingency planning is essential to ameliorate the high probability of these events.

It is common sense that we should massively reduce our vulnerability to long and complex international food and energy supply chains by developing local resilience.  This can be done by ending a century of centralisation and expanding and diversifying local economies, as also recommended by Lord Heseltine in his recently published report into boosting UK growth that could help reduce our dependence on imports generally and so improve our balance of payments.

It is now time that UK manufacturing in China is repatriated back to UK, just as is beginning to happen in USA. 

These are the only areas of short term economic growth that our politicians should be concentrating on which must focus on small and medium size businesses that our economy depends on.  Not the large and often predatory international players that tend to avoid paying their fair share of taxes and thus have an unfair competitive advantage over smaller UK based firms.

New decentralised local energy, water harvesting, food production and distribution systems are essential to our survival when our older technology centralised utility systems come to the end of their design life cycles, begin to fail or cost too much to maintain or upgrade.  Communities with multiple and diversified distributed utility systems and local food production and distribution channels that substantially reduce food miles (now in excess of 30 billion kilometres per annum) are by nature less vulnerable to failure than single large high output centralised systems that impact large populations as and when they fail.

New advances in energy storage batteries may soon enable off grid storage of intermittent renewable energy that every household or community local grid can take advantage of, especially those households or industries that have installed rooftop solar panels.

Rigorous energy conservation and energy efficiency also present business opportunities that have great growth potential within the economy.  This includes effective home and work place insulation (including shops and factories), zero carbon new housing and LED lighting installations.

Commuting daily to and from work consumes about 50% of our energy needs and therefore massive savings can be made by allowing people to work on line from home now that fibre optic Internet and video conferencing services are becoming common place.  Most London commuters I am sure would welcome this, especially if the companies they work for allow local team hubs to form in remote locations from their central head offices.

New 3D printing technologies have the potential in the medium to long term to enable local cost effective manufacture and production of whatever is needed thereby hugely simplifying product distribution channels and reducing freight miles by replacing remote centralised mass production with custom local production where and when it is needed.

It is essential that every facet of business moves away from the traditional brittle centralising model dependent on vulnerable and complex long supply and commuter chains to a more resilient distributed local model for the 21^st century and beyond.  The sooner this is done the better it will be for everyone as this will at the same time ensure a fairer and better distribution of employment, wealth and power throughout the nation!

Is there an alternative to Capitalism?

Could Karl Marx be correct in his prediction that Capitalism would ultimately be self-destructive?  If this is the case, is there an alternative to Capitalism keeping in mind the catastrophic failures of Communism?

Why Capitalism needs to radically change is very well explained in this article by Richard Smith.

A Steady State Economy centred on an ecologically sustainable approach to Capitalism could provide the answers to these questions.  Richard Heinberg, Transition Networks, The Centre for the Advancement of a Steady State Economy, Positive Money, Breakthrough Capitalism, The Ellen MacArthur Foundation and the New Economics Foundation, among many other international organisations, are all exploring ways to create more understanding and strategies for necessary and urgent change.

Politicians and Bankers - the harbingers of incompetence, hubris and humbug?

It is apparent that from about 1971 onwards our politicians in collusion with the British banking elites that bankrolled the economy, knowingly or unwittingly have brought our economy to the brink of a debt crisis abyss where the economy cannot grow because of the lack of capital for investment due to the ongoing credit crunch and new banking capital requirements. This led to dwindling consumer and then business confidence in the economy (as consumer demand evaporated) and a double-dip recession. In these circumstances, the government is beginning to realise that they may not be able to service the burden of debt interest payments and reduce the national debt. The risks and probability of default on the national debt will grow tenfold if the Euro-zone collapses as many pundits predict. Our credit rating is under scrutiny and may be adjusted downwards accordingly. How did this come about and why?

The old British Imperial way of doing things is no longer internationally acceptable, affordable or practicable, but old habits die hard as the last decade or so of resource wars has revealed. Our politicians have squandered the British National Wealth with “gun boat diplomacy” in partnership with NATO and US military forces creating in the process an astronomic Defence budget deficit and a debt-laden economy further burdened with a number of colossal failed IT and other White Elephant projects that are still being considered, much to my consternation.

Looking back on my life and with the benefit of hindsight, I vividly remember years of double-digit inflation, double-digit interest rates, energy rationing, social unrest, a three day work week and persistent high unemployment that encouraged me to consider and then take up job opportunities abroad; twice in the Middle East, Hong Kong, Canada and finally back to UK after twenty years or so. I suppose you could say I was a participant in a long “brain drain” period of UK history as many of my kinsmen became similarly disillusioned with UK prospects and tried to make a better life for themselves and their families abroad. Certainly, I did things and took on responsibilities that I never would have had the opportunity to do in UK, but those days are now well and truly over as we try to compete in a global economy with other more motivated, better educated and management skilled nations also with access to vast cheap labour markets.

Inflation, really began in earnest with UK money decimalisation in 1971 (which coincided with the ending of the Bretton Wood system of money management and shift to Fiat Currencies), the introduction of credit cards for the masses providing easy instant credit in 1972 and the 1973 entry to the EU. The following years were marked by double-digit inflation peaking at 24% in 1975 and wage demands to keep pace with the spiralling costs of living. House prices went through the roof and then crashed. By December 1973 the labour unions and miners’ strike had brought the UK economy to its knees and crippled power station coal supplies. This forced the Conservative government to bring into force energy rationing and a three-day work week.

Perceiving that matters were likely to get even worse in the years ahead under a Labour government, I started seriously thinking about leaving the UK with my then very young family and started my adventures abroad in August 1974. By 1976 the UK economic situation was so bad that the government had to request an IMF bailout. This was followed by the 1978-79 "Winter of Discontent" which led to the election of Margaret Thatcher as Prime Minister of a Conservative Government in 1979.

The Thatcher government had no alternative but to try and clear up the economic mess left by the Labour government (sounds familiar?) and pay back the IMF loan while unemployment reached more than 3 million by the early 1980s. The only way to balance the books was to impose austerity measures, sell-off government assets (council houses) and privatise nationalised industries such as British Steel, British Airways and British Gas amongst many other utility companies. For a short while, taxes of 90% on North Sea Oil & Gas revenues were the government’s saviour and a new source of wealth for the country.

To facilitate the sale of state-owned assets and industries as well as stimulate public interest in private investment in company shares, it was necessary to deregulate the Financial Markets. However, self-regulation by the financial markets resulted in the sell-off of 50% of UK companies to foreigners and culminated in the 2007-10 Financial Crisis after decades of reckless self-indulgent casino style investment banking and consumer debt fuelled economic growth made possible by the availability of easy credit by out of control fractional reserve banking that the government turned a blind eye to while massive profits and thus tax revenues were being generated by a few elites at the expense of the taxpayer that had to bail them out when the markets crashed. To this day and unlike in Iceland and the US, no-one in UK has been held accountable and prosecuted for this unforgivable mess, which is outrageous and absolutely unacceptable.  Reform  of the banking and financial sector is long overdue. 

From 1979 to 1983 inflation was rampant and incomes generally lost purchasing power by as much as 50%. MPs' salaries were equally affected but it was not politically acceptable to increase them during a period of austerity and wage restraint. However, to offset inflation and dramatically rising costs, MPs were encouraged to claim expenses and a much broader range of allowances were introduced that were not curtailed until the 2009 Parliamentary Expenses scandal when the self-serving culture of many of our elected politicians was made public knowledge. This destroyed public confidence and trust in the political system prompting a call for major reform that also remains long overdue.

The economy has gone full circle and once again we face the prospect of a long period of austerity and economic stagnation or deflation, as debt is de-leveraged - only this time without the benefit of any State owned assets or industries worth selling to reduce debts.  Meanwhile, rapidly diminishing tax revenues from North Sea oil and gas continues and we have become net importers of energy subject to global oil and gas price rises and international competition, rather than the exporters we were in the 1970-80s. Our energy supply chain is no longer securely under our control.  The government have been accused of a lack of strategy and long term planning.

The situation has been exacerbated by a flood of immigrants over the past decade that I believe the government has consciously allowed to enter UK in an effort to stimulate economic growth and maintain demand for housing which traditionally has been a catalyst for economic growth. If we had stopped the flood of immigrants entering this already over-crowded small island nation, I firmly believe we would not have a housing problem, unemployment would be lower, welfare and social services would be less of a drain on national resources while house prices would have fallen after the financial crisis to a level that would be much more affordable, particularly by first time buyers in the settled population. However, this would neither suit the banks with massive toxic loans already on their balance sheets nor high volume house builders and property developers with large land banks on their books that would be devalued overnight leading to further bankruptcies in both the banking and construction industries with deflationary consequences for the property market generally.

Unlike property bubbles in USA, Ireland and Spain, the UK property bubble has not yet burst.  It has been artificially maintained by a combination of restricted land supply (planning land use) and restricted credit in conjunction with historically low interest rates and by allowing so many immigrants into the country to maintain demand for housing in competition with the settled population of first time home buyers or renters. Rental accommodation is similarly afflicted and both home rental and purchase price bubbles will likely burst as and when interest rates go up, which they must do sooner or later. Higher interest rates will trigger the sale of distressed home owned and investment rental properties as creditors desperately offload toxic loans on properties with negative equity which is created as and when debtors find they can no longer afford to service the loans on these properties.

Unlike the boom and bust years of 1970s and 1980s, the government and Bank of England this time reduced interest rates to an historic low of .05 % in a bid to increase demand for goods and services that stimulate economic growth and raise tax revenues to reduce past deficits. However, British industry, which is the only producer of wealth in real terms, has been allowed to decline in response to fierce global competition to such an extent that it has lost market share world-wide and has become too focused on trading with EU nations that are themselves in economic dire straits.

Meanwhile, the public sector has become bloated with bureaucrats in an attempt to soak up the unemployed laid off in the private sector during previous economic downturns when industry was allowed to decline and in many cases collapse – particularly in the north of England, Midlands and Wales. This is no longer sustainable. This time around, the austerity measures are centred on reducing public spending by reducing the size of the public sector which can no longer be funded at current levels by rapidly dwindling private sector tax revenues.

The government is now trying hard to create a more balanced export orientated economy trading with emerging growth economies such as those in Brazil, Russia, India and China, in order to become less reliant on tax revenues generated by profits from the financial markets which, coincidently, are also responsible for most of our debt. This strategy, however, is flawed as it assumes we are still ahead in most scientific and technical fields and can recover lost market share. Many of these emerging economies are more motivated, competitive and better management-skilled with a superior ingrained work ethic and "can do" attitude, are better educated having attended many of our Universities, and increasingly are taking the lead in innovation, science and technology. How can we compete with them now when we have lost the required industrial skills and collective experience with the collapse of various UK manufacturing industries over the past 30-40 years.  We have done too little too late to provide strategic direction and re-skill the working population to achieve these aspirations. That is not to say we shouldn’t try but that we should be aware of what we are up against.

My generation has experienced some of the highest income tax rates ever ranging up to 83% as well as the untold costs of double-digit Inflation and double-digit interest rates during their early years of wealth accumulation, which meant that it took longer, was much harder and considerably more expensive to acquire sufficient wealth to retire on, particularly if you worked in the private sector where private Money Purchase and  Defined Contribution pension plans prevail (unlike the the public sector where Defined Benefit plans are prevalent). This was followed by the current period of high volatility in the financial markets as well as the lowest savings interest rates and annuity income rates in history caused by Quantitative Easing, just as many "Baby Boomer's" are about to retire. Now who do you think gained the most from all of this – yes, the bankers but there is no end to their avarice as they continue to award themselves colossal salaries and bonuses while we pay the price for their folly and try to grow our way out of the quagmire they created in the first place.  

Consequently, the next generation will have to work even longer to accumulate enough wealth for retirement, partly because we are living longer which requires greater amounts of capital to derive income from especially when savings or annuity rates are so low, but mainly because discretionary income for long term financial planning purposes will be substantially eroded by higher taxes to pay down the colossal national debts created over the past decade or so and by huge personal debt elimination requirements including five figure student loans, six figure mortgages and credit cards etc. Moreover, the government State Pension changes that increase the State Pensionable age also rather presumes that there will still be meaningful and worthwhile jobs available for people in their late 60s and 70s before they become eligible for the State Pension,  So far I haven't come across any - unless you want to stack supermarket shelves into your 80s, for example.

It is time to let the bankers bury themselves in their own mess and start afresh as the cost of delaying the inevitable collapse of the Euro and breakup of the euro-zone, the ensuing collapse of the EU and our own economy becomes greater than allowing the collapse to actually happen now so we can start the painful process of building a new low-carbon Steady State economy with a clean balance sheet while we transition to more sustainable local community based lifestyles - without the debt loads that enslaved us to enriching the one percent of the population that have brought us to this abyss. Nearly all of this debt has been created out of nothing anyway and is virtual debt.  There simply is not enough money on planet earth to bail out the banks.

Let’s also get out of the EU ASAP so we can control our own destiny free of the burden of onerous EU counter productive regulations created by unelected and unaccountable bureaucrats, thereby relieving us to concentrate on establishing or improving trade with our Commonwealth nations and the rest of the world before it's too late and other less regulation burdened countries beat us to it.

2011 Innovators

2011 Innovators

Here are some fascinating renewable energy innovations that in time may become life changing energy solutions for many people on a global scale.  Fossil fuel dependent economies and western society in general should seriously think about adopting some of these innovations while transitioning to low-carbon economies.

Why is decentralisation imperative to our survival?

Have you ever noticed how London always seems to prosper, even in hard times and periods of rapid change?  How is that so when the rest of UK appears to be experiencing steady economic decline? Why, for example, are property values in London apparently unaffected by the recession and austerity measures now being imposed by the government while the rest of UK flounders in economic stagnation, flat or declining property values, growing unemployment and social decline?

The answer really is quite simple.

Generally speaking, the percentage of your pay packet that actually is available for spending in your local economy after paying for taxes, mortgages, insurance, utility bills and purchases from superstores, national chain stores or Internet stores, is minimal.  Most of your money, one way or another, finds its way to H.M.Treasury or out of town corporate head offices, usually based in London, at the expense of enriching your local economy.  This also means that land ownership becomes fragmented within communities as and when it is privately acquired or leased by these out of town corporations thus impeding development by local communities that may lack the financial resources to compete, particularly when common-land is in short supply or no longer available.  Reform of land ownership will likely become a growing issue and prerequisite to enabling increased local community land development.

For the past two centuries, London has not only been the seat of government but also the centre of finance, trade, commerce and economic decision making where our most significant corporations have chosen to maintain their headquarters, while industry developed and then declined elsewhere in Britain.  This has resulted in a substantial migration to London of not just the working population and immigrants but also our national income in the form of taxes paid, savings and investments and corporate profits.  It is no wonder that London and M25 dormitory towns have prospered while the rest of the nation is struggling.  Some people might even go so far as to say that this massive imbalance in the distribution of wealth and power has made London a voracious cancer or parasite sucking the life out of the rest of the nation (a legacy approach to governing inherited from our Empire days).  Why else would Scotland raise the thorny issue of independence from UK?

It is abundantly clear that radical surgery in the form of decentralisation is absolutely necessary if the patient (the nation) is to survive.  Moreover, London cannot survive on its own.  It is entirely dependent on imports of food, sources of energy and all other resources.  Its food footprint alone embraces much of southern England up to the Midlands.  In a world of rapidly depleting resources, London in its present form is unsustainable while its long and complex "just in time" food supply chains increasingly become hugely vulnerable to inexorably rising oil and gas prices.

Sensing a groundswell of national resentment, distrust and condemnation of the political, financial and corporate elites (based mainly in London) following the MPs expenses scandal and 2007/8 financial crisis, the government has set in motion legislation that it hopes will enable change by empowering Local Government and communities to have far more control of their destinies with the recent Royal Assent given to the Localism Act.  In theory, this Act should bring the decision-making processes closer to communities and make Local Authorities more accountable to the people they serve rather than central government (Whitehall Mandarins) that currently holds the purse strings and to whom they are now accountable.

A number of other Acts of Parliament are also being prepared to reform the NHS, Welfare, Justice, Planning and Education public services making them more accountable to end users and tax payers alike.  The government’s objectives are to simplify, reduce and streamline government thereby reducing administration costs as well as making government more transparent and accountable, quite often by privatising services and competitive tendering.  Consequently, we can expect strong resistance to this by the various government departments, professions, labour unions and contractors with vested interests in maintaining the status quo, many of whom could be said to have been milking the system for decades.  However, the nation is now essentially bankrupt and can no longer afford to function in its present form.  Radical change is necessary and inevitable or we risk ending up like Greece.

Projects that reinforce London’s central role in UK such as High Speed rail and a proposed new airport on the Thames estuary are “White Elephants” we cannot afford in these times of austerity with scarce resources when we have far higher priorities to attend to.  They are simply out of step with the government’s decentralisation policy and it is doubtful that we have the resources to implement them anyway.

The government are promoting their concept of the “Big Society” which makes it very clear that with the economy in recession and over-burdened with over-leveraged debt, it is up to local communities to become more self-sufficient and self-reliant – there are no substantial funds available to support communities in this endeavour.

We are entering a long period of debt de-leveraging (massive debt reduction or elimination) and economic stagnation as a result which could signal the beginning of a forced transition to a low-carbon steady state economy as the consequences of past reckless financial and economic decisions as well as rapidly depleting global resources, come to bear.

By now, it must be obvious to everyone that we have to develop local community solutions, through local worker owned social enterprise, to  mitigate the increasing high risk and probability of financial, economic and social collapse - especially if the Euro-zone collapses as many pundits predict.  This will also require communities to discover new ways to become as independent as possible of utility companies with ageing high maintenance infrastructures, as quickly as possible – for example, water and energy companies.  New technologies are being developed to enable this aided by Transition technologies being developed by the Transition Network.