Tougher Love – Accrington and Cambridge – Athens and Munich

Now is the winter - I am content

Hi

Schadenfreude is fun.  Look what a mess those other guys are in.  Looting and burning in Athens, that’s the Mediterranean temperament.  Those occupations by students and demonstrations by dons last year in Cambridge are different.  We are different.

In June 2011 a Daily Telegraph leader wrote:

"Tougher love is needed if we are going to recover"

The leader identified the pernicious impact of low standards and the benefit culture on depressed areas. It highlighted the impact of inflated public sector salaries “the gold standard” in areas of high unemployment."

Controversial at the time, that understanding is now generally accepted.  But there is another, and hidden, side to the problem.  The “benefits” coin has two sides.

In Cambridge, "Silicon Fen," the City of London and other boom areas, there is also a pernicious impact.

 Enterprises are living in a false world of subsidy. Colleges and businesses are expanding, attracting new, highly paid talent and fuelling a continuing property boom.  This expansion is premised on the availability of low wage "subsidised" support staff.

Non-professional employees in Cambridge, on wages that would put them "on the pig's back" in Liverpool, eke out an existence thanks to subsidised "affordable" housing.  Teachers who are gold-plated in the northern regions can barely afford to rent in Cambridge let alone London.

Economic hotspot employers and their highly paid employees profitably take advantage of nationally averaged education costs, health costs, supermarket prices and ordinary wages.

Expansion decisions, and most importantly a balanced distribution of talent, depend on wage, salary, property and tax costs that are local, honest and market led.

A one size fits all treasury approach and 1970's national wage bargaining will ensure that our hotspot booms turn to bust and our depressed area busts continue bust.  (However remember that in this economic cycle the talent is internationally mobile.)

So Accrington or Cambridge, Athens or Munich, as I wrote on 27 September 2011:

Steady as she goes

Dole, handouts, “go away and don’t bother me” money, a.k.a. transfer payments from one part of a currency union to another, rarely work..................

In a crisis, a war, a flood, a fire, a tsunami, they can work.  Like Elastoplast ..........  Wolgang Nowak of Deutsche Bank says:  “........   cannot extend or tolerate the current lack of discipline, in for example Bremen or Westphalia, to Greece or Portugal or Italy.” ........

There is a secret.  Politicians, helped by some economists, try to hide it.  After about three years of transfer payments, the rich, paying areas, grow richer.  The poor, receiving areas, become poorer.

Used inappropriately or for too long Elastoplast or tourniquets damage and kill.

Is it possible to change, to escape?  Yes it is.  Informed debate can free Brussels, Paris, Berlin and London from the illusions and delusions of the Nineties and the Noughties.  The Euro is a successful and needed world reserve currency.  The European Common Market is the world’s model for improving lives and living standards.   The “Ever Closer Union” political project is a failed and atavistic pastiche.

Accrington and Athens are down, but with tough love they will survive and prosper.  It is Cambridge and Munich that have the greater challenge.  They have to overcome their fear of change, of loss.  They do not need subsidy to continue to lead and prosper.

Paws4Now

Jock

And westward look