Osborne’s £50bn plan for growth

13 Nov 2011    

News from the UK Sunday Times Today:
Osborne announces a £50bn investment plan for UK growth
230 acres of farmland for new Nuclear Plant purchased at £220k per acre

Background reading for this article from TheOligarch.Com
Stimulate EU growth with a Stiglitz Investment Fund / European Marshall Plan
Stimulate UK, solve the housing crisis, and mend our broken society by homebuilding  
Do not rely on Taylor Wimpey, think Poundbury meets Singapore style SOE investment
Political Cowardice and Ideological Rigidity in the UK Conservative Party
Tony Blair & the failure of Anglo Saxon economics

David Cameron is a confidence trickster, he is like the cat that ate the cream, he is the smooth salesman who convinces the client he is in safe hands, but if you question him carefully he doesn't have a clue and his management of the clients money is basically armageddon. Today the UK has the highest government spending budget deficit in the EU after Greece, it is printing money like no tomorrow, it has one of the highest negative real interest rates in the developed world (the real interest rate = the interest rate - the inflation rate), yet this appalling profligacy has done nothing to improve it's economic growth rate, indeed it also has one of the worst growth rates in the EU. The average person in the UK has absolutely no idea at all how bad the state of Britain is, and I worry that when they finally wake up the next Prime Minister will be from the BNP or EDL (populist far right).

People who follow my blog will know that I talk about the UK as the epicentre of bad ideological economic policy and economic nemesis. I like to compare the UK with Germany, and SELL THE UK has long been one of my messages. My contempt for the UK is not partisan, it started under Tony Blair and it continues under David Cameron, I think the Guardian newspaper is a shameful as the Telegraph newspaper. Nevertheless, I think the UK Conservatives combine political cowardice with ideological naivety, and increase the toxicity of this evil mixture by adding a heady dose of arrogance and hypocrisy. The UK has destroyed its financial services industry, it is still the premier location for the international jet set, but as life in the UK gets more an more grim it will loose that cachet. If you strip financial services, international elite services, and estate agency out of the UK economy there is so little left it's hard to see how life for the sixty million can be sustained.

The UK desperately needs two things: a strategy for growth and a strategy for making do with less. Actually it need a sort of growth strategy which improves the quality of life even as the country declines, and I have often talked about how to do this, and the solutions include the idea of state investment. So it's very exciting to read about George Osborn's plan to raise £50 billion for an infrastructure fund. This is not just another "bridges to nowhere" project, he is seeking to make a profit on the investment. This investment for both profit and stimulus is exactly the Stiglitz Invetment Fund / European Marshall Plan idea (see link at top of page) that I have been desperately trying to communicate to EU technocrats on this blog and in other places. Like little children headed toward the smell of food, this is the policy they are all slowly crawling towards, but this is the first time I have actually heard one of them articulate the words semi coherently.

It is surprising to see the UK talk about this idea before the EU, I guess it's because the UK is on the sidelines and thinking about its future whereas the other kids are so caught up in their fight to get the democratic wolf back on the lead they haven't had a chance to think where they want to go afterwards. So David Cameron is unexpectedly ahead in the "growth model" race, yet even the best plan in the world needs efficient execution. For example, in the Stiglitz Invetment Fund / European Marshall Plan article (see link at top of page) I say:

(1) These investments must generate minimal positive returns, they can't be subject to democratic capture creating loss making vanity projects (eg UK high speed rail), or loss making hot air projects (eg UK wind farms), they need to be managed in a hard headed non democratic way.

(2) We are talking about State Capitalism instead of relying on the private sector. We are talking about Chinese style "State Owned Enterprise" investment for stimulus and profit. We mustn't make the 1970s mistake - these projects can't get caught in existing public sector labour markets and unions etc, they must sit apart in a special blue sky structure or they will end up in Post Office style incompetence. Chinese SOE's don't have unions and they aren't run by elected politicians - they are hard headed professional high tech businesslike operations.

(3) They shouldn't be afraid to compete with the private sector, stepping on private sector toes is likely to be inevitable if the projects are to have real world value, besides destroying private sector monopolies is the proper way to return excess shareholder returns to the public.

(4) They shouldn't enrich vested interests in the old fashioned crony capitalist way of 1930s Germany. Avoid outsourcing in order to build up in-house talent and avoid handing private sector counterparties a bonanza. Let's let go of our ideological fear of "State Capitalism" and do this thing properly, not just hand a bunch of money to the private sector and let them run the show. If the private sector worked we wouldn't need state investment, embrace the post-capitalist model fully.

Understand that these investments should attack both the unions and the private sector, they should be antithetical to the vested interests on the left and right who control today's political parties by patronage and tradition.

That's why at the top of this article I linked to the article about the sale of 230 acres of farmland for the UK's new nuclear power plant at £220k per acre instead of the going rate for farmland which is no more than about £10k per acre. As a result of that farmland sale the 71 year old Lady Gizz, who already owns a stately home and 6,000 acres of land, and who inherited all her money and was school teacher during her life, has just ended up with a £50 million pound jackpot. Whilst I am sure she is a very nice old lady, that money will have to be eventually recovered though electricity bills sent to ordinary people across the UK.

In the article about investment I talk about the potential for both stimulating the economy and making a profit if the government confiscate agricultural land with compulsory purchase orders which pay only agricultural prices. Paying people twenty times more per acre that the government has to is a disgraceful waste of taxpayers money - they are failing to attack vested interests on the right - they are handing landholders windfall profits instead of handing them to taxpayers. Paying people twenty times more per acre that the government has to is also a chronically stupid thing to do because it undermines the profitability of opportunities, making it that much harder to stimulate the economy.

Frankly the conservative party is filled with amazingly stupid people, they should have put together an investment plan like this a long time ago, I talked about this idea at a dinner with a UK Conservative shadow cabinet member about four years ago. Their last plan a month or two ago was an absurdly small 1 billion fund, even £50 billion is still a drop in the hat and if I was Prime Minister my opening gambit would target a number ten times larger than that. Everyone who cares about the UK's future should make every possible effort to ensure Osborne grows some balls and some brains and does this thing properly. The Conservatives go and and on about how the EU need a big financial bazooka, but their are so afraid of war that their own bazooka is so small and so badly targeted it's incapable of giving anyone any satisfaction at all.

Now sometimes I go too far in my commentary and people run the other way (Steve Ives, CEO of Taptu, called my state investment for profit and stimulus article (see link at top of page) "half mad, half brilliant" on Twitter), but life is short so I am going to carry on anyway. One of George Osborn's plans is to invest in Super Fast broadband. Whereas you could easily spend 500 billions ponds on housing and nuclear and walk away with a fat profit, things like super fast broadband and new airports are more difficult to earn a return on. Now the Market Cap of BT is 15 billion pounds. If I were David Cameron I would renationalize BT paying shareholders an extra few % over the current price before investing in super fast broadband. Nationalising BT and turning it into a high tech State Owned Enterprise would be an excellent quick way to experiment with state capitalism and high tech investment and to ensure the money spent is not handed to vested interests in the private sector. Once in government ownership you could squeeze out the pointless BT competitors that have been injected by regulators, thus driving profits and economy of scale advantages. Of course you will say my plan is "half mad", David Cameron is a Tory Party Bullingdon Club Toff and he could never get away with something like this - but your predictable objection betrays your lack of imagination and idealism! As it happens, if David Cameron nationalised BT it would leave the country speechless and destroy the Labour Party forever. The secret is not to seek the politically correct yin and yang centre ground, the secret is to steal the idealistic wings of you opposition that they themselves don't even have the courage to hit. That is the true idealistic post partisan post ideological way that idiots like Cameron and Clegg can't see. As I have explained in other articles, the Nick Clegg like dilute everything policy is not just wrong, it's actually evil. David Cameron has apparently been studying justice recently, there was a whole article in The Times talking about how Cameron is beginning to ask himself "What would Jesus Say?". Well Mr Cameron, ask yourself: did Jesus create a toned down Nick Clegg like mix of Saint Francis and Martin Luther, or did he think you need to alternate between them depending on the circumstances?