An anniversary. With a message for today

Seventy-five years ago today, a powerful military nation made a fatal military error.

Instead of swinging northwards from its conquered territories in China and tackling the Soviet Union, then gripped by a life and death struggle against Nazi Germany, the Empire of Japan chose to go South and attack the Far Eastern possessions of Holland and Britain. If it had done only that, it might have achieved its aims: its forces on both land and sea quickly overcame the British and the Dutch. But they weren’t satisfied with so much and overreached, attacking the United States too.

Had Japan taken on the Soviet Union, the world might have been a profoundly different place. The Soviets might have had to divert forces from the Western Front and weaken the fight against Hitler. The United States might have felt it impossible to join the war at that stage. The outcome might have been a great deal less favourable to the Western powers.

It didn’t happen. Admiral Yamamoto had opposed the Southern strategy but, bowing to the orders he was given, decided the only way to make a success of it was to launch an attack on the US so powerful that it would knock them out in one strike. He combined careful planning with intensive training of both naval and air forces, and finally a brilliantly executed attempt to destroy US naval power in the Pacific with a single blow against Pearl Harbor.

The Japanese embassy in Washington had trouble translating and typing its government's warning to the US, with the result that the attack occurred before the the message was delivered. That led Franklin Roosevelt to describe 7 December 1941 as a day that would “live in infamy”.

More to the point, it was an attack that looked like a victory – it wreaked huge damage on the US Pacific fleet – but it failed to deliver the knockout blow Yamamoto sought. Instead, it led to a war that would ultimately cost Japan as many as three million dead, culminating in the double atomic bombing of Hiroshima and Nagasaki. It was the end of the expansionist dream of the Japanese Empire. Instead, the United States emerged as the major power in the Pacific.

Pearl Harbor: it looked like a victory for Japan
but it ultimately ensured the Empire's defeat

That’s a position the US has held on to, sometimes grimly, ever since. It’s flexed its military muscle, not always with success – viz. Vietnam – but it has relied above all on its huge economic and commercial strength. The greatest challenge in recent decades has come from a new source, China. That was a threat that Obama spent a great deal of time and effort countering. Notably, he negotiated the Trans Pacific Partnership, a trade agreement between twelve nations not including China.

The election of Donald Trump, however, killed the deal. He made it clear that he would drop it on his first day in office. That was a piece of news that must have been received with celebrations in Beijing: it marks a withdrawal by the US leaving the field open to China.

The attack on Pearl Harbor was a triumph of wishful thinking over good sense. By overreaching, Japan ensured the victory of its enemy. Ideology led to a reckless military act that rebounded catastrophically on its perpetrator.

It’s a lesson Trump could do with learning. Governed by his ideological concerns, he too has behaved recklessly, in the commercial rather than the military field, and with a withdrawal rather than an advance, but, in all likelihood, with the same drastic effects. A decision his compatriots could well come to regret.

Especially if he persists with his apparent addiction to picking fights with China.

Labour: getting back to its roots. But which roots?

“The only lesson to learn from history,” to paraphrase the German philosopher Hegel, “is that no one learns any lessons from history.”

In the course of the great debate over the leadership that is currently rocking the UK Labour Party, the supporters of Jeremy Corbyn frequently tell me that we need to get the party back to its roots. It’s because we’ve abandoned them for the last forty years – a precise figure quoted to me on Twitter, though what specifically happened in 1976 I’m not quite sure – that we’re in the mess today.

It never strikes me as a particularly good approach to call for a move “back to” some set of values. John Major, British Prime Minister between 1992 and 1997, Thatcher’s successor, launched a “back to basics” programme that was criticised even within his own party. Generally, it’s best to be moving forward and getting ready to deal with the next set of challenges, for which we’re likely to need different attitudes than worked when we faced the last.

Still, even in a forward-looking process, it’s useful to to see if we can at least learn enough from the past not to make the same mistakes again. Perhaps being aware of our roots might be a more useful approach than getting back to them. However, if we’re to do that well, we need at least to make sure we’re remembering them correctly. A mythical past isn’t going to help us at all in planning our future. It would be a pity to go back to the wrong roots, wouldn’t it?

What, then, were the roots of the Labour Party?

The great historic leader of the early days, and Labour’s first MP, was James Keir Hardie. He died long before Labour had its first chance to form a government, but he had among his advisers a young man, full of fine rhetoric and powerful views, who would lead Labour in government for the first time: Ramsay MacDonald was an early intellectual of the party and one of its most effective voices. He had principles too, and stuck to them: he was a pacifist and nothing could persuade him to back Britain’s involvement in the First World War. So, though he was one of the earliest Labour MPs, elected in 1906, he paid the price for his beliefs, losing his parliamentary seat in the elections at the end of the war.

Ramsay MacDonald: watered the roots of the Labour Party
But it didn’t end well, did it?

MacDonald came back, though, leading the first two Labour governments. Sadly, his second administration took office in 1929 and had to deal with the Great Depression. MacDonald, man of principle, thinker, left-winger, champion of the socialist cause, decided that was needed was a sound-money policy and reduced public spending. So he slashed unemployment benefit, to the fury and dismay of his Labour colleagues. In order to cling on to power, he formed a coalition with the Conservatives and remained Prime Minister, at the head of a government dominated by the party he’d always opposed, until 1935.

Are those the roots we’re supposed to get back to?

To be fair, when people talk about the Labour Party’s roots, they’re much more likely to be thinking of the great, reforming post-World War 2 government led by Clement Attlee. In particular, they’re probably thinking about one member of that government: Aneurin ‘Nai’ Bevan, founder of the NHS. They probably don’t remember that when someone mentioned to Ernest Bevin, Foreign Secretary in the same government, that Nai was his own worst enemy, Bevin growled back “not while I’m alive, he ain’t.”

Nai Bevan, father of the NHS. Much easier to get enthusiastic about.
As long as you’re not too worried abut nuclear disarmament.

Actually, that’s one of those stories that comes up again and again in different contexts, with different speakers. Another version has Bevin saying it about a different fellow Minister, Herbert Morrison. Then again, it was apparently said of Franklin Delano Roosevelt by his fellow Democrat “Cotton” Ed Smith. What all these versions have in common, though, is that they all reflect deeply destructive internal divisions in parties of the centre-left.

Sadly, we’re in exactly the same position today, but surely again this isn’t where we want to be, is it?

Much more significant than any comment of Bevin’s on Bevan, though, is a remark of Bevan’s himself. Jeremy Corbyn has made himself a bit of a name by his resistance to the renewal of the Trident nuclear missile programme. Interestingly, for a man and a member of a movement that swears by the sanctity of party decisions, he took that stance against Labour policy. He nonetheless enjoyed widespread support among his fan base, who tend to be pretty keen on Bevan too. So perhaps they need to ponder the words Nai spoke at the Labour Conference of 1957, during the debate on unilateral nuclear disarmament:

I knew this morning that I was going to make a speech that would offend and even hurt many of my friends. I know that you are deeply convinced that the action you suggest is the most effective way of influencing international affairs. I am deeply convinced that you are wrong. It is therefore not a question of who is in favour of the hydrogen bomb, but a question of what is the most effective way of getting the damn thing destroyed. It is the most difficult of all problems facing mankind. But if you carry this resolution and follow out all its implications and do not run away from it you will send a Foreign Secretary, whoever he may be, naked into the conference chamber… You call that statesmanship? I call it an emotional spasm.

Curious, isn’t it? That a past idol of the left referred to the policies espoused to the policies of today’s idol of the left as an “emotional spasm.”

So – are those the roots we’re supposed to be getting back to?

Time to listen to the Greeks?

The thing about a crisis is that it’s a great moment to re-examine some fundamental assumptions about what on Earth you’re up to. And when it comes to the European Union and, in particular, the Eurozone such an examination is badly overdue.

No one in authority in the European institutions will see it that way, but what this means is that the Greeks may well have done them a service.

By voting massively to reject the austerity package being forced on them by the Troika of the European Union, European Central Bank and the IMF, the Greek people have sent us all an important message. It is that though the Greeks may be in serious trouble, and the difficulties there have to be addressed, it can’t be done exclusively on the backs of those least able to cope with it.

It is almost unthinkable that a modern economy should shrink by a quarter over five years. 26% of the workforce is out of work, and that figure reaches nearly 50% for the young. Pensioners have seen their pensions cut in half – pensions to which they had loyally contributed throughout their working lives. To behave in that way is to break any kind of covenant there may be between government and people – it is to say that even if you do what we ask you to do, and the law requires of you, we reserve the right to refuse you the reward we’ve promised, even if that plunges you into penury.

To say “no” to that kind of action is practically an obligation.

Guardian photo of young Greeks celebrating the "no" vote

Nor does it matter only to the Greeks. Austerity politics are being pursued in a great many countries, particularly across Europe. And yet we know they fail. Back in the 20s, in the last great crash of the proportions of the current one, the immediate reaction of the Right was to tighten belts and impose austerity – though, as ever, not on themselves, only on the poor.

The result was mass unemployment and back-grinding poverty. In Britain, we had the Jarrow Hunger marches, starving workers converging on London from the North. In the US, we had “buddy, can you spare a dime?”

Fortunately for all of us, the US had the genius to find a man of Franklin Roosevelt’s calibre to replace the austerity incompetent Herbert Hoover. He applied policies of public investment in large projects to stimulate the economy and return it to growth. And at last the problems of the slump began to be solved.

This time round, we’re dominated by people of the Hoover persuasion once more, and they’ve made Greece the test bed of their policies. Where, unsurprisingly, they’ve failed again. Even the IMF has admitted as much, in a report that was leaked last week: they conclude that even if it applies the austerity policies precisely as prescribed, Greece cannot sustain its debt.

What Greece needs is help not austerity. It needs debt relief so that it can start to invest in itself, and get itself back to growth.

And by the way – a lot of economic activity these days is in services, where you’re not manufacturing, you’re not even consuming an intolerable amount of energy, you’re just using people to provide service to other people. Growth, in other words, does not have to be environmentally disastrous.

The irony is that the entire Greek government debt works out at $630 per inhabitant of the Europe Union. If the EU took on half the debt and cleared it over ten years, we’d be talking about just over $30 a year per inhabitant. What’s that? The price of a cheap shirt?

In any case, no one’s asking for that extent of debt relief. The question we should be asking, though, is if we can’t make that level of sacrifice for a member of our own union that is in desperate trouble, then what is our union for?

The Greek referendum result poses that question starkly, to us all.

And we too should be asking it, of our governments. In Britain, for instance, government is about to take £12 billion out of the benefits bill. That may sound like a necessary retrenchment at a time of economic hardship. But what it really means is that £12 billion of demand will go out of the economy: recipients of benefits spend what they receive, so every penny goes into generating demand.

Is Britain really saving anything by making those cuts? Are other European nations or the US doing themselves a favour by seeking austerity solutions? Or are we making things worse?

The Greeks have given their answer. It might be a good idea to listen to them.

Best avoided: standing on chairs and austerity politics

You’re at a concert but your view of the stage is blocked by the heads in front of you. So you stand up on your chair. Brilliant: now you can see. You’ve gained an advantage over the rest of the audience.

Hey! How about standing on my chair? I'd get a much better view...

Until, that is, everyone else starts standing on their chairs too. At which point the view’s as bad as it was before – and now you don’t even have the comfort of being able to sit down.

That’s called the fallacy of composition. It’s the belief that because something is in the interests of an individual, it’s in the interests of a whole community. It’s most vividly illustrated in what Keynes called the paradox of thrift. Saving may be great for an individual, but if everyone starts saving more, then the amount spent across the economy goes down; firms start to lose money and lay people off; incomes go down; and saving, which is proportional to income, also goes down.

So everyone saving leads to less saving.

It’s even worse if one of the bodies saving, or at any rate spending less, is government. Thrift by government does away with capital projects and reduces employment, particularly at the low end of wage scale, where people spend a greater proportion of their income. That depresses demand and drives more companies into difficulties. Growth stutters or may even turn into recession.

That’s what happened in the States after the great crash of 1929. President Hoover tried to balance the books and watched the country sink into increasing depression. In 1932, he was replaced by Franklin Roosevelt, who followed a policy of deliberately spending for growth; by 1937, he’d turned the economy round. But he too was prone to the thrift argument, so then he tried to rein in government spending – and took the country back into recession.

That is the danger in Britain now. We have a little growth. Now we need to stimulate it, to make it sure it’s sustained. The government, however, is proposing to do exactly the opposite – to cut further. If it delivers on its dire promise to take £12bn out of the benefits bill, it will take £12bn out of spending, and the effect on the economy may be devastating.

An argument can be made to say that it’s immoral that some people, on the top rate of benefit, may be on £26,000 a year – more than the median earnings in work. But taking their payments down to £23,000, as now proposed, only takes another £3000 a year out of the economy for each of those households. The economic damage may far outweigh any moral satisfaction anyone might feel.

Benefits cuts don’t just hurt the recipients. They hurt all of us. And with all the other cuts proposed, they will hurt us even more.

What’s the alternative?

• A great deal of tax is uncollected, especially corporation tax. Getting it collected won’t be easy, but why should we expect government to do only what’s easy?
• There is probably room for some small increases in tax at the top end of the income scale: these are people whose wealth has grown astronomically since the crash, while at the other end living standards have fallen.
• Establishing a more generous level of minimum wage – the living wage – and enforcing it would allow us to start reducing tax credits. If it’s applied for migrant workers too, it would put an end to the use of immigrants to undercut local wages.
• And why are we so worried about debt? Interest rates are practically zero. There couldn’t be a better time to borrow moderately.

All of this would allow us to prime the pump of the economy. With growth secured once more, tax revenues would start to rise, simply because more people would be earning and spending. There may be a need for some cuts anyway, but on nothing like the scale now being proposed: smaller cuts and rising revenue would give a much more sustainable means to improve economic performance.

That, however, means freeing ourselves from the paradox of thrift. It means understanding that sometimes governments have to spend to save themselves from debt. It means ending our reliance on austerity to get us out of a hole which, as Greece shows, it only makes deeper.

When the Tories came to power in Britain, they kept using a phrase which was crass in its over-simplification but struck a chord with many voters: “the country has maxed out its credit card.”

It was nonsense because it ignored the ability of a government, unlike an individual, to increase its revenue by spending more. So in answer I suggest we adopt a slogan against austerity which is just as simple and direct – and actually has the merit of being true.

“If the roof’s leaking, fix it. Don’t burn down the house.”

Certainly gets rid of the problem of the leaky roof
But is it the most judicious way?

Magna Carta: we can all celebrate the anniversary, even if we don't all understand it the same way

Anniversaries are the moment when the present chooses to reinterpret the past to suit its purposes.

800 years ago, on 15 June 1215, England’s leading landowners met at Runnymede, on the Thames, to the West of London. To hold land was, at that time, to hold huge power – it was, indeed, the only road to power. Land produced rent and, out of that rent, the owners could fund small armies, personally loyal to themselves.

The Magna Carta Monument at Runnymede

On that day, they met to cut down to size one of their number. They had all accepted that it was important that one should have authority over all of them but, though he might hold the title of King, they didn’t feel that was something he ought to let go to his head. He had to remember that he was ultimately just one of them, and he maintained his pre-eminence only with their consent.

The holder of that position in 1215, King John, was weak, and his peers, the barons, took advantage to extract concessions from him about just what a King might or might not do. They wanted rights guaranteed in writing, over his signature. In particular, they denied him the right to act against them at will, and they insisted that any of their number only be convicted of a crime if tried by a jury of his peers.

No free man shall be taken, imprisoned, disseised [dispossessed], outlawed, banished, or in any way destroyed, nor will we proceed against or prosecute him, except by the lawful judgment of his peers or by the law of the land.

To no one will we sell, to no one will we deny or delay, right or justice.

The words “his” and “peers” are important in this context. The barons weren’t concerned with the rights of women. And they weren’t interested in “the people” – they were interested in their peers. 

But the present imposes its own interpretation on the past. What happens if you extend the meaning of “free man” beyond the narrow ranks of the barons? Then the Great Charter (literally Magna Carta) becomes a statement of basic rights of all Englishmen (and possibly Englishwomen).

By the seventeenth century, the view was taking hold that the English had always enjoyed certain liberties, but they’d been trampled on by foreigners forcing their way into the country (echoes of our own times). In this case, the foreigners were the Normans who conquered the place in 1066. This is a view which conveniently ignores the fact that the English – Anglo-Saxons – had themselves been invaders only a few centuries earlier, when they’d usurped the lands of the Celts.

In this view, what the barons obtained from John was a restatement, or reinstatement, of those primordial English rights. And Englishmen everywhere began to demand that they be recognised, including those fine Englishmen who set up the colonies in North America. When their representatives met in Congress in 1766 to protest a new tax imposed on them from Britain, the Stamp Act, they called on the authority of the Great Charter:

The invaluable rights or taxing ourselves, and of trial by our peers, of which we implore your Majesty’s protection are not, we most humbly conceive unconstitutional; but confirmed by the Great Charter of English Liberty.

Sadly, George III took a more jaundiced view of the Great Charter, and refused his loyal subjects in the thirteen American colonies the protection they required, losing their loyalty in consequence, and, after a disastrous war, the colonies too.

The tradition, however, persisted. Nearly 750 years after the signature of the Charter, Franklin Delano Roosevelt assured us in his 1941 inaugural:

The democratic aspiration is no mere recent phase in human history. It is human history. It permeated the ancient life of early peoples. It blazed anew in the middle ages. It was written in Magna Carta.

Five years later, in his “Iron Curtain” speech, Winston Churchill declared:

We must never cease to proclaim in fearless tones the great principles of freedom and the rights of man which are the joint inheritance of the English-speaking world and which through Magna Carta, the Bill of Rights, the Habeas Corpus, trial by jury, and the English common law find their most famous expression in the American Declaration of Independence.

The Great Charter itself

And then we get to David Cameron. He told the anniversary celebration at Runnymede:

Why do people set such store by Magna Carta? Because they look to history. They see how the great charter shaped the world, for the best part of a millennium, helping to promote arguments for justice and for freedom.

Sadly, he also declared that “here in Britain ironically, the place where those ideas were first set out, the good name of human rights has sometimes been distorted or devalued.” This is his justification for trying to repeal the Human Rights Act, which guarantees the Charter’s rights, and others besides, for every one of us.

The view that this is the spirit of the Charter may be ahistorical, but quite a few of us rather like it. As did Roosevelt and Churchill.

Cameron, it seems, disagrees.

As I said. Anniversaries are moments when we respect not the contemporary significance of events, but the significance that we draw from them today. Cameron, I suppose, has a right to his own. It’s just sad that it has to be so idiosyncratic.

Not to say more than a little worrying.

Strange how the fascination with dynasties continues...

It’s amazing how difficult it is for us to rid ourselves of belief in the power of “blood” as the main determinant of anyone’s qualities. We all know it isn’t true, but we still somehow believe that mere birth will make someone better qualified than anyone else to lead, or to rule, or just to lord if over everyone around.

I mean, look at Prince Charles. You want proof that high birth doesn’t guarantee high qualities? Look no further.

The prejudice clings on even in a country where deliberate steps were taken to put an end to this preposterous notion. “No Title of Nobility shall be granted by the United States” claims the Constitution of that fine nation. And yet the sixth president, John Quincy Adams, was the son of the second, John Adams. Just as Benjamin Harrison, the 23rd, was the grandson of William Henry Harrison, the ninth. Even the two Roosevelts, though not closely related, were distant cousins.

The dynasty that never fulfilled its promise was the Kennedys. Bobby and Ted both held high office, under or in the wake of their brother JFK, but both were cheated of going further by death: in Bobby’s case his own, in Ted’s that of Mary Jo Kopechne, drowned when he drove off a bridge at Chappaquiddick.

These instances of keeping things in the family weren’t always bad. John Quincy Adams, for instance, strikes me as rather a fine fellow. He was defeated at the end of his second term by a cruel, bigoted and authoritarian successor, Andrew Jackson, the man who drove the Cherokees and other native Americans away down the “trail of tears” and had far less than enlightened views of the role of African Americans (he felt slavery was right for them). 

Undeterred, Adams got himself elected to Congress where he served 17 years, up to his death. And he appeared as a lawyer for the (successful) defence of the rebel slaves of the Spanish ship Amistad when their case went to the Supreme Court.

William Henry Harrison.
Distinguished only by the shortest presidency
And having a grandson who also achieved the office

Many of these blood relatives, however, were a pretty sorry bunch. William Henry Harrison’s presidency was distinguished only by being the shortest ever (32 days until his death from pneumonia); his grandson Benjamin’s presidency is undistinguished by anything at all.

But when it comes to sorry dynasties, we have to come forward to the present day for the sorriest. With Jeb Bush declaring his interest in the presidency, we have in prospect for the first time ever a candidate who is not merely the son of a President but the brother of another. And yet the father was unprepossessing in office, the brother lamentable.

Now this kind of thing can happen in a monarchy, as in Britain. George III lost his mind by the end of his reign; he was succeeded by his vainglorious, self-indulgent son George IV; and then by a younger son, William IV, who though slightly brighter, was never going to set the Thames alight.

Surprisingly like the Bush bunch.

Now, that this can happen in a monarchy is sad but understandable. But in a strongly established republic? With two or three hundred million people to choose from? It seems amazing.

What’s particularly striking is that every presidential election between 1980 and 2004 – seven of them – had at least one Bush or Clinton on one of the tickets, running either for President or for Vice President. And 1992 pitted one of each against each other: Bush the father against Clinton the (erring) husband.

Well, if Jeb Bush gets his way, and Hillary Clinton gets hers, 2016 could see a re-run of that battle of the dynasties. Proof if any were needed that, whatever the Constitution says about actual titles, notions of aristocracy run as deep in the US as they do anywhere else.

Hillary Clinton: a more inspiring representative of dynastic politics
Besides, she's not really a member of the dynasty

To be fair, one of the possible outcomes would again prove that this kind of dynastic politics doesn’t always have to be bad news. A Hlllary presidency could be a great result, and not just because she would be first woman president, after the first African American, but because Hillary is even brighter than the other half of the Clinton duo – and in any case, she wasn’t a Clinton by birth, only by marriage.

Which naturally brings to mind the old story about the couple. Skip it if you know it, but in case you don’t, it bears repeating here.

The Clintons were filling up with petrol – gas, I should say – at some miserable filling station in the wilds of Arkansas. Bill was struck by the strange looks passing between his wife and the station attendant.

Once they were back on the road, he asks what that was all about.

“Oh, we dated for a while back then when we were in High School,” she explains.

Bill laughs.

“Well, just think what a different life you’d have had if you’d married him! You wouldn’t have got to the White House.”

“Oh,” replies Hillary, “if I’d married him, he’d have been its occupant.”

Tears before bedtime, when a big bang spoiled the party

Fascinating to get into a debate about the finer points of economic theory at any time, especially as my knowledge of the field is strictly limited: I try to make up in enthusiasm and conviction for what I lack in actual expertise. But then, arguing from strongly held belief without much knowledge puts me in august company, including most religious leaders down the ages.

What added spice to my most recent foray into the field was that it was conducted on Twitter. Debating the economic history of the last 80 years in 140-character bites is, frankly, challenging. Though no doubt my opponents would argue that my views don’t warrant much more.

Still, I’ve decided that I owe it to myself to take the slightly greater space a blog post affords to summarise my thinking more fully here. You, of course, by no means owe it to me to read on; however, if you do, I promise I’ll put in one or two funny bits before the end.

My potted history of the world economy over the last eighty years

There was a pretty ghastly depression in the 1930s. One of the worst ever.

A major step forward was taken when the US turfed the ghastly Republicans out. The incumbent was Herbert Hoover who gave his name to a dam. He was certainly a spectacular blockage to any kind of forward movement.

Alongside Roosevelt’s New Deal, a number of measures were put in place to ensure that no similar financial collapse would ever happen again. In particular, the Glass-Steagall Act included provisions to prevent the same organisation being involved in both investment banking and retail banking.

That makes sense since investment banking can lead to huge gains, but at the risk of massive losses. If only the money of wealthy individuals is involved, fine; if it’s the savings of millions of modest individuals, and the firms they rely on for a living, it’s not so smart.

Now fast forward to the 1980s. The ghastly Republicans led by Ronald Reagan are back in office in the US, supported with poodle-like loyalty by Maggie Thatcher in Britain.

They listen to bankers, outstandingly qualified to brief them on economics, notably by virtue of having bankrolled their electoral successes. The bankers want a bit less constraint. Reagan and Thatcher confer. There’s been no great financial crisis since the Glass-Steagall Act, so what is it protecting us from? We might as well do away with all that red tape.

As they sowed, so we are reaping. And weeping too.

At this point I’m reminded of a story told me by an intensive care physician. He was treating a man close to death from malaria. The patient went hunting each year Burkina Faso.

‘Don’t you take malaria tablets?’ my friend asked.

‘Well, I did for ten years, but I never got malaria so I thought I didn’t need them.’

Reagan repealed the relevant bits of Glass-Steagall. Thatcher brought in the ‘Big Bang’ in the city.

Released from their bonds, the bankers leaped exultantly into action. For twenty years they made fortunes and they paid themselves huge sums. What a great time they all had! As the guy I was arguing with on Twitter pointed out, ‘Big Bang was good for Britain.’ Measured by spiralling house prices, the number of Porsches on the streets and the amount of champagne consumed, that’s how it felt.

The nay sayers were, of course, saying ‘nay’. Even Alan Greenspan, then Chairman of the US Federal Reserve, warned against ‘irrational exuberance.’ But everything kept going well, year after year. And people don’t tend to think much further than a year or two. Few, apart from some of the better economists, realised that we needed to be reasoning in decades.

As it happens, two decades were all it took. The exuberance ended in 2008 when the present financial crisis blew up in our faces. The worst, surprise, surprise, since that of the 1930s. The smarter economists said it would end in tears, and here we were, crying.

How did I get into this argument? Because I criticised the present British government for trying to blame today’s banking scandals on the previous, Labour administration.

‘The recent scandals took place while Labour was in power,’ I was told. Which is true. But we mustn’t forget that it was Republicans and Tories who unleashed the bankers to wreak their worst on the whole of society.

The criticism that Labour deserves is that in office they did too little to re-establish effective regulation. It was hard, though. After ten or more years of huge apparent prosperity following the Big Bang, there was a powerful consensus that this was the way to build a stable, thriving economy. Labour wasn’t immune from that generalised belief.

Here’s an extract from a speech making clear how deeply ingrained that thinking was:

The Left advocated more intervention and government ownership. Those on the Right argued for monetary discipline and free enterprise.

Over the last 15 years governments across the world have put into practice the principles of free enterprise and monetary discipline.

The result?

A vast increase in global wealth.

The world economy more stable than for a generation.

The speaker ended by haughtily declaring ‘the debate is now settled’.

Who was the speaker? The then leader of the Conservative opposition, David Cameron. When did he make this speech? In September 2007. A year later, the crash burst on us.

And two and a half years later, God help us all, he became Prime Minister.

Time to chill

You have nothing to fear but fear itself Franklin Roosevelt told us. And in that spirit I have to say that little frightens me quite as much as how frightened we seem to be these days.

It’s doing us a huge amount of damage. We’re all worried sick about the Italian economy, so the fearful people with enough money to make a difference start trying to unload Italian bonds, so the yield rises, so it becomes more expensive for the Italian state to service its debts, so the economy gets worse. And yet, at root, the problem is only fear. If we all just said, ‘hey, it’s the Italians, it’s part of their charm,’ and had another glass of Barolo, the problem would be well on the way to resolution.

Exactly the same is true of terrorism. There was lots of fear last week about the fact that the passport officers would be on strike on Wednesday, opening our borders, or so it was claimed, to all sorts of sinister characters. There were calls for passport officers to lose the right to strike.

The 9/11 bombers got into the US through fully-staffed passport control checkpoints. What on earth difference did they make?  The bombers who attacked London on 7/7 2005 were born and bred in this country. They didn’t even need to go through passport control.

Besides, 7/7 cost 52 lives, and there have been no other deaths from terrorism in Britain since. Over that period, nearly 12,000 people have been killed on the roads. So if you’re concerned about saving lives, shouldn’t you start by banning cars rather than limiting the right to strike?

In any case, none of that is the point. The right to strike may be immensely irritating when it’s exercised, but it’s still a fundamental right. Before it was recognised as fundamental, we lived in societies which were significantly uglier than today’s – the occasional inconvenience seems a price well worth paying to block any move back towards those times.

I never tire of quoting Benjamin Franklin, who was bang on the money when he said ‘he who would give up a fundamental freedom for a little temporary security deserves neither freedom nor security’.

This constant striving for safety is bound to fail anyway. I recently quoted Eliza Manningham Buller, former heady of the British Security Service MI5, from her second Reith lecture of 2011. Let’s look at what she said in the third:

‘It’s important to keep a rational perspective on terrorist risk. Bin Laden must have known that 9/11 would make this especially difficult, for at least two reasons: the endless images of the horror, recycled and replayed round the clock by the 24 hour media, and the unrealistic view that society can become risk free. The world is full of risks and dangers, only some of which can be reduced.’

That’s right. Anyone who wants to live in a risk-free world shouldn’t be in this world at all.

So if you’re scared about terrorism, just remember it’s extremely unlikely to affect you. Worried about car crashes? Don't, you're probably not going to be involved in one. As for anxiety about the Euro, bear in mind that stoking up the general sense of panic may make the very thing you fear more likely.

Not perhaps an answer to our woes,
but a great palliative

So my advice? Relax. Chill. Open that bottle of Barolo and set about emptying it. You may do the Italian economy some good, and yourself a lot more.