Thursday 21 March 2013

The Gods of the Copybook Headings

Peter Hitchens writes:

It looks to me as if the government has now decided to inflate its way out of the crisis. The new Governor of the ‘independent’ Bank of England has been given the nod that he may carry on with more ‘quantitative easing’, and the Budget seems to be offering help with mortgages to people who can’t really afford mortgages, which will create a new bubble of unrepayable borrowed money, possibly in return for a short-term boost to the economy. Everyone knows this is a bad idea, after what happened in the USA when they lent mortgages to people who couldn’t repay them. It is not even a kindness. Why do they do it?

It’s all pretty desperate, as one might expect from a  government which never had any ideas in the first place.  As far as I can find out, Vladimir Ilyich Lenin didn’t actually say ‘The surest way to destroy a nation is to debauch its currency’. Maynard Keynes rather hesitantly attributed it to the old monster. But it’s true, whoever said it. Since Gold-backed currencies gave way to paper, man has had to have faith in banknotes – so much faith that perhaps he hasn’t had the strength to have faith at the same time in God, who is considerably more credible than the average Cabinet or Central Bank.

He has to believe absolutely that the pretty blue, green or pink beer-token in his wallet is worth the goods which he purchases with it, and so does the shopkeeper who accepts it in return for those goods. He has to believe with all his heart that the columns of figures in his bank account stand for real value, along with the price he thinks he can get for his house if he sells it.

Once he ceases to do so, then money dies.

And then, nothing important stands between society and a catastrophe, which can easily end with respectable persons begging on the streets or prostituting themselves, for the price of a meal or a few sticks of firewood. Sophisticated, civilised Berlin became a modern Babylon of corruption and humiliation during the era of hyper-inflation, as did poor Vienna, whose similar humiliation in the same period is less well-known (though bitterly described by Stefan Zweig in The World of Yesterday). Both cities would go through a second period of special misery, after World War Two. Many of you will have seen that marvellous film The Third Man, set in post-war Vienna. I never really understood it until I had lived in Moscow at the end of the Soviet era, and had actually seen decent people, much like myself but with the ill-luck to have been born Soviet citizens, standing by the roadside, desperately hawking their own personal possessions to stay warm and fed. The government had ravaged their life savings overnight, as governments like to do. Their jobs had gone. Their homes were threatened. The promises of the state, of sufficiency in food and shelter, of medical care and security in old age, were so much paper. In those days I thought I lived in a country of propriety and integrity, above all that kind of stuff. More fool me.

Now, whenever I see the opening scenes of  The Third Man, I feel a chill pang of memory and a sort of guilt. There was no discernible justice in the fact that they were destitute and I was not.  There is no reason to assume that there is some special reason for me to be immune from this curse, the invariable result of irresponsible and stupid government.  In fact, as I live in a more or less free society, had a powerful platform from which to protest,  and yet have wholly  failed to prevent myself from being governed by irresponsible, dishonest morons, perhaps justice requires that I shall undergo it too, before I die.

I have seen this, I think. It can happen. People survive it, in a way, though not as the people they were before. Will I live to see it again here? I don’t rule it out.

There are many causes of inflation, but the main one is government. Governments start wars, and spend money they have not got. If they win, they may get away with this by plundering their defeated opponents. If they lose, then the bill will be presented. I was told by an economist friend back in the late 1970s that much of the inflation which we were then experiencing was the bottled-up result of the USA’s vast spending on the Vietnam war. But our own government’s insistence on spending more than it had, stoked up by the ‘Conservative’ Harold Macmillan in the early 1960s, and protested against ineffectually by Peter Thorneycroft and Enoch Powell, had a lot to do with it too. So, I suspect, did the higher food prices caused by our entry to the Common Market . I am a bit suspicious (suspicious? I loathe it)  of the great overpraised project to sell off all the most desirable council houses, very cheap, which must have shoved billions into the housing market in a matter of a few years, and of course stimulated more borrowing on the security of those houses.  Then of course there’s the Iraq war, the vast price of which is seldom mentioned as a cause of our present mess, but must play a part in it.

That period, for people of my generation, was as close as we had come to the terrors of Weimar Germany. For me it wasn’t particularly hard. I had no appreciable savings, and wages so low that I actually benefited from inflation; there were automatic set cash rises for every extra point on the Retail Price Index, and my pay was so low that the cash I received was worth more than what I had lost through inflation. For my parents, who had sold the family home and invested the money reasonably wisely but not in property, in 1963, because my father’s job had a tied house to go with it, it was a disaster. I remember being entrusted with the cheque for that house, a semi in the pleasanter suburbs of Portsmouth, which sold in 1963 for £4,500, and taking it to the bank, thinking what a vast sum of money £4,500 was. The money itself was my father’s retirement gratuity after 30-odd years in the Navy, which by the time he died in 1987 was a mere remnant. I am told he may now qualify for a posthumous Arctic Star, for his time on the Murmansk Convoys. I can hear him laughing as I write these words.

By 1973 an equivalent house would have cost more than double, and was in any case completely out of reach if they wanted to try to put right their mistake. Nowadays it would probably go for £350,000. Food, newspapers, electricity, petrol, hardware, clothes all shot upwards in price in great leaps. I do feel a fond sense of loss as I look at my old 1960s and 1970s Penguin books, marked at three shillings and sixpence,  17 and a half pee.  The recent change in the currency seemed to help this happen faster, as the basic unit, the new penny, was more than twice as big as the old penny. They got it under control in the end, browbeating the unions (or rather, the less powerful unions) into understanding that their members were simply going to have to endure a lower standard of living, and wouldn’t ever catch up with inflation. Quite how they managed to persuade us all that inflation had been caused by the unions, I can’t now quite work out. They certainly kept it going, but they can hardly be blamed for it. Take a look at the fine but dated film Sunday, Bloody Sunday featuring Glenda Jackson and Peter Finch, to get a good idea of the national atmosphere of perpetual crisis that was common in those days. When I see it now I am filled with wonder that nobody cares about the balance of payments any more. I suppose that is because there is no conceivable possibility that we shall ever set it straight again, whereas it seemed just possible then.

You’ll have to apply elsewhere for an explanation of the Thatcher miracle under which the country suddenly seemed to be flooded with money. As far as I can see now, it was floated on credit, and worked because credit stimulated a new consumer and service economy which seemed to function on the basis that we all sold each other mobile phones, hairdos and cappuccinos, the entire livelong day, while borrowing heavily on the value of our mortgaged houses to pay for it all. It is amazing to remember how hard it used to be to borrow money for a mortgage, let alone how you used to have to have any money you took abroad marked on your passport, to make sure you didn’t take too much.

Meanwhile, the Private Finance Initiative appeared to give the state the same facility, to borrow hugely without actually ever admitting it was in debt. Looking back at the period 1979-2008, I can’t for the life of me get party political about whom to blame. It seems to me to have been a riot of general irresponsibility, in which everyone hoped for the best and imagine, as they keep doing, that the Gods of the Copybook Headings had been abolished. Manufacturing industry? Who needs it? Protect our own industries? A dreadful mistake. Ensure that men have productive work to go to? Why bother? Outdated. Do your best to be able to feed yourself? Not necessary in a global world. We'll see about that.

The chief of these ugly old creatures, the Gods of the Copybook Headings, goes by the title of ‘If you don’t work, you die’. You can postpone him or divert him, by ‘robbing collective Peter to pay for collective Paul’, but you can’t abolish him. As Mr Kipling remarks, this ends with a familiar problem: ‘But, though we had plenty of money, there was nothing our money could buy.’

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