Mittelstand, German, American and British

To deal with this subject in full and in detail would take many thousands of words. This bare sketch can only be a slight introduction. The word “Mittelstand”, see Wikipedia, is German and refers to the extent of middle and small sized businesses at the heart of the economies of Germany, Switzerland and Austria.

Such businesses were also at the heart of other western economies at one time and the changes that have occurred are part and parcel of the deteriorating conditions that are affecting so many of these others.

Essentially, between 1950 and 1990, Germany and Austria were no longer powers with any major military commitment or much of a role on the world stage. They were able to attend to their own affairs and concentrate on wealth creation, trade and building democratic and socially integrated nations. In this way they followed Switzerland who had kept out of wars and major foreign commitments.

In Austria the peculiar situation meant that Vienna did not exert the economic dominance over the rest of the country that occurred elsewhere. Switzerland has been a Confederation for centuries with Bern as its political capital since 1848 but with economic and other controls highly dispersed.

In West Germany the political capital was Bonn, a small town with the economic clout elsewhere, notably Frankfurt, but with extensive devolved authority to other major cities and centres of trade.

It was a Federal State and the consequence of this between politics and finance was to support and assist industry and trade across the board, large and small, creating a formidable strength and depth.

When I began to revisit Germany in the late 70’s the contrast between what was going on in the UK and the extent of the revival and capability of German economic activity came as a shock. The contrast with the Germany I had seen under Occupation with that of 25 years later was stark, almost as much as the decline I was witnessing in the UK.

The USA being very big, a Federal State and with its belief in enterprise and the creation of wealth also had an economy which was not the same as that of the German, but certainly widely dispersed, vigorous and allowed to develop without too much in the way of control. Also, middle and small companies had good access to capital and funding and were integrated politically into its democratic system.

In the USA now the events of the last decade coupled with the errors of the previous one have now triggered what could be a severe decline in this Mittelstand and maybe with the risk of collapse. Financial power has become too concentrated on Wall Street and Washington DC has become too inward looking and dominating in economic affairs.

The loss of flexibility, incentive, capital and the gross distortions of the financial markets in the USA have all conspired to seriously damage the basis and the functioning of the middle and lower and have shifted too much power, control and money to too limited a group of big business operations. This is not capitalism, it is oligarchy.

In the UK recently we have opened our doors to and showered favours and finance on the oligarchs of the world. But between 1950 and 2010 the centralisation of government, the concentration of economic decisions, the extensive and costly interference across the board have imposed intolerable burdens on the middle and lower sectors of business and trade.

Between 1945 and 1980 in order to prop up large scale declining industries and activities the political imperatives were to extract from profitable business so much as to deny it the ability to create its own capital. Central controls of capital made matters worse.

Neither the banks nor the City did much if anything for the UK Mittelstand, essentially chasing financial butterflies across the world instead, with the encouragement of one government or another, all London centric.

The result was to put areas with a strong UK Mittelstand into decline without saving the old industries. Given the extreme centralisation of the Westminster system the UK economy became more and more dependent on the City and other service activity. Our Mittelstand is now only a shadow of what it once was.

Just look at the UK political parties and their actual membership and see where their money comes from and who they work for. It is certainly not the middle and lower reaches of the economy, it is all for the big boys with deep pockets and the ability to walk in the back doors of 10 and 11 Downing Street at any time.

In Germany their prime concern about the Euro and its troubles is not just the issues for its many banks, it is for the Mittelstand at the heart of their economy. They now have the problem that Berlin may have become too powerful.

The USA is in economic cardiac arrest. In the UK the vampires have already done their worst.

How can the UK begin to rebuild its Mittelstand? Because if it cannot; then the game is well and truly up.

Work Is The Curse Of The Drinking Classes

According to a report in the Daily Mail a young graduate in museum studies is going to court to ask for a judicial review arising from her being obliged to undergo training whilst claiming benefits.

It is claimed that this is in breach of the European Convention on Human Rights and fundamentally questions the new regulations that mean unpaid training work for short periods can be enforced to ensure that the unemployed are gaining some form of experience and awareness of the world of work.

In fairness the claim that she was undertaking unpaid voluntary work related to her qualifications whilst seeking work is true. So another issue is whether this could be regarded as a substitute for the training recommended by the Job Centre.

The work was shelf stacking at Poundland. These are shops specialising in bargain offers. They are warm, if anything over heated, clean, provided with toilet facilities for staff and offer a wide variety of potential human contact on an everyday working basis. They are open for normal shop hours in the daytime.

It sure as hell beats unloading the Grimsby Fish train at 2 a.m. in five below with a light dusting of snow coming down. After you have finished that then you might have a short break before the Paper Train arrives at 4.30 to 5.00 a.m.

Then, you, together with a lot of other sweaty foul mouthed men from vans have between half an hour to an hour to unload all the days press and magazines for a large city and get them on the road. A stint cleaning the outside of trains at the carriage sheds by the canal was almost light relief.

But I was glad of the money, not being eligible for benefits because for two years I had been off work doing a sort of forced labour. Although “National Service” this did not count for national insurance and in any case someone going on to higher education had no chance of any benefits at all.

Back at the Job Centre they have to weigh up just what chance a person has of finding a job in the field they are qualified for. In many areas of higher education because of the numbers graduating against the jobs available there will be many who never will.

So people may have to be pointed in other directions and to work which they can do and which could provide contacts, leads and experience that would enable them to vary and widen their field of choice. Added to that is life experience, always invaluable in a difficult world.

I am sure the retail sector could benefit from entrants who have decent levels of education and the ability to progress to more demanding and senior work in time. One way of finding out if they really want work or not is to take them to see how they do in the real world of the present rather than the distant past.

But these days our graduates do not expect to start at the bottom. If the courts find that this offends their “human rights” then heaven help us all. So who will do these jobs and for what pay?

Independence, Scotland's Magical Mystery Tour

When our children were first in school the counties of Clackmannan, Radnor and Rutland all had authority and responsibility greater than the United Kingdom has at present. Even the lower tiers of urban and rural district councils might have more discretion in the exercise of many of their functions.

Even then those of a radical frame of mind pointed out that the UK was not longer “independent” by reason of its membership of NATO, the United Nations and various other international bodies as well as the requirements of its “Special Relationship” with the USA. This view was unpopular, especially as it was true.

Looking back to when I was first in school people believed in British might and authority. However, we had a number of binding treaties to conform to as well as other limiting conditions, such as the League of Nations. Again, it is arguable that even then the UK had become a prisoner of its Empire rather than its ruler.

Having been damaged by one major war The Empire became involved in a second that it could ill afford if it was to survive. The decision to fight on after Dunkirk was the last gasp of any independence. When the USA was drawn into the war at the same time as the UK’s money began to run out it bought a little time.

The rest was a polite charade when we went through the motions of independent power until that party was over and we ratted on The Empire to sign up with Europe to save our economic skins. But it was North Sea gas and oil that did that for a while and not the help of our European neighbours.

When the SNP talks of an independent Scotland offering a vision of medieval internal authority coupled with a national identity owed to the Prince Regent and Prince Albert of Saxe Coburg Gotha it is a bogus prospectus.

Even in the Middle Ages there was the Church to worry about and the 1320 Declaration of Arbroath was addressed to Pope John XXII, then resident in Avignon courtesy of the King of France. The present border was the result of a grubby marriage settlement a few years later and could well have been drawn much further to the south at some time earlier.

Indeed, Scotland may detach itself from Westminster. Given the gross incompetence of the UK Westminster government machine, courtesy of a New Labour led largely by Scottish Labour members, the vast scale of the waste involved and its real work largely a retreading of EU directives, regulations, guidance and judicial decisions it is quite sensible to attempt some sanity in their own government.

One difficulty is the way what sort of independence might be achieved and this has changed its colour and pattern down the decades. At one stage it was torn between some kind of Dominion status akin to Canada’s and the leftist preference for the East German model. Ne’er the twain shall meet.

Then under the influence of wealthy expatriates it shifted to the prospect of a second Irish Tiger or Singaporean or Hong Kong model. Edinburgh would become the ultimate tax haven and a world centre for shifty and shifting money to rival and overtake the City of London.

The implication given some of those involved was that any Scottish Currency would relate to the US dollar. This might allow a good measure of political discretion, on the lines of Delaware or California, but it would not be independence. Just look at other countries that are tied to the dollar.

The tricky question then was how this fitted in with the EU. When the Euro currency was created this posed a dilemma. If Scotland went into the EU and took the Euro shilling (sic) then it would not be independent. What may happen to the Euro now is not known, but it will be different.

If it had stashed enough international capital in the wonder banks of the RBS and BoS and their related financial bodies, allied to North Sea Oil it might have a weight and influence greater than its size. As Blair and Brown used to say, all too often, this was “punching above your weight”.

In short there are a number of things that should be known and be prominent in any debate. The key one is certainly what currency and financial structure is proposed for Scotland. Anything based on any other currency, including the pound, is not independence and cannot be

Then there are the basics of governance, The Defence of the Realm, Law and Order, the structure of local government, border controls and migration policies and what taxation systems are envisaged.

To return to money, one key area is the nature of financial regulation. Scotland, if it has its own currency will need its own Central Bank. What will be the basis of this? How will it be governed and who will be the Governor?

Step forward Sir Fred Goodwin?

London, The Dying Of The Light

Up to London yesterday and it was quite strange. Not too many people around, plenty of seats to choose from in the gardens and an air of detachment amongst many of those about. Take out the football supporters on the march and the theatre goers up for bargain price offers and there were not many others.

Because we had time in hand we decided to wander round a few streets that we hadn’t looked at in a while. A great many places had been turned into eating outlets of one sort or another and a surprising number were out of business. Also, a good many of the old specialist shops had gone as well as local suppliers.

London has changed again, but the question is whether that change is one that is part of a dynamic progress and growth or something else. It is all very well for politicians and media people to prattle on about how change must be for the better but it does not always work out like that.

In the UK I have seen a great many communities of one kind or another go through changes and there is little doubt that quite a lot are a lot worse off than they were. Many are on almost life support systems of public sector spending and benefits.

In London there has been, is and it is proposed to have spending of a vast amount of money almost across the board. Not simply in actual spending but in subsidies of one sort or another and allowing tax avoidance on a large scale by the major parts of the financial sector. The transport works already completed, in progress and planned must rival the total for those of the rest of the UK.

Additionally, many of the large scale property developments planned before the Crash are still under way and taking in a great deal of both private and public sector resources. The Thameslink work on the railways south of the river is well under way and beside them The Shard building has taken shape.

This will offer 12,000 jobs for the future it has been said of which a huge 150 are being reserved for local workers. Whether the future workers at The Shard are supposed to find housing in central London, unlikely at present prices; or commute is not known.

If they have to commute they will need good money because the season tickets to places like Sevenoaks are now hitting £3000 a year with a good couple of thousand if you need to park your car daily close to the station.

As for the situation in schools and hospitals for the most part the less said the better unless, again, you have big money available. For all the talk of diversity there is a diminishing amount of it in the London economy. Once it was a major manufacturing area but a good deal of this has gone, never to return.

Additionally, many other activities, minor, small in scale, but serving local, regional or national needs are gone or going elsewhere if not shutting down altogether. Their going is hardly noticed and does not register in the statistics and it takes someone who knew districts from the past to be aware of this form of attrition.

This could be a very long post but my feeling is that for many reasons and complex causes London is now an urban sprawl not just on the brink of decline but one that has begun already.

The real question is how fast and nasty it could be and that poses a great many other questions for the UK as a whole.

The Secrets Of Wildlife

David Attenborough, the nation’s expert on wildlife, appeared on BBC4 last night in a programme about Grammar Schools only to remind me of other kinds of wild life he may prefer to forget. There was an eerie moment at the beginning when an old photograph was shown of a sports pavilion in front of which was a rugger team.

David was one of them and as the photograph is clearly one of the school team then David must have been good enough to be selected. As some of the Wyggeston School team in Leicester went on to play in the 1st XV’s of a number of decent local sides as well as The Tigers, then an invitation team, and for the county then David would need to be able to play at that level.

David’s father, Frederick, was then Principal of the Leicester University College, a respected academic establishment with high standards, on the same site as the school. It is likely that Frederick would have been hard pushed, despite his position, to pay for a public school education for his three sons and two adopted daughters.

Because Frederick had begun his career as an Elementary School Teacher and had made a good career by long personal study and application. Before then his family were of ordinary Midlands working stock. By one of those strange twists he was in teaching in Liverpool in 1911 just round the corner from Alois Hitler, the elder brother of Adolf. I wonder if Frederick was ever waited on by him in the café?

The University College was founded in 1921 by local patronage and the school was one of the many decayed old grammar schools that were revived at the end of the 19th Century. By the 1930’s new buildings had given it facilities well beyond those of many secondary schools notably the creation of a strong science department. The City had grown rapidly and needed a secondary educated class.

Many of the boys were from the City’s professional, commercial, office and business families but there was a decent intake from the Elementary Schools in the mix. Most would go on to that kind of work at 16 via part time study and only a minority would have entered the Sixth Form to go to University.

It would give David a breadth of experience, contact, variety and interest lost to those who went off to boarding schools. It was a much more adult environment and the world of work and its realities were all about him. Also, as well as working hard, they liked to play hard and Leicester was a rugger town for all classes.

And David was a rugger man as a teenager. The school was adjacent to Victoria Park, then home to several local rugby clubs with the Old Wyggestonians somewhere else. They intermingled a great deal. Some of those in the school at David’s time who stayed in Leicester later went on a memorable rugby tour of Lancashire.

A few years later, one of David’s immediate contemporaries at school, Michael Green, who was a few months younger, wrote “The Art Of Coarse Rugby” as well as a series of articles about these very teams. Looking at it now, even accepting that it told less than half the tale and all of them had been in the armed services, there was some roistering behaviour that makes the Bullingdon look like a lot of maiden aunts.

But then you had to be there, but why did David give up the game for other wildlife?

Thinking Ahead

With so many looming disasters to chose from in international affairs and finance as well as an increasingly chaotic political situation it is anybody’s guess which might be pick of the day or week.

One choice item is the appointment of a Belgian economist to the European Central Bank to head up its economic policy team. There is a joke about Belgian economists having to work out their theories in several different languages none of which can make sense of the conclusions.

It was the Daily Mail which came up with one story, the content of which was derived largely from the Wikipedia entry, on the Laacher See, a lake in Germany to the west of Koblenz apparently situated in an ancient volcanic crater. It has begun to fizz a bit and volcano experts suggest that as the last blow was 12,900 years ago and it is overdue this could be another worry.

It is potentially a big one. The last time it went up much of Northern Europe was plastered with ash and this coincided with the Younger Dryas, a very cold spell that lasted a long while. They say that whether the two are connected is speculative. Barclays probably are now pricing the risk and trying to hedge on the Asian markets.

Meanwhile Katla Volcano in Iceland, also Wikipedia has slipped out of the news but is still twitchy and the experts are keeping their cards on the table. Quite how big it might be is not known, probably enough to ground a lot of air traffic for up to a month. This would suggest a holiday season might be worth betting on.

One of my family cheerily reminded me of the Cumbre Vieja volcanic ridge in La Palma in the Canary Islands which has been studied closely. One theory is that if there is a major slip of territory following volcanic activity the ensuing tsunami would wipe out a great deal of the Eastern seaboard of the USA and much of Southern England. The Thames Barrier would not be a lot of help.

Historically, these things can come together. For example Ijen in Indonesia is on the move and can put up a lot stuff in the sky. This one went up in 1817 two years after the Mount Tambora one had radical effects on the world climate and this had followed an 1812 big one in South America. The onset of the Little Ice Age at the beginning of the 14th Century is suggested as the consequence of a series of events of this kind.

One thing that we have been confident about for a while it that we thought we all knew who or what we were, given a few trivial points of detail. But it seems that our past is more mixed that we ever thought:

http://blogs.smithsonianmag.com/hominids/2011/12/top-10-hominid-discoveries-of-2011/

So whilst in the past we asked where have they all gone, the question now might be how far are they still with us?

There Is No Affordable Housing

In the USA there has been a catastrophe in the housing markets of most parts of the Union. This has been attracted little attention in either the UK or in Europe because of the various embarrassments entailed. One is the role of many major British and European financial organisations in the debacle.

The massive bungling of the US agencies and authorities may have needed little help to bring about the disaster but our own leading financial bodies did everything they could to make it worse.

The fall in price levels coupled with unemployment and other loss of income has meant millions of foreclosures. Those still in their homes are looking at serious equity loss and may be trapped. Communities have been wrecked and whole areas demolished. The trading in mortgages and titles to property mean that many do not know who owns either their mortgage or the freeholds, many have been lost.

There are an increasing number of American homes now where Grandma is in the loft and the young adult children have returned to wrangle over the title to the remote controls. Their parents who once hoped for an early and prosperous retirement may now never retire or be able to sell their house.

In the UK some of the frantic financial operations have been designed to keep the property market afloat to avoid the same happening here. This has been helped by the inflow of dodgy money with dodgy people buying into London and area as a way of either keeping some assets or laundering money.

Consequently property prices and rentals seem to defy the realities of the gathering problems. On the BBC News was an item about a small terraced house in London where the rental was £2000 a week for a family on below average income. This was funded by Housing Benefit and was said to be typical of London pricing.

If the housing benefit scheme is not just supporting but enriching many of those whose untaxed funds come from the Illegal Economy it is a fair question for ordinary taxpayers to ask quite how this has come about and why.

Also, in the news is discussion about how “Care in the Community” had meant large numbers of the very elderly with little care and stuck in homes they cannot afford to run and with nowhere to go. John Redwood has asked the awkward question of whether such care is designed to protect the inheritances of the relatively better off rather than be paid for by drawing on the capital value of the homes.

Channel Four recently had a feature on the million unoccupied homes and who they might be brought into use. They did not mention the difficult issue of how it has come about that the titles and freeholds of many of these homes seem to have gone off shore and cannot be identified. This brings us back to the financial companies and the industrial scale of tax avoidance in which they are engaged.

As for the leasehold and rental sectors there is developing chaos in both these fields. It is becoming increasingly expensive and difficult for those needing homes who are in the middle and lower incomes. There is a real squeeze here that means that few who have to rent will ever be able to afford to buy.

Again because so much “investment” has been urged on in these fields in the recent past the money flows into this market on the assumption of easy capital gains have pushed the figures too high for comfort. There have been a lot of people badly caught out and there may well be a lot more to come.

Trying to keep a full account of the scale of the mess is impossible in a short post of this kind. Because the UK property market has become so badly overblown then the scale of any collapse could be very nasty. We only have to look across the Atlantic and at Ireland to see what could happen.

In the meantime there is ranting on about the government embarking on a huge programme of building “affordable” social housing. This is music to the ears of the developers and their financial backers. The trouble is that “affordable” probably means a major increase in subsidised housing supported by housing benefit or tax breaks of one kind or another.

This is the sort of thing that got us into the mess in the first place.