“Always a borrower, never a lender be”
–Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own and do not constitute investment advice. –
The first chapter of the Eurozone crisis story has ended as expected, with the Germans (and Dutch and Austrians) left to foot the bill, repeating the pattern we have seen in the last couple of years, at the micro and macro level: savers bailing out borrowers, the solvent rescuing the insolvent, the responsible minority rescuing the feckless majority from the consequences of their irresponsibility. No wonder banks don’t want to lend and firms don’t want to invest.
Apart from the injustice, the really damaging aspect is the message it sends out loud and clear about the way modern Western democracies operate. The younger generation will be noting the lesson — even if David Willetts, the Minister for Universities, is not — that those who work and save must bear the burden of carrying those who do neither, because nowadays the welfare state operates at all levels: personal, national, global.
The choice is, as they say, a no-brainer. Shakespeare’s Polonius needs updating: “Always a borrower, never a lender be”.
This state of affairs is not something sudden, but rather the culmination of at least half a century of evolution, as the dynamics of democracy led us from a society based on the principle that nobody should be disadvantaged by accident of birth or chance, which was agreed in all Western countries by the end of World War Two, to the current consensus that nobody should be disadvantaged by indolence or fecklessness.
With its corrosive and cumulative effect on the will to work and save, it is a philosophy which local governments could never have afforded to embrace –- so they had to be bankrolled by central government. Now that central governments in turn are going bankrupt under the burden, they are left to scour the world for a sugar-daddy willing to bail them out, like a struggling Premier League football club looking for a billionaire with money to burn.
Nobody knows how it will all pan out, but an obvious (not necessarily correct) conclusion is that we are living through the beginning of the end of the West as the dominant force in world economics and geopolitics.
The decline would not yet be irreversible, if there was any will to halt the trend and return to our roots in a society based on individual responsibility and self-sufficiency, with welfare states reduced once more to safety nets, as originally intended, rather than hammocks, as they have become. Sadly, all the signs are that recession is putting a spring in the step of supporters of the overmighty, cradle-to-grave nanny state.
The Chinese may not be aiming for world domination, but at this rate they are going to get it by default –- whether they like it or not. But it’s going to cost them an awful lot of Renminbi, as they watch helplessly while the value of their pile of foreign exchange reserves evaporates, as first the dollar falls, then the euro, then the dollar again, then the euro……………At some point, they are going to want something in return. After all, they’re paying the piper, so don’t be surprised if they increasingly want to call the tune.
Let’s have some fun in the meantime. Let’s look at the morality of what’s going on.
You might, if you were extremely naïve, expect our soi-disant progressive, Guardian-reading elite to be disturbed by the fact that Britain’s welfare state is being funded to a significant extent out of the savings of a country where half the population has no access to proper sanitation, decent primary education or healthcare. After all, it’s not as though anyone has bothered to ask the people in the People’s Republic.
By contrast, if you were cynical, you would expect the Left to ignore this inconvenient truth, salving their conscience by enthusiastically defending the aid budget and weeping crocodile tears for Chinese sweatshop workers. You can call this moral bankruptcy if you like. After all, it is one thing to advocate unsound economic policies on moral grounds. It is quite another to advocate them even though they plainly cut across the Left’s own professed moral standards, as if child benefits for British mothers and air-conditioning for NHS waiting rooms somehow trump the impatient demands from Asian peasants for primary school education and basic hospital care.
The truth is that, with their ability to handle moral issues the way circus acrobats juggle balls in the air while riding a unicycle, the Left is Britain’s (and Europe’s) equivalent of the Bible Belt Right in the USA –- the same denial of reality, the same mindless faith in holy writ, the same willingness to embrace double standards.
Even in personal matters, the hypocrisy of America’s religious fundamentalists whose sex lives so often seem to trip them up is mirrored by the propensity of our self-righteous Lefties to succumb to the temptation of fee-paying schools and private medicine. And by screaming from the sidelines, both mobs are able to dominate the political agenda and set tight constraints on their country’s economic policy.
The only thing consistent about the bien pensant Islington consensus is its inconsistency. While it opposes trade with poorer countries under the banner of promoting locally-produced food (or sometimes of protecting British jobs), it supports aid to the same countries. Likewise, it frets about the state of the planet we are leaving to our grandchildren and great grandchildren –- but is quite happy to saddle them with crippling debts all the same.
So perhaps we shouldn’t be surprised that they are so keen to get those Chinese peasants to pay for child benefits and the cost of educating our university students. In the tradition of the Left, Socialism remains what it always was: the formalization of hypocrisy.