Money for old rope is what will hang us all in the end
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In a Lookout special, the editor argues for a fair society in which nothing is for nothing.
Recently I wrote a piece on Sterling and why anyone with cash savings should get out of it (Lookout) . One perhaps justified criticism of the article was that it gave short term examples of Government incompetence and bad debt for the decision, but little of a long-term nature upon which to base the point between the lines - ie, that the UK is finished as an economic power.
In fact, I do not think Britain has had it completely: with a degree of far-sighted vision starting tomorrow, we could carve an immensely lucrative niche for ourselves in the commercial world of tomorrow.
It's just that experience suggests we probably won't - because our culture is all wrong; and because thirty years of money for old rope have persuaded far too many people that this alone will suffice for the Good Life.
The old-rope culture
As for the culture, I am on record as saying we work far too many hours and spend far too little time in our families and communities. But equally, at the end of a corporate career spanning three decades I know that most of that office time is wasted in silly meetings, dick-size politics and answering emails. While the quantity of hours is too big, the quality of thought is often very poor.
At the same time, safety Nazis and pc legal madness mean far too much time in any given day is spent worrying about stuff which will make only lawyers rich. The ultimate sign of a culture going off the rails is law firms employing marketing departments. This is not so much chasing ambulances as creating car wrecks.
A culture of macho hours, pedantic regulations, fear of litigation and corporate pissing contests ensures that most people are being paid money for old rope most of the time: that is to say, they are not having wealth-creating (or indeed, any other) ideas.
But if the economic culture is one of running about and getting nowhere, the socio-financial one has become more and more strangled by old rope - such that if we don't have the idle rich any more, we most certainly have lots of folks who are comfortably idle.
If this sounds harsh, let me start by saying that I count myself as one of them. There are at least half a dozen ways in which this process has crept further into our lives since the late 1970s - and between them they have had such an mind-altering influence on the way we think, it's hard to see how we might wean ourselves off the drug.
1. Home as asset
I first bought a property in 1975. I bought it on a 95% GLC mortgage, plus £300 of savings and £200 of credit card withdrawals. By the year 2001, this three-figure investment had grown to a notional worth of £380,000. I then traded down to a much cheaper house in Devon and the balance in investment was enough to move me on to semi-retirement.
There is no commercial investment beyond the ground floor with Microsoft that could have produced a tax-free return like that. And all I did was sit in various homes for twenty-five years. More than any other person, it was Margaret Thatcher - and her manic fear of a radical left with nothing to lose - that made this all possible.
I'm qualified to make this point now because I made it in an article for Marketing Week in 1983: any society allowing a large proportion of its citizens to make this kind of money for doing nothing is producing wealth in an unhealthy manner.
2. Remote investment
A brief return for the moment if I may to the nby hobby horse. After Thatcher set out on the road to producing a propertied nation, she began the process of creating a Shareholder Democracy.
Twenty six years on, there are fewer individuals in Britain with shares in a going concern than there were when the Baroness got going. The overwhelming majority of those who got a payout from first of all privatisation, and then demutualisation, withdrew their investment in full within three months. A large minority took their free payday within twenty-four hours.
Money for old rope.
Having in turn been given a huge discount to buy their council houses, these same bewildered but very happy people then spent money doing up or trading up - thus fuelling the property boom and increasing still further that segment of people building wealth by sitting on the DFS sofa....bought on the plastic when the share-cash ran out.
This was more remittance than remote shareholding, but it makes my point rather well. The whole system of reliance upon those outside a company for the financing of medium to large size business growth contains within it one massive flaw: people investing for personal gain will put themselves first and that company's aims a very poor second.
Worse still, they too join the ranks of people (largely over 55 and/or working on behalf of huge financial instituions) who can become wealthy by doing the smart thing - as opposed to the right thing. The ultimate form of this was of course the giant Hedge Funds. Those who tell me the market itself got rid of these reptiles are in effect suggesting that if a fatally bitten man kills the snake, everything's just dandy. I think not.
3. Easy credit
Nothing creates the illusion of wealth more quickly than obstacle-free access to credit. After the introduction of credit cards at the end of the 1960s, we went as a culture from steady credit to ready credit: indeed, the second brand's slogan at launch was 'Take the waiting out of wanting'. I know this because I was working on the account at the time; and no, I had no more idea than anyone else what a potentially destructive thing this was to say.
From around the mid 1990s, the phrase 'larging it' entered the vernacular. This was and is the process of suggesting one has more money than one really does. But soon afterwards the suggestion became a belief on the part of the credit user: 'see that sofa, that shows I'm rich that does'.
By 2004 - as nby pointed out at the time - £2 in every £5 borrowed was being used to service existing debt.
And of course, spending right up to the maximum on cards was fine because once one cashed in the ever-rising house value, the debt could be paid off - a not dissimilar attitude to that being employed by Messrs Darling and Brown as I write.
Money for old rope.
4. Welfare dependency
There's not much I can write about this area that hasn't been flogged to death in the Daily Mail and the Sun ad nauseam already. The problem with truth, however, is that sometimes it emanates from people we don't like. (For instance, I hate the fact that the BNP had to claim it was the only Party in the last election telling the truth about immigration levels, but actually - it was).
Thus whether or not the editors and owners of these two rabid tabloids are mad or not is irrelevant: the data suggest that they are largely right.
I spent some time towards the end of the Major Years working with the DSS on what were routinely referred to as LTU's - the Long Term Unemployed. This experience taught me two obvious things about welfare provision in that context: first, the targeting is absolutely hopeless; and second, virtually nothing done then or since has made the slightest dent in the underlying LTU trend.
Lack of connection to - and productive role in - a society leads to a number of serious health problems: depression, sheer boredom and even agoraphobia. In such circumstances, a very large minority turn to drugs, drink and crime.
These people don't need lifting out of poverty, they need a dramatic rise in self-esteem.
But in the meantime, it's money for old rope.
5. Further education
We don't have 'grants' for students these days: we have loans - ie, yet more debt.
The simple reason for this is that there are too many students - Government could no longer afford to give all of them a living for three years, so now they ask them to borrow at 'advantageous' rates.
The system is completely wrong because (1) it puts off the evil day when young people have to learn the difference between earned and unearned money; and (2) a grant was, forty years ago, an award for effort given to the then 3% who really had excelled enough to go to University.
In the intervening years, first the CATs were upgraded to University level - with nothing more than the stroke of a pen - and then the standards barrier was lowered to allow everyone to imagine themselves as a scholarly intellectual.
This should not be viewed as intellectual snobbery on my part: until the age of fourteen I wanted to be a professional footballer. But it is time we all fessed up to one obvious reality: a non-selective, unstreamed secondary education system is the quintessential antithesis of what education should be about: developing one's best strengths, and training to be a good, thoughtful citizen.
Sadly, what we have is people getting into debt in order to gain diluted and largely useless degrees on the one hand, while there is an acute shortage of skilled craftsmen on the other.
Money for old rope.
6. 'titled Wealth
I beg your forgiveness for this appalling pun, but it does strike me as entirely apposite.
An educational ethic by which nobody must fail, Race Relations legislation which assumes bigotry in all cases, and gender balance two-wrongs-to-a-right nonsense have all led to the phrase I and many others have heard so many times: "Yuur wull, I'm 'titled inneye?"
A society promoting the idea that entitlement comes from anything other than ability, a good heart and a big effort is a society heading for oblivion. For not only does that give the State all power to decide upon entitlement, it creates the ultimate environment in which those who want something for nothing (and automatic, unearned approbation) can thrive.
While high-profile celebrity-split cases are completely unrepresentative of everyday Divorce Court decisions, they send all the wrong signals to those who aspire to an easy payday. Feckless men outnumber gold-digging women many times over, but there are occasions in 2008 when the Judiciary appears not only to have lost its collective mind on this issue, but the alimony collection agencies seem to have lost all their clients.
I know of three employers (all of whom have started from nothing within the last five years) who freely admit in private that they will find whatever reason they can not to employ black women any more. The issues they have focus on the potentially ruinous nature of legal disputes about pregnancy and race prejudice. (For what it's worth, one of this trio is a woman).
To people who insist that Britain is institutionally racist and sexist, I say 'Yes it probably is: but legislation will never solve that problem - and we are still far, far in advance of any other EU country on such issues'.
Cases both high and low profile abound in most areas of contemporary life. A recent professional sport case involving a Manchester United footballer awarded him £1.5 million because a dangerous tackle by an opposing player had ended his promising career. We were told by a stream of expert witnesses that, had this not occurred, he would have been a world-class player.
The player's loss (if he was any kind of real person) was the inability to get paid for doing what he loves - not missing out on a long and well-paid career. The former is certain, the latter mere conjecture.
Not only was more old rope handed to the player, the Court decision also effectively ignored what every wannabe professional knows: soccer isn't a tickling contest. Shit happens. Injury comes with the territory - as it does for any squaddie signing up for the armed services.
Conclusions
The thesis I put forward is simple: we can pay people to do good stuff, or award people overwhelmed by bad stuff. What we must stop doing - at all levels of society - is giving people something for doing either nothing, or the absolute bare minimum.
This is in no way to make the case for the sort of society desired by wealth-hoarders who see something healthy in a culture where they're allowed to make as much money as they want. While it may well be true - as the FT recently claimed - that it costs £20 million nowadays 'to live like a millionaire', the price of being penniless, abject and despairing is exactly the same as it always was: the death of a civilised society.
As many of you will have noticed, the quickest way to find all the fascist rednecks on the web is simply to type into Google 'liberty individual rights freedom'. Over twelve million sites will come up, and as many as eight of their owners (on a good day) could be safely allowed out into the community.
My point is this: it matters not whether the unproductive wealth was created for a seventy year-old billionaire or a scheming, litigious underclass scam-artist - money taken selfishly by one individual in a way that can only benefit them (and quite possibly harm innocent bystanders) will always be morally repugnant to the folks in the white hats.
Economically, however, it is a pernicious disease that can only destroy the one thing we should value above all others: entrepreneurial creativity.