The Bear's Lair: Britain-Apocalypse soon!

By MARTIN HUTCHINSON, UPI Business and Economics Editor  |  Dec. 2, 2002 at 6:55 PM
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WASHINGTON, Dec. 2 (UPI) -- The England Test cricket team has just blown the third successive Test Match in a five-match series, thus ensuring that the "Ashes" remain with Australia, as they have after all nine series since 1987. Since England's population is more than twice Australia's, and the country is somewhat richer, this becomes at some point embarrassing. It also suggests a deeper fundamental problem.

It would be nice to think that the problem was simply not taking sport seriously. After all, there hasn't been a British Wimbledon Men's Singles champion since Fred Perry in 1935, so in theory non-sports lovers could console themselves with the thought that the English amateur tradition lives on, but is ineffective against modern ruthless professionalism and sports medicine.

The consolation would be attractive, but wrong. After all, the English cricket team's nose dive through mediocrity into ineptitude coincided pretty closely with the advent in 1986-87 of modern conditioning methods, together with a ruthless emphasis on fitness. David Gower, the brilliant left-hand batsman whose idea of a training regimen generally involved the better brands of champagne, never flourished under the new regime; more significantly, nor has the team.

A clue to the problem, in my view, was exhibited at a reunion I attended about 10 years ago of alumni of the middling "public" (private) school, Cheltenham College, at which I had spent most of the 1960s. At the reunion, the headmaster made a speech, proudly announcing that Cheltenham was in many respects a mediocre school, but he was sure that most of us preferred it that way.

Needless to say, Cheltenham College is not going to get either my son or my money!

This pursuit of mediocrity, the avoidance of excellence in the interests of a superficially attractive soft option, is evident in many areas of British life. In education, for example, the Major government in 1992 declared that all the polytechnics, second tier tertiary education institutions, were now to rank as full universities, with their degrees fully recognized. By this reform, the percentage of British 18 year olds entering tertiary education rose to nearly 50 percent.

There was just one problem. Since all the ex-polytechnics now felt they had to become top tier research institutions, and the university system as a whole was publicly funded, the resources available to the genuinely top tier institutions (Oxford, Cambridge, bits of London and not many more) decreased substantially in real terms. Academic salaries, too, became even more uncompetitive at the top with what was available from the City -- the financial heart of London -- private industry, overseas (one of Britain's top historians is now a professor in Ankara, Turkey), or indeed down the local McDonalds.

The consequence is that, for example, Britain's proud production line of Nobel prizewinners has almost ground to a halt. In the 1970s, Britain produced 16 Nobel prizewinners (12 in the sciences), in the 1980s six (four in sciences), and in the 1990s again six (three in the sciences). Against a steadily improving economic background, this is a very poor record. Together with the "dumbing down" of the school "A" level examinations, which reached scandal proportions this year, it demonstrates the low value that Britain today places on excellence, as distinct from safely achieved mediocrity and politically attractive feel-good education statistics.

Britain's crime statistics have also been deteriorating at an alarming rate. According to the U.N. International Crime Victim Survey, England and Wales suffered 54.5 criminal offenses per 100 inhabitants in 2000, almost double the level of 1989, and the highest among the 23 countries and regions surveyed. Three factors have combined to raise British crime levels. First, sentences in Britain are much lower than in the United States; for example the average time served for convicted burglars in England and Wales in 1995 was 6.5 months, compared with 18.0 months in the United States. Second, the effectiveness of policing in Britain is staggeringly low; there was in 1995 only a 0.6 percent chance of being convicted for a burglary in England and Wales compared with an already appalling 1.4 percent in the United States. Third, the government has since 1990 been far to the left of the public on all matters of crime and community relations, whether capital punishment, political asylum, police procedures or sentencing policy. This disassociation is similar to that seen in Mayor John Lindsey's New York (1967-75); it has had a similar effect in breaking down the community's quality of life.

In the political arena, the fear of excellence and preference for mediocrity was of course epitomized by the backroom coup that replaced Margaret Thatcher by John Major in December 1990. Major's call for a "classless society" and his evocation of the softest, least demanding aspects of English culture were designed to appeal to this mind-set, and indeed powerfully reinforced it. Since the advent of Tony Blair's New Labor in 1997, the rhetoric has occasionally hinted at excellence, but the reality has been surrender -- for example to the Irish Republican Army by the Easter agreement of 1998 -- and deliberate destruction of the remaining avenues, such as the House of Lords, by which excellence could express itself in non-financial ways. A society that is without class distinctions, other than those produced by cold cash, is one where short-term gain is the only goal. The disaster at Marconi, where Britain's most successful company, with 12 billion pounds ($19 billion) in cash was cannibalized and made destitute in less than five years, is the result of allowing mediocrities free rein to pursue short-term profit for themselves.

The chickens are now coming home to roost. The Blair government, knowing that its electors feared the effects on their living standards of full-blooded socialism, introduced socialism by stealth in their first term, 1997-2001. Since re-election, they have pursued easy, populist goals like improvement in the National Health Service without any attempt at serious structural reform, simply by ratcheting up spending at an accelerating rate, which they believed could be financed by economic growth, accompanied by a few "stealth" tax increases such as their 1997-99 partial taxation of pension funds. Naturally, if health and education genuinely improved, the government's popularity would benefit, but they won't. The firemen's strike, which seems likely to lead to a percentage pay settlement in the mid-teens, indicates where the money will go -- as it always does, to increased unproductive public sector manpower and employment costs.

Chancellor of the Exchequer Gordon Brown had already compromised the goal of socialism by stealth by his increase in employee's National Insurance contributions in the 2002 budget, which in essence raised the top marginal rate of personal income tax from 40 percent to 50 percent (bringing it closer in line with European Union norms, no doubt to much delight in Brussels). However, even with this increase, it became clear last week, as Brown announced the Pre-Budget Report to the House of Commons, that Britain's fiscal position was in trouble. Net borrowing in 2002-03, which had been projected to be 11.2 billion pounds ($17.4 billion) was now projected to be 20.1 billion pounds ($31.3 billion, or 2.0 percent of gross domestic product). Since public spending is projected to rise from 431.9 billion pounds ($672 billion) in 2002-03 to 572 billion pounds ($890 billion) in 2007-08, a rise of 32.4 percent compared with a rise in nominal GDP projected, very optimistically, at 29 percent, it is clear that taxes will have to rise further or the deficit soar out of control.

By the time of the next election, due in 2005 or 2006, the chickens will have come home to roost. Public spending will be absorbing an ever larger share of Britain's GDP, while the huge asset bubble in Britain's housing market -- according to the Halifax Building Society, house prices in October 2002 were 30.6 percent above their level a year earlier -- will have deflated, to the inevitable unhappiness of all homeowners and misery of those with large mortgages. With the dollar likely to decline against the euro, and world growth sluggish at best, a fairly severe economic recession in Britain is more or less inevitable -- which will itself worsen the fiscal picture.

For the Conservative Party, the easy thing is to sit back, avoid too many internecine squabbles about the right to teach homosexuality in schools (a recent bone of contention), and wait for the pendulum of electoral support to swing their way. There is, however, a problem with this: the Liberal Democrats, who favor even higher public spending than Labor, softer foreign policy and tighter integration with the EU, are currently only a little behind the Conservatives in the polls. Even if the Conservatives win the next election, it is by no means clear that they know what to do, or would have the will to do it if they did. Excellence needs to be returned to its pedestal, and mediocrity and populism to their box. However, Margaret Thatchers do not grow on trees, and Conservative Central Office exists largely to weed them out at the candidate selection level, before they become dangerous to the statist status quo.

It is not "Apocalypse Now" in Britain, but for reasons far beyond fiscal policy it may well be apocalypse soon. If Conservative leader Iain Duncan Smith survives until the next election, and is lucky enough to win it, there is no doubt that we shall, as Enoch Powell said of Thatcher "see of what metal he is made."

If he can't sort out the economy, education or crime, at least he might win us back the Ashes!

(The Bear's Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that, in the long '90s boom, the proportion of "sell" recommendations put out by Wall Street houses declined from 9 percent of all research reports to 1 percent and has only modestly rebounded since. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

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