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Anglo Disease: one more step to it actually being christened

by Jerome a Paris Tue Apr 8th, 2008 at 08:56:14 AM EST

The FT is inching ever closer to adopting my concept of the Anglo Disease, this time under the byline of John Plender, one of its regular editorialists. In a pretty long and detailed article about rising inequality, he has this to say, among other things:


Income inequality in the US is at its highest since that most doom-laden of years: 1929. Throughout the main English-speaking economies, earnings disparities have reached extremes not seen since the age of The Great Gatsby.

(...)

In the 1930s, it ended with bank failures and the Great Depression. Now, after decades of "financialisation" in the US and other Anglophone economies, whereby financial services have increased their share of gross domestic product, banks are being bailed out - using public money - in an effort to ensure the same does not happen again.

(...)

The question is what will happen to wealth creation, stock market valuations and economic growth if, as seems increasingly likely, the public's tolerance of income inequality and what is loosely called the Anglo-American model of free-market capitalism wears thin.

The name - Anglo Disease - fits like a glove to these repeated descriptions of the Anglo- American financial capitalism model.

But, more interestingly, the article provides explicitly, for the first time as far as I can ascertain, the explication that I've been using as to why this model was tolerated for so long:



Liberal economic policies looked attractive to pragmatic left-of-centre politicians because they appeared to deliver high rates of economic growth.

(...)

But what was it that made this long period of growing inequality and stagnant incomes for all but the few tolerable for the voters? The answer is that in all the big English-speaking countries, living standards became very detached from incomes. In a period of stable, low-inflationary economic growth known to economists as "the great moderation", low and middle income people readily took on more debt, while running down their savings.

Rising asset prices, especially in the housing market, created a sense of increasing wealth regardless of income.

The great swindle of the rich looting the economy by capturing real incomes while hiding it by encouraging people to take on debt is becoming understood as such. Well, it's not labelled as a swindle, but it's already described as what it is - a diversion, whereby consumption was made possible by debt instead of by income.


Suddenly all that has changed and, with it, the political calculus. The collapse of the American housing market has left negative equity in its wake. For many, the cost of living is rising faster than wages. Houses can no longer be used as cash dispensers and savings are having to be rebuilt. Financialisation is going into reverse and the financial sector is no longer able to supercharge economic growth.

This is the Anglo Disease: the moment of reckoning, the realization that the "supercharged economic growth" is no longer around. The next step will be to acknowledge that it never really existed, except for a happy few.

But let's take it one step at a time...

Display:
Can be found here: Anglo Disease series.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Apr 7th, 2008 at 04:56:59 PM EST
Jérôme, do you think that Russia's close financial relationship to the UK means that they will be influenced by this affliction?
by zoe on Mon Apr 7th, 2008 at 05:05:54 PM EST
[ Parent ]
I'm not sure I would describe Russia's financial relationship with the UK as "close" - sure, there's a lot of Russian money in London, but it's still small beer compared to the overall Russian economy, or even Russian wealth abroad.

But in any case, Russia has plentiful commodities, and these are unlikely to lose much value these days, so I would not worry too much about Russia's economy yet - at least not because of the financial crisis.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Apr 7th, 2008 at 05:09:15 PM EST
[ Parent ]
http://www.dailykos.com/storyonly/2008/4/7/174244/7970/444/491802

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Apr 7th, 2008 at 05:54:38 PM EST
[ Parent ]
to point him in our direction? I don't feel like doing it myself.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Apr 7th, 2008 at 05:06:11 PM EST
Would just an e-mail with a link to the "Anglo Disease table of contents" suffice?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Mon Apr 7th, 2008 at 05:51:51 PM EST
[ Parent ]
Maybe with a short explanation of how the concept resonates with his article.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Apr 7th, 2008 at 05:56:08 PM EST
[ Parent ]
Where is that op-ed draft you had written? Maybe an e-mail on how the article resonates with your "Anglo Disease: Summary".

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Mon Apr 7th, 2008 at 06:21:51 PM EST
[ Parent ]
just to bring your attention to the fact that there is something called the "English disease", and you may already be familiar with it, but this is how it is defined:

... if you go back only 25 years, the "English disease" referred to rampant union demands, class conflict and rigidities that hampered productivity. At least in the sphere of popular factoid, all these disabilities are now presented as characterising the EU and Japan rather than the English-speakers.

http://johnquiggin.com/index.php/archives/2003/06/19/the-english-disease/

other people take it to mean English football hooliganism or even syphilis (!!!!!)

by zoe on Mon Apr 7th, 2008 at 05:36:29 PM EST
The "English Disease" was when the working class got uppity and wanted a larger slice of the cake for themselves.  Margaret Thatcher did for that lot.  The Anglo disease is when the ruling classes got greedy on the back of the Reagan/Thatcher victories and started appropriating all incremental wealth to themselves by using globalisation as a stick to beat the Unions with.  Either way, its a form of class war.  Old Europe uses the state to mediate the tension by providing a wide range of universal rights and benefits.  The Anglo disease lets the markets take their course  - a democracy of the dollar rather than of people - and deregulates, outsources, and externalises economic activity and inequality as much as possible.  It's taken the general populace quite some time to cop on...

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Apr 7th, 2008 at 07:10:00 PM EST
[ Parent ]
In Hungarian, angolkór (=English disease) is ricket.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Apr 8th, 2008 at 04:51:21 AM EST
[ Parent ]
rickets or cricket?

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Apr 8th, 2008 at 06:45:27 PM EST
[ Parent ]
'But don't forget that most men without property would rather protect the possibility of becoming rich, than face the reality of being poor.' (1776, the musical)

When combining the most ruthless propaganda and delusion tools, the media, with the connotations from the above quote has allowed most of the US to be fooled.

Now the delusion is rapidly giving way to the reality of peoples' lives. It will be the impetus for real change as reflected in the rise of Obama and how his campaign has been mostly funded by the average person giving less than $100. Real change happens when people are in desperate times.

Please do not continue exhibiting your hubris over the US situation. Even though 'Old Europe' has more social justice; it is not immune from the robber barons.

The UK also has its greatest inncome inequality since the 1930's but has a buffer after the media is no longer the factor in promoting the delusions. It has the monarchy to fall back on. It is amazing how many intelligent people in the UK actually 'bow' to the Monarchy working in tandem with the Church of England  and by extension, the upper class.

by An American in London on Tue Apr 8th, 2008 at 02:49:04 AM EST
An American in London:
It is amazing how many intelligent people in the UK actually 'bow' to the Monarchy working in tandem with the Church of England  and by extension, the upper class.

Presumably you are talking about "Old Money" here?

I do not think that "Old Money" is institutionally capable of protecting itself the way they once could when (say) the House of Lords had a veto.

The "forelock tugging" respect of the working classes (as conservative a group as you would find) has long since gone.

Royalty is merely another class of celebrity, and the intelligentsia understand that better than any.

Sure, there is a lingering respect for the Queen personally, but not, IMHO, a great deal more than an emotional attachment to the Monarchy as Head of State.

So I'm not really sure what you mean about "bowing" other than the exaggerated sycophancy that seems to take over in the personal presence of the monarchy....

As for the Church of England and the traditional "upper classes" I really do not see either as relevant at all to the UK today.  

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Apr 8th, 2008 at 05:06:20 AM EST
[ Parent ]
I see the Queen, Church of England and the upper classes still very relevant to the UK today as the mindset of many British people, no matter how intelligent, is to be subservient, even if its in their mind only, to the upper classes.

The attitude, besides the small percentage of yuppies in the financial sector who probably make up most of the readership from the UK of this blog, is 'I know my place in our society and for me to rise above it is not a correct one since myself and my family have been indoctrinated to this by many generations of toffs.'

This is the reason the British have always been of the mindset 'I am what I was born and I shall not aspire to much better'. Even though there has been small changes in the general population, it still permeates British society and culture. With very few exceptions; there aren't many TV shows or films produced in the UK which are aspirational-the only ones are bought from the US.

by An American in London on Tue Apr 8th, 2008 at 01:55:10 PM EST
[ Parent ]
Well, that's an interesting view, and worth a Diary on its own, I think....

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue Apr 8th, 2008 at 02:05:14 PM EST
[ Parent ]
It is a view shared by many in the ex pat community I am a part of and also by many aspirational Brits who have thrown off the 'shacles' of their parents and society's 'Royal/toff bonds'.

Besides the residue of an entrenched society; the non separation of church and state continue to also foster a society based on class. It continues in the schooling, communities etc. Very little is based on a meritocracy.

by An American in London on Tue Apr 8th, 2008 at 02:20:14 PM EST
[ Parent ]
Hmmm, ever been North of Watford Gap?
by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 8th, 2008 at 05:33:41 PM EST
[ Parent ]
What's an "aspirational Brit"?

Very little is based on a meritocracy.

As opposed to where?
by Colman (colman at eurotrib.com) on Tue Apr 8th, 2008 at 05:40:26 PM EST
[ Parent ]
Aspirational Brit or any nationality is someone who wants to create a better quality of life for themselves and family without being predjudicial to others.

Very little is based on meritocracy in the UK as opposed to what it should be. No one is saying many other places are incrementally better but that doesnt absolve the UK of its mixing the monarchy and religion with the state which sustains its oppressive class system.

by An American in London on Wed Apr 9th, 2008 at 03:30:50 AM EST
[ Parent ]
How do social/occupational mobility rates in the UK compare to other countries?  The expansion of third level education in the 1960/70's may have helped improve this substantially, but the re-introduction of fees seems designed to slow this down?

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Apr 9th, 2008 at 06:09:19 AM EST
[ Parent ]
I's not hubris I'm exhibiting, it's schadenfreude.

After years of being on the sending end of relentless propaganda from the other side of the Channel or Atlantic telling me how reactionary/declining/cowardly/treasonous/failing I was, is it so unacceptable to be able to say "we told you so?"

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Apr 8th, 2008 at 05:15:09 AM EST
[ Parent ]
You've also been told from your own side of the Channel to stop believing in Father Christmas.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Tue Apr 8th, 2008 at 05:23:35 AM EST
[ Parent ]
I would hope your 'schadenfreude' is directed at the tiny number of Americans who were telling you 'how reactionary/declining/cowardly/treasonous/failing' you were and not the vast majority of Americans.
by An American in London on Tue Apr 8th, 2008 at 01:58:47 PM EST
[ Parent ]
and yes.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Apr 8th, 2008 at 04:43:46 PM EST
[ Parent ]
But don't forget that most men without property would rather protect the possibility of becoming rich, than face the reality of being poor

Yep. This is why a full dose of well argued points by Jerome can have only limited success by itself.

you are the media you consume.

by MillMan (millguy at gmail) on Tue Apr 8th, 2008 at 01:15:31 PM EST
[ Parent ]
and that why I'm unlikely to eve go into politics...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Apr 8th, 2008 at 04:48:44 PM EST
[ Parent ]
Just in: House prices fall by 2.5% - Yahoo! News UK

House prices have dived by 2.5% during March, their biggest monthly fall since the 1990s house price crash.(Advertisement)

Britain's biggest mortgage lender Halifax said the drop was the largest since September 1992.

House prices are now just 1.1% higher than they were a year ago, the slowest rate of annual growth for 12 years.

...

He added that the most recent drops needed to be seen in the context of house price gains of the 51% during the past five years and rises of 171% during the past 10 years.

The group said homes had lost 1% of their value during the first quarter of 2008, to leave the average property costing £191,556.

But there has been huge regional variation within this figure, with house prices in the West Midlands falling by 5% during the first three months of the year, while property prices have dropped by 4.7% in Wales and by 2.6% in the South West.

There were also price falls of 1.5% in Northern Ireland and drops of 0.5% in both Yorkshire and the Humber and the North West. But at the other end of the scale house prices rose by 2.2% in the East Midlands, 1.6% in Greater London and by 1.4% in East Anglia.



*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Apr 8th, 2008 at 04:56:40 AM EST
Hey!  Why is it every time I published a diary it is immediately bumped down page and off screen by another one - usually an old one promoted ahead of it.  Isn't the front page enough screen space for you guys?  A mere mortal could get a persecution complex around here!

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Apr 8th, 2008 at 09:44:44 AM EST
Side effect of promoting the things. Sorry.
by Colman (colman at eurotrib.com) on Tue Apr 8th, 2008 at 09:48:00 AM EST
[ Parent ]


"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue Apr 8th, 2008 at 09:51:10 AM EST
[ Parent ]
now now Chris,,,  If I recall your last diary came immediately after my previous one and had about 6 screenfuls of text above the fold relegating me to oblivion .. you can't put this one entirely on Colman...!!!:-)

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Apr 8th, 2008 at 10:10:54 AM EST
[ Parent ]


"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue Apr 8th, 2008 at 10:36:13 AM EST
[ Parent ]
One of the basic problems when discussing wealth is to define what it actually is. Right now US housing is being described as having risen "too high". This implies that there is a real worth and then there is the additional cost of the bubble.

What people fail to appreciate is that things are "worth" whatever other people are willing to pay. A perfect example can be seen in yesterday's announcement that the IMF is going to sell off about 10% of their gold reserves. Obviously they think that the current price in gold represents yet another bubble and the time to unload is when the suckers start to pile in.

They claim that they will use the money to fund future projects, but also invest it in areas which will yield a higher return. In other words they expect gold to decline. So what is gold "worth"?

Much of the wealth inequality seen over the past few decades is of the same nature. Financial instruments were bid up and the paper wealth of those holding them increased dramatically. Now that the air is leaking out of some of these balloons this wealth will decrease and inequality will moderate (from the top, the poor will still be poor). This will be used as an argument against making changes in the tax rates and regulatory structure: "there were excesses, but the market has corrected itself." Enough people will believe this bunk so that we can expect real reform to be minimal.

When the British forced the landed gentry to pay high taxes it was discovered that many of the most expensive estates had no buyers. Only the wealthy can afford items sold by other wealthy individuals. The result was than many of these estates ended up as part of the National Trust. Will we see a similar trend this time?

If a billionaire needs to sell his 500 foot yacht who will be able to buy it?

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Tue Apr 8th, 2008 at 11:04:46 AM EST
... the direct benefit I receive from using it ... living in the house, gardening in the backyard.

Its when the primary focus of real estate shifts from its use value to its value as a fictitious commodity that we start to get into trouble.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Apr 8th, 2008 at 12:19:04 PM EST
[ Parent ]
Increasing house prices are not even on paper wealth.

The video
"The Coming Collapse of the Middle Class" under the url
youtube.com/watch?v=akVL7QY0S8A

is lengthy but it is described, that the median US household's main increase in expenses in the last 30 years was housing (next to health care), even when the median size of the houses went only up less than one room. The house price boom has become the biggest danger for the middle class in the US in the last years. The point is, that in a sense houses are consumer goods not financial assets, you usually live in them. If you sell the house in which you live, you likely will buy another one. So increasing house prices are inflation.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Apr 8th, 2008 at 01:58:16 PM EST
[ Parent ]
What people fail to appreciate is that things are "worth" whatever other people are willing to pay.

Possibly the most incorrect statement possible for any human to say.

"Remember the I35W bridge--who needs terrorists when there are Republicans"

by techno (reply@elegant-technology.com) on Wed Apr 9th, 2008 at 04:03:36 AM EST
[ Parent ]
We are looking at the distinction between Value and Price, and Wilde's definition:

A cynic is a man who knows the price of everything but the value of nothing


"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed Apr 9th, 2008 at 05:25:03 AM EST
[ Parent ]
In Spain we say sólo el necio confunde valor y precio (only the dunce confuses value and price).

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Wed Apr 9th, 2008 at 06:05:35 AM EST
[ Parent ]
The name - Anglo Disease - fits like a glove to these repeated descriptions of the Anglo- American financial capitalism model.

But, more interestingly, the article provides explicitly, for the first time as far as I can ascertain, the explication that I've been using as to why this model was tolerated for so long:

Just curious as to what this model is and how it is different than the alternative models (that are assumed to be better)?

Rutherfordian ------------------------------ RDRutherford
by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Tue Apr 8th, 2008 at 07:09:45 PM EST
provided here which provide some answers to your question.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Apr 9th, 2008 at 05:28:50 AM EST
[ Parent ]
You mean here?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Wed Apr 9th, 2008 at 06:07:48 AM EST
[ Parent ]
That was not actually an answer.
Linking to 30 threads all bunched together is only showing a long diatribe without a clear answer to what this supposed model is.

A well defined model can be written on the back of a business card.

Rutherfordian ------------------------------ RDRutherford

by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Wed Apr 9th, 2008 at 12:57:40 PM EST
[ Parent ]
In that list you can find Anglo Disease: a summary

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Apr 9th, 2008 at 01:04:43 PM EST
[ Parent ]
At The Anglo Disease (3) - an introduction for non-economists which also seems like a summary of sorts, has the chart of:
http://i8.photobucket.com/albums/a28/afew/zoroimf.jpg

But if you want to spell out which countries may be exposed to a kind of Dutch Disease then it would be better to have Net Financial Services Exports as a percentage of Exports. The way you have it does not control for economies that exports make up a disproportional aspect of the GDP.

Or in other words, it matter little whether there is a lot of exports as percentage of GDP if it is proportional to the whole economy.

Rutherfordian ------------------------------ RDRutherford

by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Wed Apr 9th, 2008 at 04:47:50 PM EST
[ Parent ]
Are you saying that as a percentage of GDP and proportional to the whole economy are not (very closely) the same thing?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Wed Apr 16th, 2008 at 11:11:19 AM EST
[ Parent ]
I guess, I have not explained myself very well.
Let us say that we have 2 economies X and Y.
X exports around 3-4% of its GDP
Y exports around 75% of its GDP (lots of pass through or a market that is geared toward exporting services)

Thus if one segment of exports in X is 2% of GDP that is high as a percentage of exports but not GDP.
And if one segment in Y has 4% of exports of GDP that really does not signify much external exposure as percentage of total exports.

That is one reason I think the Caribbean countries had such high levels of GDP but may not be the same level of exposure. Just trying to differentiate between high exporting countries and not.

Rutherfordian ------------------------------ RDRutherford

by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Thu Apr 17th, 2008 at 06:56:12 PM EST
[ Parent ]
BTW, I mentioned the Anglo Disease in this conference in the European Parliament...

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Apr 18th, 2008 at 05:33:21 AM EST


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