Economy and Business: debate on the Queen’s Speech

Monday December 8 2008
Speech by the Bishop of Durham, Dr N. T. Wright

My Lords, like I suspect many of us in this House I was delighted but not surprised to see that the Gracious Speech started with a clear stress on the stability of the British economy during the current global economic downturn. I was also very glad to hear that the Government is committed to helping families and businesses through difficult times, a commitment which was then spelled out in various particulars. There was also a wonderful commitment ‘to ensuring everyone has a fair chance in life’, though quite what that means remains vague. But I was especially pleased to see the promise that the Government would ‘work for a coordinated international response to the global downturn’, looking ahead to our hosting, next April, of the next G20 Summit on financial markets and the world economy, and to the prospect of ‘reforming financial institutions’. This again remains a generalized promise, and we on these benches would welcome some clarity in what is clearly an urgent and extraordinary moment to which future generations look back in the way that we do to the financial crises of the 1930s and even the 1860s.

My Lords, I wish to highlight two areas in particular, first the global and second the very local. At the global level, we now have the opportunity and, I suggest, the urgent necessity, to rethink the whole way our global financial institutions work. Ever since the Bretton Woods agreement in 1944, the global economy has been tilted so as to benefit the rich nations in the north and west at the expense of the rest of the world. I don’t need to go into details; the case has been made again and again, and the results are all around us. In particular (and again this is widely known and acknowledged) several of the poorest countries in the world are still faced with massive and unpayable debts, run up in generations past and still earning multiple compound interest. Since a country cannot do what an individual can, namely declare itself bankrupt and begin again, these debts continue to shackle some of the world’s poorest countries and compel them to prioritise debt servicing ahead of such basic needs as healthcare, clean water and education. One of the delights of the Lambeth Conference four months ago was to meet bishops from Tanzania who spoke from first-hand experience of the dramatic effect in their dioceses of the debt remission granted to that country in 2001. At a stroke, all kinds of much-needed programmes could be launched as money became available for things we in this country take for granted. Even though the remission was only partial, it was enough for the Joint Review team, including representatives from foreign governments and donors, to say that ‘pupils, teachers and parents are pleased that new and improved facilities are arising  before, their eyes, and especially that their children are beginning to have books, more motivated teachers and improved teaching and learning environments’. In healthcare the previous shortage of basic drugs became a thing of the past, and the rate of immunisation shot up to 83%. That was in 2004; since then, in July 2006, a further 18 countries had their debts to the World Bank written off, with similar results.

But an enormous amount still remains to be done. The current estimate is that around $500 billion needs to be cancelled, most of which would be taken up by 100% relief for the very poorest countries (i.e. the 65 ‘Low Income Countries’, according to the World Bank’s classification). This debt is, quite strictly speaking, ‘unpayable’, that is, even servicing the interest on the debt would be at the expense of the most basic needs of the people. Some work on this has been undertaken, but it only amounts to a beginning [$88 billion out of the 500, for 23 of the key ‘target countries’] and a further amount has been promised if the countries manage to jump through all the hoops put before them by the IMF.

Perhaps the most useful statistic is that the very poorest countries (the ‘Low Income Countries’) are paying about $40 billion each year, even after the partial write-offs that have already taken place. This is about the same as the total level of official aid to them, some of which (though not, I think, that from this country) is simply designed to benefit the donors rather than the recipients, for instance the ‘aid’ given to enable the poorest countries to buy armaments from first-world manufacturers, enabling them merely to compound their economic problems with the long-term devastation caused by violence, terrorism and other unrest.

All this is a long way away from the noble vision articulated by Gordon Brown when he spoke nearly ten years ago in St Paul’s Cathedral (7th March 1999). This is what he said, and I hope the promises in the gracious speech will revive this determination: ‘Poor country debt is the great moral issue of our day, the greatest single cause of poverty and injustice across the earth. . . We must drop the debt and drop it now.’ The same agenda was strongly endorsed shortly after that by the then Leader of the Opposition, the Rt Hon. William Hague.

What has happened to this vision? Take the example of Bangladesh, one of the Low Income countries. Its current debt stands at $19 billion, and repayments are higher than the annual health budget. Yet this is one of the countries most at risk from climate change, and the number of people living on less than $1 a day is about 40% of the population. Or take the Philippines. Most of its $28 billion debt was incurred under the Marcos dictatorship. The Philippines has already paid five times as much in debt service as was originally lent, but even so the compound interest has made the debt balloon to over $60 billion. The result? One in ten children suffers from malnutrition, and one person in five has no access to clean water. These two examples stand for several more around the world.

Now, my Lords, it won’t surprise you that whenever I, and other bishops, have spoken about these things in the last ten years, as we frequently have done, we have been met with a chorus of protest telling us that we don’t understand how the world works, that people who borrow money must learn that they have to pay it back, that the borrowers were wicked or irresponsible or incompetent, and that any debt relief will only be siphoned off to fund yet more extravagance on the part of the few. But the events of the last four months have demonstrated beyond any cavil that this excuse always was threadbare and can never be used again. The sight of governments, including our own, bailing out banks, and the sight of at least one bank being refloated in such a way as to allow large bonuses and payouts to shareholders to proceed unchecked; the sight of the American government bailing out the car manufacturing industries with loans taken from the funds supposedly earmarked for ecologically important design improvements; all this looks to the ordinary person in the street, and to the ordinary bishop on the bench, like the very rich doing for the very rich what they have refused to do for the very poor. If the promises in the gracious speech are to be fulfilled, these global issues must be addressed as a matter of first priority. In fact, as many have pointed out, relieving these debts, so far from damaging the economies of the lending countries and institutions, would set the developing countries free to become creative and serious partners in a new global economy.

That raises, of course, the question of free trade and fair trade. Again, you would expect that when a bishop bangs on about this sort of thing he will meet a chorus of disapproval, perhaps even the sneer that we are being crypto-communist. Far from it, my Lords. That chorus needs to be matched by the chorus of responsible, senior observers from around the world who have put their finger on the problems faced by developing countries when so-called ‘free trade’ – in other words, the enforcement of premature, indiscriminate liberalisation on poor countries, leaving their struggling producers at the mercy of competition from the well-resourced and often well-subsidized multinationals – when so-called ‘free trade’ becomes simply a code for exploitation. The World Bank’s director in Ghana, Mats Karlsson, stated three years ago that ‘the biggest problem facing farmers in the developing world are the subsidies the West provides for its own farmers.’ Mary Robinson, the former President of Ireland and UN High Commissioner for Human Rights, spoke of seeing children in Mali who couldn’t go to school because of subsidised dumping of US cotton.’ Professor Joseph Stiglitz, the former Chief Economist of the World Bank, and a Nobel Laureate in Economics, spoke a couple of years ago of the poorest countries having ‘had their arms twisted and got nothing in return.’ My Lords, these are not wild statements by wild and woolly left-wingers. They are sober assessments of a reality which is still crippling huge numbers of our fellow human beings, a reality which, if the gracious speech means what it says, the Government must address.

We are, in short, at a moment in history when sudden circumstances have forced us to ask, nationally and internationally, questions that should have been addressed decades ago. We cannot expect, and we should not seek, to return as soon as possible to ‘business as usual’. It is business as usual – not least the mounting spirals of debt at every level, and the extraordinary gambling culture of many financial institutions – which has got us into our present mess. In the terms made famous by Thomas Kuhn in his book The Structure of Scientific Revolutions, we are in need of a paradigm shift. And that paradigm shift cannot simply be that we return to the old mixed economy, balancing out the rampant follies of the so-called free market with appropriate government ownership and intervention. The danger there is that we would fail to address the underlying issues which have been with us since the late 1940s, and which have been hidden behind the smokescreen of rhetoric and the claiming of apparent high moral, or at least economic, grounds by those with most to gain from the system as it has been operated. My Lords, it is time to rethink the global economy, and the financial markets and institutions, not just from the top down but from the bottom up, and to grasp this opportunity to bring genuine justice and genuine hope to those people who have long suffered grievously from the woes which have so recently overtaken our own banks and industries. There is much more that could be said by way of positive proposals on this score, and I and my colleagues on these benches will hope to work with those involved to campaign for, and develop wisely, appropriate future shaping of an economic order in which all may genuinely benefit.

And when I say ‘all’, my Lords, I have in mind the people I work with day by day, the people of the north-east of England. Professor Christopher Coker of the London School of Economics, writing in the Times Literary Supplement last week (TLS 5514, December 5 2008, p. 12), reviewing the book What Next? by Chris Patten (London: Allen Lane), warned against paying too much attention to the grand themes and too little to the particulars. ‘The global,’ he writes, ‘is only as strong as its power to shape the local for the better.’ Well, I have spoken of the local in terms of places far away. What is going on nearer at hand? What are the real-life situations to which, according to the gracious speech in its strong opening paragraphs, the Government must now pay urgent attention?

Ten days ago, my Lords, I attended a meeting of local business leaders from across the north-east. The message came through from them loud and clear: the banking model we have worked with for the last few years was seriously flawed and needs to change. Bailing out the banks will do no good if the system is not radically reformed. The massive overregulation in areas like health and safety, which is a standing joke among struggling small and medium enterprises, now appears as a kind of displacement activity for the massive deregulation which has allowed astonishing irresponsibility to flourish in the financial sector. Reform must protect savers and businesses, not shareholders and executives. And issues of this magnitude are not addressed by small tax cuts here and there or tinkering with interest rates.

That said, there are two different messages I am getting from around the north-east. On the one hand, the steady economic improvement in the region over recent years has been good and diverse, and some who were previously redundant have found new work. Commercial building, as opposed to house building, continues to do well partly because the money for this was in place before the current downturn and people are happy to proceed with projects believing them to be important for the longer term future. In addition, we have a traditionally low spending population by comparison with the south-east, so we do not expect such a drastic change in spending patterns when money is tighter. There are some reasons for cautious optimism, such as a positive balance of trade and research by Oxford Economics which forecasts that the region will escape recession. The North East Chamber of Commerce’s manufacturing members, particularly in the Tees Valley, are markedly more positive than other parts of the business community, and the key concerns they raise continue to be inflation and especially energy prices. There are several other concerns about which the NECC has already written to the Government, such as the restoration of the empty property tax relief. Some of these concerns are partly addressed in the Chancellor’s pre-budget report.

So there is some cautious optimism around in some parts at least of the north-east economy. However, unemployment has gone up to 8%, which is I believe the highest in the country, and there have been significant job losses even in thriving companies like Glaxo in Barnard Castle. The small and medium enterprises, of which we have a good number, and particularly vulnerable to sudden economic swings. In larger businesses, we have seen a slowdown in production, for example the extended Christmas closure period forthcoming at the Nissan plant in Sunderland. Parish clergy across the diocese report the many people are living on a knife-edge, barely able to make ends meet. Rural communities in particular are badly hit when money is tight, and simply getting around to a hospital or benefit office is difficult for many. One priest tells me of the suicide, two weeks ago, of a man in his 30s for whom the situation had become intolerable. The hill farmers, who were hit in 2007 by the foot-and-mouth crisis caused by a leak from a government research laboratory, were already in serious difficulty and this is now exacerbated; and when the farmers are in financial trouble all local businesses suffer as a result. More and more young people are moving away from the region in an effort to find work, and experience suggests that few if any will return. Not for the first time, many people in the north-east ask themselves whether they have fallen off the map – especially following the Northern Rock debacle, which not only gave the impression that institutions based in the south hoped they could sacrifice a northern cousin and so escape similar problems, a hope which of course turned out to be illusory, but also hit hard at a great many charities in the north-east which had looked to Northern Rock as a primary sponsor. For these and other reasons many important projects in which the churches have worked in partnership with other local agencies have been closed or curtailed.

Nevertheless, we in the churches remain committed to working with the whole community, and we on these benches hope that the aims highlighted in the gracious speech can be pursued in partnerships at every level in which we will play our full part. Local projects abound: various churches are running credit unions and food distribution, in some cases offering small interest free loans to people in dire need. The churches can, in fact, give a lead in helping local authorities identify those most at risk. In addition, despite the curtailment in voluntary work which I just referred to due to lack of funding, there remain various ways in which the churches can help provide voluntary work for those, particularly young people, who are without work but who ought if possible to find things to do to develop skills and retain a sense of self-worth. At the same time, we are actively involved in helping local communities to think creatively about where we should be aiming in the medium and longer term. In these and other ways the churches can, I believe, take a small but significant lead in helping restore and maintain morale and thus assist in the objectives which the Government has outlined in the gracious speech.

My Lords, at every level we have the chance for some long-overdue thought and action which could transform the way our world, our country, and our local communities work together. Our hope on these benches is that we will seize this opportunity, and that the good though generalized aims set out in the gracious speech will be pursued energetically and with the specific focus which will enable us in future years to look back to this moment with gratitude as a time when fresh vision and bold action made a real and lasting difference both globally and locally.