After Lockdown- Government Support, Nationalisation vs. Sovereign Wealth Fund, Political Interference vs. Corporate Greed, Avoiding both Scylla and Charybdis

Controlling the economy or investing in the future? Well, depending on your political point of view, government involvement in the economy can be either good or bad news. This is also dependent on the propaganda spin used to describe it. For example, many wealthy nations like Singapore and Norway who have consistently run budget surpluses, have used their wealth to invest in the future. Often this is not just in their own economies but also in overseas economies. They can be seen with certain large pension funds, such as some of the Canadian examples, which have often popped up in various infrastructure companies and projects. However, this style of investment in their own domestic industries is seen generally as a good thing, not necessarily as an economic crutch but rather enabling the nation to benefit from the profits and successes of its own businesses, and usually on a longer term basis.

On the other hand, if I were to change the terminology to ‘government ownership’ or even the heresy of ‘nationalisation’, then there is often a collective sucking in of breath. In the UK, we have lived with a history of nationalisation and government investment, but sadly, have often wasted the opportunity of establishing our own wealth fund for future value. We only need to go back to the history of the coal and steel industries, here. The news flow was all too often universally bad, as these industries staggered on for years with varying levels of support. Yet after WW2, that was exactly where the origins of the EU were, with the establishment of the European Coal and Steel Community in 1951 under the Treaty of Paris designed to rebuild these strategic industries after their decimation in the War.

For strategic infrastructure, such support is usually seen as fundamental, but it is the day to day operation and interference of such state supported enterprises that is probably where the key controversy lies. In the UK during the 1980’s, we had the controversial privatisation programmes, some of which proved both popular and successful, but others like the railways, were seen as a mess. In fact, the railways were privatised faster than most of the trains, leaving a ‘buggers’ muddle of operators, equipment lessors and track ownership.

Now, for those of us who remember British Rail, it was awful, and not just the curling sandwiches, but frankly that was hardly surprising given the starvation diet of government investment over the decades. When the privatisation was announced, I recall the Treasury deciding upon the establishment of the three (trains, carriages, and wagons) equipment leasing companies- Why? Because, three gave you competition. That could have been true except that one focused on intercity trains, the second freight and the final one, all the local and commuter trains- brilliant- thus, creating three monopolies that could charge almost what they wished- and they did!

With the banking crisis in 2008, we had howls that we were bailing out the banks and as taxpayers, we owned a large chunk of Lloyds/TSB and the majority of RBS. Now at the time, it was obvious that not only was this necessary, whether you liked it or not, as a banking system is a vital part of the blood flow of a capitalist economy, but given enough time, good management and a recovering economy, we could get our money back and even make a profit on it. We still own 62% of RBS and only just sold out our final part of the 43% of Lloyds in 2017.

So why should we bother about this now? After the lockdown, we are going to see a significant queue of key corporates asking for support and handouts. Thus, are we going to see a programme of renationalisation, albeit in part? Or are we going to see the UK build up a portfolio of investments in national assets in both corporate but also infrastructure as well? A sort of Sovereign Wealth Fund or Portfolio of National Assets?

This is a question of government behaviour- are we going to be seeing these as investments, or as governments now feeling that they can manage/mismanage companies’ operations, investments and development? The answer is clear- no. Politicians have bad enough trouble running the country, and they have almost a universal reputation for mismanaging government invested businesses and projects!

Equally, the sinners here are not just the politicians. Here again, we already have some of the less appealing faces of capitalist greed. After all, are we going to use government money (sorry, our taxpayers money and liabilities) to give to large companies to pay out their own executive salaries and bonuses or fund takeovers (sadly, examples of which we are already hearing about in the USA)? No, we need to make sure that our national investment money is being used for its correct intention, to help the economy recover from this viral cardiac arrest.

So now, the judgement of Solomon- not on the threat of killing a child, but rather, which company are you going to support, and which will die? Is British Airways, or rather IAG, a strategic and vital asset flying the flag (well three if I am being pedantic with Iberia and Aer Lingus)? Then what of Virgin Atlantic who would also be claiming to fly a somewhat smaller flag albeit 49% now owned by Delta in the USA?

So, we have the opportunity of using this moment to provide support and build a portfolio of investments for the creation, we hope, of future value to help the next generation have some chance of managing this huge debt. Could we then build a portfolio of valuable and essential assets, that the nation needs and will earn future value and not just be seen to be bolstering the finances of indebted chains of burger bars? We must beware of the dangers and steer a careful course between the Scylla of political interference and incompetence and Charybdis of corporate greed.

And finally… Dar Es Salaam, Tanzania. Reuters have reported that President John Magufuli of Tanzania, whose government has already drawn criticism for being secretive about the coronavirus outbreak, has blamed some of the problems on their testing kits which seemingly had ‘technical errors’. He has now instructed Tanzanian security forces to check the quality of the imported kits.

As part of the tests they had randomly obtained several non-human samples, including a pawpaw, a goat, and a sheep, but had assigned them human names and ages. These samples were then submitted to Tanzania’s laboratory to test for the coronavirus, with the lab technicians left deliberately unaware of their origins. According to the President, the samples from the pawpaw and the goat tested positive for Covid-19.

However, I would urge a level of scepticism, as Magufuli also said that he was sending a plane to collect a cure being promoted by Madagascar’s president. The herbal mix has not yet undergone internationally recognised scientific testing. Thus, in the meantime and just in case, please stay away from any coughing pawpaw’s you come across, even if they do have a mask on.

Have a good week and please keep safe and well.


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