Gold News

Hard Hats & Baronets. Or Vote Tory, Get Labour!

The corporatist corruption of capitalism in the UK chancellor's Autumn Statement...
"CORPORATISM," said ex-Tory MP and now UKIP intellect Douglas Carswell on Wednesday.
"Hard-hatted corporatism."
Carswell was tweeting about the UK Conservative government's new Budget programme, writes Adrian Ash at BullionVault, outlined to Parliament on Wednesday by Chancellor George Osborne in his Autumn Statement. 
And he's got a point (plus some nice gags). A point not far from our own money-copter outlook for government spending everywhere... 
...and a point not far either from Labour shadow chancellor John McDonnell's mis-fired gimmick – in his response to Osborne's statement – of quoting and throwing 20th century Chinese dictator Chairman Mao's Little Red Book at the Tory front bench on Wednesday.
See, with nickel prices hitting new 12-year lows, Chinese base-metal producers on Monday asked Beijing to buy "surplus" stockpiles, reports Reuters – "the first coordinated effort since 2009 to revive prices."
Would the Politburo buy? It's planning to amass $10 trillion-worth of raw materials from overseas anyway, Premier Li Keqiang said Wednesday. So why not?
Bloomberg says Wednesday's rally in base metal prices showed how "China is moving to prop up metals prices." And with that rumour of state-support in the bag, China's base-metals lobby began petitioning for more government meddling, this time to ban "short selling" of metals derivatives by speculators – that old bug-bear of every special interest group in any financial market.
China also leads the world in mining gold – also at multi-year low prices right now. And Beijing already happens to be the No.1 central-bank gold buyer this century so far.
Ex-Soviet Russia too – the world's No.2 or 3 gold producer – has been piling up central-bank gold. Whether that's aimed at boosting prices or not, it has certainly helped Russia's domestic miners earn Rubles  even as sanctions block Russian banks from doing business for Dollars or Euros over the Ukraine crisis.
The Kremlin has also long helped Russia's domestic platinum and palladium miners. State depository Gokhran holds untold quantities of the white metals. And Wednesday's pop in the price of palladium – half of which comes from Russian mines each year – quickly saw traders gossip that the government was out buying more, trying to put a floor in the market at these new multi-year lows. 
India has no precious metals mines to speak of. But it does have a huge jewelry sector, serving the world's No.1 consumer gold market and employing maybe 2 million people directly in small workshops and bigger factories.
So step forward the Indian gold lobby, asking for lower import tariffs on gold so it can source more material to turn into exports. And step forward the Finance Ministry – already aiding India's inefficient, over-capacity refining industry with special tax advantages – by saying it is now maybe happy to help.
As for UK finance minister George Osborne – often spat at by the left-wing press as next-in-line to a baronetcy, a title first created and sold to an ancient forebear by tax-raising spendthrift James I – he's throwing tax-payers' money at his own favoured sector of the economy as well: 
Hence the "hard hat" jibe from Carswell. Hence the torrent of concrete coming across the country. Hence the flood of construction contracts...and financing deals...needed first. 
In his Budget speech Wednesday, Osborne used the word "build" some 27 times. That was well ahead of "income" (17), "credit" (11), "deficit" (10) and "debt" (16). 
Can you guess the only other words (on our quick count at least) which he used more? 
"Tax" (34) and "spending" (63).
Even the British press – between praising the make-work scheme for bricklayers yet fretting over what it will do to house prices – spots how this marks "the end of austerity" (even though the current Conservative leadership abandoned it back in 2012). But today's papers all miss the bigger picture. It was badly sketched by McDonnell's forlorn jibe over state-owned Chinese companies being invited to bid for UK state assets and contracts. It stars brandy and cigars all round for the corporatist construction lobby. 
Tax, spending and building. Cheers!
"The capitalist system has been corrupted," wrote 2006 Nobel Prize economist Edmund Phelps in 2012.
"The managerial state has assumed responsibility for looking after everything from the incomes of the middle class to the profitability of large corporations to industrial advancement. 
"This system, however, is not capitalism, but rather an economic order that harks back to [imperial Germany's] Bismarck in the late nineteenth century and [Fascist Italy's] Mussolini in the twentieth: corporatism."
Phelps is wrong, of course. There never was some "Austrian economics" Eden where entrepreneurs ran naked, unabashed and uncorrupted by State-given contracts and monopolies. The rule of law finds "government" and "civilization" indistinguishable. And while the "managerial state" surely does afflict the modern West, its ideal now lies not in history – not even in the "stop-go" industrial policy of the 1960s and '70s – but in today's so-called "emerging economies".
Carswell calls this week's Autumn Statement a "Blairite Budget". Basically ex-Labour finance minister Gordon Brown, but without the charm.
A decade ago, Brown famously announced "the end of boom and bust" in his tax-and-spend budgets. And his arrogance was surely one reason that history and irony gave the UK a kicking before anywhere else when the global financial crisis then followed in 2007-2012.
But the current Conservative leadership never made much secret of its own corporatist view of the world either, backing Brown's faith in the "managerial state" even as it battled him to take power in 2010. 
Government cannot "manage" economic activity or direct "the free market" anymore than they can "manage" other relationships between people. Mis-manage, yes. But drive efficiencies in an open society? By taxing some and favouring others...and by getting ever-more involved in choosing what grows, what dies, and who benefits?
Phelps' word "corrupted" is too nice. Simply "corrupt" will do. And yet here we are, still electing tax-and-spend parties who ape Russia, India and most of all Communist ex-Communist China as their model of the corporatist state.
As for any Conservative voters now worried they voted Tory but got Labour, a glance at the history books says Osborne's ancient forebear...the first Baronet of Ballentaylor and Ballylemon...repaid James I's divinely-right decision to sell him that title by siding against the King's son (the even higher-taxing spendthrift Charles I) and backing Cromwell during the English Civil War's bloodshed in Ireland. 
Really! Some pensioners and placemen have no gratitude.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals