Archive for July 2014
We have to admit, however grudgingly, that the right team won the World Cup. There was no obvious stand-out team for most of the tournament, but following their 7-1 annihilation of Brazil in the semi-finals, it was clear that Germany had by far the most balanced team.
They didn’t have a megastar player like Ronaldo or Messi, but there were no significant weaknesses in the team either. To use that tiresome cliché, Germany were ‘efficient’. The rest of the football world is playing catchup.
But it goes beyond football. In terms of economic growth and an approach to life, we in Britain have much to learn from modern-day Germany. It’s very easy to get to Germany in this age of the Channel Tunnel and cheap flights, but it’s remarkable just how little most Britons know about our old rival.
Last year, the BBC made a fascinating programme called ‘Make Me a German’ in which journalist Justin Rowlatt and his wife, Bee, spent a week in Germany and tried to live life as typically as an average German would.
They went to great lengths to get the specifics right, and consulted an advertising agent who had done much research in this area. Everything from the time they got up in the morning, to the supermarket they shopped in, to how they spent their spare time had to be as typical of the average German family as possible. So much so, that they left two of their four children with the grandparents in London, as the average German birth-rate is 1.4 children per couple.
The findings of this programme were fascinating, and each aspect of life can teach valuable lessons to us here in Britain:
Germans work less and earn more than we do. Two thirds work for small and medium sized businesses, most of which are family-owned.
There is no Microsoft, Apple or Amazon in Germany. These are specialist businesses – they tend to do one thing and do it very well. In this instance, Justin went to work at a pencil factory that exported all around the world.
The way they prepare young people for work is different. In Britain, the emphasis is on getting young people to university, even if that means saddling them with huge debts with no guarantee of a good job at the end of it. In Germany, more than half of young people do apprenticeships, something far less rare in Britain due to social snobbery and businesses being unwilling to shell out the costs of training someone up.
There is a sense of loyalty – a lot is expected of the staff but in return the company will do certain things to try to retain them. Like everything else in the programme, Justin’s job at the pencil factory was average and typical of the country.
Germans typically work an eight hour day, which includes an hour for lunch, in which Justin went for a hot meal at the heavily-subsidised staff canteen.
The work itself is hard and disciplined. You are there to work, not to discuss your personal life, gossip about celebrities, or spend half the day on Facebook. You owe it to yourself, your colleagues and your employer to do an honest day’s work.
One of the ways the pencil company helped its staff was by a doctor carrying out regular health checks on the staff. This also gives staff the chance to discuss minor medical matters, something that in Britain would involve making a GP’s appointment, which could quite easily take them away from the workplace for around half a day.
The pay is good, and although wages don’t really rise much above inflation, job security is high. In Justin’s case, he earned €2,250 per month. In addition, he received a transport allowance and extra for working shifts, taking his total monthly salary to €2,802 per month. He also received 30 days holiday per year.
There are taxes to be paid: Income tax, health insurance, pension insurance, unemployment insurance and payment towards nursing care. Justin also pays less tax because he and his wife have children (more on that later).
On top of his salary, Justin will receive a production bonus. It’s yet another incentive to work hard and not let your colleagues down.
Compare this to Britain, where the culture is work long hours in insecure jobs, have the bare minimum of holiday leave, have to rely on a very basic, bureaucratic healthcare system in the NHS, as well as make your own provisions for your old age in terms of nursing costs and anything beyond the miserly state pension.
There is no property owning fetish in Germany, and unlike Britain, there is no social snobbery attached to renting. Taking out a huge mortgage just so you can say you ‘own’ your own home is not the norm. More than half of Germans rent, including many in well-paid jobs. As ‘typical Germans’, the Rowlatt family lived in a fairly spacious rented 1970s apartment.
Wives and Children
This is where Britain really has lost the plot. Radical leftist and New Labour disciple Patricia Hewitt described stay-at-home mothers as a ‘problem’. Many British women consider being out of the house working, and dependant on the state and an employer rather than a husband as being ‘liberated’. The role of the parent has largely been taken over by the state in the form of ‘childcare’, namely handing very young children over to strangers whose attention will be split between yours and other children.
British ‘childcare’ is a very peculiar concept indeed. Many lower income families have no choice but to do it. Those with higher incomes often decide to let one parent (usually the mother) to stay at home, while making significant sacrifices. They rarely complain, but many draw the line at having to pay taxes to subsidise ‘childcare’ for other families of similar means where both parents choose to work.
We have to wonder why Ms Hewitt and other New Labour apparatchiks are so keen on this. Separating children from their parents as soon as possible so that the state can install its conformist values on them has long been one of the key cardinals of communist regimes, the sort which many New Labour ministers supported in their youth (Hewitt, Reid, Clarke, Mandelson, and others). How many of them still hold these views deep down, but are too politically savvy to say them in public?
Things are very different in Germany. The tax system is unashamedly designed in such a way that it is both affordable and practical for mothers of young children to stay at home and bring them up. There is a social stigma against mothers who go out to work, called ‘raven mothers’. Germans rightly understand that young children require a level of attention that cannot be provided by a stranger in ‘childcare’. They teach them such things as table manners and appropriate behaviour, which would be very welcome indeed in Britain where children running around restaurants and making a noise on public transport has become increasingly common in recent years.
As toddlers, children typically spend a few hours each day in kindergarten, which costs just a fraction of ‘childcare’ in Britain, but these take a very different form. In the programme, Bee took her children to an outdoor kindergarten in a forest. Toys were banned, children bonded with nature and developed their communication skills with each other. Importantly, they also learnt to clean up after themselves and the site was spotless as they left. They seemed happy and content – they were allowed to be children and spent time in a natural environment, rather than in stuffy rooms with computers and plastic toys.
Primary school doesn’t start until the age of six and the school day is short. At secondary school age, there is a three-pronged system which sends children to schools that best suit their abilities and natural skills. There isn’t some cruel ‘Eleven Plus’ style exam to determine this, instead, it takes the form of a discussion between parent, pupil and teacher, and the decision can easily be changed if it turns out to be the wrong one.
The overwhelming majority of Germans shop at discount supermarket chains, with Aldi having by far the biggest market share. Credit cards are frowned upon – the German word for ‘debt’ is the same as the word for ‘guilt’ – ‘schulden’, and people mostly pay for things with good honest cash.
Social life in Germany seems more varied and more interesting than in Britain, where millions come home from work and spend night after night watching television, barely knowing their neighbours or having much to do with the wider community. In every German town and city, there are lots of ‘societies’ where people take part in purposeful social activities. In this instance, Justin joined a singing society (a particularly popular activity), a group of about 30 people, male and female, from a varied age group. There was plenty of time for eating and drinking both in the interval and afterwards, but the singing itself was structured and had a purpose.
In Germany, Sunday is a genuine day of rest. The shops are closed and people are expected to behave quietly. Noisy activities such as drilling and mowing the lawn are prohibited and police have the power to impose fines, on a scale of proportion, for people who violate such laws. In this programme, there was an incident (possibly staged) where the Rowlatt children were making a noise that disturbed the neighbours, and they received a visit from a neighbour, a policeman, who informed them of the Sunday laws.
In Britain, the Sabbath was largely abandoned in 1994, when the Sunday Trading Act effectively turned the day into one of shopping and spending, rather than worship, relaxation and family.
The way in which German football clubs are run is radically different from those in the English Premier League. In Germany, the fans own 50% plus one share. Tickets for good seats cost around €15, meaning ordinary fans can easily afford to watch their teams play.
The English Premier League is to a large extent predictable, with leading clubs more-or-less buying a place in the near the top of the league. There is a soullessness about it. Well over half the clubs are now under foreign ownership, and there is a real sense of detachment between the clubs and the communities in which they are based. The stadiums may be full, but the atmospheres are flat as ordinary fans are priced out of the ground with corporate interests and the well-off filling the seats.
Many foreign owners see buying a football club as a snobbish status symbol, the same way insecure men in Britain buy Porsches to draw attention to themselves. Another motive for a person of extreme wealth to buy a football club is that it can effectively become a form of money laundering.
The way German clubs are structured prevents this from ever happening to them, and what’s more, they’re very successful! German clubs have been far more prevalent in the latter stages of the Champions League than their English counterparts in recent seasons, and, as is now blatantly obvious, a far better structure is in place to ensure the German national team has a good supply of talent. The matches themselves are played in atmospheric, noisy stadiums populated by real fans.
In conclusion, German people, it seems, do not take their lifestyles for granted. The country was flattened and bankrupted after World War II, and it required hard work, discipline and good management to build it up. Much more recently, the cost of reunification in the period after 1989 was hugely expensive. Today, Germany is effectively bailing out countries caught up in the Eurozone crisis.
Personal financial responsibility is taken seriously. As we’ve already established, debt is discouraged, while people on average save far more of their incomes, allowing banks to loan out far more to people starting their own small businesses.
Germany will continue to face difficulties and challenges in the years ahead as the Eurozone crisis continues, yet in terms of work, family, leisure and overall quality of life, there is much we in Britain could learn.
It’s true to say there are causes for optimism with regards to the British economy at the moment – unemployment is falling, consumer confidence is rising and the private sector is expanding. But this ‘recovery’ is fragile, and there is still a very long way to go before the nation’s balance sheet is back on a stable footing.
Let’s take a moment to remind ourselves how we got into this mess, and what the true causes were. Gordon Brown’s track record as Chancellor was largely to blame for the scale and severity of the recession. During his decade as Chancellor, he sold off much of Britain’s gold reserves when it was at the bottom of its economic cycle, he raided the private pension funds of working people who had saved and done the right thing by preparing for their old age, he introduced 157 new taxes, he borrowed more money than all previous British governments in history put together, and he paid for public sector ‘investment’ by private finance initiatives, a form of borrowing that was to land future governments with hefty bills that would need to be paid years after he was off the political scene.
Brown was fortunate that the chickens didn’t come home to roost a lot sooner than they did. He was lucky in that the global economy was largely stable for much of his tenure as Chancellor, and currencies weren’t as affected as they might have been by instability on Japan or the terrorist attacks of 9/11.
When the rain eventually came, there was nothing in reserves to help the country battle through a few hard years. Every responsible individual, and every responsible family puts some money to one side in case they lose their job or are unable to work due to circumstance. Mr Brown did not do the same with the nation’s money.
The banking crisis has its origins in legislation President Clinton brought in during the 1990s that effectively removed the boundaries between the day-to-day banking most of us use and the high-risk casino banking very few of us will ever encounter. The USA sneezed, and the world caught a cold, though it is worth remembering that during its 13 years in power, New Labour did absolutely nothing to stop ordinary people being exposed to the consequences of casino banking, nor did it do anything to prevent high street banks from merging, which led to them becoming too big and resulted in a lack of competition.
Then we have the elephant in the room, the big issue that doesn’t get talked about nearly enough – personal debt.
UK personal debt has doubled since the turn of the millennium. Our cultural attitudes need looking at if we are to address this problem. In Germany, the word for ‘debt’ is the same as the word for ‘guilt’. That, combined with looming memories from the financial ruin of the Weimar Republic in the early 1930s means that the German people have a completely different, and much healthier attitude to debt.
Most Germans pay for their weekly shopping in cash. Credit cards are rare. Most people, even middle class professionals, rent, rather than own their homes. We, as a country, need to learn lessons from this. In many cases, the debt burden of having a mortgage is too great, and people would be better off renting, which allows people to move house easily and at short notice as their jobs and personal circumstances change. You are only ‘throwing money away’ by renting if property prices rise indefinitely, if you are willing to gamble on what state your life will be in 25 years from the start date, and if you are willing to spend large sums on maintaining the property.
Then there is the issue of consumer debt. This will require a massive cultural shift. I hate consumer debt with a passion. I cannot imagine, at any time, or under any circumstance, taking out a loan or credit agreement to pay for a car, a new sofa, or a holiday. If I cannot afford something, I go without. I choose not to run a car because I wouldn’t use it anywhere near enough to justify the cost. It’s 10 years to the week exactly since I returned from my most recent foreign holiday (I have been abroad much more recently for work purposes). ‘Keeping up with the Jones’s’ is not one of my hobbies. Many people subtly try to outdo their friends by buying flash cars, building conservatories and holding fancy wedding days. They don’t fool me. I’m not impressed with any of that, because whenever I see it, my first question is: How did they pay for it?
This combination of factors means that George Osborne’s task wasn’t and isn’t one to be admired. Since he became Chancellor in 2010, his track record has been mixed. He deserves credit for raising the Personal Allowance, which has removed millions of low earners and part-time workers from income tax completely. He can take credit for the fall in unemployment and for creating the conditions that have allowed the private sector to grow.
The ‘tax cut for millionaires’ has been nothing of the sort – they’re actually paying more tax than before, and besides, Mr Osborne understands full well that raising taxes for the richest only leads to them taking their money, and their businesses, to other countries with a more competitive rate. That was a mistake Labour made during the 1970s and it would be even more disastrous in today’s globalised economy.
In today’s papers, we read that Mr Osborne is planning to merge income tax and National Insurance if the Conservatives win next year’s general election. It’s about time too – it’s a total myth that there is a separate pot of money set aside to help individuals in times of need, and it would be far more honest, and ultimately far more efficient, to make the two a single tax.
Yet Mr Osborne’s track record is far from perfect. Perhaps his biggest piece of good fortune is that most people don’t know the difference between the terms ‘debt’ and ‘deficit’. Understanding this point is crucial. ‘Debt’ refers to money owed historically, whereas ‘deficit’ refers to the amount the government borrows every year. Mr Osborne has indeed cut the ‘deficit’, but the ‘debt’ itself is still piling up year on year.
Government borrowing, namely the ‘deficit’ was £107.7 billion in 2013-14, down from £115.1 billion the previous year. That means that Mr Osborne has made up for an income tax shortfall to the tune of £107.7 billion this year by borrowing. There are two ways this figure can be reduced: 1. By increasing the amount of money the government receives from taxation. 2. By spending less.
Option one can be achieved by getting more people into work and paying tax, which, to his credit, he has helped to make happen. It’s important not to fall for the myth that the government could receive more tax revenue by raising taxes – this would lead to people having less money to spend on products and services, and therefore fewer jobs would be created, whilst business is lost to overseas markets.
Option two means accepting the cuts, making the public sector work more efficiently, and accepting that the government should do less, which means individuals and families would have to take far more personal responsibility for their lives.
Only once the deficit drops to zero, and the government receives more tax revenue than it spends (a surplus), can it start paying down the debt. And boy, does that mountain of debt need to be dealt with. It currently stands at around £1.3 TRILLION, but when we add in all government liabilities such as state and public sector pensions, the true figure is closer to £4.8 TRILLION. That works out at roughly £78,000 for every man, woman and child in the country. The interest alone currently amounts to £1 billion per week.
In conclusion, we are going to have to accept the ongoing cuts. There are numerous examples, especially among Labour-run councils in places like Sheffield, of pet projects continuing and the number of well-paid consultants increasing while frontline facilities like libraries and leisure centres are closing. The electorate needs to be vigilant in ensuring that their taxes are spent wisely, and that their council is run for the benefit of local people, rather than the people who work for it.
We should also fully acknowledge Labour’s role in creating the economic crisis. Gordon Brown’s closest adviser while he was playing hard and fast with the nation’s finances was Ed Balls, the current Shadow Chancellor.
There appears to be an inbuilt belief among the Labour hierarchy that all problems can be solved by throwing money at them, or by expanding the role of the state. Indeed, the public sector expanded by more than one million workers between 1997 and 2010. Good, efficient management and increasing productivity doesn’t seem to register with them. Of course, the fact that public sector union votes were the key to getting Ed Miliband elected as Labour leader, and that union donations are keeping the party afloat probably clouds their judgement somewhat. As far as Labour is concerned, all public sector cuts are bad and the current government is only making them to be nasty. They haven’t come close to grasping that these are necessary measures to clear up their mess.
The problems are many, and it’ll be a good while yet before the nation’s finances are back on an even footing. We are being kept afloat at present by the availability of cheap credit, which won’t last forever, so carrying on as we were before is not an option.
No matter how bad things are, and however much we may dislike the cuts, letting Labour back into office would lead to things being far, far worse.
Gordon Brown ruined this country’s economy. Don’t let his closest adviser do the same again.