Free market vs nationalisation? It’s a delusional divide

This autumn’s UK party conferences triggered reminiscences about the old political debates from the 1970s and 1980s. Jeremy Corbyn wowed his new Labour Party supporters with a call for full-scale nationalisation, including of the rail, mail, water and energy companies. In response, senior Tories used their conference speeches to assert the merits of the ‘free market’, under the inspiring mantra of ‘no return to the 1970s’. Theresa May used her infamous leader’s speech to declare that ‘the free-market economy, for so long the basis of our prosperity’, is under threat, and needs defending.

As a great 19th-century thinker remarked, history repeats itself: the first time as tragedy, and second as farce.

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A successful industrial strategy requires letting zombie firms die

As the government considers its industrial strategy white paper, due later this year, it must first break free from blinkered thinking.

While doubtless well intentioned, the familiar policies under discussion so far – additional public infrastructure investment, more state-funded research, and skills enhancement, with a particular focus on management training – are not sufficient to bring about a new industrial revolution.

The flaw in this approach is that none are new practices – and even as they have been operating, Britain’s productivity trap has been getting worse. Repeating what hasn’t been working is not a good route.

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Ten Wasted Years: The Crash One Decade On

This summer has seen the start of the discussion about the 10th anniversary of the financial crisis. It’s a discussion that will continue through to autumn next year. To recap, it was on 9 August 2007 that the French bank BNP Paribas announced that the ‘complete evaporation of liquidity in certain market segments of the US securitisation market’ had ‘made it impossible to value certain assets fairly’. This blunt admission by BNP Paribas that it could no longer price, and therefore redeem, investments in three of its funds triggered a breakdown in trust between financial institutions.

As a result, the wide diversification of repackaged debt around the financial system, which had previously been heralded as sound ‘risk management’, backfired. No one seemed to know which bundles of paper were worthless, so none could be relied upon. Credit markets began to freeze up.

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