Tag: economics

Mind the Gap: London vs the Rest; Polar Bear: Spy on the Ice

Mind the Gap was a two part series presented by Evan Davis about the growing gap between the economy of London (booming) and the economy of the rest of Britain (somewhat stagnant). I’m not sure he really had 2 hours worth of material, but I guess he wanted to divide it into two themed chunks. The first programme mostly covered what the situation is and how it has arisen. Davis talked to a variety of people – CEOs, workers, people involved in transport, Boris Johnson etc. The take home message was that the gap exists because a gap already existed and it’s just got more pronounced. Basically businesses want to be near other businesses – either of the same type for collaboration (or people poaching) or of different types (again for collaboration). So once London started to be the place to be, it became more the place to be. Davis did spend a bit of time talking about the downsides of this as well – in particular the way people get priced out of the city. And the effects on transport and other infrastructure requirements. Like the fact that Crossrail isn’t even built yet and they’re already planning Crossrail 2 because the projected growth of the city means it’ll be needed that soon.

The second programme was more concerned with what, if anything, can be done to reduce the gap – bringing up the rest of the country rather than bringing down London, obviously. This felt particularly padded, to be honest. Davis’s message here was the he thinks (and this was clearly couched as a personal opinion) that trying to bring the whole of the rest of the country closer to London in economic terms is a non-starter. By spreading the economic growth so thin you don’t ever get momentum going anywhere. Also Davis didn’t seem to think many places had enough there to start off with. His idea was that the best hope for economic growth outside London is to encourage formation of a supercity in the north of England. Statistically speaking if you compare city population sizes between many European countries including Britain then we don’t actually have a “second city” – there’s a far bigger gap between London and the next tier of cities than you’d expect. So Davis thinks that the way forward is for the Liverpool to Leeds corridor to turn into Britain’s second city. I guess Glasgow/Edinburgh wasn’t chosen because it has the issue that it might turn out not to be British shortly.

Overall I wasn’t sure if I agreed with Davis, but I’m aware I don’t really know much about economics and haven’t thought about these issues much before – so my sense of disagreement might be just the result of ignorance.

If you were after a serious programme about polar bear life and biology, then Polar Bear: Spy on the Ice is not the programme you’re looking for. However it was very entertaining 🙂 The best claim to seriousness that it has is that it uses disguised remote control cameras to get closer to polar bears and to film them acting in a much more natural fashion than you can do when there’s a whole film crew around. And as the programme blurb says, this does demonstrate their intelligence and curiosity. But what made it worth watching was the narration (voiced by David Tennant, in his natural accent so not quite like Doctor Who providing commentary). In the narrative the polar bears were fairly anthropomorphised and the cameras were definitely anthropomorphised, and it was great fun to watch!

Other TV watched this week:

Episode 2 of The Plantagenets – Robert Bartlett covers the history of the Plantagenet dynasty, who ruled England for nearly 300 years.

Episode 4 of Pagans & Pilgrims – series about the sacred places of Britain, presented by Ifor ap Glyn.

Episode 6 of The First World War – a 10 part series covering the whole of the war.

Episode 1 of Monkey Planet – series about the biology and behaviour of primates.

In Our Time: The Physiocrats

The Physiocrats were members of a French school of economic thought that flourished in the 18th Century, and can be thought of as some of the first modern economists. The three experts who talked about them on In Our Time were Richard Whatmore (University of Sussex), Joel Felix (University of Reading) and Helen Paul (University of Southampton). The programme not only looked at what their economic theory was, but also set it in the context of the politics of the age and looked at the influence it had in its turn on politics.

Someone trying to predict the future at the end of the 17th Century would’ve thought that France was the rising star and would go on to dominate politics across the world during the 18th Century. But this didn’t actually materialise – instead Britain began to rise in prominence. A lot of thought was put into the question of “what went wrong and how do we become great again?” during the mid-18th Century in France, and the Physiocrats were a part of this cultural soul searching.

The big idea of the Physiocrats was that all wealth was tied to agriculture. They divided the world into three classes – the producers (i.e. those who actually worked the farms), the sterile class (or commercial class) and the landowners. This was quite a change from the prior medieval division of people into aristocracy, clergy and “the rest”. It wasn’t, however, intended to change the social order – they still believed that the landowning class were entitled to the produce and labour of the producing class, as in the old feudal system. They saw the problem of France’s decline as being down to regulations messing up the divinely appointed natural economic system – basically if wheat and other agricultural produce was allowed to be freely traded within the country then they thought wealth would naturally increase.

There was a definite anti-British flavour to this theory as well. Relatives of British aristocrats might move into trade (rather than become clergy as was the “proper” idea) – and this was seen as something that detracted from a country’s wealth by the Physiocrats. I think the experts were suggesting that this belief was in part caused by not wanting to follow Britain’s lead in anything. Which was a shame for the Physiocrats long term aims – after all the British were about to kick start the Industrial Revolution and manufacturing was just about to take over the wealth creation role from agriculture.

One thing that set the Physiocrats’ ideas apart from previous ideas about economics was that they were a part of the Enlightenment mindset. They were approaching the problem of how to create and maintain wealth in a scientific fashion (although not entirely – as I mentioned above they saw their theory as divinely appointed). And they took inspiration from other sciences at the time – like seeing the circulation of the blood as akin to the circulation of wealth in the economy.

They were influential on later economic thought, in particular ideas about free trade – and Adam Smith was notably influenced by them. Another influence they had was probably even less to their tastes than influencing a British economist – the idea that the people who worked on the land were the actual producers of wealth fed into the French revolution.

When we started to listen to this programme I thought it was going to be awfully dull (economics isn’t a favourite subject of mine) but it turned out pretty interesting after all. The Physiocrats were a curious mix of trying to think about economics rationally, whilst being blinded by their political ideology.

In Our Time: The South Sea Bubble

The South Sea Bubble is one of the more famous early boom-bust financial scandals in Britain, in which a large number of people lost money & the government were thought to’ve been all too involved in the whole thing. The experts who talked about it on In Our Time were Anne Murphy (University of Hertfordshire), Helen Paul (University of Southampton) and Roey Sweet (University of Leicester).

They started the programme by setting the scene a little. The South Sea Company was set up in 1711, which is very early in the history of the financial stock market in London – which was only really set up in 1690s. Queen Anne was on the throne, and Britain was involved in the Spanish Succession War (attempting to prevent the French Bourbons from gaining the Spanish throne). War is expensive, and the government debt was rising – so the South Sea Company was set up to take on some of the government debt, and hopefully also make a profit (the model here would be the East India Company, which as we all know was spectacularly successful and gained a whole colony for Britain).

All three experts seemed sure that there was a chance for the Company to make a reasonable profit, it wasn’t an actual scam. It had a monopoly on British trade to South America – which was important politically because the Spanish controlled South America & so this played into the war efforts. They did in fact trade with South America. The Spanish never got a proper foothold in Africa, so they relied on other countries to provide them with African slaves to work in their colonies in South America, and the South Sea Company got one of these contracts (the war over the Spanish succession had Spanish on both sides, so that’s not as much of a surprise as one might think).

So the Company continued to finance the government debt, and make some profits, in a normal sort of fashion until 1720. And then a combination of factors all came together to make the prices of shares first rise stratospherically (from about £100 per share up to £1000 in a few months) and then crash back down. One of these factors was that companies were beginning to figure out how to advertise their shares to make them seem more attractive as investments thus drawing in ever more investors. And they were making it easier to buy those shares – you could pay in instalments, or get a loan from the Company itself which you paid back over a longer time (or with the profits you’d “inevitably” make rolls eyes). Another factor was the rumour spreading that the South Sea Company had “something big” in mind. And this big thing was that they were going to take on even more of the government debt. I admit to a blind spot about economics & how capitalism works – it always seems a confidence game to me, where it all just works because the economists believe it will – so I have to take it on faith that this would prompt investment. Or equally perhaps I’ve misunderstood this point 🙂

As the share price began to rise, people started to make lots of money (on paper) and this fuelled the desire of other investors for shares in the Company (I do understand how that bit of economics works 🙂 ). Other companies began to spring up – some with sensible sounding ideas, some less so – and to take advantage of this desire to invest, a bit like the dot com bubble with all the little start ups. And here’s where the South Sea Company started to shoot itself in the foot – they actually got Parliament to pass a law restricting the setting up of these new joint-stock companies and that started to change the mood of the investors (I think that’s how it was a bad idea).

And then it went pop! The mood changed, and the price dropped, and a lot of people lost money – some of it money they’d not actually had in the first place. One of the reasons that it’s so famous is because for the first time it affected a large cross-section of society – including a lot of writers who wrote about it. And not just wealthy people – because of the loans-to-buy-shares thing there were quite a lot of less well off people who’d thought they were going to make their fortune, and now had lost even what they’d started with. However, the experts were unanimous in saying that actually it wasn’t as bad as one might think from the reports and the writing about it – it didn’t drive the whole country’s economy into recession (or not for long), and even the South Sea Company itself continued along for another hundred or so years making modest profits. And even some of the vocally upset people only lost money “on paper” – if you’d bought in before 1720 then your shares were worth around the same or a little more in 1721. Of course some people made a lot of money by selling out at the right time, but they tended to keep rather quieter about it. This (as they said a couple of times on the programme) was definitely a period of history that was written by the losers.

Suspiciously one of the people who made money on the deal was Walpole – a leading (Whig) politician (who wikipedia tells me was the first Prime Minister of Britain – it didn’t really exist as a role till around the 1720s). There was definitely government corruption involved in the setting up & running of the Company (the debt financing side of it) – the experts talked about bribery with the Company doing things like promising politicians shares which they then had an incentive for passing laws etc to raise the value of. The collapse of the bubble damaged the reputation of Walpole, the Whigs & even the King (George I was on the throne by this point). Although Walpole was still one of the premier politicians for another decade or two, at the time of the end of his political career satirical cartoons about his involvement in the South Sea Bubble were still being circulated.

I can’t remember which of the three experts it was, but one of them brought up the effect the bubble and its collapse had on wider perceptions of women & finance. Because of the opening up of share buying and the advertising and encouragement for new investors to join in there was a much more significant number of women as shareholders of the South Sea Company – as many as 20% of the investors were female. Some of these women did well – they mentioned a particular Duchess whose name I’ve forgotten who sold out at the right moment, then made even more money lending it to people who’d lost money. But at the time that this hysteria & mania for shares that lead to the boom & bust wasn’t really understandable – economists today know this is how markets work when you have these conditions, but at the time it was seen as irrational. And there was a perception at the time that it was in part due to letting silly, irrational women make financial decisions – that they’d followed some notion of “fashion” and that had lead to the bubble and to its bursting.

I think I’ve missed out loads they talked about on the programme – like there was a bit about the French financial market which collapsed a bit before the South Sea Bubble. All three experts & Bragg were definitely very enthusiastic & kept wandering off on to tangents and having to re-track to get back to the actual topic on hand.