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Blueprint for a Twenty First Century
Western Democratic Government

        The recent so called credit crunch should have taught us all a lesson and the biggest learners MUST be the Governments of the world. Evils such as inflation have always been controlled by the money supply. Any credible Government would never have more money in circulation than the reserves they hold to back it up. Look on your paper money and it says "I promise to pay the bearer on demand". If any Government allows more paper money to be in circulation than they can cover they are in trouble (look at Hitlers inflation money during the second world war OR Robert Mugabe's hyper inflation of recent times). However, all the Governments of the world HAD to print as much money as it took to fix the financial crisis. Just imagine if you went to the ATM and it was shut off, so you go to the bank and it is shut with a "closed till further notice" sign on it. So the Government "guaranteed" £50,000 of savings but where is the government office you can go to for your guaranteed money when the bank is shut? Under those conditions the only thing of value would be NOT money but tinned food, bottled water, a gun and as much amunition as you could get. In Britain 126,000 police could not stop 60 million hungry people. Why did it happen? Because previous Governments loosened the reins of control on the banks. When control is eased, those under that control don't take an inch, they take a mile. Look at the MP's expenses scandal (what about the House of Lords, are they on expenses and how much have they plundered), caused because MP's would not vote themselves a pay rise in sensitive times so controls on expenses were eased as compensation and the MP's took advantage. To a man they all said "I made a mistake" but, if they make mistakes on their own money, what qualifies them to look after ours?

    Looking at recent history we have seen that Communism does NOT work. Now we have seen that Capitalism is frail. This shoots down the "Idealist" politics for good. A sensible and pragmatic approach is needed. Forget party lines, left and right and lets cut to the bottom line! A credible Government has to guarantee some basics to their people before they earn an ounce of respect. Firstly they must guarantee the security of the Country so we have a military. No Country that CB knows of has got a privatised military so it is Government owned and controlled. Next they should guarantee against biological attack so the air must be constantly monitored (this is done in all civilised western countries). Then they must guarantee law and order so we have a police force and CB has never heard of a privatised police force. Now they must guarantee the basics needed for life which are water, gas and electricity so these MUST be Government owned and controlled. Beyond that everything else is best served and supplied by the free markets WITH CERTAIN EXCEPTIONS AND CONDITIONS!

    A credible Government, after the financial collapse, MUST realise that EITHER a controlling share OR legally supported controls have to be introduced to the banking system. The fear that if controls are imposed the banks will move their head office to another country is easily addressed. Banks operate under liquidity rules. A very simple example of this is if they only have £100 million they cannot lend £500 million, keeping afloat on the hopes that every payment comes back on time and never late, they HAVE to be able to fully fund their business. Now that the taxpayer has put so much into the system it would not be hard to legislate that the liquidity of a bank is "under the protection" of the Government. Any bank moving its office to the Bahamas to evade Government imposed controls would effectively lose its liquidity to the Government. Far easier to have the majority share in the bank.

    On a final note regarding banking, the banks have always been the same in how they do business. If you have a business that is awash with cash, they bend over backwards to lend you money. When you hit a low spot and you ask them for a loan they walk away, considering the risk factor has adversely changed. They also have a poor record in supporting new business ventures.  We are currently in a recession. What a good time to start a new business. Because of others going out of business plant and equipment is readily available at auction and at a very low price. Suppliers are desperate to do business and the prices are as low as you can get. The banks, however would never want to lend for business purposes during a recession.
The economy of a country is paramount to its prosperity. For this reason a credible Government should have a National Business Bank. As long as the risk is properly assessed, the support of SME's and new start ups is best handled this way. It should obviously be run by banking professionals but with an eye on enhancing the level of gross national product. An active participation by Government in new and small business in this way should help to grow the economy better than ever before. If the established banks are too windy about risk in business, let them just deal with the private individuals, it is all they deserve.

    Now as a blueprint, the above description is a Government of mixed principles, nationalised companies are a Labour thing and the free market being a Tory thing, however it goes back to the basics required of a credible Government. CB sincerely hopes that our next (and hopefully, new) Prime Minister takes these proposals to heart.




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© The JSC Group March 2006