Who wants to live in a socialist utopia?

The hypocrisy of politicians is simply breath taking. Here is the latest sample from German chancellor Angela Merkel. “The world hasn’t sufficiently learned the lessons of the devastating 2008 financial crisis… Never again can we allow irresponsibility like back then to happen. In a social market economy, the state is the guardian of order – and that is something people should be able to count on.”

Merkel has form here. Back in 2010 she argued for a re-establishment of the “primacy of politics over markets”. As investors, who rely upon the judgment of markets and the value of money, we can only hope that this never happens. If ever there were a case of the pot calling the kettle black, it is politicians accusing financial market operators of irresponsibility.

I will accept that the sub-prime lending boom was not the bankers’ finest hour, and you will know that I avoid all creations of the financial services industry if at all possible. But as politicians like to say, “let us be absolutely clear about this”: in respect of the global economy the three most irresponsible acts of recent years are all due to the politicians.

Three diabolical mistakes by politicians

First off, the introduction of the euro in 1999 without a properly integrated European economy was an accident waiting to happen. The euro crisis, the high rates of unemployment and the devastating hardship that has caused a number of violent riots to break out in a number of European cities is entirely because, in Merkel’s phrase, European leaders chose “the primacy of politics over markets”.

The second act of irresponsibility was the failure of bank regulation. Gordon Brown is in the dock here for passing this from the Bank of England to the Financial Services Authority (FSA), but it is a global failure. We pay our politicians to do things that we cannot do ourselves and making sure that banks are safe and sound is one of them.

Our political leaders have failed dismally in this respect, they have let us all down and in true political fashion are now keen to blame others.
 
But the biggest failure of the lot has been the failure to balance national budgets. If business leaders and investors have lost confidence, it is no wonder. Outdated Keynesian economic theories of pump-priming, left-wing social policy and persistently over optimistic economic forecasting are all failures of the political class that have reduced us to this present mess.

When will politicians and others realise that you cannot have things that you cannot pay for? All that markets do is assess the financial reality and when they ‘provoke’ a crisis, by, for example, dumping Greek bonds or Northern Rock shares, it is because they can see the plain facts that politicians choose to ignore.

Those blind wishy-washy socialists

I am fed up with hearing people demand something for nothing. The other day I heard a ridiculous journalist called Bea Campbell arguing that old people were “entitled to be looked after by the state”. What utter nonsense.

There is no such thing as an “entitlement” to be looked after, and even if there was, the plain fact is that the state simply cannot afford to keep the swelling ranks of the aged in the fields of clover that Campbell and other wishy-washy socialists believe is their right.

All the time I hear people claiming that they are entitled to things for which they have not paid. Take teachers’ pensions. Teachers argue that they were promised retirement at 65 and a certain level of pension. They say that because teachers cannot cope when they are old, because teaching is a low-paid profession and because they have served their country (in a job from which nobody ever gets fired) that they should now be able to shuffle off into retirement. But at whose expense?

A lesson from the Chinese

Life expectancy is way higher than it was when those pension arrangements were made. The pension contributions that teachers have made nowhere near cover their pension liability. The money is not available and it cannot be simply conjured out of thin air. You would think that teachers would have the brains to understand.

For years successive governments, mostly of a socialist persuasion, have mollycoddled the population with money borrowed from our children and grandchildren. Sometimes it is cruel to be kind. Have politicians not noticed that the world’s most successful economy, China, is one where people have to look after their own fortunes and their own future?

The Chinese understand the value of money, the link between education, hard work and material rewards, and the satisfaction of achievement. In our socialist utopia we have lost all of this. 

• This article is taken from Tom Bulford’s free twice-weekly small-cap investment email The Penny Sleuth. Sign up to The Penny Sleuth here.

Information in Penny Sleuth is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Penny Sleuth is an unregulated product published by Fleet Street Publications Ltd.

35 Responses

  1. 10/01/2013, Max C wrote

    The Chinese (and the Koreans, sooner still) want just the same protections as everyone else, and they’ll get them as soon as they are able to. Nobody wants to live in your capitalist nightmare.

  2. 10/01/2013, John B wrote

    I should stick to finance and avoid politics if I were you, Tom. You could seriously upset teachers, socialists and pensioners (to say nothing of journalists) with such comments!

  3. 10/01/2013, Stephen Watson wrote

    Teachers had a deal, or thought they had, in which low pay was compensated for by a decent pension. Their employer, the state, which means the rest of us, defaulted on that deal. They earned it, Tom – your returns depend on people who got an education from those same teachers. Do ten sides on the economic value of education please, by tomorrow.

  4. 10/01/2013, IAN POLLARD wrote

    A commitment, is a commitment, is a commitment. Even if it is a commitment to pay a pension to sections of society which Tom regards as unworthy. He also appears to be ignorant of the fact that China at least claims to be, a socialist utopia.

    Tom can do better than impose on us the rantings of an apparantly immature mind. Best stick to what you claim to know about – being a tipster .

  5. 10/01/2013, Neil W wrote

    Excellent article, Tom. It’s just too easy to blame the bankers for the state of the economy. All the parties you mentioned are as much to blame – the self-serving public has demanded its “entitlement” from the self-serving politicians and bankers and they are too greedy for power and wealth to recognise when to say “no”.

  6. 10/01/2013, Tim Kyle wrote

    Previous comments all missing the points made. Tom is totally exasperated by the “spend money that you haven’t got” brigade. So am I by a long chalk. Uk is ‘broke’ and the sooner politicians and others realise that the sooner the better. I prefer to spend my earned money on what I consider sensible stuff and not have it taken off me by a lot of total spendthrifts. The more people get used to “Government handouts” the more money gets wasted and the less there is to invest in wealth creation.

  7. 10/01/2013, Brian wrote

    Hi Tom, I contribute to Red hot penny shares, yet I have not seen
    anything about the small British firm that has exclusive rights to
    drill 3,000 Acres of potentialy oil bearing ground in your monthly articles

    Regards
    Brian.

  8. 10/01/2013, David wrote

    Tom,
    Well done, couldn’t agree more…..
    Puzzles me why most of the respondents so far seem to be such blinkered ‘pinkos’ – From what I see of the teacher’s ‘proteges’ from the last 20, (or more ) years, a good proportion of them leave school, still not being able to read write or count! (ie. unemployable!) – Teachers don’t deserve the reverence they keep, demanding; – a good percentage of them should have been sacked!

  9. 10/01/2013, Martin Edwards wrote

    Agree with Tim Kyle. Successive governments have royally messed up their actuarial calculations. I am incensed that we are borrowing money now to pay ‘entitlements’ to people now, that children as yet unborn will have to pay for. This is immoral, and unsustainable.
    There are increasing millions of people without pensions because they earn little and are taxed so highly. Government continues to rob them to pay for the ‘entitlements’ of other more favoured sectors. Some pension funds that actually had money in the Banks, unlike the government, which has none, were raided by Gordon Brown on the grounds of ‘excess profits’. Tell those private income draw down pension holders who now earn in a year what they used to earn in a month that the system is fair! Spendthrifts is a polite way of putting it.

  10. 10/01/2013, Peter Holden wrote

    Tom, please stick to the tips.
    There are so many holes in your ill thought out article, I barely know where to start.

    @Neil W. I’m not sure if it is too easy to blame the bankers.
    I guess people may be inclined to stop if some of them where actually punished for the fraud(s) they have committed.

  11. 10/01/2013, Howard D wrote

    Hello Tom. Are you suggesting that the UK is probably more communist than China? Not disputing this, just checking whether I interpret this correctly!

  12. 10/01/2013, JimW wrote

    I have contributed to private and public pensions at separate times in my working life, both times I was told what was going to happen and this is what I would get.

    I think the point with pensions, private and public, is that us lesser mortals were not giving a choice.

    When they first came out I was given a booklet that told me what was going to happen and what I will get which I accepted. So who originally calculated these figures for what I would receive as a pension?

    People can whinge about other people with there pensions but its really the organization that set it up in the first place that should be the target.

    They latest tosh is that we are living longer. We have been living longer since 1900 so whats new there?

  13. 10/01/2013, Willem de Leeuw wrote

    There are a lot of people living in China in poverty, brah.

    It’s not immoral for our children and grand-children to have to pay for debts taken today e.g., if a bridge is built and will last 100 years and they will use it too, why shouldn’t they pay. Also, they’ll need, say, medical care in their lifetimes from people being taught by (evil, greedy) teachers and university lecturers today.

    Tom shows potential but must try harder.

  14. 10/01/2013, T wrote

    This is an utterly disgraceful article. Honestly can’t believe how truly deluded you are and incapable of being balanced. This is supposed to be a share advice service not a forum for wholly inaccurate & toxic political commentary. Save your black propaganda for the UKIP annual conference. The dark days of the 80′s are over. Deal with it.

  15. 10/01/2013, Robert Hill wrote

    For an average teacher, contributions have increased to 7.6%. Further increases will take place in April 2013 and 2014. Local education authorities and quangos running academies also pay 9%. The increases are not required to fund the Teachers’ Pension Scheme. This will be additional revenue, which the Government will use for a variety of purposes. The Government have failed to produce an up-to-date scheme valuation report to demonstrate the necessity of this change.
    I notice private sector opinion has stopped change to RPI while teachers’ pensions have already moved to CPI.
    David-What is a good %?
    Tim-Pension contributions have been spent by successive Governments. There is no invested fund. Governments have spent what they can’t afford!

  16. 10/01/2013, Humph wrote

    Tom, just remember, you’re not allowed to hold an opinion unless it accords with the lefties.

    Lefties, just remember, there really really really is no magic money tree out there.

  17. 10/01/2013, Nacho wrote

    Oh dear Tom, I generally like your articles but thoroughly disagree with the tone of this one.
    The incoherence of it is displayed by these comments, you first state that, to paraphrase, the primacy of politics over the markets should never be established, and also that politicians are more irresponsible than the bankers.
    In the next paragraph one of the main accusations you levy at ‘politicians’ is that they failed to regulate the banks.
    Thereby if politicians needed to ensure the banks are regulated then politics does need at least some primacy over the markets, and it is implicit in that statement that bankers cannot be trusted to behave responsibly.
    Of course many of the values you talk about like hard work, education, fiscal prudence and family values are important but you are mixing issues up here IMO- in the end this was simply an incoherent right-wing ramble and you certainly displayed your colours here.

  18. 10/01/2013, LefTurn wrote

    I suggest you stick to what you are supposed to know about.

  19. 10/01/2013, Alastair MacMillan wrote

    I agree with Tom Bulford’s points and what I would add as a third failure of politicians in the UK at least is that they are telling us that everything is under control whilst doubling the national debt to a totally unsustainable level. It is surely better to be honest with the electorate now and make substantial cuts in expenditure while we can do it on our own terms rather than run up more debt and be forced by bond holders and the IMF to make even bigger reductions in expenditure when the economy will probably be in an even worse state.

  20. 10/01/2013, ASDAK1 wrote

    Good Evening Tom, This was certainly more than a little rant! I agree with some aspects of it and tonights News highlights that our dear Politicians feel they need a £20,000 payrise! Given the fact that they earn £65,700 on the bottom scale, do they not realise that we certainly cannot afford a 30% increase in their Salary. As has been said The U.K. is broke and it will take a lot of mending. I was taught to live within my means and there are certainly not enough people doing that, including our Government.

  21. 10/01/2013, Pete C wrote

    Spot on, Tom. If the UK was a business it would have been declared bankrupt years ago. This country can’t keep spending what it can’t afford. In any case, teaching is not low paid. Sure, teachers don’t earn as much as footballers, doctors or hedge fund managers but their pay is actually comparable to and in many cases better than private sector graduate jobs, particularly in the regions. If they can and want to earn more, quit and do something else. No-one’s putting a gun to their heads and forcing them to be teachers. I’m personally sick of supporting the bloated final salary pensions of public sector workers when I can barely afford to contribute to my own (money purchase) pension after the government’s taken it’s slice.

  22. 10/01/2013, Russell Bruce wrote

    Stick to the stock research. We neither live in a utopia or a socialist one. You are entitled to your views but don’t mix them with your core remit.
    Pensioners paid for their pension entitlement throughout their working lives. The fact that the government spent all the national insurance contributions is down to governmental failing. And don’t pretend the markets are perfect just as governments are not, as you admit, G Brown got it wrong with bank regulation. But did you argue for that at the time debt levels were becoming unsustainable? Seems you are in favour of regulation after all.

  23. 11/01/2013, WeymouthJohn wrote

    What a lovely rant. I didn’t realise I lived in a socialist paradise, any way what’s wrong with living in a paradise? If my neighbour is in trouble then I want to help him and don’t expect to profit from his misfortune. If that makes me a “socialist” then so be it, I’m proud of it. I have recently had the bad luck to need the services of the NHS. Excellent care from many dedicated people being paid a fraction of the “earnings” of the banking fraternity. I’m glad I didn’t come round from the anaesthetic to find a “city gent” looking after me – even worse to have been operated on by a LIBOR fixer. But there’s money to be made, the vultures are gathering and already parts of the health service have been flogged off to the US. Cash in now! There you go, an alternative rant.

  24. 11/01/2013, Jamie wrote

    The points on over-spending, and politicians being hypocrites, isn’t going to get much argument. Yet, as mentioned in another comment, why label the politicians worse than the financial sector, whilst blaming them for not regulating?

    The language on state pensions is arrogant. Not everyone wants to spend their life chasing the green, and playing with money isn’t the only game in town. Midwives, teachers, the police: why should anyone bother? Review the system, sure.

    Of course the idea that the UK ought to be following China’s model – in which rampant greed, corruption, a gross wealth divide, and woeful security for the less fortunate all exist – sounds ridiculous. He knows it.

  25. 15/01/2013, Tom Bulford wrote

    Today on the radio I heard somebody complaining about alleged cuts to police pay. He said that he disagreed with these ‘and with all the other cuts being made by this Government.’ To which Victoria Darbyshire asked him how he would tackle the budget deficit. ‘I don’t know,’ he replied, ‘I am not a finance expert.’
    How difficult is it to understand that you cannot go on spending more than you receive, either as an individual or as a group? This is my point. There is an air of unreality from Angela Merkel and others who seem to think that money grows on trees.
    As to the teachers, life expectancy has shot up in the last hundred years. I agree that the actuaries might have anticipated this when they calculated pensions and contributions 30-60 years ago, but they did not. If you are a teacher, or any other retiree in the same situation, what would would prefer? To carry on working a little longer and pay in a bit more – or fall down dead aged 65-70 as you were expected to do?

  26. 16/01/2013, Nick Fury wrote

    So long as we are all expected to abide by law & order (which we didn’t write) then the State has a duty to look after us all, giving all a quality and generally acceptable lifestyle, including a retirement, and make no mistake, it is owed to us all, as we are all part of the nation state. If not then why can’t I just find a nice piece of land and build myself a home or print my own currency (as it seems there is a magic money tree!), perhaps I could form a militia and force outsiders to do what we think. Don’t take the now forgotten fundamentals of civilisation for granted, we are citizens becuase it is in all our interests to be, if the state fails in it’s part – expect consequences.

  27. 16/01/2013, RªVÏ wrote

    The Politicians. The Priests. The Big Brown Envelopes. Mess of potage. Unfortunately they have sold us down the river at the same time.

  28. 16/01/2013, Julian wrote

    Politicians are responsible for creating the conditions and the parameters within which the rest of us have to operate. If the crisis was caused by recklessness as a result of deregulation of the banking system, the politicians are to blame; not the bankers. If the politicians had any balls, they wouldn’t have taken off the reins in the first place!
    It also makes me laugh when they turn around to ordinary working people who use convenient tax laws to save themselves money and call them “immoral” (David Cameron to Jimmy Carr, 2011) – If you’re so bothered by it, cammy, close the loophole!
    Not to mention there are many millionaires in the cabinet with money held in offshore accounts. Hypocrits.

  29. 18/01/2013, Jack wrote

    There is an argument for socialising medicine. We are all randomly prey to infectious disease, accidents, and other misfortunes of nature. Even Jim Fix, the guru of jogging as a means of maintaining health, died relatively young.

    In 1947 when the nation ran on coal, every factory, railways (which were the main means of transport), and every power station were fuelled by coal, it was logical to socialise the ownership and production of coal. (By the 1980s it was no longer logical to do so).

    To what extent do we rely on the banks? Most people need retail banking for everyday transactions, but beyond that what interest do we have in their activities? This suggests that banks should be separated with the state underwriting (socialising) retail banking but the merchant banking being left to fend for itself.

  30. 18/01/2013, Jack wrote

    Tom your point about teachers’ pensions.

    When one makes a deal, one should stick by it.
    If one makes a mistake and the deal is extraordinarily advantageous to your counter party, you still stick by the deal. A deal is a deal.

    So the government got its sums wrong. Oh dear. Why should its counter parties suffer because it is incompetent? If the boot were on the other foot, and the teachers had got their sums wrong would the government not hold them to the agreement?

    We as tax payers can complain about the government and its incompetence, but the teachers are doing nothing wrong in demanding that the deal they entered into be honoured.

  31. 19/01/2013, JimW wrote

    30.Jack wasn’t it the tories who set out the pension scheme in the 1980′s?

    It does make me laugh when they say we are getting older when we’ve been getting older since the 1900.

    Notice Tom didn’t mention wars as a liability for future generations. Wouldn’t be because of so called defence companies would it?

    We are suppose to be in dire financial trouble yet we have forces in Afghanistan, Falklands, anywhere else, near Syria perhaps. Our government certainly manages to find money for wars.

    Who was it said use funds for Welfare not Warefare.

  32. 01/02/2013, Hail The Tripod wrote

    “If my neighbour is in trouble then I want to help him and don’t expect to profit from his misfortune. If that makes me a “socialist” then so be it, I’m proud of it.”
    It doesn’t. Believing that everyone equally and collectively acting through a monolithic power structure run by greedy narcissists would be better placed to help your neighbour rather their family, friends and neighbours – that would make you a socialist.

  33. 02/02/2013, Provider9 wrote

    30. Tom. A deal is a deal. No when the people making the deal aren’t the people who are paying for it whilst screwing their own pensions in the process.

  34. 28/02/2013, pip wrote

    The agreement regarding teachers pensions was made assuming teachers would remain at least competent. My children attended one of the best junior schools in the area and yet the standard of english among the staff is so poor they would be unable to pass an 11+ exam. Too enable my daughter to gain a place at our nearest Grammar School I had to tutor her myself. Agreement are two sides to every deal; teachers have failed to keep to their part.

  35. 28/02/2013, pip wrote

    Please note my typing is poor due to quadriplegia

Comment on this article

MoneyWeek magazine

Latest issue:

Magazine cover
Walking out on the banks

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 3 FREE Issues
Shale gas 'fracking' promises to transform Britain's energy market. Find out what it is, what it means, and how to invest.

More from MoneyWeek

The problem with the Bank of England

Fracking: Nine reasons not to get carried away

Five small-cap stocks worth a flutter

This Dutch company could help us tame floods

ScreenHunter_01 Mar. 25 09.51

Get the latest tips and investment opportunities from MoneyWeek magazine: Claim 3 FREE issues HERE