Those who have been following my blogs and other internet postings will know I have previously referred to what I call "The Anglo-Saxon Syndrome", my observation that in the coming economic crisis that those countries which have most surrendered to the monetarist, neo-liberal, keep-the-government's-hands-out-of-business creed, will be those to suffer the most. And as for the most part these governments run countries where English is the native or preferred language, then the term seems appropriate, as does its acronym "ASS". Four of these ASS countries are at particular risk - the USA of course, but also the UK and my own fair land now, New Zealand and I also include Ireland, nominally a great success, the European Tiger, but suffering the same excesses of the housing bubble and huge indebtedness. Whilst Australia and Canada will also suffer, their vast size and relatively small populations and their ownership of still massive amounts of unexploited resources might shield them somewhat from the harsh realities now blowing at hurricane force through the global economy.

For instance, this is what I posted to the MediaLens site in February 2007, in response to a then recently released UNICEF report comparing the welfare of children in different countries, and providing an overall score. The UK and US scored miserably.

"This is just so sad. Humiliating. Sickening really, but so predictable. I suppose some country has to be bottom, but it's utterly shaming for a rich nation like the UK or the US to be below Poland or the Czech Republic. As an ex-Brit, with what used to be a high regard for my own country, words fail me. There are many wonderful things about the UK, but if the country can't look after it's own children, these things count for nothing. I would like to have seen Australia's and New Zealand's place in this survey - whilst I have no doubt they'd be higher than the UK and the USA, I suspect they won't be as high as the more egalitarian societies such as Holland or the Nordic countries. (Nov 2008 - NZ doesn't keep the sort of figures that allow for this overall comparison, however last year NZ ranked last in the child safety in the OECD, and was near the bottom in many other measures. One can find the report here) The almost total surrender of egalitarian sovereign powers and the necessary investment in the public realm to the corporatist monetarist economy, and the consequent pathological social and economic disparity, has been the particular distinguishing feature of the Anglo-Saxon economies - we unfortunately speak the same language as Americans, and we have been most vulnerable to the perverted logic of this simplistic and destructive philosophy. I call this the Anglo-Saxon Syndrome.

"Welfare Reform Minister Jim Murphy said the Unicef study was an "historic" report, which used some data which was now out of date". But if you check the very first such report produced in 2000 the UK was fourth from the bottom, the US second from the bottom, the UK obviously deserves it's continued lowly place. It is interesting though that Italy was second bottom in 2000, now eighth from the top, I find it difficult to believe anything dramatic could have happened in just a few years in Italy to account for this, other than Berlusconi leaving office. So whilst this survey can't be taken as the last word on the subject, the overall finding is pretty clear, some of the richest and proudest nations on this earth are failing a huge number of their own people. This is the recipe for social disaster and economic ruin.

Yet there is absolutely no understanding of these things in the Parliament. Labour should be hanging their collective heads in shame, what an appalling indictment of their stewardship of the British nation over the last ten years. And as for the Tories, not much enlightenment there either, Shadow Chancellor George Osborne accused Chancellor Gordon Brown of having "failed this generation of children. After 10 years of his welfare and education policies, our children today have the lowest well-being in the developed world," said Mr Osborne. He carried on"I don't actually think government has the answer to all these problems. This is not all about politicians in Westminster passing laws, it's about social responsibility, it's about parents taking greater responsibility for their children, it's about trusting teachers in classrooms, it's about us as neighbours in a society playing our part as well." In other words it's about absolutely anything that places culpability for this state of affairs except where it truly belongs, at the top. And, Mr Osborne, whilst you're in such an expansive mood, can you tell me about the previous twenty years?

The Tornado

I am reminded about this matter from an unexpected source, by reading on the internet of the brand-new steam engine that has just been built in England. This engine has been provisionally named "Tornado" and has been built with the backing of a well-off industrialist and much commercial sponsorship and private donations, and a great deal of tenacity by a large number of enthusiatic volunteers. You can read about this heart-warming project on their web site, the A1 Steam Locomotive Trust. It's a fascinating site, reading it brought back fond memories of my childhood, and the occasional visit to the Leeds Station to see the steam locomotives, and of some of my friends who were keen "train-spotters". This engine has now been certified for travel on public main lines, and will shortly be tested at its likely full speed of about 90 mph.

It's a long time since any steam locomotive was built in Britain, nearly fifty years ago, in fact. The Tornado was built from plans preserved at the York Railway Museum and the design represents the pinnacle of steam locomotive engineering at the time. This is a summary of the project as posted on the Trust's internet site:

The A1 Steam Locomotive Trust, a registered charity, has built Peppercorn class A1 Pacific 60163 Tornado at its Darlington Locomotive Works and when certified it will be used on charter trains operating on Network Rail. Fitted with additional water capacity and the latest railway safety electronics, Tornado is fully equipped for today's main line railway. The class A1s were designed by Arthur H Peppercorn for the London & North Eastern Railway and 49 were built in 1948/49 by British Railways. However, following the dieselisation of the railways, all were scrapped by 1966. The project to build a new Peppercorn class A1 was launched in 1990 and after 18 years of planning, construction and fundraising the £3 million locomotive was completed in August 2008.

The trust chose this particular design as the equally famous, or perhaps more so, line of Pacific locomotives designed by Sir Nigel Gresley has quite a number of preserved examples, whereas this line of engines had none. You can read a bit about this on my own site here. (I used the Sir Nigel Gresley to compare the pinnacle of locomotive engineering, with the pinnacle of automotive engineering using the internal combustion engine.)

You can find particulars of the Peppercorn design here. I think everyone would agree that the locomotive is strikingly handsome and beautifully propotioned. These locomotives would prove the most reliable of any main line passenger locomotive run by the newly nationalised rail network, British Rail.


So what has this to do with the "Anglo-Saxon Syndrome"? Certainly the Tornado represents the very best of traditional British engineering, a truly remarkable piece of instant nostalgia. What is more remarkable than this being the first mainline steam locomotive to built in the UK for nearly fifty years, is the fact that this is first mainline locomotive of any type built since the early 1990s. This is what this page in the Guardian said.

The astonishing thing about Tornado, a latecoming member of the once 49-strong A1 Pacific class designed for the London and North Eastern Railway just before the nationalisation of Britain's railways in 1948, is that this is the first main line locomotive - steam, diesel or electric - built in this country since the beginning of the 1990s. Shopping-mall, service-economy Britain has very largely abandoned heavy industry and railway locomotives are things seemingly best left to foreigners willing to make large-scale machinery from massive lumps of iron and rolls of steel.

. It is astonishing, and very troubling, for the UK cannot afford to abandon its industry to other countries. No modern, progressive nation can. A vibrant industry is a strategic and forward-looking asset. It is the training ground for skilled workmen, constructors, engineers, civil engineers, scientists and all the other panoply of the human capital of a progressive nation. Compare the rump of British industry with that in France or Germany for example. Even Finland is a success in this matter, a country less than one tenth the size in population, where its workforce build the world's largest cruise liners, where Nokia competes successfully around the world, and where they build the majority of massive engines for the largest supertankers and other vessels around the world.

Such skills can be put to other uses, building windmills, solar power plants, nuclear installations, buses, trucks, trains, but if those skills have languished for a generation then how can this be done? The world economic crisis will partly be solved by massive government intervention, especially in the important infrastructure of transport and energy, and the UK is going to be sidelined and unable to take advantage of this investment. I doubt many bankers and investment analysts are going to be that keen to get their hands dirty, and how many engineering firms would wish to employ them? The UK, along with the US, and NZ has gone along with the absurd notion of the "service" economy, but a service economy is extremely unbalanced, it is basically unproductive, and is supported mostly by borrowing vast amounts of money from overseas, selling off the most productive assets to overseas interests, living on the investments of previous generations, and failing to invest in important and productive infrastructure.


For some years, a trenchant, literary and amusing critic of the financial and economic mess that is the USA has been James Howard Kunstler, whom I have mentioned several times previously. He came to New Zealand about three years ago, and whilst he enjoyed the scenery in the South Island, he found our towns and cities to be drear and trashy, with the same sort of sprawl and temporary architecture of malls, car lots and car-dependent infrastructure of this home which depressed him. He was interviewed on the radio, and the general consensus seems to have been that he was a Jeremiah and his views were just too extreme. As the world economy now crumbles, perhaps his views might get a better hearing, though one shouldn't count on this, not many people are content to admit they were wrong. This is his forelorn and heartfelt opinion about his homeland "A land full of places that are not worth caring about will soon be a nation and a way of life that is not worth defending."

This attitude to productive endeavour is typified here when the recently voted out Labour administration bought back the railways from Toll Holdings (at a very inflated price). It is known that a billion dollars or more will need to be invested to bring this railway system up to something that is more nearly appropriate for a modern wealthy nation. It is proposed to build purchase locomotives and build carriages in New Zealand. One particular then opposition MP, who's name I can't recall, though it could have been Rodney Hide, wondered out loud to complain, why was New Zealand thinking of building carriages, it was stupid to think of doing so, or words to that effect. I can't now find the reference to this, but I can tell you it really annoyed me. In 1863 my great-grandfather immigrated to New Zealand and later joined Price Bros. engineering in Thames. This company started making steam locomotives in in 1904 and built 123 by 1928. So more than one hundred years ago, this country, with a population of just one million people, could build a railway system and build the locomotives and carriages to run on it, has now, with a population of over four million, become so industrially inert that we can't, at least according to one New Zealand MP, even consider building a railway carriage. Talk about selling your country short. With this attitude, it's no wonder New Zealand is finding it hard to make a living in this world. It might also explain how in 1970 the GDP per capita of Finland and New Zealand were nearly identical at $2425 and $2337 respectively, but now are $36,000 and $27,000 respectively.

Around the same time as my MediaLens posting above, I wrote this, pertaining to the same matter. This was at least sixteen months before the start of the financial crash.

I have a strong personal affinity for the idea that the Scandinavian system of strong state welfare and higher taxes has generally preserved a reasonably high standard of living, without the extremes of wealth and poverty we see in the UK and the US. These states have always seemed to me something of an ideal to aspire to. Of course, they are not perfect, humanity isn't perfect, but as an antidote to the untrammelled neo-liberal, monetarist, market driven economy they are very precious, they show that there are other ways of organising society and, at least in child health, and I suspect in many other important measures, not least average per capita income, they do rather better then the UK.

I can add here some professional support for this view from an opinion piece in the Scientific American, November 2006. by Jeffrey D Sachs, Director of the Earth Institute at Columbia University. I wrote to Jeffrey Sachs, asking his permission to post this article on my web site, this was my letter:

Dear Dr Sachs,

  Just the briefest e-mail to thank you for your article that appeared in November's Scientific American in regard to the welfare state and economic ideology. My own internet site contains several references to the subject of your article, and I have previously called this phenomenon the "Anglo-Saxon syndrome". This has been an important issue for me, as I am British and moved to New Zealand about twenty years ago, so I have experienced directly the ever widening disparity in income and social well-being, both in the UK and here in New Zealand. We have a nominally Labour government in New Zealand, and whilst has been some softening of the purist monetarist approach here, the basic philosophy remains the same. I feel like a small sprat being carried along by a powerful tide, even if I could swim against the tide, what is the point when so many of  the other sprats seem so content to let the ocean continue its present course?  

Thanks again, I hope you will happy for me to post a copy of your article to my site?  

Yours sincerely,

Friedrich von Hayek was wrong. Welfare States, beyond Ideology Are higher taxes and strong social "safety nets" antagonistic to a prosperous market economy? The evidence is now in.

One of the great challenges of sustainable development is to combine society's desires for economic prosperity and social security. For decades economists and politicians have debated how to reconcile the undoubted power of markets with the reassuring protections of social insurance. America's supply-siders claim that the best way to achieve well-being for America's poor is by spurring rapid economic growth and that the higher taxes needed to fund high levels of social insurance would cripple prosperity. Austrian-born free-market economist Friedrich August von Hayek suggested in the 1940s that high taxation would be a "road to serfdom," a threat to freedom itself. Most of the debate in the U.S. is clouded by vested interests and by ideology. Yet there is by now a rich empirical record to judge these issues scientifically. The evidence may be found by comparing a group of relatively free-market economies that have low to moderate rates of taxation and social outlays with a group of social-welfare states that have high rates of taxation and social outlays.

Not coincidentally, the low-tax, high-income countries are mostly English-speaking ones that share a direct historical lineage with 19th-century Britain and its theories of economic laissez-faire. These countries include Australia, Canada, Ireland, New Zealand, the U.K. and the U.S. The high-tax, high-income states are the Nordic social democracies, notably Denmark, Finland, Norway and Sweden, which have been governed by left-of-center social democratic parties for much or all of the post­World War II era. They combine a healthy respect for market forces with a strong commitment to anti-poverty programs. Budgetary outlays for social purposes av- erage around 27 percent of gross domestic product (GDP) in the Nordic countries and just 17 percent of GDP in the English-speaking countries.

On average, the Nordic countries outperform the Anglo-Saxon ones on most measures of economic performance. Poverty rates are much lower there, and national income per working-age population is on average higher. Unemployment rates are roughly the same in both groups, just slightly higher in the Nordic countries. The budget situation is stronger in the Nordic group, with larger surpluses as a share of GDP. The Nordic countries maintain their dynamism despite high taxation in several ways. Most important, they spend lavishly on research and development and higher education. All of them, but especially Sweden and Finland, have taken to the sweeping revolution in information and communications technology and leveraged it to gain global competitiveness. Sweden now spends nearly 4 percent of GDP on R&D, the highest ratio in the world today. On average, the Nordic nations spend 3 percent of GDP on R&D, compared with around 2 percent in the English-speaking nations.

The Nordic states have also worked to keep social expenditures compatible with an open, competitive, market-based economic system. Tax rates on capital are relatively low. Labor market policies pay low- skilled and otherwise difficult-to-employ individuals to work in the service sector, in key quality-of-life areas such as child care, health, and support for the elderly and disabled. The results for the households at the bottom of the income distribution are astoundingly good, especially in contrast to the mean-spirited neglect that now passes for American social policy. The U.S. spends less than almost all rich countries on social services for the poor and disabled, and it gets what it pays for: the highest poverty rate among the rich countries and an exploding prison population. Actually, by shunning public spending on health, the U.S. gets much less than it pays for, because its dependence on private health care has led to a ramshackle system that yields mediocre results at very high costs.

Von Hayek was wrong. In strong and vibrant democracies, a generous social-welfare state is not a road to serfdom but rather to fairness, economic equality and international competitiveness. The Earth Institute is a major academic attempt to encourage debate, leadership and training for a sustainable planet, and its web site can be found here.

Prof. Jeffrey D. Sachs is director of the Earth Institute at Columbia University.

I went on to say in my posting to MediaLens in February '07:

I think the proof of the pudding of which is the best way to organise an economy and society won't be obvious at the moment, when the good times still seem to be rolling - at least to those who don't understand this thesis, which includes most of Anglo-Saxon society - but when the s..t hits the fan. We will see much more clearly then as to the robustness and sustainability of society when times get harder. I don't particularly wish to see this, but this Media Lens site has many postings about global warming, peak oil, unsustainable economic and industrial activity, and the economic distortions of neoliberalism. When the crash does come, and it will come, as it usually does, from the US, I have a strong presumption to believe that societies that are more inclusive, that have strong community communications and systems in place, where envy and disatisfaction with one's place in society is reduced, and may be the sense of entitlement, these will do rather better than those countries, like the UK and the US, and maybe NZ, where these principles have been forgotten or allowed to atrophy.

For an analysis of America's preparedness for this situation, see this article. This is a very sobering assessment by an expatriate Russian, Dmitry Orlov, on the state of American society, and what is likely to happen if it collapses, he predicts this is inevitable. Well worth reading.

There will be many disparate factors that will allow countries to ride out the economic storm or founder. Political stability, a cohesive community, lack of graft, national pride, flexible and truly representative political and social institutions, lack of economic disparity and many others, will be important determiners of outcome. I am certainly not writing off the UK, the US or NZ, nor do I necessarily think that all other countries will do better, many countries have their own major social dislocations, but even so, I think the Anglo-Saxon countries, having so far moved their societies away from the usual productive endeavours of advanced nations, and which have allowed a very severe inequality of advantage and advancement to develop, are going to be extremely vulnerable. I hope for the best, but fear the worse. I have previously noted a certain smug superiority in the UK for instance, as compared with France, as to the success or not of their respective economic policies, but I have pointed out over several years that the proof of all this is not how these economies do in the good times, but how they cope in the bad. Well, it's all playing out now, and we won't have to wait long for the answer.