I am still hoping for a Santa rally in share prices but they are certainly not happening today. The Bank of England raising interest rates by 0.5% to 3.5% has surely had a negative impact. These are some of the depressing comments made by the Bank:
“Bank staff now expect UK GDP to decline by 0.1% in 2022 Q4, 0.2 percentage points stronger than expected in the November Report. Household consumption remains weak and most housing market indicators have continued to soften. Surveys of investment intentions have also weakened further”; and “The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response…..The majority of the Committee judges that, should the economy evolve broadly in line with the November Monetary Policy Report projections, further increases in Bank Rate may be required for a sustainable return of inflation to target”. In other words, more interest rate rises are likely to follow.
With major strikes by train staff, NHS staff and postal workers, you can see why there is gloom in the market. Are the strikes justified? My personal view is that NHS nurses deserve some increase to reverse the erosion of their real pay over the last ten years and to make the job more attractive. I visited my renal consultant on Monday and she was not happy to be providing cover for striking nurses in the next few days. But will I need to cross a picket line for my next appointment? It’s almost 50 years since I had to last do that when HM Customs & Excise staff were on strike but it was all very civilised in reality.
As regards train staff I am not convinced that they are justified in disrupting another essential service for a pay rise and for their demands over working practices. They are already highly paid in comparison with other workers and they should not be trying to dictate how management run the operations. There are also suspicions of a political undertone to their actions.
I issued a tweet saying the strikers should be give an ultimatum to work normally or be sacked. Rather surprisingly I got a response from the RMT which said “In your haste to sound draconian you’ve not considered who would staff the railway or train the replacements if you’ve fired them all? Nothing would move for years!!”.
My response was “Well it worked when Ronald Reagan did it for air traffic controllers, did it not?”. This refers to the events in August 1981 in the USA. To quote from Wikipedia: “After PATCO workers’ refusal to return to work [over a pay dispute], the Reagan administration fired the 11,345 striking air traffic controllers who had ignored the order, and banned them from federal service for life. In the wake of the strike and mass firings, the FAA was faced with the difficult task of hiring and training enough controllers to replace those that had been fired. Under normal conditions, it took three years to train new controllers. Until replacements could be trained, the vacant positions were temporarily filled with a mix of non-participating controllers, supervisors, staff personnel, some non-rated personnel, military controllers, and controllers transferred temporarily from other facilities”.
The US airlines continued operations with minimal disruptions and the Reagan move had a significant impact on union activities in other organisations effectively resetting labour relationships in the USA. Strikes fell in subsequent years. From 370 major strikes in 1970 the number fell to 11 in 2010, and it had a positive effect in reducing inflation.
Just as Margaret Thatcher handled the coal miners in the UK, Reagan’s firm resolve on facing up to the unions created a new and better culture.
As regards postal workers the picture is not so clear. The average postman salary in the United Kingdom is £47,500 per year but the average for all postal workers is much less. But there is one thing for certain, Royal Mail Group will be badly hit by the strikes and customers will reduce the number of letters they send even more and switch parcels to another provider. Postal workers are cutting their own throats by continuing strikes. Here also the dispute is not just about pay but also working practices.
This is another essential service which should not be disrupted. Legal notices get delayed, dividend cheques go missing and letters re hospital appointments and medication deliveries are held up.
It’s all gloom on the political and economic fronts at present. But I am getting ready for the xmas holidays by stocking up on books to read. In fact I have already started reading “The Stock Market” by John Littlewood which covers how capitalism has worked in the UK in the last 50 years. Not well in summary is the answer as it has been driven by political dogma from one extreme to another. The author points out the difference from the USA where the major political parties have always supported capitalism rather than socialism.
Other books I have ordered are “Fall” – a biography of arch fraudster Robert Maxwell, “The Anglo-Saxons: A History of the Beginnings of England”, “Power Failure: The Rise and Fall of General Electric”, and “The World: A Family History” by Simon Montefiore. They should occupy me for a few hours!
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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For further Christmas reading I would recommend “The Tyranny of Merit” Prof Sandler and if you have not read it yet “The price of money ” by Edward Chancellor which explains very well why we have an inflartion issue having had too cheap money for a decade