Sunday, 2 June 2013

The Many Faces of Liam Byrne

Liam Byrne is probably best known for his "There's no money left" note on leaving the Treasury in 2010, though the "Working with Liam Byrne" memo from 2008, which specified in excruciating detail how civil servants should treat the great man, runs it pretty close. The former was stupid, but highlighted his assumption that in addressing fellow neoliberal and ex-investment banker David Laws, the then new Chief Secretary, he was addressing a member of the same club (Laws' decision to release the note to the press, in support of the coalition's austerity strategy, was one of many LibDem betrayals). The latter characterised Byrne as a self-idolising "mover and shaker", applying the micro-managing norms of the corporate world to government. The common thread in this, and Byrne's career to date (Harvard MBA, Accenture, Rothschilds, Parliament), is the neoliberal assumption that the business of government is business.

This shines through in the extracts of his new book, Turning to Face the East: How Britain Can Prosper in the Asian Century, which is published this week. What also shines through is his egomania, which is consistent with his previous oeuvre. I defy you to read the first two paragraphs of this extract in the Observer and not piss yourself laughing. To judge from this taster, the work is of no political or economic (let alone literary) merit, other than as further evidence of the tenacity of neoliberal thought and Liam Byrne's tin-ear. There is the usual threadbare rhetoric about a "global race", though this time the prize is a larger slice of the Chinese market rather than nebulous world domination. He refers to "the great economist Jim O'Neill" on the scale of China's growth. O'Neill, the author of the BRIC acronym, has always been an inhouse economist at global banks, most recently Goldman Sachs. His contribution to economic thought, as opposed to currency speculation, has been zilch. He is a perfect example of the hegemonic control of the discipline, that sees market interests dictate both academic and public discourse, which was exposed in the documentary film Inside Job.

Byrne is particularly concerned about the Germans: "In Europe, Germany is outstripping us. In thinktank-land they talk of a German-Chinese 'special relationship'. Fully 47% of European exports to China are from Germany, far more than a decade ago. German trade targets for 2015 are three times the size of ours". The reference to "thinktank-land", not to mention pushing the Germanophobia button, is presumably Byrne's attempt to talk like an ordinary bloke (let's be grateful he isn't shouting "Cum on, Ingerlund!"). What he seems incapable of pointing out is that healthy German exports to China are largely driven by machine tools and specialised engineering services, i.e. feeding the manufacturing boom. Given that we trashed our manufacturing sector back in the 80s, and did little to revive it during the 90s and 00s, preferring to privilege the finance sector that Byrne worked for instead, bleating about Germany's market share today is just dim.

His remedy is free trade, the free movement of capital, and the free movement of skilled labour: "To succeed, more of our children must study in China, so must more of our teachers and academics. Chinese firms must do more business here – and more British firms must work in China. Managers and employees must pass back and forth. Brits should own great Chinese brands – and vice versa". His self-delusion is obvious when he decides to give us the benefit of his historical knowledge: "For centuries we were connected only by long and dangerous caravan routes along which we traded spices, silk – and myths. We don't trade so much spice and silk any more". The obvious myth is that Britain ever traded spices and silk with China, with "caravans" slowly toiling through the lanes of Kent. During the heyday of the Silk Road, we bought these luxury goods from middlemen, notably the Venetians, who controlled access to the Eastern Mediterranean entrepots.

When direct trade between Britain and China finally started in the 17th century (following the lead of the Dutch), it was via ocean-going ships. This was luxury trade, centred on tea, silk and porcelain. As the Chinese had little appetite for British goods, these had to be purchased with silver, leading to a balance of payments problem similar to that which the US has today with China. The solution was a combination of intellectual property theft (transplanting tea production to Assam in India), which is ironic given the way this charge is routinely levelled at the Chinese today, the importation of cheap textiles (notably Indian cottons), which undercut domestic production, and the illicit importation of opium (grown in India). The last of these was not a wicked plot to undermine Chinese moral fibre, but a rational attempt to achieve a balance of payments. The human cost was incidental. Had it not been for middle class demand in Britain for fine porcelain and Earl Grey tea, we wouldn't have bothered.

What is significant is that Britain's trade with China was dependent on its monopoly control of Indian produce and its ability to use the Royal Navy to prevent the Chinese from blocking imports during two "opium wars". In other words, this was the result of imperial exploitation and military strength. Free trade is not the same as fair trade. Byrne is having none of this: "If there's one lesson we should learn from ... our economic success over three centuries, it is that we thrive on competition. Let's not lose that spirit. Let's be confident enough to throw in our lot with the changing world, to become full-blooded globalisers". There is not a smidgen of doubt in Byrne's mind that globalisation is best, not only for Britain but for the rest of the world. He highlights three win-wins for the UK and China.

First, he believes that they require expertise in the high-value services that we are so good at, such as "advertising, aerospace and automotive, branded consumer products, civil engineering, education (especially higher education), energy, financial services, and life sciences". It should be obvious that these divide into two camps: high-end engineering and science skills that the Chinese are currently developing themselves, and parasitical services sold as positional goods. I'm surprised he didn't mention Scotch whisky and Shakespeare. Second, he subscribes to the Cool Britannia bollix that we are a uniquely inventive nation and can therefore partner with Chinese manufacturing: "the real opportunity is to go global with Chinese firms, harnessing British invention and innovation with Chinese production technology and scale in a search for Chinese – and then global – markets". This is nonsense. China will no more forgo developing its own R&D capabilities than Japan did. It has a generation of PhD students to employ, many of them educated in the UK. Third, and most pertinently, he believes we can help China invest its huge dollar surplus. You can take the boy out of investment banking, but ...

One of the choice snippets from the Working with Liam Byrne memo was the claim that: "Money is the root of all progress. Finance are a vital part of the initiation conversations" The use of "are" rather than "is" in the second sentence tells you that for Byrne "Finance" is an organisational entity (despite the common plural confusion) rather than an abstract concept. It's a group of players that includes not only himself but ideological chums like David Laws and Jim O'Neill. The Asian century is an enormous opportunity ... for investment banks.


  1. This is a superb article, why the hell has nobody commented?

  2. I agree - excellent blog - so I linked it to housepricecrash.

    The City is preparing - Gavyn Davies in the FT blog:

    "So far, the permitted amounts are small, but Goldman Sachs estimates that in the next few years, China’s demand for external assets might rise from the current 20 percent of GDP to 90 per cent. That represents a potential outflow of about $6 trillion, as Chinese investors are permitted to diversify overseas."

    Carney will preside over an unholy boom. Sadly I don't expect UK residential real estate to get left out.

  3. And Byrne is to be responsible for Britain`s universities ??????? !