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Britain's Problem with Banks and Immigrants

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Anyone who's been listening to British politicians over the last few years could be forgiven if they drew the conclusion that all of Britain's problems stem from banks and immigrants. There have been brief respites from the focus on these targets when politicians have jumped on the bandwagon of indignation and directed their attention to other things like the British phone hacking scandal or the Stephen Lawrence murder trial 18 years in the making.

Don't get me wrong, I find the phone hacking scandal and the fact that it took a family over 18 years to obtain any kind of justice for their murdered son abhorrent, but it seemed a bit disingenuous to me that every Tom, Dick and Harry of a politician lined up only when it became sexy to do so to either claim credit for justice finally being done or express outrage at the facts and circumstances surrounding systemic invasions of privacy, including one such invasion that inhibited the search for a murdered schoolgirl. There are of course some politicians who have seemingly always been on the right side justice and British standards of fair play. But where were the rest? Perhaps they were scheming to get invited to the next News International 'Summer Party.'

But I digress. Getting back to the topic of this article, a lot of the discourse during the 2010 parliamentary elections that brought the Conservative Party to power focused on banks and immigrants. Yes, it is absolutely unacceptable to create moral hazard by allowing bankers to believe that their losses, however reckless, will be covered by governments. However, criticism of using taxpayer money to save Britain's pride-inducing banking system smacks of hypocrisy when nary a word is said about the taxpayer money that goes to fund the luxurious upkeep of Britain's royal family. What is more utilitarian? Ensuring a banking system that will support house purchases of ordinary citizens, robust British businesses and provide employment to millions of Britons, among them, many janitors, secretaries, administrators and other members of the 99 percent, or Prince Harry being able to live it up in Las Vegas with his bodyguards in tow?

The other favourite punching bag for politicians is immigration. Britain's former prime minister, Gordon Brown, famously got into trouble for his remarks about a voter who had complained about Eastern Europeans coming to Britain and taking jobs. Rather than incur the wrath of the voter by telling her that Britain as a member of the EU had all but signed away its rights to restrict most EU immigration, Gordon Brown rationalised by saying that there were British citizens migrating to other countries too, but later on, unaware that he still had on a live microphone, called her a bigot. Needless to say, Mr. Brown had to spend part of the remaining election campaign apologising for his remarks.

The Conservative Party in turn campaigned hard on reducing net immigration, but also never highlighted the fine print that Britain had all but signed away its rights to restrict most EU immigration. Each party harped on immigration to win votes, but the Conservative Party seemed little bit more convincing and is therefore currently in power. However, a recent report by the British Press Association affirmed that the Conservatives cannot realistically keep their promise to reduce immigration. Regardless of whether they can keep their promise, perhaps the excessive focus on immigration is misplaced. Another recent report, one by the independent think tank, the National Institute of Economic and Social Research, found that immigration had no effect on unemployment. And let's not forget that most immigrants are taxpayers in Britain, with many having to fork over 50% of their income to the coffers of the UK government. But will reports or facts alter the focus of Britain's politicians?

Unlikely.

Scapegoating immigrants and banks is too big a vote getter to abandon.

But the intense focus on banks and immigration will not get Britain's economy back on track, and neither will relying on good ol' fashion optimism as the leader of Britain's Labour Party seemed to say in his 2012 New Year's message.

Rather, the government will do well to focus more on reviving the proud tradition of British manufacturing, an important area of the economy that has languished in the recent past and is in need of a bold stimulus. Britain has a European example of a strong manufacturing sector in Germany. Despite Germany having discarded its prized Deutschemark for the doomed Euro, its unemployment rate is at a record low today. Why? One of the main reasons is that Germany has a strong manufacturing sector which is comprised of small to medium sized businesses (known as Mittelstands). Despite competition from the likes of China and India, German manufacturing is succeeding in a way that British manufacturing is not. According to research by the British accounting and advisory firm, BDO, the success of Germany is due to a number of factors, including a strong national commitment to engineering. What is needed in Britain is indeed strong unwavering commitment to all factors that encourage a thriving manufacturing sector, including investment in higher education, instead of encouraging kids to end education at 16 years of age, and a healthy banking sector that will finance the growth of the manufacturing sector.

Lest politicians continue their game of deflecting criticism for the current state of the British economy, blaming previous governments and the "bankers" and grandstanding about immigration, with the current situation of high inflation at 4.2 percent, low GDP growth at 0.6 percent and high unemployment at 8.4 percent, a warning to politicians on all sides of the political spectrum might be to be careful not to become Portugal. Today, thousands of Portuguese citizens are seeking employment in former colonies like Angola and Brazil and the Portuguese prime minister has had to go to Angola with cap in hand seeking much needed investment in Portugal's €7 billion privatisation programme. Could a similar fate await Britain?