Tag Archives: economics

Brexit and the austerity paradox

Here’s a conundrum. I think it is widely understood now that at least one major factor for why the Remain side lost in the EU referendum campaign was that a significant number of people in the poorest parts of the country did not feel that they enjoyed any of the economic benefits of being a member of the EU and wanted to give the political establishment a bloody nose. There were certainly enough of those voters to make the difference between staying in and leaving the EU, given how close it turned out to be.

So if we’d spent the last decade investing in those parts of the UK and ensuring they saw greater economic renewal, more jobs and a higher standard of living instead of forcing austerity on them, driving up reliance on foodbanks and increasing human misery in the process, we wouldn’t now be seeing the sort of meltdown that we’re witnessing going on in the City right now.

Here’s the thing though. The City had made it perfectly clear that it wanted that austerity. Indeed, the City has quite a lot of form when it comes to threatening governments with economic hardship if it doesn’t get its way. During those infamous “5 days in May” in 2010 when we had no functioning government after the general election, the mood music coming from the Square Mile was grisly. The constant refrain, especially from the Lib Dems in the coalition, was that if we didn’t follow this path economic disaster would follow. I lost count the number of times that Nick Clegg and Danny Alexander over-egged the pudding and claim that we were on the brink of economic disaster on the scale that Greece has experienced over the last few years.

I can mock Clegg and Alexander, but the fact remains that there was some truth in this. The City was telling us to follow a course of action, and were threatening to punish us if we didn’t get in line. They had the whip hand, just two years after wrecking the global economy when you would have thought there would be a little more contrition.

In retrospect, I wonder: would the market have been able to cope with a little less austerity if what it got in return was the UK remaining in the EU? With the benefit of hindsight, I think the answer is yes. And yet here we are now, staring at economic disaster, with no political leadership in Westminster, and with the money men more in charge than ever. There is talk of sensibly abandoning austerity, but only because the economic case is pretty hard to dismiss (just as it was in 2007). And in the longer term, it looks like we’re going to be more dependent on the good will of the markets than ever. Far from having our sovereignty return from Brussels, it’s been punted a couple of miles down the Thames.

For several decades now, there has been an agenda to decouple politics from economics, with both politicians and business alike preferring to pretend that never the twain shall meet. There is only one economic model that works, and politics should focus on non-economic matters. So at the same time as we see all political parties becoming uncritical market capitalists, we see identity politics and nativism take hold. The reality is that the two are fundamentally intertwined. There are deep political consequences to economic decisions, which in turn can – and has – had fundamental economic consequences. Somehow, and I don’t know how, we need to create a greater awareness for how the decisions made on the floor of the stock exchange impacts daily life in Hartlepool. The alternative is a political system which continues to consume itself and drive itself increasingly to extremes, which in turn leads to economic ruin.

Myleene Klass and political failure

Myleene Klass may be deeply confused about how the mansion tax will work in practice, but she probably isn’t the only one. As a supporter of land value taxation, it is no surprise that I think it is a flawed policy, but what’s really problematic is the way both Labour and the Lib Dems are attempting to sell it.

In many ways, Klass’s tustle with Ed Miliband sums up the problem. She seems to think that, as a tax which will only apply to properties worth £2m and over, that in parts of London that applies to garages. She’s wrong. The £2m figure was calculated to be as painless to as many people as possible. In fact, under Vince Cable’s original proposals in 2009, the tax was to apply to properties worth £1m and over. This was quickly adjusted following an outcry from Cable’s fellow South West London MPs who feared a backlash (and even £1m is a bit steep for a garage, Myleene).

The UK – and London in particular – has a real problem with rising house prices. Home ownership has reached extremely low levels compared to recent history and the fears of another housing price bubble, despite the views of fantasists like Danny Alexander, are very real. The UK ought to be having a very serious conversation about how it tackles this.

Instead, we try to kid ourselves that this is just a problem for the very rich. Hence the mansion tax’s £2m threshold. We ought to be having a national conversation about restructuring our economy to avoid property bubbles. We ought to be talking about a property tax which kicks in at much lower levels. But we’re too busy blaming everything on immigrants and the poor.

Meanwhile, our existing domestic property tax, the council tax, has not been revalued in England since 1991. If our politicians lack the courage to even do that, what hope is there for us to have a serious conversation about what’s needed.

Ironically, the Lib Dems in particular, are in a better place than they have been in years to make the case. 10 years ago, they were transfixed with the idea of scrapping all property taxes and making taxes on employment take up even more of the strain. Now they are making the case for more taxes on property and taking people out of income tax altogether. Yet there is no narrative connective tissue between the two. They aren’t making the case for a fairer society and stronger economy in which a hard day’s work is taxed less and wealth is taxed more.

Ignore policy for a minute, which is largely irrelevant these days in a world of coalition government. What a liberal party ought to be making the case for right now is a new economy with significantly different priorities. It can’t be done overnight, but it can be done over time, piecemeal. There can be a direction of travel. It can’t however be done by stealth; the public need to buy into it or it will fall apart after the first Daily Mail headline.

The mansion tax could be step one of a new economic plan; as it is, it’s a policy cul de sac. Assuming it eventually happens, it will probably suffer the same indignity as council tax, and never be touched again. Or worse, start going up by inflation to ensure that only a tiny minority ever pay it and its true revenue potential is never realised. It’s emblematic of the political malaise; instead of dealing with the big political issues of the day, we’re reduced to soundbites.

How JJ Abrams could severely hurt tabletop gaming

Typical. Just after I write a blog post praising Fantasy Flight Games, they go and do something that makes me wary. Yesterday, FFG announced their intention to be taken over by French board game company Asmodée. This comes just months after Asmodée took over Days of Wonder, publishers of the enormously successful Ticket To Ride board game (among many others).

The Days of Wonder/Asmodée takeover didn’t especially concern me as, despite their success with a number of product lines, Days of Wonder seems to have been struggling for some time to come up with another big hit; I can see how that merger could potentially be in their interests. Fantasy Flight on the other hand is a much larger company currently in its prime; it isn’t immediately obvious what they’re getting out of this, but I assume they have their reasons.

I’m especially nervous about this because Asmodée itself is part of the Eurazeo group, a publicly listed investment company with its fingers in a large number of different pies. To say the board game industry has had a fairly difficult relationship with the stock market would be an understatement. The most notorious example is that of Hasbro’s buyout of Wizards of the Coast and Avalon Hill. Hasbro began the 2000s owning the largest war games company (Avalon Hill), RPG (Dungeons and Dragons) and card game (Magic: the Gathering). It ended that decade having royally screwed all of them up, although Magic has since clawed its way back and D&D has just had a successful relaunch.

The problem is that PLCs’ main focus is on shareholder value, not necessarily on delivering good product for consumers. Add to that the fact that they almost always have to borrow to afford these buyouts and the focus within those companies inexorably becomes about profit. And if they don’t return the right numbers to keep the board happy, they have their work cut out explaining how their business works to a bunch of people with no knowledge of the industry. The result, if Wizards is anything to go by, is creatives getting the chop, gouging and a company which is less viable than it was before the takeover.

With all that said, as I said before, Fantasy Flight have always seemed like a sensible company which has learnt from the mistakes of its predecessors. It’s entirely possible that their current business model, with several highly successful product lines and more on the way, are the perfect fit for a PLC and that all this takeover will mean for them is access to resources and in particular capital to allow them to expand. There is a bigger question in continental Europe where a lot of FFG’s games are licensed to companies which are not part of the Asmodée group and what will happen to those companies (either merger or they’ll take a big hit being the most likely answer), but generally, this could be all steam ahead for FFG.

What makes me worry though is this: it has already been clear for quite some time that FFG have been lining their ducks in a row in anticipation for Star Wars: Episode 7. They currently publish or will soon be publishing three Star Wars roleplaying games, two Star Wars card games and three Star Wars miniatures games. Of these, Star Wars LCG and X-Wing are two of their biggest sellers, and the incoming Imperial Assault looks set to be as popular if not more so than these two. Like Disney-Lucasfilm, they have opted to ditch support for the prequels-era in favour of a line of products that very much harken back to the original films.

By December 2015, all these product lines will be very firmly established, and no doubt FFG are keen to have these games on the shelves of every supermarket, toy and book shop in time for Black Friday next year. No doubt, Asmodée’s takeover will help them in that respect (let’s ignore the plight of the specialist retailer here for a second), and there is a good chance they will be wildly successful. If, as everyone hopes, Episode VII is a hit and results in a new mega-franchise to rival Marvel’s (owned by the same company), then this could result in a significant boost for the company.

But there are two things that concern me here. Firstly, what if the new JJ Abrams’ film is rubbish? I’m sure it will make a lot of money either way, but a weak film will lack the sort of fanbase that FFG are hoping for. They’ll probably be safe for Christmas 2015 either way, but Christmas 2016 will be another story if the film is widely perceived to be another Phantom Menace. That potential will dry up and if any of those games are produced in large, unsellable numbers, a lot of money will be lost.

If the film is good, there’s still the question of what happens when the franchise winds down. Again, past precedent is not encouraging. Games Workshop almost collapsed in the mid-2000s when their cash cow in the form of the Lord of the Rings films came to an end. If FFG get big based on a film franchise, they are unlikely to be able to convert huge amounts of the mass market over to buying Twilight Imperium 4; they’ll be dependent on more franchises.

Under either scenario, there will come a point in which the company, while still profitable, will need to contract compared to its height, at which point the money men step in. And that’s when I get nervous. When Asmodée’s expansionist plans were limited to companies like Ticket To Ride, we weren’t looking at an investment company navigating its way through a boom (as distinct from a more sustainable period of growth). Now the fortunes of what amounts to a very large chunk of the industry is going to be at their mercy.

Hopefully, Episode VII will be a success and FFG will find the success it is hoping for for several years before it reaches that crossroad, by which point the relationship with the money men will have matured enough to avoid any panics making things worse during the inevitable lean years. But as of yesterday, an awful lot of my hobby suddenly became hitched to the fortunes of JJ Abrams’ film career, and so I’m nervous.