The Money Disease has left the British economy exhausted and worn out.
Here’s how it happened.
It starts like this: people who have made money out of farming, manufacturing and trade invest those proceeds in established assets, such as property and shares, making money out of money rather than something new and productive.
A whole industry of bankers, consultants, lawyers, brokers and financial traders then grows up to service the buying and selling of assets and businesses. These people also trade assets on their own behalf.
As more and more entrepreneurship and innovative skill is focused on making money out of money, less and less goes into developing and producing the real wealth that we consume, such as food, clothes and manufactured products. So more and more of that real wealth has to be imported from abroad.
Since the 1870s, the British economy has shifted from being the workshop of the world to being dependent on stockbrokers. That shift has accelerated hugely since the 1980s, so we’re now dependent on imports for our food and manufactured goods.
To pay for those imports, we’ve had to attract huge sums of money from abroad. We do that by making British assets as attractive as possible to foreign investors.
For example, all those public services that were turned into money-making assets by the privatisations of the 1980s offer rich pickings for this foreign money. Most of our energy supply and distribution is foreign-owned, and foreign money is paying for a new nuclear power station, under-written by British taxpayers.
Meanwhile, the government encourages developers to build flats in our cities to sell to foreign buyers, and this is one reason why it is so keen to keep house prices going up. It might make homes unaffordable for local people, but it keeps the money rolling in.
And it explains the boom in office space in the City of London, where all that foreign money is managed by the banks, brokers and law firms in those expensive buildings. The fees they earn help keep the British economy afloat, but it means that even more of Britain’s best talent is unavailable to develop and produce the real wealth that will secure our future.
That is what the money disease looks like. It slowly kills an economy by strangling its capacity to create real wealth for itself. Selling itself to foreign investors can put off the moment of reckoning for a while, but it’s only a remission. Because the problem with investors is that ultimately they want their money back. And they want to take away more money than they put in.
After years of receiving sky-high rents, one day they’ll want to sell those city flats at a profit.
And after buying into key services and iconic British companies, they’ll want to recoup their money through dividends and rising share prices. And as that money starts flowing out in profits, it has to be replaced with yet more money coming in.
It means that Britain’s economy is on an accelerating treadmill, moving faster and faster as it seeks more ways to monetise and sell itself to pay for the real wealth we no longer produce.