Another heatwave, and I am fed up with it. I’d like us to skip the phase of deciding if air-conditioning is a moral outrage and join the rest of the world in adopting it. How we choose to power it is another question; solar definitely seems like a more viable option than it would otherwise (at least during the day).
We’ve seen Burnham talk about areas around vape and betting shops, alongside changes to how companies manage subscriptions, and a consultation on how companies do discount offers. Look, this is arguably good politics – easy enough to understand, voters hate how vape shops are everywhere, and anyone can understand the pain in cancelling a subscription. But is this what a new government should be prioritising right now? In their own words, cancelling subscriptions could save £14 a month, which isn’t groundbreaking. What are the highest costs? Housing, especially rent, and energy are the biggest issues, coupled with stagnant wages.
There’s a need for a new Prime Minister to act quickly in their first year to make their mark and establish an image in voters’ minds. So far, I’m getting a sense of a better political communicator than Starmer (low bar), with a Mayor’s instinctual awareness of retail political issues… but not much more. Perhaps this is simply buying time until he deems an election suitable, but I don’t understand the wait. The perennial worry is that there really are no ideas or opinions on how to get economic growth going.
With that cheery view out of the way, let’s look at the links this week. Firstly, an area where the Prime Minister is definitely passionate about: social care. We examine Europe’s China dependence first, and then the current internal Chinese debates.
https://open.substack.com/pub/charliegdavies/p/the-indignity-industry?r=22u0c&utm_medium=ios
- Charle Davies returns with a post on the need to build a dignified care system in Britain that doesn’t simply rely on cheap imported overseas labour.
- The indignity does not end there. Families frequently discover that alongside the emotional pain comes financial devastation; Britain has developed a care market in which private providers compete for vulnerable people while local authorities struggle to fund even basic provision. Those fortunate enough to have accumulated modest assets throughout their lives are often confronted with a cruel choice: sell the family home to finance care, or watch savings painstakingly built over decades disappear into fees that can reach thousands of pounds every week.
- It is quite astonishing how toxic the current settlement is. The UK effectively says that if you have a primary medical condition, the NHS will treat you. But if the long-term needs aren’t considered a primary health need, this results in no NHS support, and back to you or the council. The council then examine your wealth, with a staggering £23,250 enough to get you off their books.
- No wonder this issue is so brutal. Watching your parents’ or loved ones’ savings be destroyed to fund their poor social care, while you see others have their care completely covered by the NHS or council, is brutal. This is also significantly contributing to local councils going bankrupt, along with SEND provisions. Reforming it should be a matter of national urgency.
- However, the early signs are concerning, at least to me. Suggesting that we go down the route of the NHS, given its well-documented problems with rationing of services, seems a bad idea. The temptation here, as it is in the NHS, is to plug gaps with immigration, regardless of the social or political consequences. There are much better alternatives that we should be looking at (I’ll come back to them).
- If the wages paid within social care are insufficient to allow workers to support their families without wider welfare support, then surely the problem is not the immigration rules but the structure of the care sector itself. Why should the state continue subsidising an employment model that relies upon chronically low wages rather than addressing the reasons those wages remain so poor? Why is the progressive response to defend the existing model instead of transforming it?
- The UK continues to dodge this. We do not want to face the upfront costs for care, and so we turn overseas to solve this problem. It’s notable how this has gone from a disreputable view in the early 2000s into the mainstream, despite the obvious issues of increasing migration.
- The drawback to Davies’ article is the lack of alternatives suggested here, as unfortunately, while we all may nod and say of course care is important, our revealed preference is for this to go away. Luckily for us, other countries have reached more sustainable and fairer models.
- Nations like Germany use insurance to pay for adult social care, with individuals contributing part of their income into care insurance. This stops social care being a lottery, means individuals and families can maintain their dignity, and the burden is shared across society. Hopefully, Burnham can see this and be inspired by it as a much better way to do social care.
https://open.substack.com/pub/samolsen/p/europes-china-dependence-is-becoming?r=22u0c&utm_medium=ios
- Sam Olsen writes a response to Brussels Tea House criticism of the European Union’s increasingly hostile approach to China, arguing that the Second China Shock is about to devastate Europe
- In July, the European Commission opened an inquiry into whether Chinese producers were selling Pekin duck in Europe at unfairly low prices.
- The sums involved are modest, but the symbolism is not – this is the first time the EU has targeted Chinese agricultural imports. Restaurant-bound duck has become the latest front in Europe’s widening economic dispute with China.
- As Olsen notes, this is another move by the EU against China, having already targeted vehicles, solar, and other industrial goods. The Chinese view is that this is unfair European protectionism against Chinese competitiveness, which Olsen notes has some validity. European movements towards net zero and higher energy costs, and a lack of start-ups due to stagnant labour markets have contributed to Europe’s poor economy.
- China’s economic model is state-directed, supply-side and scale-driven. It combines industrial policy, public investment funds, preferential access to capital, protected domestic markets and regulatory coordination. Strategic sectors can be supported through periods of weak profitability, while production can continue expanding even when domestic demand is insufficient.
- Europe’s model is different. Companies remain more constrained by expected returns, competition law, higher energy costs and fragmented national policies. Investment must generally be justified commercially, while governments intervene slowly and inconsistently.
- This is key, and why the United States, for all of its unpredictability, has had cross-party support for tougher action on China. Chinese companies, particularly in electric vehicles, batteries, and many other areas, are genuinely incredible in their scale, quality, and competitiveness. But as Olsen notes, this is in the Chinese economic model that deliberately subsidises investment, with low consumption. This model is now overwhelming the rest of the world, with much greater tension on the global trading system than ever before.
- Europe must solve its domestic issues to be globally competitive first and foremost. But it needs to reckon with what China really is and understand China’s economic model and its objectives.
- Europe neither can nor should sever its economic relationship with China. But unless it restores enough industrial and technological capacity to make meaningful choices of its own, it may preserve access to cheap goods while losing the industries, skills and freedom of action required to remain a serious power.
- Nothing further to add.
https://substack.com/inbox/post/209547651
- Bill Bishop’s Sinocism has a monthly report from Sinification, giving us hugely valuable and interesting information about how China feels about domestic and international issues.
- European integration once suggested an autonomous pole capable of preventing a US–China bipolar order and a third world war, but Brussels has instead become an institutional vehicle for confrontation with China. Recent consultations pulled both sides back from the brink—China still values the European market and strategic autonomy and Brussels doubts it can withstand Chinese retaliation. However, the two sides cannot resolve the structural conflict rooted in Europe’s declining competitiveness and export controls on the advanced goods China actually wants to buy.
- A great tie-in to the prior link, but one from the actual Chinese side. Unsurprisingly, China considers the EU to have become a geopolitical rival of sorts, but fascinating how China seems to recognise no responsibility for this. Furthermore, Beijing is probably correct in that Brussels cannot or will not be able to accept retaliation from China for now, short of red lines being crossed – so far no evidence to date that Europe has any red lines on China. Finally, note the area where Europe initially has some leverage over China is in turn countered by the United States.
- Britain’s seventh prime minister since the Brexit referendum was open to cooperation with China at the local level, but will face a more complicated position as prime minister. Burnham inherits economic decline, social division and international uncertainty, as well as the risks associated with chronic leadership churn. This means that his priority is likely to be domestic repair rather than diplomatic reinvention.
- I have touched on the UK and China before in this blog. Just to recap, given the CCP’s hostility to the UK, our relatively small exposure to China, and its control over supply chains, we should absolutely be avoiding any further dependencies. It seems that China doesn’t particularly expect much from Burnham vis-à-vis Anglo-China relations. I would not expend energy on this.
- Strong supply and weak demand are not the result of short-term fluctuations, but originate in an unbalanced pattern of growth supported by institutional and structural factors…Only by reducing the savings rate and increasing terminal demand can capacity utilisation be raised. China should reduce its total savings rates, reform its tax system, encourage private enterprises to increase dividends, funnel RMB20 trillion of listed state capital into social-security funds, use 50 per cent of macroeconomic to address the problem, raise pensions to release consumption and use housing support to address the mismatch facing migrant workers
- I love finding pieces like this, in this case from the former Vice-Chair for the Committee for Economic Affairs. It’s easy to imagine under the CCP, and particularly under President Xi, that China has an intellectual monoculture. This piece helps to disprove that. Whether or not it has any influence at the very top of the CCP is another question altogether, but it does give me hope for life after Xi. The world economy needs China to rebalance towards consumption.
- There is a great deal more content in here, including AI, Chinese graduates, and other geopolitical topics such as Latin America. It is well worth a read.
