The mystery of Blond, revealed


2:00 pm - March 28th 2010

by Hopi Sen    


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I was surprised last night. I read a Phillip Blond article in Prospect, and it was less asinine than I expected.

Rather than being mouth achingly stupid, it was merely utterly unrealistic and impossible as a platform for governing, which puts it with oooh, 99.9999% of articles written for political magazines.

Mind you, Blond didn’t make one mistake – a firm proposal that a Tory government should mutalise BA. (“Cameron should push a radical economic policy — mutualising British Airways…” ran the email I got promoting the piece). With what? I thought, Jellybeans? BA’s Market Cap is what, three billion. I can think of a few things we should be doing with three billion quid other than buying companies and turning their shares over to their workforce.

Anyway, turns out Blond doesn’t quite say this. Instead he just says mutuality provides a model for energy companies and BA, and leaves the thought hanging there, with no suggestion about what should be done with such a lovely model.

This is the tenor of the whole piece. Blond proposes a whole series of rather vague things that the Conservatives are never going to do, because they would cost a fortune (“a living wage for every familiy”), be incredibly impractical (“localise the banks”), would anger the city (“break up Tesco”) or totally self defeating (“extra tax raising powers to councils”).

The only plausible suggestion is using the bank capital gains we get when we sell our stake to support
entrepeneurship. Which would be fine, except for the fact that George Osborne has already committed the Conservative party to selling cut price shares in the Banks to private investors, so there wouldn’t be much capital gain.

The Osborne approach is more a Tell Sid policy than a Red Tory policy, whatever the populist window dressing. Do you remember the urban poor getting a particularly big stake in BT?

Anyway, reading Blond’s piece, you get the sense that this is a man who on being taken for a ride in a flashy sportscar by a new friend, notices that the brakes are failing and a cliff-edge is coming up. He glances nervously over at the driver and wonders if he can really trust him.

This article reeks of someone preparing to detach himself from upcoming disaster, but is jettisoning himself quite yet, just in case the brakes will be OK. Which reminded me of someone on my own side. Someone who rose by asssociating himself with the language and style of New labour, then continued to rise by turning on it when it became unpopular, thus ensuring a never ending stream of plaudits from comment editors and those whose tactical interest co-incided with his rhetoric.

So, I have worked it all out.

Phillip Blond is the Tory Neal Lawson, and I claim my five pounds.

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This is a guest post. Hopi Sen blogs here.
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Story Filed Under: Blog ,Conservative Party ,Economy ,Humour

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Reader comments


Something is often forgotten in the current BA dispute with writers on the right howling that BA is a “dinasour” that “cannot carry on as it is”

Who oversaw the privatistisation of BA and made its present incarnation, claiming he that the “ugly duckling had become the world’s favourite airline”? Lord King of Wartnaby.

And who was “Mrs Thatcher’s favourite businessman”? Why, Lord King of Wartnaby.

“Who oversaw the privatistisation of BA and made its present incarnation, claiming he that the “ugly duckling had become the world’s favourite airline”? Lord King of Wartnaby.”

So what? Market conditions change. No private company should ever be forever. We expect more from an airline these days, not least better value.

@ 2

Market conditions have indeed “changed” the whole free-market, neo-liberalism of the past thirty years have come crashing down around our ears creating an unprecdented economic crisis which we, and our kids will be paying of for decades. And the free marketeers did it all by themselves.

Willy Walsh is trying the old ’80s free-marketeers trick of breaking a union and getting a low-paid, low-benefits workforce. Plus ca change….Oh and the premium price/poor value service was Walsh’s idead too. Pity it couldn’t survive the economic crash eh?

And if you think Walsh is aiming for “better value” airline, then your idea of the ideal airline must be Ryanair…..

‘And if you think Walsh is aiming for “better value” airline, then your idea of the ideal airline must be Ryanair….’

I never fly any other way (well SkyEurope was good while it lasted). Know why? Cos I am not very rich! Ryanair give more consumer power to people on lower incomes. What’s not to like?

As for the crisis, I think you will find the main cause was central banking, something that Hayek and the rest had been whinging about for years. In terms of fianance, we have been in a planned economy since the 70s. Check out the free market solution sometime: it is called honest money.

@ 4

Ryanair; the airline for people who like being treated like shit and excessive hidden charges. The airline with “a deserved reputation for nastiness” and the airline that “has become a byword for appalling customer service…and jeering rudeness towards anyone or anything that gets in its way” (from that Trot jounal ‘The Economist’).Yup, sounds like Willy Walsh’s ideal for BA.

As for the economic crisis resulting because: “the main cause was central banking….In terms of fianance, we have been in a planned economy since the 70s”. Earth to Planet Nick come in please! Are we secretly governed by giant lizards too?

I am not a fan of The Economist. Too establishment. I must say, I’ve never been stung by hidden charges. I guess because I can use a computer and can travel light. But regardless, air travel is cheaper than it was, and for people on low incomes, that is a good thing.

I don’t think it is any secret that the housing bubble was caused by excessively cheap credit whose source was, eventually, low central bank interest rates. No need for lizards, just politicians trying to get re-elected by making everyone a home-owner.

@6 Well there was a pretty old school bank run on the wholesale money markets too.

If there had been something similar to deposit insurance (which is why we no longer see bank runs every 5-10 years like we did in the 19th Century) the crisis wouldn’t have spread so quickly through finance and hit the real economy.

Hopi Sen: “Which would be fine, except for the fact that George Osborne has already committed the Conservative party to selling cut price shares in the Banks to private investors, so there wouldn’t be much capital gain.”

The Conservatives have (fairly) made great play on Gordon Brown’s bungled sale of UK gold reserves. Osborne appears to be repeating this folly. By suggesting that bank shares will be sold at a discount to private investors, he is discouraging institutional investors. Why should institutions even attempt to buy bank shares from the government if they are going to be able to buy them from short term private investors who want a quick return on discounted stock?

“@6 Well there was a pretty old school bank run on the wholesale money markets too.

If there had been something similar to deposit insurance (which is why we no longer see bank runs every 5-10 years like we did in the 19th Century) the crisis wouldn’t have spread so quickly through finance and hit the real economy.”

All bank runs are a consequence of banks lending more money than ordinary companies would be allowed to without becoming legally insolvent. Sometimes it is due to fraud, some mechanism which fools people into treating credit as real funds, but usually it is due to a priviledge granted by the government (traditionally because the government wants to borrow money from the banks to finance a war without raisng nominal taxes, but there are other reasons too).

They’ve even got this explanation in rap form now: http://www.youtube.com/watch?v=d0nERTFo-Sk

@ 9

Jesus. So the credit crunch was all the state’s fault eh?

That’s a novel way of looking at it.

And there was me thinking it was unregulated banking oligarchs….

hmmm have you ever read a book, cos this libertarian bullshit bingo is not going to get you very far in years to come.

http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

There is nothing ‘bullshit lingo’ about saying that banks are permitted by the state to lend in ways that other companies would be shut down for doing. It is uncontentious.

Now, WHY the state permits bankers to behave in this way is a good question. Obviously, politicians have their own interests and starting wars or buying up assets with other people’s wealth is often in their interests. But, of course, bankers are part of the same class as politicians and benefit massively from state protection and intervention themselves (and wars too!). So which bit is the tail and which is the dog is an interesting question, but not a fundamental point of disagreement. The best policy is still to stop giving bankers these special protections that they have used to run the economy into the ground. That politicians never really talk about doing that ought to suggest that they are not really on our side either.

Oh and the premium price/poor value service was Walsh’s idead too. Pity it couldn’t survive the economic crash eh?

Eh? BA’s model pre-crash was to charge a fortune for excellent service in Business and First, while matching its competitors’ prices and service levels in Economy. The fact that people were willing to pay a premium over rivals to travel in BA Business and First allowed them to maintain a higher cost base than their competitors – so Eddington never needed to fight the unions, and hence why a long-serving BA trolley dolly still gets paid twice the national median wage.

It wasn’t a sustainable business model unless you believed the boom times would never end – BA should have taken advantage of the good times to stuff its current crews’ mouths with gold in exchange for hiring new recruits under more sensible contracts (ie roughly what Virgin pays, which is still clearly enough to attract motivated people who provide excellent customer service), rather than keeping its cost base so much higher than its rivals’ in the long term. Unfortunately, Eddington was an idiot, and by the time Walsh took over it was too late to get much done before the recession kicked in.

Now, BA has to make those changes to ensure its survival, but doesn’t have the money to bribe its staff to accept them. Hence, the current problems.

On Hopi’s point about BA, yes, it’d be daft for the government to pay gbp3bn as a transfer to BA workers. However:

1) BA’s enterprise value is something like GBP7bn. The reason its market cap is only GBP3bn is because it also has a GBP4bn pension deficit – ie money that the company owes to its workers. In the same way as has happened with GM’s restructuring, giving a majority stake in BA to its workers to reflect that liability could be an option if the company were to come closer to administration.

2) Because BA failed to do anything about its labour situation during the good times, the union is now in a very strong position. If the industrial action drives BA technically insolvent, but still with a positive enterprise value (albeit one that’s less than the pension deficit), the shareholders will have lost everything, and the staff and pensioners will own what’s left of the airline.

14. Sunder Katwala

I’ve had a go at fact-checking the opening paragraph of the book

though not sure how we would best test the claim about ‘general pointlessness and a pervading lack of daily joy’.

http://www.nextleft.org/2010/03/britain-is-stuff-of-red-tory-nightmares.html

15. Mike Killingworth

[8] Absolutely. What we have to remember, Charlie, is that when the Tories do this kind of thing it’s called “encouraging stakeholding” (or something) but if anyone else does it, it’s financial irresponsibility.

I haven’t read Blond, but mutualisation doesn’t normally involve ownership by workers. Building societies were mutuals – owned by their members – savers/borrowers, not by their staff. An airline owned by passengers might be quite good.

17. Luis Enrique

Out of idle curiosity, does anybody know how a mutualisation would actually be handled? Would the state make an offer to shareholders, and then “lend” the money to the employees, who would then repay the taxpayer over some period?

18. Charlieman

@17 Luis Enrique: Err, nationalise the commanding heights of the economy and transfer control to employees via a workers’ council?


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    The mystery of Blond, revealed http://bit.ly/aJRpQP

  2. James Morgan

    @dinarickman http://liberalconspiracy.org/2010/03/28/the-mystery-of-blond-revealed/ like we sed

  3. 0-i biz

    Liberal Conspiracy » The mystery of Blond, revealed http://bit.ly/apsGo5

  4. Banditry » Those British Airways strikes

    […] is that Red Tory Philip Blond’s suggestion that the government should mutualise BA isn’t quite as insane as it looks – more than half the company is already owned by the […]





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