Matthew Lynn is a financial columnist and author of ‘Bust: Greece, The Euro and The Sovereign Debt Crisis’ and ‘The Long Depression: The Slump of 2008 to 2031’
18 min listen
On this week's episode, author and financial columnist Matthew Lynn begins by arguing that the EU has already botched its Covid vaccine rollout. (00:25) Then, Will Knowland, formerly an English teacher at Eton, explains why he was dismissed from the school and criticises its 'stifling monoculture'. (08:20) And finally, Mary Wellesley reflects on the lives of 13th-century hermits.
34 min listen
Coronavirus vaccines are now being distributed across the world, but what are the challenges posed by its delivery? (01:30) Is Boris Johnson the SNP's greatest weapon? (13:55) And is Prince Harry becoming more and more like his mother? (23:35)With financial columnist Matthew Lynn; former director at the McKinsey Global Institute Richard Dobbs; the UK's former director of immunisation David Salisbury; The Spectator's deputy political editor Katy Balls; The Spectator's Scotland editor Alex Massie; journalist Melanie McDonagh; and royal biographer Angela Levin.Presented by Lara Prendergast.Produced by Max Jeffery, Alexa Rendell, Sam Russell and Matt Taylor.
The banks would all flee. International investors would take fright. And the pound would turn into the Great British peso. We heard a lot over the last four years about how leaving the European Union would be catastrophic for the UK economy. But here is something odd. With the transitional arrangement coming to an end with the close of the old year, and with the UK now out of the Single Market and the Customs Union, and with just a loose trade arrangement with the rest of the continent that doesn’t even cover financial services, so far the FTSE is loving Brexit. True, it is only the first week of trading, and even that is not over yet, but so far the benchmark FTSE-100 index has risen from 6,500 on Monday to 6,850 on Thursday.
It was the most excruciating moment of Ursula von der Leyen’s short tenure as President of the European Commission. On Friday morning she hastily put together a press conference to counter the growing media storm across Europe over the EU’s handling of vaccine procurement. She doubled down on ‘solidarity’, announcing that the Commission had managed to secure more doses of the BioNTech/Pfizer vaccine, but also that the EU would stick absolutely to buying together. ‘We have all agreed, legally binding, that there will be no parallel negotiations, no parallel contracts,’ she insisted testily. ‘We’re all working together.’ At the same moment, however, her former colleagues in Berlin, where she was never popular, were busily undermining her.
It was a ‘rush of blood to the head’. Its central bank would prove to be hopelessly ineffective. And cultural differences would remain too deeply ingrained for an internal market to ever work as it should. We learned this week from papers released in Dublin that Mrs Thatcher was completely damning about the idea of a single currency for the European Union. Looked at with the benefit of 30 years of hindsight, however, it is clear that the most remarkable point about her views is not just how intransigent she was but that she was completely right. The Euro has been a comprehensive failure, just as she said it would be. Rewind three decades to the fading months of the Thatcher premiership and she was facing what turned out to be terminal trouble over her views on Europe.
In the end, the fish were only of symbolic importance. Neither does it matter that much what happens to Scottish seed potatoes, no matter how much of a fuss Nicola Sturgeon kicks up. Farming, tariffs and quotas are of relatively little importance given that the exchange rate will simply adjust to compensate for any changes that are made. As the UK and the EU finally agree a trade deal, there was one victory that really mattered: regulatory divergence. And on that the UK appears to have secured a victory.
The port of Dover has been closed down. The Eurotunnel isn’t carrying any freight for a couple of days. The lorries are already starting to back up in Kent, the supermarkets are working out where they can get fresh supplies from, and flights have been suspended, with the British likely to find they are turned away from most of our neighbouring countries. If you had blanked out all the other news you might think that after some terminal row about herring, Brexit had actually been brought forward by ten days, creating the kind of chaos that even the most swivel-eyed Remainer could scarcely have imagined possible. And yet, of course, it is the new strain of Covid-19 that means restrictions are being put in place. But, hey, one thing seems to have come good.
Factories will close. Prices will rise. Profits will suffer. Another day, another warning of disaster from one of the major car manufacturers about the catastrophic cost of a no-deal Brexit. But hold on. Before anyone’s eyes start to glaze over, there is a twist to this one. It is a German company that is starting to worry about the hit to its bottom line. And, in truth, it is hardly likely to be the last. Yesterday, BMW, which used to be the most formidable manufacturer of upmarket automobiles until Tesla came along, went public for the first time about the financial impact of Britain leaving the EU without a deal.
Currency speculators at some of the hedge funds in Mayfair may be feeling quietly pleased. Trade experts will be relieved that their lucrative consultancy gigs will keep on coming. Heck, even financial columnists can safely pontificate about the possible outcome for a while yet, while the FBPE mob on Twitter can carry on predicting the apocalypse every time Nissan adjusts its production schedules. There are a few people for whom today’s agreement between Boris Johnson and European Commission President Ursula von der Leyen to carry on discussing a trade deal will come as a relief. For the wider economy, however, it is little short of a disaster. It is hard to know exactly what there is still to discuss between Britain and the EU.
Lorries will be backed up across Kent. The shops will run short of essential goods. Travel plans will be disrupted, and factories will start to close as British goods are shut out of their main export markets. As the UK comes to the end of its transitional deal with the EU, and as talks on a trade agreement appear to have reached an impasse, there will be plenty of high-stakes brinkmanship, and pressure on the government to give some ground on fishing and regulation to avoid the potential chaos of no deal. And yet in truth, if Boris Johnson caves into the EU’s demands at the last moment, the voters will punish him — and they will be right to do so. Right now, it is anyone’s guess whether a trade deal can be done at the last moment between the EU and the UK.
The giant drug companies that are on brink of delivering a Covid vaccine in record time? Well, that’s easy. The technology companies that have relentlessly innovated to transform the way we communicate with one another? That’s not too hard. The power generators, food manufacturers and automobile conglomerates that supply most of our daily needs? That’s a breeze. Heck, even the banks can justify their existence, at least in theory. Most entrepreneurs and businesses are fairly easy to defend. But Sir Philip Green? Errrrr… The free market needs defending, perhaps more now than at any time in the last 50 years Of course it was just about possible to explain his vast wealth.
There is still some debate about who came up with the adage that ‘if you owe the bank $100 that is your problem. If you owe the bank $1 million dollars that is their problem’. It is usually attributed to the oil tycoon J. Paul Getty, which may help explain how he became the richest man of his era. Occasionally, and in a slightly modified form, it is attributed to John Maynard Keynes in his advice to the British cabinet after world war two. And yet in truth, it should probably have been coined by an Italian. Why? Because the country now owes so much money to the rest of the eurozone it looks about to hijack the whole system.
They’ve only received a fraction of their old salaries. Many have missed out on months of work. And their pension contributions and holidays have been completely scrapped. So it is perhaps understandable that teachers, town planners and tax officials are feeling a little aggrieved. Except, er, no, sorry I made a mistake there. That was a description of what happened to the self-employed over the last eight months, not the average public sector worker. Instead, it now looks likely that the government will impose a pay freeze on everyone who works for the government this year, and possibly next as well. The 5.5 million affected will reportedly include the police, armed forces, teachers and civil servants.
A couple of shots to the arm and this will all be over. With today’s news from Moderna, last week’s from Pfizer, and with a potential update from AstraZeneca in the next few days, we may soon have three vaccines against Covid-19 (and if you add in candidates from Russia and China perhaps more). And yet, it turns out, that some people are already fretting about potential side effects from that. And they don’t just mean a mild fever or muscle ache. They mean something far, far nastier. Profits. While most of us have been feeling a lot better about the epidemic over the last week, Jeremy Corbyn seems most worried that — once a vaccine has been approved and the virus eliminated — a big company might make some money from it.
A new era of transatlantic cooperation will have begun. The United States will pivot towards Brussels. The trade wars will come to a swift end, and the American president will once again be a respected figure on this side of the Atlantic. With Donald Trump finally defeated, if not quite yet evicted from the White House, most commentators are expecting a far closer relationship between Berlin, Paris, Brussels and Washington, with Boris’s Brexit Britain left out in the cold. But hold on. Something is not quite right with that narrative. Instead, the EU seems intent on going to war with Joe Biden. In the very same week that the veteran politician finally made it to the presidency, the European Union has, oddly, made two extraordinarily aggressive moves against the US.
There are still safety trials to be completed. Data has to be collected, checked, double-checked, and then peer-reviewed. And we still need to find out whether it is the most effective of the various candidates currently in development or whether there is something even better just around the corner. But the Pfizer vaccine has already proved something beyond any reasonable doubt. Free enterprise works. And for all its flaws, it remains the best system for solving complex problems. Amid all the justifiable excitement over the potential approval of the first safe and effective vaccine against Covid-19 it would be easy to overlook one point: the vaccine was developed with private money.
In the last decade, the mega corporation has taken a lot of stick from just about everyone. But hold on. It is just about to rescue us from the worst global crisis since world war two. Drugs giant Pfizer — part of the Big Pharma — has announced that its Covid-19 vaccine was effective in trials. It looks safe as well. It may well be approved before the end of 2020. With luck we should have a few million doses this year, and a billion by next year. AstraZeneca may not be far behind with the Oxford vaccine. And a few more are on the way. With a safe effective vaccine, a world that has been plunged into chaos can start getting back to normal. Lockdowns can be ended. Mass unemployment can be avoided. The threat of bankruptcy will be lifted from millions of business.
High Street chains are closing all the time. The restaurant chains are shutting their doors. The gyms are going out of business and it doesn't look as if all the airlines will survive. There have been lots of different industries that have been wiped out this year. But now we can add one more to the list: the polling companies. It remains to be seen who won the US Presidential election. Donald Trump and Joe Biden may fight it out for a few more days yet. But it is absolutely clear who lost. The people who are paid plenty of money to talk to voters and work out what they are thinking. It was meant to be a 'Blue Wave', meaning the Democrats would take both the White House and Congress, probably in a landslide.
By tomorrow morning, he should be back on one of his golf courses. Or prepping for a new series of the Apprentice. Or quite possibly spending more time with his lawyers. Either way, if the polls and bookmakers are to be trusted, Donald Trump will be the first sitting president to be ejected from office since George Bush Senior, way back in 1992. In truth, he won’t be much missed. His bullying, narcissistic manner demeaned the office. His estranged relationship with the truth made him an unreliable ally. And his lack of empathy made him a poor leader at a time of crisis. But in one respect at least he will have a legacy. He is the first leader since Ronald Reagan and Margaret Thatcher to show two things; that you can deregulate; and that you can dramatically reduce taxes.
In Germany, the DAX index – the benchmark for the economy – is already down 4 per cent today. In France, the benchmark CAC-40 is down by 3.3 per cent – heading toward the low points seen in the spring. Across Europe a stock-market crash is starting to unfold. Is it a panic? An overreaction of edgy traders? Not really. The reality is that the markets have noticed something that not many people have yet picked up on: that the Eurozone is at the epicentre of the second wave of Covid-19 – and the economic damage this creates is going to be a lot worse than it was in the spring.
