In the news

Dubtap feels challenged.

How much does it benefit the actual people of that economy though.

Bottom line GDP is all well and good, but not if it's all concentrated at one en d of the curve.

I’ll agree I was being a little dramatic. But it’s interesting either way

How much does it benefit the actual people of that economy though.

Pace MMT arguments it funds public services, at least. And in an economy where most paths to traditional middle class comfort have been hollowed out it allows some grads to escape.

If you think about something like the Lloyd’s market, a good proportion of the world comes to London to buy and sell insurance. That’s mostly a Good Thing for the UK. It also took 300 years to build and finding an industry to replace it might take a while.

I’ve never subscribed to the view of the manufacturing fetishists that ascribe the weakness of the UK economy to the fact that we don’t “make things” anymore. Truth is, once we had lost the captive Empire markets by the 60s/70s, no-one wanted to buy our shoddy, high-priced goods.

https://www.bbc.co.uk/news/world-us-canada-63925341.amp

I worked in the Lloyds market for names agents and underwriters many years ago. During the time when the market suffered a collapse because the rules were being broken and money that it was taken on trust would be held in cash simply wasn't there. It's also directly connected to the bonds and equity markets in terms of the amounts held as collateral against the underwritten risk.

I won't say too much about the 'names' who put the money up but it's common knowledge that it's a popular scheme for landed gentry etc. to make a little more on their investments and no one expects to ever lose.

But yes, it is an ancient industry that shows we were once leading in the provision of networks to support risk in the world. No doubt it supplies some tax revenue whilst supplying profits for the 'wealthy' which are not supposed to be leveraged but in the past have been shown to be.

One does not simply “make the turbines” etc

No doubt it supplies some tax revenue

PWC were hired to investigate how much tax the UK insurance industry contributes to the treasury.

It adds up to just over 2% of total government tax receipts. ~£16bn in 2020.

https://www.abi.org.uk/globalassets/files/publications/public/tax/2021-abi-total-tax-contribution.pdf

suffered a collapse

The LMX spiral?

Very interesting (and very long) read in the LRB about this from last year: https://www.lrb.co.uk/the-paper/v43/n14/james-meek/who-holds-the-welding-rod

Thanks.

Aah.. but now one offshores the shoddy manufacturing and concentrates on heritage. See numerous threads on steel bikes and dandy apparel on here.

I think that paper is the Labour industrial strategy judging by Reeves's witterings on R4.

That was one of the issues. The other was the weight of claims that came along following huge storms, the loss of a satellite and the Black Monday Crash. When the names were called on for the liquid part of their backing it turned out a lot of them didn't have it and in fact had never had it but had been told, 'don't worry old chap, no one will ever come asking'.

I was asked to write software to look at asbestos runoff claims following a landmark case in the US. It got to the point where the possible losses exceeded the number of digits for a number that the software I was using could hold in a numerical field. Then the claims stopped succeeding in court and the people covered by the insurance policies died off due to 'normal' reasons and the problem went away.

It also took 300 years to build and finding an industry to replace it might take a while.

This is a straw man argument. Questioning the primacy that finance acquired since Thatcher's big bang is not the same as saying "Let's get rid of the insurance market" or "Let's get rid of the City".

There was a very interesting book of the week on R4 a month or so back called Edible Economics by Ha-Joon Chang. He proposed that attributing the success of economies traditionally seen as service based solely to financial services (in his examples Switzerland and Singapore) was a fallacy as those economies actually have very strong manufacturing sectors. In fact, they have some of the highest exports per capita of any county in the world (https://en.wikipedia.org/wiki/List_of_countries_by_exports_per_capita)

So, in his argument, the concept of London as 'Singapore on Thames' was total nonsense.

primacy that finance acquired since Thatcher's big bang

I am too young to remember Big Bang but my suspicion is that its impact on the City is overstated as part of the right’s mythmaking around the value of deregulation.

"Let's get rid of the insurance market" or "Let's get rid of the City"

I mean, now that you mention it...

That was one of the issues.

Well the unprecedented run of Catatrophes (as defined by the market) exposed the fatal flaw of the LMX market, rather than being a separate factor (IIRC, IMHO etc).

But yes, there was huge complacency about what being "liable down to your cufflinks" meant in reality. It was common practice for secretaries etc to be made Names when they retired.

Crazy to think longtail liability was ever written on a "losses occurring" basis, but doctors were suggesting cigarettes to open up the lungs and asbestos was still a "miracle of science" in the '50.

Thatcher, with her inadvertent ability to send Sterling from almost parity with the US$ to being worth almost US$2, reamed the UK's metal bashing industries, then took out both the NCB and British Steel, and decided not to invest in high tech manufacturing, (except, possibly, for Defence contracts). Compare the choice of South Korea to become a major manufacturer of electronics from computer memory upwards.

I mean, now that you mention it...

Ha!

@NickCJ there was certainly myth-making but it also marked a fundamental shift in attitude to the purpose of the markets that hasn't changed since. From "finance helps business prosper" to "The prosperity of Finance is an end in itself". It wasn't the first step in the chain - you could trace things back to Henry Ford losing in court or earlier - but for the U,K. it was a watershed event.

which are not supposed to be leveraged but in the past have been shown to be

You can still support 50% of your ‘funds at Lloyds’ with debt. The good wheeze for the aristo Names was pledging some unproductive land as underwriting collateral at a farcical valuation. Unlimited liability not well understood!

For all that, worth remembering that millions of industrial workers got compensated for mesothelioma etc thanks to Lloyds. Avoided some manufacturer bankruptcies (although many eventually occurred).

I still work on the fringe of the Lloyds market and well remember the Names losing their shirts 20 or so years ago when the asbestosis long tail hit.

The result was a market restructure, I don’t know the numbers but I reckon Names now provide well under 10% of the trading capital.

For some reason that doesn’t increase my confidence in the other 90% but I could be wrong. I was working in the city in the 80’s so missed the results but they can’t have been as bad as the predictions at least based on the assumptions the firm I was working for were making.