30 October 2009

A Tale of Two Sectors

I am posting from distant Brno, which is a civilised country where you can travel miles on a tram for fifty pence and people still stop work to lunch together while resting and talking. So the gloom that surrounded the latest ´growth figures´ for the UK economy seemed less important than usual.

What are these guys measuring? You begin to think that they have been convinced by their own fantasy. The reason economists did not predict the continuation of the Recession may be that they genuinely believe that what is happening in the City has some relevance to the British economy. The confusion between counting artifically inflated monetary values and accounting for real economic activity seems to have impaired the ability of the statisticians to assess what is really happening.

The capacity of the private sector to "create wealth" has always been related to its ability to find various methods for creating money. The latest is to lean on the government to use money that has been queased into existence from nowhere to buy various bits of corporate debt, thus flooding the stock market with cash. Presumably this is some desperate stratagem to prevent the yachted classes from quitting the country.

According to the economistic mythology, those of us who work in the public sector do not create wealth. Education and health are not wealth, they are mere by-products and as nothing compared to a healthy balance-sheet. It may be this sort of prejudice that is stopping the government from using the money it is creating to invest in the future of our country by building up the public sector. This would be the normal policy in a time of Recession when private sector incomes are squeezed and public sector incomes make up what they lost during the boom times. This is illustrated in the graphic taken from an IFS paper by Richard Disney that looked at the public-private sector wage gap in the 1990s.

But this Recession is rewriting the rulebook. Private-sector managers are insisting that their bonuses continue, and these growing returns are being funded at the public expense. On the one hand we are being forced to forego the public investment we need to build a low-carbon infrastructure and improve health and education; on the other, we will be required to pay more in taxes to repay the debt incurred to keep the structure of inequality.

Perhaps most serious of all, the private-sector managers who have been injected wholesale into the public sector have brought their old ways with them. So they are responding to the recession by forcing cutbacks before they become necessary. This may partly explain the appalling recent figures, although most of these cuts are yet to bite. So we can expect to managerialised into an even deeper and longer recession ones the plans laid in the public sector this autumn come to fruition in the new year.

26 October 2009

What if Business is the Problem?

Of course, for me this is a rhetorical question. My whole work as an economist is predicated on my belief that business itself is the problem. But I work in a Management School that was formerly a business school and is still dedicated to producing young people to manage business. Our courses focus heavily on international corporate business culture and structure - although the vast majority of our students will not join these sorts of companies.

My research is supposed to be directed by the Association of Business Schools which produces a list of journals to which I am intended to aspire. Clearly, my work will not find favour, since it has at its heart a critique of business. Business has taken control of government and has now taken control of the universities as well. Universities once found their political space within a department dedicated to education; they now reside within the department for Business, Enterprise and Regulatory Reform. So if business were the problem, it clearly would not be any of my business to identify this, or to study the reasons why for the sake of the public benefit. Well at least not in my day job.

So it did not surprise me to read that a report from Scientists for Global Responsibility has found that the objective scientific research we expect from our academics is being increasingly distorted by the priorities of the funders, either business itself, or government which, is dominated by business interests. Universities are also being encouraged to act like businesses. In my case, the Dean who was brought in to assure that this happened to our teaching and research has experience of neither himself, having spent his career as a civil servant at the Welsh Office. I have no idea what expertise he was supposed to bring to an institution focused on teaching and research.

As Stuart Parkinson, co-author of the report, comments, ´The trustworthiness of science and scientists is at stake.´The credibility of government is no longer worth defending, sadly. Although the report draws attention to the appointment of Lords Drayson and Sainsbury as consecutive science ministers, this is really the least of our problems.

As debate over climate change hots up with the approach to Copenhagen, the increasing polarity between profit and survival is felt as keenly in our research institutions as anywhere. When business is the most powerful player in our society, and its profit logic is the central cause of a destructive expansionist economy, how can we hope to develop ideas to counter this when are universities have already been subsumed into the government department dedicated to business support?

17 October 2009

Norms and Normality

Where I live, in Stroud, a delightful town of white stone cottages that nestles into the Cotswold hills and is shortly to be twinned with Rivendell, we are distantly aware that we may not see the world through exactly the same sort of lenses as other people. It isn't exactly the land that time forgot, more likely the place where we remember what times were like before selfish individualism was the dominant ideology, and try to recreate those times.

At least that is what I like to think. There is nothing backward-looking about our culture. It is sustainability with a soul - taking the best form the past and being creative about innovating a future we can all share - the low-carbon high life.

But last weekend I learned something that gave me a bit of a shock. I do stray into the urban jungle of our local city of Gloucester on a fairly regular basis, just to keep my feet on the ground. While there last weekend I was told that they have a phrase they use about us and our kind: NFS, or Normal for Stroud! This applies to anything involving lentils or beards or free-thinking, I assume.

At first I felt rather upset, but then I thought maybe it was a backhanded compliment of sorts. Our urban neighbours were acknowledging that we live in a different way, we have a different set of what sociologists would call 'norms'. These may make us something other than 'normal' but the fact that we are an identified group proves that our changed values are starting to have an impact on those who live near us.

As behaviour changes in an adaptive response to the climate crisis, some communities and organisations will lead the way. For a while they will not be 'normal', especially as the norms that define our normal today tend to be competitive, exploitative and destructive. I like to think that where Stroud leads the world will follow. I'm not sure whether the invention of NFS proves that this is the case, but it certainly proves that we are being watched.

14 October 2009

Not a Common Occurrence

I confess it doesn't quite reach the level of the election of the first black man as President of the United States, but in my world the award of the Bank of Sweden prize for economics to a woman is a pretty earth-shattering event. The prize is frequently, but wrongly, referred to as the Nobel Prize for Economics. Nobel wouldn't have dreamt of endowing a prize for economics when he set his awards up in 1895. It is a latecomer - arriving only in 1968 - and an imposter.

The prize was given to Elinor Ostrom, whose work was summarised thus:

'Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.'

So what did Elinor Ostrom do to achieve this level of esteem amongst the five men who make up the nominating committee? It is surely an indication of the lack of confidence amongst orthodox economists that they have chosen not only an academic whose work could be claimed to undermine the central tenets of a market philosophy, but one who has never actually resided in an economics department. (If she had, she would, of course, have found it very difficult to carry out this sort of work.)

Elinor Ostrom is, and always has been, a political scientist. This is entirely appropriate in a year when politics has dominated the choice of prize-winners - and perhaps it always does. So what can we ascertain from the choice of this year's award-winner? Well first it should be said that Professor Ostrom obviously could not be trusted to take this weight of responsibility alone. She has been forced to share the prize with a rank outsider, Oliver E. Williamson, who, I cynically surmise, was chosen alongside her because some of the committee couldn't stomach awarding the prize to her alone. As a student of Ronald Coase, his work is in a tradition that directly opposes that of Ostrom herself, arguing that the assignment of clear property rights is enough in itself to deal with most environmental problems.

If the committee is representative of the economics profession then there is some evidence here of the sackcloth and ashes that many feel its orthodox members deserve. Ostrom's work is also motivated by concern for the environment, and particularly the depletion of natural resources, hence her focus on fisheries and natural environments. We wait to see whether the obvious connection between market economics and environmental destruction is translated into the freedom for those of us who teach the subject to adopt a heterodox approach.

9 October 2009

What People Want

We hear a lot about what women want, but do not find a corresponding amount in terms of what women get. Power is still predominantly a men's game - just observe the token woman who still routinely appears on question-time-style panel debates. Women need to move on from using their excellent communication skills and hone the skills of power. Personally, I have never spent any time on 'women's studies' because the fact that so many women (and so few men) do is part of the reason there are so few female economists and politicians.

But I'm going to break my rule to address a new report by the Centre for Policy Studies that is ruffling feminist feathers. The report is based on a survey of 4500-odd men and women and found that, of the mothers interviewed, 12 per cent did not want to work. We were not given figures for the number of men - with children or otherwise - who did not want to work.

Because that is the problem, really, isn't it? This discussion, like the debate last month about whether the children of working women do worse at school, is framed in terms of a nuclear family, with two heterosexual parents, one of whom has a penis and thrives in the workplace, the other of whom has mammaries and yearns to make pretty cushions.

Starting from that assumption you can arrive at a whole lot of different conclusions, and generate the sort of heated debate between old-school feminists, who found their own freedom through work and now argue that vast sums in taxation should be spent bribing other women to do the same, and Tory ladies whose well-paid husbands can afford to subsidise their lives spent at the gym or the WI.

According to the BBC's account of the report: 'The poll found only 1% of mothers and 2% of fathers (with children under five) thought the mother in a family, where the father worked and there were small children, should work full-time. Nearly half said she should not work at all.' But how many thought the man should not work? Or that they should decide to genuinely share parenting? Were they even offered this option?

Nobody asks the men if they want to go to work - especially men outside the chattering classes who do the most unpleasant work. No one is thinking creatively about how bringing up children can be shared within a loving community of men and women. Even the feminists do not question how their daughters will feel about balancing their wish to be loving mothers and their desire to function in the world, when they have spent their working lives struggling to park them in childcare while not challenging the model that says men are more likely to be working than women.

The person who seeks self-actualisation in the post-modern, managerialised workplace is a very sad person indeed. The image of the population as no more than millions of Dobbie-style house elves, eager to meet every latest target, is a false and depressing one. This discussion of work is mythologised (see my rather dated attempts to unpick some of these myths here) and does an injustice to the millions of working people in this country - of both sexes - for whom work is a humiliating daily grind that crushes their creativity and erodes their self-respect.

7 October 2009

The End of Hegemoney?

Now that the cracks caused by the earthquake that struck the global economy last year have been papered over to the satistfaction of most casual observers, and with stock markets forging ahead (fuelled by the quantitatively eased money that cannot be found for the public sector), the more interesting consequences of the financial crisis are beginning to unwind.

The most potentially momentous is the threat to the hegemonic position of the dollar in world capitalism. Way back at the G20 in April - when our attention was successfully diverted by the trivial tittle-tattle about bankers' bonuses - the Chinese kept their eye on the ball. They joined the Russians in proposing a new neutral international currency to replace the dollar. This call was repeated yesterday by a UN panel - was it a coincidence that this happened on the same day that news leaked about secret deals between the oil states, the Chinese, Russia, France and Japan to end the rule of the petro-dollar by trading petroleum for a basket of currencies? And from a UK perspective, notice which of the 'leading world economies' is missing from this list.

The embarrassing visit by Hilary Clinton to Beijing in February, where she effectively begged the Chinese to continue buying US debt, indicated the desperate position of the US economy - and polity. With quantitative easing on a grand scale being the only thing keeping the once-mighty dollar afloat its credibility as the foundational currency for the world economic system is utterly undermined. If China ends the rather one-sided deal by which it acquires pointless bits of paper in exchange for massive quantities of consumer goods, the financial crisis will return with a vengence and the US economy will be sucked down into the whirlpool of its own debt.

But are the Chinese seriously proposing the Yuan as a viable alternative? Can the currency of a state capitalist economy play the role of currency of first preference in the global economy? China is now selling its own debt in Yuan rather than dollars and because their currency is backed up by real economic power it should prove popular with investors. But the Yuan is not subject to even the limited influence of speculative movement by international capital. It is non-convertible and still politically controlled by the Chinese Communist Party. It is this control that has enabled China to expand so successfully, because it never faced the risk of having its currency picked off by global capital if it looked too threatening, as happened with the once fierce Asian tigers and the Russian rouble in the late 1990s.

So what is China's game? What does it plan to do with the power its people have won for their state through their hard manual work over the past 30 years? For the sake of humanity let us hope that they plan to use this power as political leverage over the US at Copenhagen. The US needs to be helped to manage its way down from the position of bloated, gun-toting pariah that controlling the world's hegemonic currency has left it in. If the US offers a serious movement on carbon reductions in December, perhaps the rest of the world can allow it a graceful descent, rather than the catastrophic demise which China could precipitate at any moment if it were to flood the market with US Treasuries, or refuse to buy more.

The asset bubble that led to last year's financial crisis began way back in 1971, when Nixon reneged on the Bretton Woods deal. The supreme economic dominance that the US has enjoyed since then was won by foul means, not fair ones. The people of the world and the planet itself have borne the cost in wars the US should not have been able to afford to fight and a lifestyle that was never earned from its own work or resources. But secret deals between the leaders of a small number of powerful nations is no way forward for a peaceful and stable world. We need to repeat the call for a global financial structure to be negotiated democratically, not fought out between Washington's Dogs of War and the dinosaurs of the Chinese Communist Party.

5 October 2009

True Blue Never Fails

At last the Tories have come out of their policy closet and given some detail on what they actually plan to do after the next election. And we see that they are the same old party. Their response to a recession is to cut public spending and pick on the vulnerable. Cuts in the health budget and tax breaks for business: business as usual for the true blues.

The slogan for the first day of 'business' was peculiarly misplaced: getting Britain working. It is hard to see how forcing the sick and disabled from one form of social security benefit to another is going to create the millions of jobs that our economy is short of, according to the conventional economic paradigm, based as it is on wage slavery. Any attempt to resort to the traditional pasttime of threatening the marginal with starvation is more likely to get Britain robbing.

Why is it that those on the right are so desperate to force others into unpleasant, poorly paid jobs, that generate little of value and a great deal of carbon dioxide emissions? Could it be that they detest their own jobs and feel others should suffer alike? Light greens are much more likely to offer to share some of their work through reducing work hours, or their income through a citizens' income scheme. Darker greens would argue for freeing access to resources - especially land - so that people can provide for their own needs outside the market system.

And what of the Tories' promise to be the 'new green'? This fake and shallow veneer has rapidly peeled away. 'The environment' will barely feature at this week's conference as the planet's fair-weather friends revert to type and blow on the dog-whistle of oppressive Victorian policies that works so well within their electoral niche.

As Colin Hines argued back in the spring, within the conventional paradigm the obvious answer to the two-sided crisis of environment and economy is to send the quantitative easing money in the direction of real green jobs, with real green consequences: retrofitting Britains' tragically leaky housing stock would be a good place to start.

It's hard to know whether the reason this will not happen is that Boy George can't work out the economics - or whether he just can't resist his in-built propensity to beat up on the working people of this country. Or perhaps I should say the people who would be working if the money that might have enabled this had not all been spent on those who live from rents rather than wages.