Time is money

When Robert Owen introduced the idea of time money to the world with the launch of his Equitable Labour Exchange in 1830, he was inspired by the injustice of the fact that the money system enabled the powerful few to steal the value created by the powerless and overworked many. As I wrote in an account of Owen's radical banking activities published to mark 150 years since his death, 'The inspiration for Owen’s unpredictable journey to understand and reform money was his concern to achieve justice for the working person, and an understanding of the nexus that, within a capitalist economy, links money, work and inequality.'

The Tories blundering proposal that those who 'volunteer' to help elderly people will be given 'care credits' that they can then invest for 50 years and claim on to pay for their own care in due course demonstrates clearly the paradox of the Big Society. I have nothing but praise for genuine time banks, where local people share services and the local community is strengthened. But an attempt by the state to intervene in such schemes can only serve to undermine their credibility.

Once 'volunteering' becomes institutionalised and rewarded through an official alternative money system it is no longer voluntary but a poor substitute for a national system of essential public services. The world before such public services was a world of gross injustice, where political and economic power lay in the hands of the few and mutual aid was the only hope of a dignified life for working-class people. Political action led to the taming of the market and a fairer sharing of its product in parallel with the growth of the public sector and we should not now let our concern to defend what is public prevent us from campaign with equal energy against the theft of economic value in the private sector.

The fire of injustice that spurred Robert Owen to create his own money lives on as an inspiration for the Co-operative Bank, which says on its website, 'Owen argued that the acquisitiveness of capitalism encourages deception and the dehumanisation of others. This is especially so where employers fail to give either customer or worker full value for money as they cut corners in their quest to acquire as much profit as possible for themselves.' This is the real purpose of time-based money schemes: to humanise and introduce justice into the private sector, not to provide a diversion from the destruction of the public sector. Tweet

Follow the money

Any intelligent observer who was paying attention must have learned since 2008 that the money system is the trick that facilitates the control of the global economy in the interests of a tiny but powerful minority. So when any proposals are made to change the way that money-banking system works we should pay great attention.

On Tuesday Mervyn King, the Governer of the Bank of England and therefore the man responsible for both banking in the UK, monetary policy and the pound sterling itself, gave a speech in New York (aka Capitalism Inc. HQ) where he said explicitly that 'Of all the many ways of organising banking, the worst is the one we have today.' (Full text available here.) This is the clearest indication yet that capitalism is in the course of a major adaptation: the key to who will gain and who will lose will be in the design of the money system that will emerge.

King's central point in terms of critique seems to be similar to that made by my good friend Mary Mellor in her book The Future of Money, namely that it is simply unfair that a system so unstable as that of fractional reserve banking should be guaranteed by the public so that, in the now familiar cliche, the losses are socialised while the profits are privatised.

According to Robert Peston's summary of the speech, King argued that the hastily agreed Basel III accords are insufficient guarantee for publics who still stand behind their banks. For those do not spend their time watching the pin-stripes, Basel is the place where international bankers go to decide amongst themselves what is the least they can agree to tinker with their business model to keep the world's politicians happy (again: note the location).

What Mervyn King was arguing for, in the heart of the banking beast, was the abolition of banking as we know it. He proposed two alternative models. The first is already the subject of wide debate and would require a complete separation of retail and investment banking. The second is more interesting and known as 'limited purpose banking'. It works on the insurance model inherent within mutual approaches to finance and, as far as I can understand, leads to a situation where we really are ‘all in it together’, since the risks between capital and personal investments are pooled, with businesses and households sharing risks, but within different kinds of 'banks', operating with different degrees of risk.

Mervyn King places his hope in the Independent Commission on Banking, whose members are all well-steeped in the capitalist money and banking system, and are sure to recommend an adaptation that does nothing to change the status quo in terms of the sharing of economic power within global capital. Perhaps it is time to launch our own People's Commission on Banking in response. This could propose that the creation of money should be in the public, not the private sector, thus solving all King's problems at a stroke. I propose Mary Mellor for Chair. Tweet

Debt is a Feminist Issue

The gendered nature of the globalised capitalist economy is evident at many different levels. Empirical studies of women at the top of financial corporations appear to be absent from the peer-review literature, but even The Economist has suggested that the causes of the 2008 crash were partly hormonal.

The figures for women’s share of the world"s resources, as collected by UNIFEM are a shocking catalogue of inequality. Perhaps the most striking statistic is that ’Women perform 66 percent of the world’s work, produce 50 percent of the food, but earn 10 percent of the income and own 1 percent of the property’. In many countries women face discrimination in terms of property ownership, as we did in this country until the passage of the Married Women’s Property Act in 1882.

The study of economics is also dominated by men.To quote from an academic study from York University, ’Women make up approximately 30% of the research/PhD students, 15% of the lecturers, 10% of the readers/senior lecturers and 5% of the professors. Males in standard full-time academic jobs are twice as likely to be at a senior level (above lecturer) than women (46% compared to 23%).’ In the 41 years that the Swedish Bank has been given a prize for economics, a woman has only won it once, and then she had to share it.

So the world economy is dominated by men, the corporations who control it are dominated by men, and those who study it and inform policy are also largely men. When these policies are implemented, at least in the UK, they are done so by a cabinet which includes only one woman, plus a token other without portfolio.

Since women have so little economic power, they can have had correspondingly little responsibility for the economic and financial crisis we are in. So how can it be just that they will bear the majority of the pain? We are not all in this together: women who care for children and other relatives are more likely to receive benefits that will now be cut. They will be left picking up the pieces for the broken society that results from the devastation of public services. They are disproportionately likely to work in the public sector and so more likely to lose their jobs.

In the 40 years since the implementation of the Equal Pay Act women have seen their influence and their control over property increase in the UK, but until we have equal access to economic power we will always be an easy target. Tweet

Who do we owe the national debt to?

On this day when we finally hear the details about the cuts that we have been bullied and battered with for the past six months, it might be helpful to have a bit of a recap about what the alternatives are for dealing with the huge debt that we are left with after the banking bailout.

Many commentators have pointed out that there are two sides to the public balance-sheet and that the focus on cutting the spending side, rather than raising more revenue through increased taxes, especially on the corporate sector which has done so well from our largesse, is an entirely political decision. Another approach which is available even within the existing capitalist structure could involve managing the economy into a smaller and more equal form, thus achieving the sorts of social side-benefits that are identified in The Spirit Level.

But on this morning, of all mornings, let us look beyong the political rhetoric and think about the hard finance of the situation. That takes us to the question many outside the media bubble are asking: who do we owe this money to? And in a world where nearly every government is facing a similar problem of massive debt, could we not all come to some agreement to forgive each other and start again? In following up on the accuracy of a statement by George Osborne that the interest we are paying on the debt is going to foreign governments, my friend and colleague Barbara Panvel has done the bit of research necessary to answer the question about who the money is actually owed to, and the answer raises a whole series of new questions.

The figures, from the website of the government Debt Management Office, indicate that much of the money we are paying on our national debt borrowings is not going to foreign governments, as George Osborne gave as a justification for the need to urgently cut the size of the debt, but rather to our own good selves in various guises. So the cuts programme is really an example of robbing Peter to pay Paul. The data shown in the graphic indicate that only 29 per cent of the gilts currently in circulation are held by overseas investors, with slightly more (30%) being held by UK insurance companies and pension funds. The figures also indicate that nearly a quarter of our own national debt currently belongs to the Bank of England, which I assume is the result of the quantitative easing policy.

So who would lose out if we acknowledged that repayment of a debt on this scale is inconsistent with living in a civilised society, and began a policy of negotiating with creditors that they would not see the whole of their lending repaid? For those who have investments in pension funds, they will see their pensions reduced while their services are protected, so it will be a trade-off, but one that is fairer because those with larger savings will lose more, in contrast to the spending cuts that hit the poorest hardest. The overseas and other financial institutions would also lose out but this could be seen as compensation for the massive investment bubble they benefited from, and gained from, and which caused the banking and credit crisis that landed us all in this mess.

So there are a range of alternatives, with different degrees of challenge to the existing economic system, that are available to the UK government. To suggest that destroying the remaining vestiges of solidarity in our society is the only option is the big lie for our times. Tweet

Monbiot on the Money

As regular readers will know, I do not always see eye-to-eye with George but here I think he is spot on. This is just one symptom of the adaptation of capitalism in the wake of financial crisis and with the prospect of environmental and energy crises. Our actions and discussions should be informed by a sense of this historical moment, rather than undermined by the attempts to create chaos and fear that Monbiot identifies:

http://www.monbiot.com/archives/2010/10/18/britains-shock-doctrine/#more-1291 Tweet

Limiting Educational Aspiration

The blizzard of policy announcements since May has been quite bewildering. Journalists and academics are reeling at the pace of change, and much of what is being proposed seems both illogical and inconsistent. In my own area, that of higher education, the aim of the policy seems fairly clearly: to reduce the number of young people going to university. Raising fees from £3,000 to £7,000 or more is not a funding measure but a rationing measure.

The Telegraph headline may read 'too many middle-class students at university' but is not very informative until we have a clear idea of what 'middle class' means. As the cuts proceed it appears to be the very concept of 'middle class' that is being squeezed. Perhaps we could have a more informed debate if the sociologists who used to explain to use what class meant had not all been removed from their posts during the 1980s Thatcherite purges.

Clegg argues that tuition fees led to an unfair system of admissions; the Lib Dems graduate tax would ensure social mobility. The actual policy has focused on cutting costs, so the 'too many students' part stuck but the graduate tax was lost. Two posts in a row citing Clegg unfavourably might be considered unfair, but he has foolishly allowed himself to be the fall-guy for the coalition's policies. It's a small step from 'too many middle class students' to 'too many students', and naive Nick has done the Tories dirty work for them.

For those who missed the announcement because they were looking down a Chilean mine, and to those whose minds cannot accept it and are still asking 'eight-teen per cent?', let me repeat here that the policy proposed by the erudite Lord Browne is that the teaching grant should be cut by 80%. In future the government will only subsidise medicine, science, engineering and modern languages degrees. The sorts of courses we need our thrusting businesspeople to be equipped with, which is unsurprising given that Browne and Cable (who will implement this policy on behalf of the coalition) are both veterans of the corporate oil industry.

The savings that will result from this reduction in funding a civilised society is £3.5bn. In comparison with the size of the bailout this seems like a drop in the ocean. Corporate pressure has already diminished the standards of education in our universities; this will convert them into external training departments for the globalised business elite. As well-qualified young people who choose to enter employment rather than university displace their less well-qualified contemporaries unemployment rates are sure to rise, bolstered by the cohorts of university teachers whose skills will no longer be required. The savings will be cancelled out but this does not mean the policy is misguided, since its aim was always political rather than economic.

The Browne Review promised to ask searching questions about what our universities are for, but none of the most important questions were considered. How might our cleverest citizens prepare society for the transition to a low-carbon economy? How do we balance the interests of business and citizens in determining curricula? How might universities be models of transition institutions, rather than following an export-led growth model of education?

These questions were not asked because Lord Browne already knew the answer to his own question. Our professors are required to work in the service of business and to prepare a new generation of serfs to do likewise. Critical thinking is off the menu: the new paradigm will be developed elsewhere. Tweet

Mortgaging our future; stealing our assets

Financial engineering is a phrase that has become part of our normal vocabulary when thinking about the 2008 crash and its aftermath. Like genetic engineering, which implies that the botchery of implanting crocus genes into rice is akin to building the Clifton Suspension Bridge, the phrase is unduly respectful towards the City whizz-kids. Financial fraud is obviously closer to the truth.

It is worrying, therefore, that so many of the cabinet have a background in the financial world and owe their exalted status to its riches. And more worrying that the techniques they learned there are creeping into policy-making at local and national levels. The offending item of policy is what is being called 'tax increment financing' - a piece of misleading spin typical of the 'financial engineers' who brought us credit-default swaps and leverage.

At the Lib Dem conference Clegg claimed that tax increment financing was ‘the first step to breathing life back into our greatest cities’. It is hard to see how shifting debt from central to local government is breathing life. At a time where debts are in the process of destroying what we have come to think of as civilisation it seems more like the kiss of death.

The theory is that public infrastructure can be funded through borrowing, which will be repaid as a result of extra taxes that will be generated because this infrastructure, say a road, will encourage the development of more property, say another supermarket. This is using financial engineering to engineer economic growth and forcing the pace of development. It is also putting local taxpayers at the mercy of developers, since infrastructure (like roads) that would serve their interests will find funding, whereas infrastructure that will not (say, a care home for elderly people) will not.

The word from the Treasury is that tax increment financing would operate within a ‘carefully designed framework of rules, which the Government will work closely with local authorities to design’. The nature of liabilities and the assignment of collateral will be key here. Depending on what the detail says, this could be a way of allowing developers and financiers to take control of local infrastructure and the most important local asset: land. Tweet