Great Transformation: Phase II

I have finally overcome my inherent thrift and bought Karl Polanyi's Great Transformation, allowing me the leisure time to consider his arguments at length during train journeys, rather than in haste before his book had to be returned to the British Library stacks in Wetherby. What I found surprised and impressed me immensely.

At the level of chat, Polanyi is discussed, dismissed even, as an 'economic historian'. This is a familiar glitch in discussion of economics, where considering long-term trends is thought to undermine the quality of your contribution. After all, it might risk allowing in the possibility that there have been alternatives to the market, even that these have dominated human history and achieved high levels of well-being.

The popular view of Polanyi is of a social historian who offered an understanding of non-market provisioning systems. The motivation for his book, however, is clearly that of political economy. He begins with two chapters on the gold standard and its role in maintaining peace in Europe in the 19th century. Far from peasant economies and mutual aid, this is a story of political intrigue and the power of global finance.

Polanyi describes four institutions that held 19th-century Europe together: the balance-of-power system, the gold standard, the self-regulating market and the liberal state. He is in no doubt about which mattered most: 'Of these institutions the gold standard proved crucial; its fall as the proximate cause of the catastrophe. By the time it failed, most of the other institutions had been sacrificed in a vain effort to save it.'

While history never repeats itself, this quotation made me ask myself which of the institutions and values we hold most dear we are willing to sacrifice to support the existing reserve currency system, and particularly the power of the dollar and the euro. The political pressure required to service the needs of finance today are ripping apart the social fabric, leading to the rise of nationalism and racism, the destruction of social services, and the waste of our skilled young people to unemployment.

Perhaps even more familiar is Polanyi's judgement on the impact on equality of the currency wars of the 1930s: 'Internally and externally alike, dwindling currenices spelled disruption. Nations found themselves separated from their neighbours, as by a chasm, while ta the same time the various strata of the population were affected in entirely different and often opposite ways. The intellectual middle class was literally pauperized; financial sharks heaped up revolting fortunes. A factor of incalculable integrating and disintegrating force had entered the scene.'

It is said that Karl Polanyi is an influence on Maurice Glasman, theorist of the self-parodying ideas of Blue Labour. In such quarters Polanyi's book appears to be used unopened, as an iconic support for mutual aid and communitarianism. But if Glasman and ilk have the influence they claim on Ed Miliband, Polanyi may soon be a name worth dropping.
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The Bourne Derivative

Where is George Orwell when we need him most? The lasting contribution of his writing is not his lucid and baldly honest descriptions of historical events, valuable though these are, but his nailing of the operating mechanisms of a totalitarian state, whether of the right or of the left. While Big Brother and the Big Society seem locked in some process of intellectual dialectic, the concept of doublethink thrives in Cameron's Britain.

Let's think, for a while, about the Independent Commission on Banking. Who precisely is it supposed to be independent of? Given that it was established in the wake of the greatest financial collapse history, caused by the reckless behaviour of privately owned and profit-driven banks, one might hope that it would be independent of the finance sector.

This is far from the case. In fact, the most independent member is probably Martin Wolf, who has made his living as a financial jourjnalist. Hence he is entirely reliant for stories on the sector from which he is supposed to be independent. John Vickers himself was Chief Economist at the Bank of England, Martin Taylor is a former Chief Executive of Barclays, while Bill Winters had a similar post with J P Morgan until 2010.

The justification for this make-up is presumably based on expertise, in line with the oft-repeated and highly patronising thought that we the people are simply not smart enough to understand what goes on in the arcane world of finance. Like latter-day alchemists, the financiers make something from nothing, and then make things of real value disappear. Such knowledge is far too dangerous to be made available to the unwashed masses.

I have an alternative proposal: a truly independent banking commission. This would be made up of five ordinary people, drawn by lot in a process akin to the jury system. It would be chaired by Joanna Lumley, who would be responsible for reporting its findings to the general public. It could take evidence from a range of people: financiers, politicians and journalists, but also those who have been on the rough end of the miracle of finance: small businesses owners who cannot raise finance, single mums who cannot feed their children, and dissident economists of course.

The purpose of the commission will be to create the general principles within which technocrats can then make policy. If a derivative or other 'financial product' cannot be explained to them in a convincing manner, then they will be duty bound to reject its role in the finance world of the future. If we are truly to live in a democracy then finance must be required to submit to such rules, while the people, in an equally painful process, must take responsibility for understanding the financial system that is such a vital part of their lives.

Last night I went to watch Inside Job with some friends. I was frankly disappointed by the failure to nail the nature of the coup by the financial sector, which has effectively taken over the US government. The film was also short on remedies, ending on a platitudinous quotation about how the struggle to regulate finance 'will not be easy'. Hardly an insightful observation. My friend the Green Bean Counter has a better idea. Why don't we hire Matt Damon for one last vengeful performance, where he outwits the bankers and destroys their empire by force. Hence the title of this post.
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A bouquet for the BRICS

The movement in economic power towards the populous and productive nations of Asia, and the resource-rich countries of Brazil and Russia, has been obvious. The Western nations' strategy of extracting an unfair share of the value of this work and taking resources that do not belong to them through the trade-and-currency system is finally being challenged politically.

The BRICs, once a theoretical grouping, are beginning to operate like a political force. Their call for a new reserve currency to replace the US dollar as the basis of global trade is a sign of frustration with the failure of the US government to tackle the injustices in the global economy. The invitation to South Africa to join this grouping is an indication that, much more so than the G7, it is beginning to represent a global decision-making forum.

To some extent the leaders of these countries are being polite in making statements. They hold the power in the global economy and, if the UK and US fail to negotiate, it can only be a question of time before our currencies are simply sidelined. At present the call is for the use of special drawing rights as a global reserve; it might just as well be a currency set up in common between the BRICs countries and their allies, sidelining entirely the Western countries that have dominated the global economy through power rather than performance since the end of the World War II.
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Take that, George!

Those who, like me, have been increasingly frustrated by the prevailing flavour of reassurance, and the serious absence of facts, around the Fukushima story, may enjoy the response to George Monbiot from Helen Caldicott.
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Ambassador for Outrage

It was Terry Jones, the Python not the Koran-burning cleric, who first made me conscious of the increasingly wayward behaviour of abstract nouns. First we were launching wars on them (Terror being the foremost example) and now we share diplomatic representatives with them. David Cameron has apparently appointed an Ambassador for the Big Society. It made me wonder whether we couldn't have ambassadors for a whole range of abstract nouns and concepts. And if you're asking, mine's a pint of outrage, although the position of Irony Tsar would also appeal should it soon fall vacant.

The latest target for my roving outrage is the abysmally poor quality of the campaign over AV. I have yet to receive my 'independent' leaflet from the Electoral Commission but have been out delivering the Yes leaflets and have received a No leaflet through my door. The arguments in both are tendentious, misleading and entirely negative. How can it be that the Yes campaign can think of no better arguments in support of the case for creating genuine democracy than that it might make politicians feel more insecure and that they would consequently work harder? This has only a marginal connection with relevance and also serves to reinforce the myth that politicians are lazy.

I was, of course, predisposed to feel more negatively about the No campaign's leaflet, although the level of deceit and determination to mislead shocked even a campaigner hardened by as many political battles as I am. Meanwhile the media debate, led by the now ennobled John Reid, scraped even lower into the barrel of vintage scare-mongering by suggesting that AV would serve the interests of the BNP.

Barbara Panvel, a challenging rival for my claim to the position of Outrage Ambassador, has produced an excellent blog post detailing the funders of the No campaign, which is portrayed as a 'coalition of City billionaires, Tory peers and trades union barons backing the campaign to oppose a change in Britain’s voting system'. Barbara's judgement on the message to keep the open and simple system we current use: 'It is OPEN: to lobbying. It is SIMPLE: those with the longest purses are heard with the deepest respect.'
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Elite's Marginal Productivity Challenged by Nobel Renegade

In spite of the fact that he is clearly right, and that he is in the sort of position where holding critical views could have some impact, I cannot feel warm about Joseph Stiglitz. It must be the years he spent at the World Bank drawing a fat salary while the Bank's policies caused starvation and death. Although the black mark is partially expunged by his dissent and subsequent sacking, it still recalls a bank boss who takes his large pension and then joins the Rotary Club after retirement. And of course Stiglitz has never returned his 'Nobel Prize', suggesting he still revels in the acclaim of his dubious peers.

But bitterness aside, let's enjoy his latest offering published in this month's Vanity Fair. The article begins with the commonplace and yet shocking statistic that the top 1% of US citizens take nearly a quarter of the country's income each year and own 40% of its wealth. As recently as 1986 the comparable figures were 12% and 33%. This extraction of value by the plutocrats has been bought largely at the expenses of the professionals.

There is a useful phrase in the article which I think we could make much of: 'Trickle-down economics may be a chimera, but trickle-down behaviorism is very real.' The lifestyles of the wealthy, which in an earlier age we would have considered beyond our station, are now advertised to us as something to aspire to. Such luxuries and long-haul flights and fast cars are considered as rights, and greens who suggest that they may need to be restricted are painted as killjoys if not oppressors.

Stiglitz argues rightly that the justification for the growth in inequality on the basis that wealth creators have to be rewarded so that the economy can boom, and that this additional output will benefit us all, is unsupported by evidence. What he fails to notice, and what makes the need to end the extraction of value by the wealth so urgent, is that this economic growth is actually undermining the conditions that enable any economic activity at all to take place.

This is the argument offered by the eco-socialists, their so-called 'Second Contradiction of Capitalism'. A green economist would probably find a more grounded and passionate response: the greed of the wealthy, and the economic growth it is linked to, is killing the planet and destroying all our lives.
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If you want to save the species, get political

Is has become increasingly apparent during the past couple of years there is an inability amongst a wide range of people in politics and media to think about more than one issue at the same time. Since the financial crisis and the advent of deficit-vision any thought of showing concern for the environment has entirely evaporated.

In a sad report on the Transition Network website we learn the consequences of a shift in one administration from fluffy Lib Dem to market-hard Tories (that of Somerset County Council). The article quotes the authority's new hardline budget strategy: 'some services will be stopped completely e.g. climate change work, work on renewable energy, natural environment policy and delivery'. They have also sacked their Climate Change Officer. In the world of deficit-think, the environment is entirely forgotten.

The absence of any analysis around political economy was one of the criticisms most frequently made in the early days of the Transition movement, especially by academic commentators. Rupert Read, for example, made the case some three years ago that Transition Towns play a valuable demonstration role but cannot offer a sufficient response without taking politics seriously. Rob gave a spirited defence of the need for unleashing the powers of positive thinking and creative community action.

Like Rupert, and many other green politicians, I have been engaged in Transition initiatives from the start. And from the start I was well aware that any political support demonstrated by 'grey' parties who have always been adherents of the prevailing political and economic culture, whose existence relies on the power structure that is killing the planet, could only ever be partial and opportunistic. What has happened in Somerset appears to validate the view that inspiration, hard work and bright ideas, while important, are insufficient without political analysis, strategy and action.
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