Right or Left, or Right or Wrong?

This morning I am going to do something I certainly never expected to do on this blog: agree with the business editor of the Daily Mail. Alex Brummer has published a book called Britain for Sale: British Companies in Foreign Hands – The Hidden Threat to Our Economy. Brummer claims that more than half of British companies have already been sold, and that 'foreign companies acquired £30billion worth of British enterprises in 2009. In 2010, that rose to a value of £54.5 billion.'

He claims that 'Foreign corporations also currently control 39 per cent of UK patents. This is far more than the percentage of foreign-owned patents in the U.S. (11.8), Japan (3.7) or even the European Union as a whole (13.7)'. He makes a strong argument that, when companies that were once British are bought, we lose not only knowledge about industrial processes, we also lose skills and are effectively selling off our tax base. Given the right-wing slant of the book, it is unsurprising that little is made of the inability of government's to take a strategic approach when companies are privately owned, never mind owned by overseas investors. This has been particularly striking, and particularly risky, in the case of our energy policy.

Brummer makes his case in a BBC interview with Nick Higham. In his interview, Nick Higham criticises Brummer's case as an 'old-fashioned view of protectionism'. Brummer responds that this is a question of national and economic security, rather than a challenge to global free trade. This position is, I think, inconsistent and even incoherent. It is also dangerously outmoded: more localised production and distribution systems are necessary because of their energy efficiency, as well as the higher levels of resource security they offer.

My own proposal for a bioregional economy has its basis in social justice, as well as security and sustainability. I would go much further than Alex Brummer dares and question why global corporations should wander the world, using their ill-gotten gains to buy up other people's resources. This is the root cause of global inequality, but also undermines accountability. Linking people back to their local natural resources gives them an incentive to protect them long-term.
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Austerity Breeds Outrage

Two reports came out on 21st May which was also, incidentally, my birthday. The first was the report of the Environmental Audit Committee's inquiry into the Green Economy. I gave evidence there on behalf of the Green House thinktank, following up on our written evidence. I was in an evidence session with David Powell from Friends of the Earth and a representative of the TUC. It is encouraging that, as well as Green House's evidence, WWF, NEF, and others were clear that a green economy will be one that respects planetary limits and recognises that we must restructure our economy so that it does not rely on perpetual growth.

The Committee chose as its media hook for the report the fact that deregulation is undermining attempts to move towards the green economy, a rather dull angle which failed to arouse much interest. The real political question of our time - whether we can ever or should ever return to growth - was ignored. Perhaps it just seemed too far from the hegemonic idea of the urgent and unassailable need to return to growth as the only solution to our economic woes.

The EAC's report focuses rather on 'current patterns of economic growth', in spite of clear evidence from Tim Jackson about the fact that decoupling growth from resource and energy use is a chimera. However, they did quote at length a list of groups who took a hardline view on growth:

'52. Many saw the Government’s current agenda as focusing too much on growth and too
little on measures to protect the environment and ensure environmental limits are not
breached. David Powell of Friends of the Earth believed that current government policies, including Enabling the Transition, were being presented as “growth first ... let’s try and make it green and anything else we can do is fantastic”. . . We also heard concerns that, without a definition of sustainable development being included within the new planning guidance, proposals to introduce a “presumption in favour of sustainable development” would lead to unsustainable development. RSPB believed greater thought should be given to whether the “continued push for growth is in fact in conflict with prosperity in the longer-term”. The Packaging Federation believed there was little sign that the Government understood a “real danger of a fundamental incompatibility between UK climate change goals and economic growth”. Green House believed that a strategy of export-led growth was incompatible with a green economy as “it relies on lengthy supply chains and hence an extensive use of energy and so contributes to climate change”.'

Our idea of 'transitional growth' was also cited: 'Green House believed that economic growth was only possible in the short-term as part of a transition strategy to move us towards an economy that is in a steady state. Such economic growth would be confined to replacing infrastructure to enable self-reliant economies stabilising the economy within our national resource limits.' And we were quoted as stating that 'because of the “unfeasible nature of the increased efficiencies required and the nature of rebound effects associated with technological improvements”, seeking to decouple economic growth and production from CO2 emissions “is an example of psychological denial”.

Oxfam also gave evidence, which brings me to the second report I wanted to draw attention to: Be Outraged: There are Alternatives, an attack on the present absurd economic policies being followed by Western nations from a group of development economists published by Oxfam. The report states 'that the austerity approach to reducing deficits and debt is counterproductive; it is leading to a downward spiral of incomes and government revenues making it more difficult to reduce the debt and undermining growth prospects.' The report is authoritative and useful in bringing together clearly and critically the consequences of misguided economic policies including: 'More than 10 per cent of European adults are unemployed, up by 50 per cent since 2008. More than one in five- 22% - youth under 25 are unemployed and in some countries over 40%' or 'Top incomes have soared in the UK and US especially: the globe’s richest 1 per cent (61 million people) earn the same as the poorest 56 per cent (3.5 billion)'.

Overall, though, the report is fairly standard Keynesian stuff and, although Oxfam gave evidence to the EAC and devote attention to the structural problems with the growth economy, this line of their work does not seem to join up with their attempts to challenge austerity politics. As the Green Party has found, resolving the tensions between social justice and a steady-state economy is not always easy, but no organisation or research institute that has understood the need to respect planetary limits should now be producing arguments for growth.

Green House is running a personalised campaign to shift the media position on this question: please join us. We are targeting the BBC, on the basis that we pay for them, and because their email addresses are easy: firstname.familyname@bbc.co.uk. Each time you hear the hysterical statement of the universally acknowledged need to return rapidly to growth, please email the person who has made this statement, giving them some links to clear statements of the destructiveness of this position. You can refer to work by Green House, the EAC report, or more broadly the website of CASSE - the Centre for the Advancement of a Steady State Economy.
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Irrefragable Justice

In his Philosophical View of Reform, published in 1820, the English radical and poet Shelley wrote the following in connection with the pressing need to repudiate the national debt:

'The settlement of the national debt is on the principles before lucidated merely an arrangement of form, and however necessary and important is an affair of mere arithmetical proportions readily determined; nor can I see how those who, being deprived of their unjust advantages, will probably inwardly murmur, can oppose one word of open expostulation to a measure of such irrefragable justice.’

This, I think, is a useful addition to the sterile debate around austerity or growth. Not only should we remember that growth is destructive of environmental justice, but also that financing public spending through debt is destructive of social justice. As Shelley also observed, ‘the national industry’ by which he tells us he means ‘to increase the labours of the poor and those luxuries of the rich which they supply' served only 'to augment indefinitely the proportion of those who enjoy the profit of the labour of others as compared with those who exercise this labour.’

His target, the economic system of capitalism which was advancing to global dominance 200 years ago, could, in his view, never achieve social justice. This is much the same argument as the Citizens' Audit movements, which are growing in strength across Europe, inspired by the example of the debt repudiations and refusal of further debt financing by the economies of Latin America. These were framed by the idea of odious debt, a most useful legal concept that dates back to the 19th-century, when the US wished to avoid responsibility for the debt of the states it had absorbed into its territory as a result of the Spanish-American War, specifically, the debt that Cuba had incurred under its colonial rules. It holds that:

‘debt should not be transferable to successor regimes if (a) it was incurred without the consent of the people and (b) was not for their benefit (Alexander N. Sack, 1927; Ernst Feilchenfeld, 1931). The underlying principle is that just as an individual does not have to repay money that someone fraudulently borrows in her name, and a corporation is not liable for contracts that its chief executive officer enters into without authority to bind the firm, a country should not be responsible for debt that was incurred without the people’s consent and was not used for their benefit.’*

An idea that was developed for a single pragmatic requirement and had gathered dust in legal libraries came back to public attention in 2003, when US Treasury Secretary used it as justification for repudiating the debts incurred by Saddam Hussein when it took over Iraqi territory. It derives from a strong moral sense that those responsible for acquiring debts should not be able to force this responsibility onto other who have neither consented nor benefited from them:

‘It is morally repugnant to saddle the population of a country, down unto generations yet unborn, with the obligation to repay debts that are truly odious in the Sackian sense. Most people instinctively believe that the consequences of reprehensible acts should be visited exclusively on the malefactors (in this case, the corrupt regime and its complaisant creditors). The question is whether this moral imperative can be translated into a workable legal theory.’**

The concept of ‘odious debt’ has been related to debt acquired by regimes that have been regarded as illegitimate in international law either because they were oppressive, or undemocratic, or because a change in state regime rather than just government had taken place, in the case of Cuba and Iraq due to external invasion. But might we extend this concept to stable western democracies, whose citizens are now struggling with oppressive debts? Recalling Sack’s two conditions—that the debt was incurred without the consent of the people and was not for their benefit—can we apply these conditions to our own situation in the UK?

This is not the place to enter into a philosophical or legal discussion of consent, but such a route might be fruitfully followed in an area where ignorance on the part of the citizenry was so widespread. A clear finding of the various popular books that have emerged in the wake of the financial crisis is the opacity surrounding the behaviour of financial institutions and their employees, which left many key policy-makers and politicians, not to mention the citizens who trusted them to regular the sector, ignorant of the ‘dark arts’. The role of the public in supporting the banks that are headquartered on their soil was not well understood, suggesting that meaningful consent to the financial costs of this can be questioned.

Whether or not it was for the benefit of UK citizens is perhaps more problematic. In a situation where the Chancellor of the Exchequer publicly stated that we were within hours of the cash-point machines failing, there was clearly a strong public need to support the monetary systems, which required nationalising the banks at vast public expense. But UK citizens were unfortunate that some of the world’s largest banks were headquartered on their soil, and this led to their supporting a banking system for the general global good at their personal national expense. Whether the tax receipts during the boom justified the cost of the bust to the UK balance-sheet is one question that a Citizens Audit could seek to answer.

*Jayachandran, S. and Kremer, M. (2006), ‘Odious Debt’, American Economic Review, 96/1: 82-92.
**Buchheit, L. C., Gulati, G. M., and Thompson, R. B. (2007), ‘The Dilemma of Odious Debts’, Duke Law Journal, 56/5: 1201-62.
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Not Man With a Plan but Solidarity against Finance

After Bush it was a relief to have in Obama a US President who was witty, urbane and physically attractive. However, in policy terms I think we have to admit that he has been an utter failure. US citizens need a President who can stand up for them, as Roosevelt did in the 1930s, but the US seems like a state utterly captured by financial interests. Although we will never know what happened around the Camp David hearth, we can be sure that the pressure was on Merkel to provide more cash for the vulture financiers.

It has been embarrassing in recent days to see the self-created powerlessness of our 'leaders', as one after another they call for a plan to tackle the exhausting and debilitating crisis. The absence of leadership results from the obvious fact that what is needed is a political challenge to the power of finance, while all our politicians are utterly in hock to those same financiers. The only solution to this crisis is to be honest about the gap between the real economic value of the world's economies and the phoney book value, and then to negotiate an arrangement to bring these back into balance. This would mean huge losses for all those who control the financial value. This is why it never reaches the negotiating table. Instead we have political performances of terror and concern, which are intended to soften us up for the next round of ruthless exploitation and loss of social and democratic rights. I put forward such a plan last summer, and it still seems just as relevant today.

This weekend 20,000 European debt audit campaigners have been camped and demonstrating in Frankfurt, the heart of European financial power and home to the European Central Bank. They have a simple platform of demands: refusal to accept a fiscal pact that puts finance in control and sidelines democracy and the needs of ordinary people; expression of solidarity with the struggles of the people of Greece and support for the political platform of Syriza; and rejection of the way that the debt crisis is being used to usher in the next phase of neoliberalism, that is to say financialisation and the sale, at often low prices, of public assets. Their call is for a thorough audit of all European public debts and state assets so that a real negotiation can take place about what the value of the economics is and how it can be fairly shared.
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Circulation and Circularity

I was really cheered to see a comment on my post about the need to understand the economy as a complex system, pulling me up for not mentioning the limitations of a Keynesian approach in an era of ecological crisis. I covered this point in my earlier post 'A green paradox of thrift', but I am still encouraged to know that the no-growth position is now so established that people are reminding me about it!

When proto-green-economist Kenneth Boulding made his point about the need for a 'circular economy' he was using this conception as a contrast to the wasteful production-and-destruction economy that typifies capitalism, which he described as linear. Materials come in at one end, they are transformed using large quantities of energy into products, which are sold and usually become redundant or unusable within a short period of time. They have then become 'waste'.

Since achieving all her ambitions in terms of round-the-world sailing, Ellen Macarthur has set up a Foundation to shift the mode of the productive economy towards a more ecological circular pattern. She freely acknowledges this as a far greater challenge than the southern oceans. The aim is to ensure that nothing is wasted, that products last longer, and when they can no longer be used in their current form can be broken down and reused as components or as materials. Reducing energy is another key aspect of this 'circular economy'.

German MEP Sven Giegold has recently produced a report linking the Eurocrisis to European economies' dependence on fossil fuels. I cannot make this link work, perhaps because of the slow Broadband speed in my semi-rural idyll, but his conclusion makes me feel that it is worth my while to persevere:

'The increase in raw material import costs between the first quarter 2009 and third quarter 2011 equals on average to 50% of their current account deficit in the same period. The rising import bill is particularly affecting lower and middle income groups, as they have to spend a disproportionately large part of their disposable income for energy consumption. Consequently, convincing measures to overcome the euro crisis have to reduce the dependency on fossil fuels and other non-renewable raw materials: No stabilization of the Euro without a Green New Deal.'

It is important that we explain to people why public-spending cuts are bound to cause recession, that we help people to understand the economy as a system in which circulation is what matters, not individual transactions. But it is also important that we are clear about the false dichotomy of austerity or growth. I hate to have to say this, but what we really need is a third way, a way in which we maximise local, quality economic interactions, and minimise those based on the use of materials and energy. Qualitative growth, and growth in local economies would build greater resilience and happier communities. While we need to be austere with our use especially of fossil fuels, the austerity of the spirit should always be condemned.
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It's the System, Stupid!

So the Eurozone is on the brink of slipping back into Recession. The latest growth figures indicate the growing inequality that the single currency is causing between Europe's countries. The quaterly rates of growth range from -1.3% in Hungary to +1.3% in Finland.Meanwhile, annual rates of growth in 2012 compared with the same quarter in 2011 are truly shocking. Greece is showing a contraction of 6.2%, while the Portuguese economy contracted by 2.2%. The Netherlands shrank by 1.3%, while the UK is registering at zero. In the case of Greece, Spain and the countries that are showing disturbing rates of contraction, the austerity measures are the key cause of this. The failure to understand this appears to be wilful stupidity.

The first graphic indicates the relationship between government withdrawal of investment and the failure of growth. We can clearly see the economy take a nose-dive in 2008, then return to stability and slow growth as a result of Labour's stimulus policies, before nose-diving again once the Tories were elected. Do these politicians really not understand, or refuse to understand, the nature of economies as complex system, and the importance of multiplier effects? This refusal is a type of ideological blindness which is devastating all sectors of the UK economy and destroying jobs and livelihoods.

Why is it so easy for politicians to convince voters of this mistaken view of how an economy works? I think the answer lies partly in people's unwillingess to think systemically, and in this it is related to the problem we face as Greens of persuading people to think about ecological systems. As far as the economy is concerned, I have produced two graphics, which I hope help to explain how Osborne and his ilk have the economy completely wrong. We need to encourage people to stretch their minds to seeing the economy as a system, not as a linear series of transactions.

The first graphic represents the Osborne view of economics: a view that was, until recently, accepted as hegemonic by most media outlets. The first assumption of this model is that wealth is only created in the private sector. Tax then removes this wealth and feeds it to the greedy public sector, which destroys it. What remains stimulates consumption-based economic activity. If the money paid via tax to the public sector could be shrunk, as in the right-hand panel, then the private sector would expand and the economy would be more successful.

The second graphic represents the economy as a dynamic system, with public, private and third sectors all interacting. Wealth is generated in private, public and third sectors. Taxation is paid on all economic interactions, and that taxation becomes investment in further activity in all three of the sectors. Conclusion: the way to revive the economy is to increase the circulation of wealth and stimulate greater activity.

This is not a complicated argument, and it requires only a short application of mental effort to realise that the first model is simplistic and wrong. It is some combination of mental laziness and ideological perversion that prevents the majority of European citizens from grasping this - and demanding economic policies that respond to it.

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Man who Makes his own Underpants Strikes Again

Those of you who enjoyed John-Paul Flintoff's Through the Eye of a Needle will be pleased to hear of his involvement in a new project to inspire and empower us all. I suppose we should not be surprised to learn that John-Paul's new endeavour has been inspired, at least in part, by Tolstoy. I have been following the latter's work with avid interest over the past few months. He was particularly lucky to have counted one of the 19th-centuries greatest painters, Ilya Repin, as a friend, so that his PR was in safe hands.

John-Paul wants to share Tolstoy's insight that history is ours to make. The media world feeds the mistaken Great Man view of history, theorised by Thomas Carlyle and with which Tolstoy struggled in person and in print. Tolstoy favoured the view that we are making history in our everyday actions and that we should remember the small things as well as the large. This is the philosophy behind John-Paul's new book How to Change the World, part of a series called The School of Life, edited by Alain de Botton.

John-Paul describes his project as follows:

'We all want to live in a better world, but sometimes it feels that we lack the ability or influence to make a difference. John-Paul Flintoff offers a powerful reminder that through the generations, society has been transformed by the actions of individuals who understood that if they didn’t like something, they could change it. Combining fresh new insights from history, politics and modern culture, this book will give you a sense of what might just be possible, as well as the inspiration and the courage you need to go about improving and changing the world we live in.'

I will leave the last word to George Eliot, who was well aware of Carlyle's Great Men but may have had at least as great an impact on the world as many of those men of war he championed. Here are the closing lines from Middlemarch, written about the heroine Dorothea:

'Her finely touched spirit had still its fine issues, though they were not widely visible. Her full nature, like that river of which Cyrus broke the strength, spent itself in channels which had no great name on the earth. But the effect of her being on those around her was incalculably diffusive: for the growing good of the world is partly dependent on unhistoric acts; and that things are not so ill with you and me as they might have been, is half owing to the number who lived faithfully a hidden life, and rest in unvisited tombs.'
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