Answers in the Trees

I do hope that there is wisdom in the woods, since I have chosen to spend my summer holiday this year at Clissett Wood in Herefordshire, where I will be learning green woodworking. I'm not so ambitious as to think I will actually make a chair, but I should become better acquainted with a shave-horse, and spending that much time outdoors is enough of a thrill for me.

The rap poet Paradox is offering wisdom from the trees in his poem about the scandal of money, banking and interest. You will have heard this message many times before since the Crash of 2008, and read plenty of similar stuff on this blog, but none of it as stylish, I think, as this six minutes of poetry. Tweet

Sustainability Watchdog to be Put Down

Producing a report, as a government body, that recommended ending economic growth was always a risk. It seems that the Sustainable Development Commission just went to far, when its economics commissioner Tim Jackson did this last year. Reports suggest that the closure of the SDC is to save money, but with such an absurdly small budget this is surely just political cover.

For more than ten years now, the Sustainable Development Commission has been trying to do what I, and many other green commentators, think is impossible: persuading those who hold power in business and politics within this paradigm that they should take a path that does not threaten the planet. They did this politely, and in a measured way, backing their arguments up with clear and irrefutable evidence.

This result is that the SDC has been closed. This is surely evidence in itself, if such evidence were needed, that the existing power structures cannot be changed incrementally, from within. We need to recognise that the political system we struggle with will not allow us make the changes that the planet needs - the Westminster system of power and its corporate lobbyists are corrupt from top to bottom.

Tim Jackson's report was the latest and clearest statement of the total incompatibility of capitalism with sustainability. He may not have phrased it in those terms, but since capitalism cannot survive without growth, to challenge growth is to challenge capitalism itself. So I am not surprised that the SDC has met its doom; I only hope that those who thought that the art of persuasion could be successful will learn this lesson and have the courage to join us in building the new paradigm outside the mainstream. Tweet

One Law for the Rich . . .

One of the greatest benefits of an academic life is that it forces you to keep in contact with academics from across the world so that you keep an international perspective. For a localist like me, who might otherwise lurk in my burrow with only the occasional foray to the 'big city' (Cardiff) this is a salutory obligation. In Bordeaux I recently had the pleasure of listening to two presentations about radical economics in Latin America. This is not the wishful thinking of pressure groups or smaller parties but the work of governments on behalf of their citizens.

Ana Rosa de Mendonca from Brazil presented a paper about the role of public banks in the Brazilian economy. In Brazil these banks, which are politically managed, control 43% of the credit in the economy. For many people they are their retail bank of choice, in place of the high-street banks we rely on, which exist to maximise profits for their shareholders.

Economic theory suggests that such public banks can play a useful role in underdeveloped economies until the market is sufficiently developed so that the private banks can take over, offering their manifestly superior services. Ana Rosa quite reasonably questioned whether such public banks might in reality play an important role in developed economies too, especially since they can act in an anti-cylical way, i.e. investing more when the economic is in recession and drawing money out to prevent over-heating.

Public banks, operating in the public interest, can also support important economic transitions as they did in Latin America's building of its industrial infrastructure in the 1950s and 1960s. In the UK, if the banks which we already own large portions of were simply turned into public banks, with political governance structures we could see them playing a similar role in our transition to a low-carbon economy.

Meanwhile, Eugenia Correa from the National University of Mexico outlined arguments for politicians to retake political power over the financial structures of the Latin American countries. Venezuela and Bolivia are already controlling their currencies on the foreign exchange markets. All the LA countries, she argued, have been net exporters of foreign capital for decades, as their wealthy citizens have deposite funds abroad, Switzerland being the destination of choice. This has left them short of capital for domestic investment and expansion.

She also proposed a Banco del Sur and a regional exchange currency. The latter already exists in the form of the SUCRE, which already exists to enable countries to settle foreign-exchange balances without needing to hold foreign exchange reserves. This could allow the Latin American economies to create a thriving regional economy that is insulated from the depredations of the rest of the world.

Like Africa, Latin America has for long seen its resources sucked out to benefit corporations sited elsewhere. Its people are no longer engaged in violent revolution in response to economic injustice but are rather electing politicians who are smart enough and courageous enough to defend their interests. Viva la revolucion economica! Tweet

Gunning for the Money Men

I'm recently back from the Association for Heterodox Economists annual shindig, held this year in a sunny and astonishingly beautiful Bordeaux. It was the usual hot-bed of vibrant conversation amongst economists who, having long ago eschewed the neoclassical orthdoxy and therefore any hope of an exalted career path, see no risk in embracing and enjoying a plurality of opposing views about economic life.

I had the usual temptation to engage in some impromptu ethnographic research, especially when sharing a meal with a bunch of fellow economists, who use game theory to work out who should tip and by how much, and watching the World Cup semi-final in what the French considered an English pub with a people of mixed nationalities and prejudices was also highly entertaining.

One of the greatest pleasures was meeting Gunnar Sigurdsson, who claimed to have personally overthrown one Icelandic government and be well on the way to destroying a second. This gives you a clue to the sort of person he is, and I imagine that the negotiating skills needed by a politician are well beyond his skill-set. He himself admitted that his greatest mistake was standing for election.

But then, what else are you supposed to do when your country and everybody in its has been put onto the baize cloth by a small number of irresponsible young men? In Gunnar's case what he decided to do was to make a short and entertaining film of his personal take on the Iceland banking crisis and subsequent bankruptcy.

You will not be surprised to learn that the City of London was highly implicated in the fraud, by supporting the Viking Raiders as they bought up a range of high-street names which they could not realistically support. (Surely the purchase of supermarket Iceland was just a little joke on their part?) Gunnar also noted the support by 'respected' economists Mishkin and Portes, who he claims were paid to say that there was no problem with Iceland's stability. In effect, 'the were hired because they were willing to get it wrong'.

I have previously suggested the Icelandic case as an object lesson in what goes wrong when an economy becomes detached from its real, physical base. It seems that the reality was murkier, with a tiny elite corruptly supporting each other in an anti-democratic network that stretches back to the founding of a US military base on the rocky island in 1951. Too many Icelanders enjoyed the good times without asking questions: they have wised up since and Gunnar says that all Icelandic people are now economists, as are many of his best friends!

Gunnar's own journey since his decision to follow the money has involved considerable air miles as he trekked from Guernsey to Tortola in the British Virgin Islands to track down the movement on the non-existent money on which the Iceland miracle was based. There he discovered 600,000 financial companies were registered, with no regulation whatsoever, including 120,000 in just one small office block. His deeper journey of disillusion and loss of trust is one we are all embarking on, whether we choose to or not. Tweet

Chick and Pettifor Call to Reverse UK Spending Cuts

This fairly standard Keynsian call for counter-cyclical public spending to avoid a self-reinforcing depressionary spiral is interesting more in where it is found (on the Bloomberg website) than for any new thinking. Tweet

Land: The Final Tax Frontier

Here are some further interesting reflections from Martin Wolf, who seems to be breaking the economists' rule of a lifetime and actually engaging in some open-minded thinking. This time he is on the issue of land, and even goes so far as to consider the writing of Henry George on the subject. (I have already posted about my recent encounter with his devoted followers.)

Why should this issue be receiving attention, all of a sudden? Could it be that, with all other sources of revenue drying up, the politicians are at last realising the benefits of taxing land, which cannot be sent offshore or hidden in a foreign bank account? The Tax Justice Network considered this possibility in a recent special issue devoted to land tax, where I rehearsed many of the arguments Martin Wolf addresses in his piece.

Theoretically, Wolf must be right that the removal of land from economic theory was absurd, and contributed to the disconnection of the economy from the environment that has been a major contributor to ecological crisis. But as Greens we always have to be cautious about taxing land, since putting pressure on its value could merely lead to over-exploitation. Proposals for such land taxes always need to be linked to strategic objectives, put into practice via a newly democratised and community led planning process. Tweet

Culture of the Shameless: Part II

It's only once a year that I ask this favour. If you're enjoying all the priceless education and thought I share with you for nothing, in flagrant and shameless denial of all the precepts of economic theory, you might consider voting for me in the annual poll of political blogs.

The rules are simple.

1. You must vote for your ten favourite blogs and ranks them from 1 (your favourite) to 10 (your tenth favourite).
2. Your votes must be ranked from 1 to 10. Any votes which do not have rankings will not be counted.
3. You MUST include at least FIVE blogs in your list, but please list ten if you can. If you include fewer than five, your vote will not count.
4. Email your vote to toptenblogs@totalpolitics.com
5. Only vote once.
6. Only blogs based in the UK, run by UK residents or based on UK politics are eligible. No blog will be excluded from voting.
7. Anonymous votes left in the comments will not count. You must give a name
8. All votes must be received by midnight on 31 July 2010. Any votes received after that date will not count.

For ideas about other political blogs you can include to reach the total you can check the links to the right. Tweet