Bowled for six

This morning we see the final act of the asset-stripping of local communities that began when the Abbey National gave up its mutual status, under the pro-market encouragement of the dying Thatcher government, in 1989. Wikipedia helpfully provides a list of the spate of demutualisations that followed: it shows that many of our building societies are now controlled by Spanish bank Banco Santander.

I imagine the original founders of these societies as bewhiskered gentlemen in Batley or Huddersfield, but the reality is that they were more likely to have worn flat-caps than top hats. They were working people clubbing their savings together so that one after another they could save themselves from rapacious landlords.

The building societies were part of the mutual society that developed in response to the growth of capitalism. As a challenge to domination by rentier interests it is unsurprising that the high tide of capital power saw their dismantling. In the loadsamoney culture of the 1980s the members who voted for the paltry £1500 or so of shares (most of which they turned into cash) had lost their sense of the way that owning assets protected them. Their ancestors had learned this the hard way; they may well be learning that lesson in the years to come.

Mr Bradford and Mr Bingley, those sober, suited gentlemen in bowler hats would never have gambled their investors' money on self-certified mortgages and buy-to-let cowboys. We have, perhaps, been dazzled by the proliferation of multi-coloured bowler hats, a classic piece of financial illusionism, but the hard realities of a capitalist economy remain. Money means power and the more assets you control the more powerful you are. Trying to take on the big boys in property speculation was a sting perpetrated on the foolish by the confidence tricksters. And the building societies that working people worked so hard to create now belong to banks which follow only the interests of capital.

In my home community of Stroud we are going back to learn from our ancestors. The recession does offer us opportunities as a community, since assets such as empty property and even - conceivably - land will fall in value. Although we are poor, we are many. Just as the Miners’ Welfares and working mens’ clubs of Northern Britain were built on the sixpences of their working-class members, so we are establishing a ‘tenner a month’ fund which we hope will generate enough cash to buy community farms and workshops. Tweet

Fair shares?

It has been refreshing to hear the calls for nationalisation coming from union leaders in Manchester this week - quite like old times! Even those with no interest at all in socialism must be beginning to see that crucial public institutions such as banks, transport and utility companies, even telecomms and housing, would be better off outside the risky culture of the marketplace.

But we can't have security for our most basic services because it is too expensive. So the argument runs, but let's look at the numbers. In 2007/8 total government spending was £589 billion (see the government's account here). Last Friday alone the Bank of England 'made available' $40bn, which we can guess is around £20bn and the same day the Guardian reported that the banks controlling the world's reserve currencies had together 'injected' $550bn. into the money markets that week. Given an exchange rate of around 2:1 that is equivalent to half of UK public spending in just one week!

Sums like this are beyond the wildest imaginings of the union members running hospitals and schools. They couldn't be trusted to act responsibly with such vast sums. Much safer in the hand of bankers like Sir John Gieve, deputy governer of the Bank of England, who has particular responsibility for financial stability. Back in May he reassured us that 'London's troubled money markets could soon recover' from the disastrous squeeze on credit. 'The most likely path ahead', he said 'is that confidence and risk appetite will return gradually in the coming months.' I'm so glad my money is in the hands of such a prescient economic actor.

It is capitalism's way to privatise the benefits and publicise the costs of the economy. So in the good times corporation taxes remained low for them who paid them at all, and personal taxation of those on moderate incomes paid for public services. Now the bust has come, companies are rushing into the public-sector fold, demanding our money to keep their bonuses paid.

How many people are going to accept this and just carrying on shelling out for those much wealthier than themselves? How many bags of chips do you have to fill to afford a Maserati? As taxes rise over the coming years will the meek of the earth simply run ever harder on the work treadmill to keep capitalism turning? Tweet

It's the Energy Stupid!

In spite of evidence that UK consumers bought less stuff in the last statistical quarter (only 0.1% less stuff, but in view of recent trends the slowing down is still notable), the reduced incomes resulting from economic slowdown and the disappearance of cheap money is likely to make people respond more strongly to prices when making the spending decisions.

This is a shame. Capitalist economics has trained us to use price as the most important factor in making decisions. If we look at just one market, the food market, we see the consequences of this. Until recently we may have been able to buy ever more food for ever less money but the food has been of frankly shit quality.

The predominance of price in market decisions is an indication and a reinforcement of the fact that, as capitalism grinds on to its miserable nadir, money becomes the only thing of importance. Everything else is sacrified to money—quality, happiness, health and so on. In a market where money is set up as god, both producers and consumers lose out. Those who win are those who control the money.

There is something we can do about this and that is set up for ourselves another standard rather than that of money. We should create our own mental energy-tags to replace the price-tags that the market shows us. When making purchasing decisions we have to be actively enthusiastic about paying more for items that have less embodied energy.

Once you adopt this way of thinking it becomes a habit and you begin to see stuff in shops in terms of its energy content rather than its price. In this way you can begin to the shift from measuring economic life in terms of energy rather than money that sustainability requires. Tweet

One law for the rich

There is so much to learn from the present tumult on world financial markets - make sure that you are saying clearly what you know and think on the bus and in the local shop. This is a great opportunity for radicalisation that should not be missed. It must be increasingly obvious to those who do not usually share our scepticism about the way our economy is organised that, far from being a uniquely powerful and 'efficient' system, capitalism is in fact an impressively attired version of various low-level financial scams.

A question that is being asked increasingly is: where can the governments get the money from to 'inject' into the financial markets? There are two possible answers to this question. The first is that they put it onto the national debt, leaving it to be paid back by ourselves and our children through losing a share of the value we create via taxation.

The other is that they simply make it up. This is fraud on an epic scale - but if it is in the national interest why should we worry? I think the answer is that we will still have to pay. Just like the national debt, it is a way of forcing the poor to subsidise the rich. The debt created while the banks were booming may not be real money but it was still used to buy real stuff. So by creating non-existent money and swapping it for worthless assets the government is colluding in this fraudulent creation of value by the rich.

Another question I would like to add is: do we need stock markets? What function do they actually serve? Is the buying and selling of bits of companies of any real value? It is now generally known that stocks and shares are actually just alternative vehicles for gambling to horses or dogs. How about serious financial regulation that required investors to stay with the company they had chosen for a minimum time period of, say, a year. That might lead to stock markets that supported rather than undermined the real economy.

As Evan Davies rightly stated on Today this morning, capitalism is a roller-coaster, but one that, rather than choosing to ride, we are born onto. For those who are beginning to grow a little sick and tired might I suggest moving your assets and consumption into the alternative, mutual parts of the economy? Tweet

Money, money everywhere

I had another horrendous train journey yesterday - I was facing the prospect of a two-and-a-half hour delay on a two-hour journey when I took direct action and cadged a lift. The explanation was 'incidents in tunnels' which has made me think about 'leaves on the line' and, more relevantly, 'the wrong kind of snow'.

Perhaps this is what Marx meant by the contradictions of capitalism? During the floods, which were our local learning experience of last year, we found ourselves deluged and yet short of water. This year our economy is short of cash because of an excess of credit. The recession that we are jointly embarking on has been the result of the uncontrolled creation of the wrong kind of money: debt money.

The link between rail disasters and monetary disasters is that we should not allow control of the most fundamental structures in our economy to be in the hands of privateers. Railtrack, at least, is now back in public hands; the money creation system should follow. This is not to argue for the abolition of private banks, just to suggest, as James Robertson and Joseph Huber do in their excellent book Creating New Money, that they should perform a standard retail function rather than being allowed absolute power over the extent of credit in our economies.

Such a system would not only stabilise the money system, it would have the added benefit that the value of the money created would be in public, rather than private, hands. It would be available to be invested in public projects or used to pay off the national debt and generate tax cuts, depending on the preferences of the government in power.

The debate is now focusing on whether or not the carnage we see around us representss capitalism working or failing. All I can say is that if this is a system working, it just isn't a very good system. Tweet

By the waters of Leman . . .

So here we are again. Financial journalists and politicians trying to make sense of a world they have long reassured us could never come again. A world they vaguely remember from old men's stories and scratched black-and-white moving images. A world where banks collapse and stockbrokers commit suicide - well scrap the last part because there was at least some honour amongst thieves in the 1920s which appears strikingly absent today.

Because nobody believed this would ever happen again nobody has a plan to deal with it. We are all dredging around for what we can remember reading in the work of Galbraith, deliberately written to prevent us taking the same path towards economic destruction caused by financial irresponsibility. A path we have stumbled along in recent years with increasing speed as memories of the last significant financial crash have faded.

Vince Cable managed to dredge up the name of the Glass-Steagall Act, which I also recall from undergraduate economics. A lesson well learned from the last crash which required the creation of a wall between commercial and domestic banking activities and was designed - if memory serves - to prevent the risky behaviour of venture capital investors from dragging down the small saver - precisely what appears to be happening now as a result of the Act's repeal.

Clearly re-regulation of financial activities is crucial and urgent, but it isn't sufficient. Boom and bust is not an inevitability, it is merely the periodic consequence of an economic system which creates money in an irrational and undemocratic way. Without monetary reform we will only be storing up more problems in the future. The suited chaps who will bear the brunt of public opprobrium in the coming months were bound to create ever more ingenious ways to persuade people to borrow their unreliable money, because otherwise the whole system would have seized up. It is the system, not the greed it generates, that is at fault.

That is not to say that we should allow these city rogues to retire to their recently acquired country estates. The artificial value they created in the financial sector has been translated in many cases into real value as they bought up land, gold and other safe assets. We should use the money laundering legislation to trace the path this money took and claim it back through windfall taxes. This is the only way that the pain of recession can be fairly and democratically shared. Money generated from these windfall taxes can be used to fund the Green New Deal that leading environmentalists are calling for.

And because this is a blog which strives for erudition as well as political insight, here is a stanza from T. E. Eliot's The Wasteland which was dredged up from my memory:

THE river's tent is broken: the last fingers of leaf
Clutch and sink into the wet bank. The wind
Crosses the brown land, unheard. The nymphs are departed.
Sweet Thames, run softly, till I end my song.
The river bears no empty bottles, sandwich papers,
Silk handkerchiefs, cardboard boxes, cigarette ends
Or other testimony of summer nights. The nymphs are departed.
And their friends, the loitering heirs of city directors;
Departed, have left no addresses.
By the waters of Leman I sat down and wept...
Sweet Thames, run softly till I end my song,
Sweet Thames, run softly, for I speak not loud or long.
But at my back in a cold blast I hear
The rattle of the bones, and chuckle spread from ear to ear. Tweet

What is a Brumaire anyway?

At the risk of sounding like a Marxist I can't help noticing that the struggle between capital and labour over the value in the economy is becoming more pronounced every day.

While the economy was growing, politicians could conceal the fact that, since the heady days of the 1970s, they have responded more and more to the concerns of 'business' and less and less to those of 'ordinary people'. The pie grew larger, the environment was more stressed, but even those who had the smallest slice tended to get a slightly larger slice each year. Inequality was ruled irrelevant, in spite of evidence showing that it is intrinsically very bad for a nation's health. The fact that the labels 'capital' and 'labour' have been replaced by those of 'business' and 'hard-working families' has not changed the essential power dynamic in the economy.

But with the recession, the fighting over the spoils is beginning to intensify. Unusually, although unsurprisingly, it is the leaders of the trade unions who are speaking up (finally) on behalf of their members and asking very reasonable questions. Such as why should energy companies like British Gas see their profits rise by 500% while bills soar and a significant minority of poorer people will struggle to keep themselves warm.

I'm enjoying what the unions are up to just now. Campaigning for a windfall tax on energy profits to be given out as winter fuel payments is a good start. So is there persistent campaigning to close the scandalous loopholes around the tax treatment of private equity companies. Longer term the attempts to build international unions is the only serious political resonse to the globalisation of production and the way this has reduced the power of organised labour in the West.

Once, while I was giving a talk, a woman got terribly excited and clapped her hands together squeaking 'Oh, this is just like the Sixties!' I'm feeling rather that way about the return to the 1970s. Actually they were a grim decade with Glam rock and playing scrabble by candlelight, but at least there was some honesty about the struggle over economic value. Tweet

Africa Wins the Olympics

I missed enjoying Christina Ohuruogu win the 400m. in Beijing. It was during the time when my resolve to boycott this hideous corporate extravaganza was still holding out. Eventually I gave in, overcoming my rage that my own delight in sport should be alienated from me by the real powers behind these games — corporate PR and Chinese rehabilitation.

The attempt to defend the sole right of those who have paid millions to gain publicity from the games has gone to the absurd lengths only a totalitarian state would be capable of. Logos and brand-names of those companies who could not offer the large price-tags have been covered with masking tape throughout Beijing. A shame this process was not taken to its ultimate conclusion, thus allowing us a temporary escape from the corporate shouting-match our high streets have become in recent years.

So much for intellectual property. What of the physical property, the muscle-power and stamina and co-ordination that the games are really about? The ultimate provenance of most of this — especially in athletics — is really Africa. In the case of the UK, both Christina Ohuruogu and Philips Idowu, our two leading medal hopes, have names that suggest African ancestry. Outside the countries of central and eastern Europe this also applies to the medal-winners of most other rich western nations. Even the US, having stolen Africans in their own fairly recent history, are now benefiting from their sporting success while still oppressing their descendants on home soil.

If Africa fails in the global market-place I can only think that this is because of its generosity of spirit. A country so over-endowed with resources natural and human has felt no need to be grasping and mean. Its tragedy has been that it has come into contact with cultures so much more lacking in the human spirit that it is. Tweet