Answers Still Blowing in the Wind

Technical reports about wind-power present a classic picture of statisticians dealing with the unpredictable. Aside from a helpful opening sentence in a BERR advisory note informing us that 'The UK is a very windy country' and a range of pseudotechnical concepts, it is hard to get accurate figures about how much of our electricity could realistically be generated from windpower. But what is fairly clear is that we have a lot of wind 'resource' availabile and, because we have a large Atlantic coast, the wind blows relatively more consistently here than in Denmark and Germany, which both have considerably more installed capacity than we do (Germany has 16.2% of the global total compared to our 2.6%).

This year's annual Ethical Consumerism Report indicates that spending on most areas of fair trade and ethical goods shows large increases (organic food is the exception), but the report's funders Co-operative Financial Services identify renewable energy an example of area that has 'failed to make significant progress'. So what is holding us back, and what can be done to break through these barriers?

Assuming that we are not going to have a government that will see this as an opportunity to create jobs and reduce our carbon impact and thus provide state investment to the sector, we will have to rely on a combination of good will and financial incentives. So in order for this market to take off we need what a technologically constipated economist might refer to as a 'triple coincidence of incentives'. We need the right sort of wind (fairly consistent and not gusty), where people consume large amounts of electricity and where there is spare capital for them to invest in the hardware.

In an earlier post I argued that the main hurdle to be overcome - the resistance of local communities to 'unsightly' windfarms in their vecinity - could best be addressed by a co-operative model but it seems that, even with the generous terms currently available via the feed-in tariff, we still do not have the right model to garner sufficient support to see the response from local communities that would enable us to match Germany's capacity over the next five years or so.

One disincentive for local communities is that cost of the environmental reports needed to get a planning application on its way, when the possibilities of success are still unknown. This might amount to £40,000 or so that must be found from local small investors, who may just be throwing their money away. What we need is a group of Public Interest Planners who can afford to do this work pro bono and, where this is relevant, provide templates for the parts of the reports that are not site-specific. A Community Renewable Energy Toolkit for England and Wales, along the lines of that already produced by the Scottish government, could also help the process.

But rather than knowledge or expertise it may be the financial engineering that is most necessary. On this front, I heard an interesting pitch recently from Tim Helweg-Larsen, formerly of the Global Commons Institute and now at the Public Interest Research Centre. His model, called the Energy Bank, connects well-intentioned investors with local communities in windy places, at least achieving a double coincidence. Whether this turns out to be more successful than the payments offered to smooth the path to planning permission in reluctant communities remains to be seen.
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Any Economy So Long as it is Colourful

Henry Ford coined the adage that best describes the ethic of the mass production-mass production era of the 20th century: ‘Any customer can have a car painted any colour that he wants so long as it is black.’ I think we usefully adapt this pithy phrase to help us vision the economy of the future. In this case it can be as colourful as human creativity can encompass but it has one fundamental limit: the energy limit. To put an exact number of the reduction in energy that we are looking for is a speculative process, but we need to reduce our current demand by something between 70 and 90 per cent.

This number is based on estimates in the Zero Carbon Britain report about what we need to do to achieve global equity by 2050. The exact figure requires assumptions about how energy intensive it is to construct and maintain renewable energy generation facilities; the likelihood of technology advances increasing energy efficiency vs. rebound effects; the contribution to carbon sequestration made by changing land use; and many other factors that cannot be convincingly quantified.

Although many reports about social responses to climate change can feel fairly prescriptive in fact what we are looking for is creative and imaginative responses. You can have any economy you want so long as it is a low-energy economy. My work as a green economist is about visioning the most rewarding and satisfying economy we could create for the global human community while keeping within these planetary limits. Anybody is perfectly at liberty to create another vision, and in fact since Nature’s way is one of diversity we are likely to have a variety of different local economies within and between the present nation-states of the world to replace the stultifying uniformity of the globalised monoculture. Designing future economies, and devising the political pathway to follow to arrive at them, offers both a challenge and an opportunity.
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A sideways look at Christmas

I have had a couple of near misses with poet laureate Carol-Ann Duffy. First a colleague hosted the post-funeral party for the local and much-loved poet U. A. Fanthorpe. A bevvy (could that be the word for a collection of female poets) arrived at the house and drank their way through the contents of the wine cellar, which given the nature of the occasion was entirely understandable. The further activities of her eminence are best kept under wraps.

Then my son was part of the winning University Challenge team last year (I think this is the first time I have mentioned this?!) and who else should be booked to present the rather kitsch prize than Ms Duffy herself?

Carol Ann Duffy's most famous colleciton is The World's Wife, a wry look at the world from the perspective of famous men's spouses. Shortly before being given the top job she wrote a poem from Mrs Scrooge for the Guardian. She turns out to be a role-model for our times and the poem a gift. The ghost of Christmas Past has a message that is an appropriate one for this blog:

'But then she heard a cracking, rumbling groan
and saw huge icebergs calving from the floe
into the sea;
then, further out, a polar bear, floating,
stranded,
on a raft of ice.
"The Polar Ice Cap melting," said the Ghost,
"Can mankind save it?"
"Yes, we can!" cried Mrs Scrooge. "We must!"
"I bring encouragement from Scrooge's dust," replied the Ghost.
"Never give up. Don't think one ordinary human life
can make no difference - for it can!"'
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Higher Education Accountability

As the debates over student fees have ebbed and flowed I have missed once again the skills of the accountant. What nobody has explained adequately to me is how the government's plan will ensure that money flows in in these straightened times, and exactly how it will also flow out.

Will Hutton has assisted on the second point, by offering some figures in his report on 'fair pay' in the public sector. Two points leap immediately to the critical mind: since national bankruptcy has resulted from the behaviour of the private sector, perhaps we should start our pay policy there; and how can any person reasonably accept Hutton's conclusion that a differential of 20-to-1 within organisations can be fair. Time for a new dictionary, not to mention a new moral code.

For myself and my colleagues in the universities there is no surprise that the differentials are highest in our sector. We have long been scandalised by the salaries and the expenses-paid trips enjoyed by our bosses. Hutton found that the average salary for a vice-chancellor is £200,000 and the median salary is some 15 times that of the lowest paid academic salary. Of course that is far from the lowest salary in a university, which also has a huge number of cleaners, caterers and other support staff on poverty wages.

The fattests of gowned cats are found, unsurprisingly, in the self-selected elite who call themselves the Russell Group, where the differential is 19 to one. These very same professors and administrators who are calling for students to pay three times as much to enjoy their skills are part of the reason why a university education is no longer affordable. Universities pay their managers more than all other sectors, with vice-chancellors earning more than four-star generals.

In these 'times of austerity' these salaries will be hard to afford, but how will raising student fees help? Since the increase will only affect the 2012 freshers, no money will flow back to the Treasury until 2016. Here is where accountants could be so useful. The details are decidedly murky at present, and when they are published no doubt we will all be looking elsewhere, but it appears that this money will be marked as an asset rather than a liability, thus reducing the deficit by actually shifting it onto the individual debts of young people.

With the additional help of some financial wizardry, the government may also be able to bring money into the public coffers sooner than 2016 by making the debt of our young people available for sale. This method of using securitization of our children's futures to help pay for support to the banking sector is the story that was missed while we watched the enraged students attempting to smash their way into the Treasury.
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Easing Eurozone pressures

Richard Douthwaite, of the Dublin-based think-tank FEASTA, has produced a useful paper offering solutions to the Eurozone crisis from an Irish perspective. The solution, which he terms 'deficit easing', is similar to that proposed by the more radical proponents of the Green New Deal, i.e. that money is created by governments to be invested in the transition to a low-carbon economy. This will support economies otherwise facing depression, while making our basic support systems resilient to climate-related weather shocks.

Since, as shown in the graphic, all the countries of the Eurozone are in debt, and therefore engaging in austerity measures, any policy designed to grow or trade our way out of the economic decline cannot be effective. The second graphic shows how all the debt, both public and private, is interconnected. So a collective solution is the only hope of success.

Richard's paper has the clarity and conviction that would be expected from one of the world's leading alternative economists. I would be inclined to add two small additional points. The first is the political point made by Robert Peston, who fished around in a lengthy and probably extremely tedious report from the Bank of England to find the nugget of data: in 2009 public support for the banking sector amounted to £100bn. This is more than half the so-called 'structural deficit' and indicates the cost to all of us of not finding a structural solution to the banking crisis.

Second, Richard's paper surprisingly makes no references to the link between financial expansion and resource exploitation. He has argued this elsewhere and would I'm sure be in agreement but it is important that all radical economists keep this planetary perspective in mind - and continue to draw attention to it - when proposing our monetary solutions.
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Putting the 'n' into Tories

With Christmas approaching I have thought of a new party game. Well, ok, it was really Jim Naughtie's idea, but why not claim the credit since he seems somewhat embarrassed about his creativity?

What we can do, which is sure to cause more of a warm glow than those awful cracker jokes, is to find genital substitutes for the names of the Tory cabinet ministers. David Cameron has been so helpful here by choosing the phallic Mr Willetts and by appointing Mr Hunt to the Culture Department. Willetts can actually be mistaken for two titillating organs, since according to that lexicographical bible Krek Waiter's Peak Bristle in the South-West it is the popular name for the female breast.

Other examples of cognomen syndrome gratefully received. Tweet

Ideas Merchant Facing Institutional Challenge

This has been a week of mysterious coincidences. On Wednesday I made a presentation about co-operatives to a delegation from the Technical University of Chongqing who were visiting my own institution. This troubled me on many levels. It indicated the limitation of the globalised approach to HE: I simply could not identify a ground on which to make my approach to these people. I had utterly insufficient knowledge of their cultural and social understandings.

I was not a party to the reason for their visit and so was left to assume that we were hoping they would send us thousands of students and help keep us solvent in the competitive-global-knowledge-economy. Aside from my concern about the carbon impact of this strategy, I did not become an academic in order to train Chinese businessmen to be more effective capitalist managers. I sold them the idea of co-operatives as a means of negotiating over the value of labour production. I believe that they left unconvinced, and I cannot be sure whether I made them more or less likely to make a formal link with our university.

Given this experience at the sharp-end of the academic barrow, the violent debates over the shifting of the costs of higher education away from the public purse and onto individual students were gratifying. The general conclusion appears to be that this level of our national education has moved fully into the market. This will, according to David Willetts, improve the quality of teaching. Education is a product like a potato or a sports car. If others offer better or cheaper education (potatoes/cars) I will be forced to become a better teacher.

Although Willetts is fondly known as 'two brains' he appears to have practical experience of only one side of the teaching relationship. I think this shows in his approach to policy. My experience tells me that the awareness that your time is being bought by your students undermines the trust and respect that a teaching relationship requires. Far from seeking out more time with their professors, my experience suggests that students believe they have bought the degree when they arrive; turning up and being troubled with new ideas or, worse still, expected to actively engage with theoretical concepts is an affront to their consumer rights.

Much as Darian Leader so cogently argues for psychotherapy, education cannot be turned into a product. An education that is bought and sold will always be a poor education. Watching your students check their mobiles during a lecture, and wondering whether they are calculating if you have earned the £26.49 they paid for you since you entered the room, is a dispiriting experience that saps the confidence and encourages the sort of teaching that appears to be offering value for money: voluminous handouts and regurgitated facts.

Perhaps most important of all, real education is not always an enjoyable experience. Genuine education is emancipatory and revolutionary, which may be a reason why Conservatives distrust it. The good educator challenges the student's world-view and this cannot always be a comfortable experience. You know you are teaching successfully when you see a furrow begin to appear on the youthful skin of your students' foreheads. This connotes the performance of 'thinking', an activity that has been increasingly rare in universities since the advent of the market.
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Anarchy in the UK

Yesterday was the anniversary of the birth of Peter Kropotkin, and we celebrated by drinking a toast to him in our local Stroud Brewery ale. As we heard from Stroud's leading anarchist Dennis Gould, Kropotkin had an extraordinary life. An aristocrat by birth, Kropotkin was engaged to undertake a geographical survey of Siberia. What he saw there - the appalling suffering of the people and their struggle for survival - revolutionised his worldview. He became caught up in the struggles for justice in his homeland towards the end of the 19th century.

Kropotkin was also a scientist, who extended Darwin's theory by arguing that 'mutual aid', or the human inclination towards co-operation rather than competition, was what he called 'a factor of evolution'. His studies of how small-scale communities might be viable are not theoretical but full of earthy detail. His sociological studies give us an insight into the working-class communities of industrial London. But he was capable of rhetorical flourishes too. Here is his stirring conclusion to the 1888 essay 'The Wage System':

And these voices will be heeded. The people will say to themselves: 'Let us begin by satisfying our needs of life, joy and freedom. And once all will have experienced this well-being we will set to work to demolish the last vestiges of the bourgeois regime, its morality, derived from the account book, its philosophy of 'debit' and 'credit', its institutions of mine and thine.

Kropotkin was forced into exile first in France and then in London. He returned to Russia following the revolution but strongly disapproved of the authoritarian nature of the Bolshevik regime.

This biography may seem miles away from the violence we saw on London's streets yesterday, but perhaps what links them is the simple word: freedom. To many, anarchy is the nihilistic violence that typified the punk movement. To Kropotkin it meant the freedom to live a dignified life and to aspire to the highest levels of self-expression within self-governing rural communities.

Riots of this level of violence on the streets of our capital and within yards of the 'mother of parliaments' are a rare occurrence and people do not undertake them lightly. The abandonment of higher education is merely the taper; it is the loss of democracy that spurs people to such action. It does not take a university-level education to understand that none of the parties who competed for our votes a mere eight months ago offered us this in their manifesto. When our representatives scorn our views, political mobilisation is the only possible response.

The political crisis that has been developing since the financial crisis broke in 2008 is more reminiscent of the events of the early 19th century than anything I can remember in my lifetime. The events that led to the mass mobilisation are strikingly similar: a loss of autonomy over livelihood, political disempowerment, and a government that serves its own rather than the national interest.

Shelley, who was a trenchant critic of the economic oppression of his times, even identified the creation of artificial value in the money system as one of the sources of injustic that drove the street protests. In his poem 'The Mask of Anarchy', written following the Peterloo Massacre in 1819, he included the stanza:

'Paper coin - that forgery
Of the title-deeds, which ye
Hold to something of the worth
Of the inheritance of Earth.'

In his day it was the debasement of paper money that enabled exploitation; in ours it is the ceding of the power of money creation to a self-serving banking system.

To merely condemn the actions of violent protestors, the automatic response of the powerful, is too simplistic. In an important Quaker testimony we are advised to:

Search out whatever in your own way of life may contain the seeds of war. Stand firm in our testimony, even when others commit or prepare to commit acts of violence, yet always remember that they too are children of God.

What history teaches is that when people witness blatant injustice in the distribution of resources and are deprived of a political route to right this wrong, then violence is an inevitable response.
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Rethinking Resilience

The word resilience is going the way of sustainability - becoming so over-imbued with meaning that it becomes meaningless. I recently heard a presentation by somebody who was basing a whole research project around meanings of sustainability. It seems to me the time would have been better spent organising a Potato Day like the one we have coming up in Stroud.

For surely, resilience is about getting down and dirty in your local environment. It seems to me a contradiction in terms to travel away from home, as I do, to conduct academic research into what resilience or sustainability might mean. For the record we should be clear that these two are not the same. Sustainability is an approach to life that is respectful of the planet and all the species who enjoy it today and may enjoy it into the future. Resilience is a much more limited concept, which seeks to elucidate our relationship with natural systems.

The reason resilience is useful as a concept is that it has a fixed, physical definition, which we can use by analogy to explore what we are doing in planning our transition to sustainable living. Wikipedia defines resilience as 'the property of a material to absorb energy when it is deformed elastically and then, upon unloading to have this energy recovered.' This strikes me as a wonderfully inspiring definition if we apply it to our human communities. When they are challenged by environmental or social change, rather than fracturing, they can adapt to the stress temporarily and then unleash creative energy in response.

In these days of unexpectedly harsh weather, the word resilience has crept into many journalistic reports as an expression of what has limited our response. The suggestions for change focus around the expenditure of more energy and money, much as the proposed response to the environmental crisis apparently needs more technology.

But true resilience lies in the design of systems, not their technological sophistication. Because there will always be situations where the road between Glasgow and Edinburgh is likely to become impassable on some days of the year, an economy which requires large numbers of people to travel between these cities is not resilient by design. The large distances we travel for work and to acquire provisions are examples of poorly designed, non-resilient systems. Building resilient communities can enable sustainable living precisely because it will mean embedding deeper into your local environment, a key feature of the bioregional economy that will offer a resilient and a sustainable future. Tweet

Render unto Ceasar

Now that we are officially in Advent perhaps it is inevitable that your mind turns to Jesus, or perhaps I am just trying to make up for the fact that we have a Toy Story 3 advent calendar in the house this year and I want to believe there is something more meaningful about our foremost national festival. Whatever it is, I thought I would share my growing suspicion that Jesus may have been a green economist.

Of his many quotable quotes perhaps my favourite is 'Consider the lilies of the field, how they grow; they neither toil nor spin, yet I tell you, even Solomon in all his glory was not arrayed like one of these.' This message, like John Ruskin's 'There is no wealth but life', seems redolent of the awe for life's abundance which guides a green approach to the economy. It is also a message against the Protestant work ethic and in favour of a relaxed approach to provisioning that is necessary for the sufficiency economy we are seeking to build. And the beards, long hair and sandals were an obvious clue.

But what about the harder edges of economic life? Did Jesus have anything to say about those? I am partial to the bits of the bible where Jesus ceases to be the rather effete, kindly 'new man' emblazoned on so many Sunday-school walls and really loses his rag. When he rages against the money-changers for example, or berates his friends for dropping asleep when he was in his hour of soul-searching crisis at Gethsemane.

I think Jesus might have been rather smarter about money than he has been given credit for. Remember, 'Render unto Caesar the things which are Caesar’s, and unto God the things that are God’s', Jesus's response when asked whether his followers should pay their taxes to the Roman authority. Last night we had Mary Mellor here in town and she adeptly explained why taxation and money issue are two linked roles of the state, and why Jesus was quite right to say that taxes should be paid back to the issuing authority.

As Mary explains it, you cannot start an economy unless you have something to circulate: issuance of money must precede deposit. The history of money is a history of political authorities from Croesus through Medieval kings right down to the Bank of England issuing money and then taxing it back. The problems we are facing today result from the failure to understand the role taxation plays in enabling circulation, and the privatisation of this right to issue currency (the right of 'seignorage') so that it now belongs to the banks.

Because money now originates in the private sector the public sector cannot exercise the seignorage function and so has to rely on taxation alone to fund expenditure. If the state issued money directly then taxation would be used to prevent excessive circulation and the resulting inflation, rather than being a means to acquire money for investment. Since the UK state will not widen quantitative easing to encompass this function, it can only initiate monetary circulation and enable economic exchange through going into debt itself. Osborne's ideological resistance to this basic economic fact and his determination to eliminate the deficit means that he will choke off limit monetary circulation and destroy the economy.

The other biblical story about currency was Jesus's outburst in the temple, when he attacked the money-changers. Here he was rather less on-message, since temple money might be seen as skin to a local currency. It was exchanged for the national currency but could only be spent within the temple precincts, much as the Stroud Pound can only be spent in Stroud. However, Jesus's objection seems to have been to the inflated prices that were charged for what the temple traders were selling - mainly animals doomed to unpleasant, sacrificial deaths - so as long as pounds sterling and Stroud Pounds are exchanged one-for-one we should stay on the right side of doctrine. Somehow, though, the thought of the advent of Jesus to the Stroud Pound stall, upturning our tables and throwing a wobbly in the middle of town is a peversely appealing one. Tweet

Just Say 'No'

The Irish State faces a historical moment. In keeping with its tradition of courageous struggle for freedom and justice and the unique role that Irish people and culture have played on the world stage, Ireland can now be the country that stands up against the bullying forces of the financial markets. The morally unacceptable terms it is being offered mean that any other response is unthinkable.

The bond traders responded to Merkel's attempt to constrain their profiteering by downgrading Irish debt - thus raising the income they gain from it - increasing the costs imposed on the Irish state, and crucifying the Irish people. It is time for a proud nation to say no: default is better than humiliation.

Such a strategy will also turn the tide. Since the break-up of the euro nwo appears inevitable Ireland could be a player in the end-game, rather than a victim. The plan of the financial interests is to pick off one Euro country after another. This is similar to the financial contagion that began in South-East Asia in the 1990s, but with the added appeal that, as each country falls, Germany will pay off the traders. Ireland's default would signal the end of this process and force a political solution on the Eurozone. If Ireland does nothing Germany will come under increasing pressure itself to abandon the euro and create a new currency, leaving the smaller nations of Europe in turmoil.

And here is one I prepared earlier. All EU states should simultaneously suspend trading in their national debt. They should then agree interest rates that they are prepared to pay on their national bonds over a 10-year period. These rates would vary to reflect the nature of the economies involved, but only within narrow bands, and at much lower rates than are being paid today. New dated bonds with fixed returns would be issued up to a percentage of current holdings.

States would thus retake the power over their national economies. Traders could accept the terms or lose everything. Their game of extorting the value of national economies through pressurising their politicians would be finished.

This radical political move would clearly have serious implications for the other global currencies, and especially the dollar. But it would bring the interests of citizens back into play and increase the pressure for urgent negotiations to establish a new global financial architecture which serves people rather than financial interests.
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Merkel Confronts the Market Wolves

Throughout the years of financial crisis it has been notable that financial and business interests have been writing the story. Media analysts have been colluding: those who understand what is going on are in the pockets of the business lobbyists; those who do not are scared to reveal their ignorance. The result is that we are being sold a lie.

The official version of what is happening in the finance markets goes like this. Countries are in debt so they look like a bad risk. The debt of risky countries is harder to sell and so the price falls and traders need to be offered a better rate of interest to accept it. Traders will not buy it at all unless they are convinced about the soundness of the national economy selling it, so that markets demand that countries introduce austerity measures. If they are not satistifed the austerity must be made more austere.

The truth is different. As they pick on each country in turn the bond traders create a self-fulfilling prophecy. They (through the credit-rating agencies) downgrade the surety of the country's debt. Its price falls and the return they gain from holding it rises. Thus their creation of this story is a simple means of increasing their profits. They feel they can still squeeze more out of Irish debt, hence the story that the 'markets don't believe' the Irish government is secure. Once they have destroyed Ireland they will move on to Portugal, Spain and even Belgium, according to today's story. Governments in those countries tremble and beat up on their own people.

Understanding the behaviour of market traders is not difficult; devising policy to counteract it is. The process of globalisation meant the signing away of political power over economics, so even when the free operation of finance markets is clearly disastrous for the world's people politicians feel powerless. If one country acted alone they would face the massive movement of speculative money and, as Black Wednesday proved, no country or currency can withstand that.

German Chancellor Angela Merkel has been clearest about the need for political action, perhaps because she represents the strongest economy, perhaps because of the folk memory of the 1930s and the destructive consequences unrestrained finance wreaked then, perhaps because she grew up in a debt-averse Protestant home. First she called for political controls over credit-rating and now she is suggesting that the bond-holders should contribute to paying for the costs of the crises they are causing, shifting the balance of their incentives away from destroying domestic economies. These represent the first feeble attempts to reassert political authority over the globalised economy. "Have politicians got the courage to make those who earn money share in the risk as well? Or is dealing in government debt the only business in the world economy that involves no risk?" she asked on Wednesday.

Gordon Brown is short of a job these days. Perhaps the son and daughter of the church could combine their efforts in devising a plan for European governments to take charge. If he really wants to save the world, now could be just the right time.
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The Happiness Crusade

The demonstration I was on yesterday in Cardiff was so much fun it went on all night. If you are a tweeter you can support the protest by sending a message of support. The demonstration was lively, noisy and made up of a mixed bag of students and schoolkids, leavened with a mix of Marxists, socialist workers and Greens. We were already well into chanting when the younger students arrived in their own march to great cheers - what somebody on the Twitter feed has called 'the children's crusade'.



Protesting is turning out to be so much fun that it makes me wonder whether this is part of Cameron's reason for beginning to measure happiness since, as the graphic shows, close social connections make people happier than money, once their basic needs are met (thanks to nef for the graphic, and their leading research in this area). Labour's creation of the disturbingly oxymoronic position of Happiness Tsar has been taken up by the Condems who have instructed their national statistician to begin a programme of scientific measurement of how jolly we all are.

Unlike in Bhutan, however, happiness is not to become the focus of policy-making, merely an adjunct to the measure of economic growth which is, as the PM will tell us later today, the real source of all our aspirations. If Richard Douthwaite was right in his seminal book The Growth Illusion in establishing that, beyond a certain point, growth actually detracts from our happiness, then this is a circle that simply cannot be squared. Instead we need to be developing policies for the post-growth world, as in the recent example of participatory policy development at the Leeds Steady State Economy conference, whose report was recently published.
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Money on the Move

It would be nice to portray David Malone as an Everyman, stumbling disbelieving through the financial crisis and documenting his rising confusion, frustration and rage. To an extent this is true: he may be a leading documentary film-maker but when it comes to credit-default swaps and fractional reserve banking, we have almost all been brought to the same level of ignorance and disbelief.

Malone's book The Debt Generation is a positive response. From the summer of 2008, when he first glimpsed the 'Mad Max Future' he kept a regular diary of the news of financial mayhem. The book is humorous, but there are few belly-laughs. However, the very personal nature of the account is its main strength. We all took the same journey from a sunny summer, through an incredible autumn and on to the coninuing winter of our discontent. The difference is that David Malone kept a regular record, and in the era of ephemeral information this is invaluable.

Here is an extract from February 2009:

'Now here is a surprise. Jean-Claude Trichet, the head of the European Central Bank, has just declared, 'We live in non-linear times' . . . Our leaders and economic masters are linear recidivists. They still think of the economy as if it were a machine that has broken down. . . They imagine all they need to do is pour in lots of lubricating money, replace a few bent and busted parts, then press the big green GO button and the machine will roar back to life.' (p. 79)

Malone concludes that the financial system - indeed the whole economy - is a system. The problem we have is systemic and only systemic change can fix it. As crises pile up the wisdom of this position becomes clearer by the day.

In a world where community has broken down and mutual aid is, for most, no more real than the legend of King Arthur, all we have to rely on is our money. This is the message of capitalist invididualism: your money will make you happy; your money will keep you safe. This is why the financial crisis is so pointedly and destructively frightening and why people are losing their heads. Some are reacting with anger, others with despair, while the majority resort to denial, analgesia and shopping.

For those of us who are keeping our heads there are a rising number of campaigns for a new type of banking system, new money, or a whole new economic system. You can find out more about David Malone's work at The Debt Generation website. Positive Money is a campaign growing out from the New Economics Foundation. There is even a Bill that has been introduced in parliament which you can ask your MP to support. Tweet

Ooh aah!

You might think that footballers would know a thing or two about money. Not only are they paid absurd amounts of the stuff, but they have also seen their game destroyed in a process of rapacious financialisation so that nothing beautiful remains. Well, ok that winning goal that Spurs scored against Arsenal on Saturday is an honourable exception.

So we can be delighted to hear from Eric Cantona that it is not complicated to sort out the global financial crisis. All we have to do is nip to the bank on December 7th and take all our cash out. This will precipitate a banking collapse: banks are the problem, so problem over.

The advantage of being French is that you can make such prognostications sound really cool and when you say 'C'est pas complique' you sound irresistible. But Eric could not be more wrong about this providing a solution to the problem. Just like in 1968, destroying an existing system is not the complicated part: it is putting something better in its place that takes the thought and effort.

I'm intrigued to see whether this money withdrawal ploy will take off like the Rage Against the Machine mass buy-in did last Christmas. Perhaps it is something about the festive season that lures us to act in a communal fashion. If it works, then Cantona may finally get himself onto a Philosophy Football t-shirt, although there will no means of buying it.
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Currency to Serve People and Planet

We need to see the Irish tragedy as part of a wider picture: the ongoing currency wars and the struggle for domination of the global capitalist economy. Since 1945, the US has enjoyed extraordinary power as a consequence of the Bretton Woods Agreement that the dollar should be acceptable in the place of gold as a global numeraire. Since the US reneged on its promise to support its currency with gold in 1971, its government has been able to print dollars at will, and claim goods in return. This, more than anything else, explains the decadent US lifestyle - and its planetary consequences.

Europe's response, after years of decline and unfair competition, was to establish the Euro. This was a fatally flawed strategy since, unlike the USA, Europe is not a natural currency area, and there is no single democratic body that matches the currency area. Hence it has always operated like a strait-jacket, with some currencies having interest rates too low for their needs (hence the Celtic boom and bust) and others having interest rates too high. It was Germany's currency, the Mark, which gave the Euro its credibility, and the German economy that provides the ballast for the currency. Hence what worked for Germany has been forced onto the other members of the Eurozone, with disastrous results for their national economies.

Yet the problem of dollar dominance persists. Hence Skidelsky's call for a 'bancor', or bank gold, a proposal for a neutral currency to facilitate world trade and form the basis for national currency holdings. This should be the call of the Irish people: global justice and a balanced system of international trade. This has been the call of the Chinese for some time. It is only because we live in the Anglo-American media bubble that our perceptions of the dollar demise are so distorted.

I have been calling for some time to consider the possibility of linking the new global currency to carbon emissions, thus putting an automatic brake on economic activity on a global basis, and rationing CO2 emissions by country. Another possibility is that the exchange rates between countries might be fixed in an inverse relationship with wages, so that no country can undercut another by restricting rates of pay. In this way, a neutral global currency could not only stabilise the financial system but also end the 'race to the bottom' that globalisation has brought in its wake.
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Vultures Circle Dying Tiger

Today we are likely to witness the death of what Richard Douthwaite once called 'De Valera's Dream'. The dream of an Irish people in control of their own destiny, proud of their culture and their bountiful resources, confident in their ability to follow a different and better path to that of their erstwhile coloniser. But while the Irish were smart and brave enough to escape English military domination they misunderstood the dangers of the more subtle currency colonialism to which they are now subject.

At last Ireland's politicians are talking about sovereignty, but they are 20 years too late. Sovereignty was lost when the country opened its border to US finance and when it allowed its domestic economic policy to be controlled from Germany by joining the euro. As in Iceland, the policy was driven by a tiny 'business' elite who benefited most from the inflation in asset prices and the development boom. The masses were lured into support by cheap money and tawdry consumer goods: a poor price for the loss of independence.

It is tempting to ask how many of Ireland's politicians really believed that they could control that beast whose misnomer is of epic proportions: the Celtic Tiger. An economic policy designed in corporate America, driven from Frankfurt and labelled by Baudrillard was always going to end in tears. The finance-driven model of economic development led, as it always does, to social instability, inequality and ill health, as documented in Feasta's 2004 volume Growth: The Celtic Cancer. A model of growth based on uncontrolled, undirected growth in this way can never be either socially or environmentally healthy.

De Valera's model of development came with a narrow parochialism and stifling Catholicism that would be unacceptable today. But in its focus on indigenous resources, the agricultural sector and cultural specificity it has much in common with a bioregional approach to economic development. The vision of a self-reliant economy that uses its own resources for the benefit of its own people may now seem more appealing than a turbo-charged boom-and-bust model, especially when that automatically implies a loss of democratic control and environmental sustainability.

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For local readers

Mary Mellor is coming to Stroud on 2nd December to talk about what went wrong with the money system and how we could redesign a system where money works for us and belongs to us. For local blog followers this will be a useful opportunity to learn and feel empowered.

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Improving the Climate for Business

The history of the fuel-duty escalator in the UK was a chequered one. Rather than energy policy being determined in the public good, and with respect for the planet, it became an area of political in-fighting and corporate bullying. The fuel protests of 2000 frightened politicians away from a responsible policy of a steadily increasing fuel price.

But perhaps we could go one better. Perhaps we could set an upward trend in fuel prices that would not only send a clear signal to markets that carbon-based energy would only get more expensive, but also support them by ensuring a consistent upward trend, removing the volatility that increases business costs by making long-term planning so difficult.

Price volatility presents a major hurdle to the business and public-sector investment in renewable sources of energy that can serve as an alternative to oil, as well as a hurdle to investment in efficiency measures, conservation, and the general re-ordering of our society to be less energy intensive. A stable oil price across the UK would be a huge support to business. The idea of the policy would be that the government would relate fuel tax inversely to fuel prices, so that it would suffer the volatility rather than business and customers, who would none the less face a steady upward trend in price.

The Conservative government introduced a ‘fuel price escalator’ in 1993, ensuring that the annual increase in fuel duty would be initially 3% and later 5% greater than inflation. This was explicitly intended to help the UK achieve its Kyoto targets. According to the UK Treasury in 2000, ‘The road fuel escalator was a major success in helping the UK to meet its Kyoto commitments. It is estimated that the increases between 1996 and 1999 will have saved 1 to 2.5 million tonnes of carbon by 2010.’

By 2000, the UK had the most expensive fuel in Europe, with fuel tax representing over three-quarters of the price paid at the pump. These relatively high prices led to protests by truckers, including the blockading of key oil facilities and food shortages, which caused the government to announce the end of the escalator in November 2000.

Fuel duty contributes around £18bn. annually to the UK Treasury; it is collected nationally and is not hypothecated. UK consumers pay an additional sales tax (VAT) on fuel, currently at a rate of 17.5%. A specific form of ‘red’ diesel used by those in agricultural and construction sectors has a much lower rate of tax and aviation fuel is not taxes.

In 2008, the UK Chancellor announced that he would postpone the increase of 2p per litre in fuel duty, to support businesses who were struggling with the combination of increases in oil prices and the credit squeeze. However, this policy has not been changed as oil prices have fallen, indicating that the UK government’s approach to fuel duty is still short-termist and essential political, with no seeming motivation towards encouraging the move towards a low-carbon economy in the long term.

The proposal suggest a simple policy with a simple goal: to set a clear upward trajectory for the price of the major input to most industrial companies—that of their fuel. This would support investment in the transition to a low-carbon economy and remove much of the uncertainty that the Stern Review found was prohibiting such investment.

What are the political implications for such a tax proposal? Although any suggestion that fuel prices might increase is likely to be greeted with horror by the corporate oil lobby, it could be demonstrated to be to the benefit of ‘business’ who appear to be the main political constituency these days. As a proposal which is actually a pro-environment measure, but can be framed as a pro-business measure, it could be very attractive to a party wishing to brush up its green credentials without threatening the business lobby. The proposal would also help to level the playing-field between the large corporate players in the economy, who can hedge the cost of their fuel, and the smaller players who suffer most from price volatility.

Of course a government that can introduce such a measure can also abolish it, and the impact on individuals might be unpopular, particularly if there were no parallel measures to protect the more vulnerable against fuel poverty. However, making a clear commitment to removing fuel price volatility could be a virtuous spiral—initially it would give businesses and individuals an incentive to invest in low-carbon developments, but once they had, they would then have bought in to the measure and would be less likely to lobby for its repeal.

What the breakdown of international negotiations over CO2 reductions has made clear is the difficulty of agreeing a policy to deal with this most important issue. The danger for the countries who industrialised first—such as the US and UK—is that they have become so dependent on fossil fuels that they are finding it difficult to adapt. The most powerful argument in favour of making the changes that human survival requires—especially at the corporate level—is that failing to do so will rapidly undermine the power of business in this new century, which will be the century when fossil fuels cease to drive our economies. Thus a policy which encourages the fossil-addicted businesses in those countries to invest in the new future, by removing oil price volatility, could make high-taxing strong central government the true friend of the corporate sector.

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Diverting the Currency Wars

Robert Skidelsky joins the debate about the need for a neutral global trading currency, but this time in the Financial Times which is also available at his personal website. This is the Green Party's policy and was proposed by this blog for the last G20. Skidelsky, being an unreconstructed Keynsian, has not included the planetary limit in his thinking; the EBCU proposal would do this. China will be arguing for a neutral currency, issued by the World Bank, as it has been doing for some time. We should put our energies behind this call, but with the additional twist of a currency that keeps trade and production within environmental limits, as well as bringing balance and equity.


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Gilts and Boars

Now that our national strategy of using finance to energise the economy has been seen so spectacularly to fail, the favoured option of the pro-capitalist, pro-globalisation ideologues is to follow the export-led growth model. Hence our Business Secretary Vince Cable, together with the Prime Minister and several other cabinet members, has headed off to China to advertise what real products we have to sell. The wares as advertised are a motley collection with a resonance of the Sunday-morning car-boot sale. Much of what is on offer, from randy pigs to shit treatment, is distinctly unglamorous. We can only assume that there are major arms deals behind the scenes to justify the cost in sparse sterling and carbon emissions.

Vince Cable has drawn attention to three items which make it intensely challenging to take seriously the Coalition's claim to be the greenest ever government: Jaguar cars, tourism, and education. The environmental impact of encouraging China to consume more in these three areas is deeply disturbing. Latest World Bank Figures show that only 22 people in every 1,000 in China own a car, compared with 463 in the UK. To you this is a relief; to Jaguar it is the biggest market opportunity in the world. You can almost hear them salivating.

In my own sector, education, the encouragement of Chinese students to learn in the UK represents an alternative to supporting our own students in higher education. But the environmental consequences are equally stark. Each return flight a Chinese student takes creates around 5600 kg of CO2, some five times the annual limit under the Contraction and Convergence framework that the Liberal Democrats apparently support. Many of our students travel home and back more than once in a year.

The composition of the trade delegation is also unsurprising. According to the Washington Examiner, the businessmen on the trip include executives from Royal Dutch Shell PLC, Tesco, Barclays bank and Diageo. This is a recovery strategy designed by corporations to serve corporations. Little help here for the struggling small business in a provincial town.

China's dominance in material production is recent; its contribution to spiritual wisdom is ancient and still valuable. Here, in the words of Lao Tzu, Cameron might acquire some strategic guidance:

'When rulers take action to serve their own interests,
Their people become rebellious;'

Verse 75, Tao Te Ching


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Down to Earth

The Politics Show West made an interesting film about global growth vs. local sustainability as responses to the economic crisis. I then got to debate the film in the studio with an investment specialist. It is on iPlayer here (after 29 minutes)

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Ignoble Strife

There was a difficult choice of entertainment for me on Thursday night. We had a meeting about the cuts here in town organised by the the Socialist Workers Party while Channel 4 was advertising a professional butchery job on the green movement. The first would be the talk of our town, and the second was bound to play the same central role amongst the e-debates I am party to. I think I made the right choice: I spent Thursday evening watching John Schlesinger's 1967 film version of the Hardy classic Far From the Madding Crowd.

I suppose it is an advantage of being involved in politics for a number of years that you pick your battles. I now choose those where I think I can make a difference and avoid those that will only frustrate and depress me. We know that our vision of the future does not include dominant media corporations, so we cannot expect to receive a fair hearing from them. To suffer frustration as a result of one's own naivety is an unnecessary loss of energy that we can ill afford. The reason Mark Lynas is given so much air-time is not because he is smarter or better informed than we are, but because his views do not challenge the status quo.

For me, the most serious impact of an unresponsive and biased media - as with an unresponsive and biased political system - is that if you spend too much time immersed in it you begin to believe that it is the central point of public opinion. My visit to Plymouth University yesterday to give the staff research seminar made me realise how I had misjudged where most people are in their thinking about the state we're in.

I went in my role as ideas merchant, with my barrow resplendent with bioregional economics, community farms, and other local produce from Stroud, and attempting to convey conviviality with every fibre of my being. There was the inevitable 'Are you a communist?' question, but for the most part the responses from the audience (and three quarters of the packed room was made up of students) were sensible questions about power and tactics.

Encouragingly, I was asked about the fractional reserve banking system, and my answer, during which I pulled no punches ideologically or intellectually, was clearly understood by a significant minority of the audience and received a smattering of applause. I left feeling encouraged, and that the thinking people of this country are on the move. We are struggling with a monopolistic information system dominated by one hegemonic idea: that the market system is supreme. But out in the country this is not believed, the information is not trusted, and its purveyors are losing credibility.

As for Mark Lynas, I recently debated the issue of climate change policies with him on a public platform. He was relentlessly arrogant and disparaging and I had to call on all my Quaker training not to respond in kind. He explained how he had solved the CO2 problems of the Maldives - apart from the tourist flights that underpin the country's economy, which will require a little more techno-fixing.

During the panel discussion we clashed over figures for emissions of CO2 per head and, after we had finished, I asked Mark where his were from, knowing that my own were pretty out-of-date and China is moving fast. He told me he uses Wikipedia as his source. There is pride amongst ideas merchants, and this immediately told me he is the intellectual equivalent of Delboy, interested in the deal rather than the quality of the product.

The title of the Hardy novel comes from Gray's Elegy, a poem whose theme is redolent of the balanced sense of the modesty and lack of self-importance that country living brings, and whose whole tenor is the antithesis of the modern media culture. I like to think that my decision to watch the film rather than watching the documentary represents a decision to be reminded of the deeper wisdom of our ancestors rather than pure escapism.
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Plutocracy

If you can bear to take a visit to the Daily Mail, you may find something of interest there, with evidence of the extent to which we really are all in this together. Tweet

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