30 April 2010

Cleaning Up

BP, as we observers of greenwash remember, was aiming to go Beyond Petroleum. They were the oil company that was going to take us to the grassy, solar-powered uplands. As a massive slick of crude oil makes its way ineluctably towards the precious natural havens of the Mississipi delta this claim, admirably dissected and dismantled by Sharon Beder, seems more insulting than ever.

Pundits have pointed out how, in the world of banking, the profits have been privatised but the costs, whether financial, social or environmental, remain with the public. Now we see exactly the same in the case of the oil industry. Two days ago, Shell announced that its annual profits were up 50% on last year a result, according to the BBC, of rises in crude oil prices.

This implies that there is a market for oil like there is a market for shoes, where if one company charges too much, others will rush in and set up a network of oil-rigs and petrol stations and offer us their wares at a reasonable price. Whether it is a formal cartel or merely an informal oligopoly, it is clear that the oil market is controlled by producers not consumers. BP's profits for the first quarter of 2010 nearly doubled: up from $2.4bn. to $5.6bn. compared to the same period last year.

The disaster in the Gulf of Mexico has been compared with the foundering of the Exxon Valdez tanker in 1989. Following that natural catastrophe, while seabirds, fish and seals struggled for breath, Exxon's lawyers struggled to string out the legal process and minimise the size of the fine. The case reached the Supreme Court two years ago, where Exxon successfully appealed against the earlier £2.5bn. fine for damage to the Alaskan environment. The final paltry sum of £500m. for punitive damages represents a small proportion of Exxon's annual profits and a drop in the ocean of the company's earnings.

A green economist should have no particular inclination towards public ownership of either the means of production or the commanding heights of the economy. However, it does seem that some aspects of a complex economy are simply too important - and too potentially destructive - to be allowed to remain subject to the rapacious instincts of the market. Banking has clearly shown itself to be one; energy must surely have a strong case to be another.

24 April 2010

Putting Capitalism in its Place

Canvassing is always a salutary experience since it teaches you that people are far smarter than the pundits give them credit for. This reminds me of my once-held belief that we would be far better off if we engaged in some sort of periodic job exchange scheme, where every ten years or so our politicians would become hairdressers and vice versa. Except for the quality of our haircuts of course.

This morning, while waiting in a queue at the cashpoint, I had a very interesting conversation with a local voter. He was critical of politicians' reluctance to admit exactly how much our public services were going to be cut. I responded by pointing out that, had we not experienced an extraction of value to our banking sector, we would not be needing to cut at all.

My mention of the word 'capitalism' was not well-received. I had to explain that I was not for a centrally planned system where every bicycle would be made in Conventry and sold through a state-run and utilitarian shop. My concern was rather that capitalism should be pushed onto a socially benign path. Here we were able to agree.

Capitalism needs to be contained within social limits. If the prevailing economic system benefits only a very small proportion of the citizens of a country - or of the world - than that system clearly needs radical revision. Although I might style myself as 'anti-capitalist' it only takes a few moments to consider the history of societies where social ownership is ubiquitous to realise that we may not be ready for that yet.

It seems to me there are three criteria which we can use to examine whether a capitalist business is socially acceptable: its size, the scope of its activities, and the extent of its profits. All three can easily be enforced by a just taxation system combined with an effective Office of Fair Trading. And our economy would also benefit from greater diversity, so that there were more social businesses, social enterprises, and co-operatives.

However, the economic system that dominates the UK in 2010 is not capitalism in any recognisable sense. It is a financialised system of exploitation where, rather than using money as a medium of exchange to facilitate the exchange of goods, a tiny minority are using money corruptly to extract the overwhelming majority of the wealth of the world for their private enjoyment.

My cashpoint friend seemed reluctant to consider how the monetary system might be used to suck our money out of us, so that we will face losing the services we value and the quality of the society we share. The issue feels too big; most do not have the courage even to consider it, much less to dare to argue for something better.

We should resist the intimidating behaviour of the masters of capital, whether exercised in print or via credit-rating agencies. Capitalism is not working: we deserve something better. Just because these issues are not raised as part of the election campaign should not lead us to think that we have no right to debate them.

20 April 2010

Vote for Baudrillard

Electoral politics has been moving along the path towards Baudrillard's simulacrum for a number of years, with a growing sense of unreality and the increasing resemblance of party leaders to characters from Thunderbirds. We have now reached the final stage where, as Baudrillard put it, the simulacrum masks the absence of the reality. The more we hear about choice and change the more we know that things will stay the same and that the distance between the parties we see performing is smaller than ever.

What the Nick Clegg phenomenon demonstrates is the way that the forces of the corporate media totally control our political system.* I have seen this impact in a devastating fashion on my own party, so that we tailor our message and our internal structures to fit into the corporate vision of Britain. It was the decision to include Nick Clegg in the TV debates, so that voters finally learned who he was, that caused the increase in his vote. Had Caroline Lucas or Nick Griffin been given airtime the effect would have been the same.

And what about the policies? Listening to the election coverage is little help in working out which party is proposing the sorts of changes that you might actually wish to vote for. When they are given that opportunity, as in the Vote for Policies website, their selection is quite distinct from what we see in the closed, forced-choice questions of the pollsters.

Perhaps the greatest evidence that our democracy is now little more than a sham is the way that the forms of democracy we impose on Iraq or Afghanistan are designed to more accurately link the wishes of the people of those countries with the political power exercised on their behalf than is the system we labour under here.

The Wikipedia entry on Baudrillard's work refers to a story by the superb Argentinian author Jorge Luis Borges called 'On Exactitude in Science'. An oppressive and obsessive empire decides to map its territories at an exact scale, so that the map becomes as large as the territory itself. When the empire crumbles only the map is left. In a similar way, a closer look at our self-proclaimed mother of parliaments reveals it as a crumbling ruin.

*An article in today's Guardian suggests that the Murdoch strategy of deliberately sidelining the Liberal Democrats may backfire

18 April 2010

Return of the Politician?

I have just returned from my annual jaunt to teach green economics to students in the Czech Republic. At first I was rather smug about my decision to travel by train, but as soon as I reached Prague central station (which is stunning, incidentally) I realised how Iceland's second world-beating catastrophe in as many years would affect my own travel plans.

The station was full of the sort of people who never normally travel by train. In contrast to the comfortable leisure wear of those of us who routinely use sleeper trains there were tanned women in high heels and middle-aged and unfit travellers with massive suitcases. It was also easy to distinguish those displaced from their accustomed first class exclusivity. Men with the appearance of gangsters and large expensive coats looked sweaty and dislocated.

The culture of individualism that must be a key characteristic of the frequent flyer in these days when the link between climate change and air travel is so clear was predominant. The train from Cologne for which I booked my seat a month ago could not leave because so many without reservations had mobbed aboard. Deutsche Bahn have strict rules about overloading, but clear instructions from the guard that only those with reserved seats could travel were repeatedly ignored.

On arriving back in the UK I was greeted by untypical weather and an equally untypical debate on Any Answers about why the PM had not rapidly set up an emergency cabinet to devise a plan to return citizens to the country. This left me baffled: the individuals who have chosen to spend weekends in Amsterdam and enjoy three long-haul flights every year did so via a market system. You pays your money and takes your choice. Their choice did not pay off this time, but I fail to see how this can possibly have anything to do with a politician.

Are these people perhaps wishing for the return of nationalised air and rail systems? In such a world, there might be some action politicians could take. But in this world of private enterprise we are left to the tender mercies of Willie Walsh. If he decides to restart flights it will be profits rather than pity that is the motivating factor.

If voters are seriously tiring of the limitations of a market world, they might do better to call for the return of political control of the financial system than the transport system. As Mary Mellor argues in her excellent new book about the financial crisis, the reality was always that money was a social construct supported by political will. The power to reorient the monetary system towards the interests of people and planet has always been ours. If we seek politicians with the courage and vision to begin to act rather than merely manage, finance would be a good place for them to start.

6 April 2010

Services Beyond Price

Something is still rankling with me from the Chancellors debate. It is the way that the view commonly held amongst economists that wealth is only created in the private sector is taken as an unquestioned assumption by all three of the suited men who we are supposed to choose between come the general election. This is the same assumption that leads to the captains of industry trying to resist the increase in NI contributions. They create the wealth; they create the jobs. We must not hold them back from this valiant endeavour.

Let's just spend a little while testing this assumption of modern political life. The easiest way to create money, which seems to be effortlessly elided into wealth by most spokespeople on economics, is by engaging in financial fiddles. As Adair Turner himself pointed out, very little of this creates anything of social worth.

Digging deeper we may question the value of much of what is done in the private sector. At the risk of creating an equally distorted picture from the other end of the lens, I could characterise much of what passes for work in the private sector as using a lot of energy to design or produce an item of dubious social value, or persuading somebody else to buy the same.

The justification for arguing that the private sector creates the wealth that the public sector then squanders arises from one of the principles taught to students of introductory economics courses: that taxation is a deadweight loss. In neoclassical diagrams, tax is simply extracted from the economy, as though by a greedy and thoughtless government. Its reinvestment via in valuable services via public sector wages is not drawn, and hence not measured or valued.

In reality, the position is the reverse of what is assumed. It is because what is done in the public sector - whether healing the sick or educating the young - is so valuable to a civilised human society that we don't leave it to the vagaries of market distribution. We decide that everyone should benefit and we share the cost. That is what the public sector means and that is why what is provided by that sector is always going to be more - not less - valuable than what is provided by the private sector, regardless of the amount of money it does or does not generate.

4 April 2010

Be Prepared

There have been many posts on this blog over the past couple of years detailing how the financial crisis has resulted in a massive transfer of wealth from ordinary working people to those who live from their cash. This year will be the time when we have to become political about changing that, and the platforms of the 'three main parties' in the upcoming election make clear that they will all be on the same side.

The media debate moved swiftly on from the horror over the £800bn. bailout to the necessity for public-spending cuts. Little attention was paid to the arcane and obfuscatory policy of quantitative easing. But by creating money to buy debt from financial institutions it was also a policy that allocated national value to the investment community.

While the media analysis has been deficient and much of the detail of the financial wheeling and dealing has been impossible to understand, most people in this country have a deep and lingering sense that they have been scammed. Once the election charade is over and the cuts begin that unease will turn into anger and action. Those of us who work in the public sector will have an active role to play.

I grew up in a household which had two rules that I have passed on to my children: don't tell lies, and never cross a picket-line. When I was younger and in the mood to question anything, I wanted to understand the ins and outs of every example of industrial action - this was the 1970s, remember, so there were plenty to choose from. My grandfather, who had seen Keir Hardie as a boy in Merthyr and remembered the General Strike, explained that nobody goes on strike lightly.

Now I have had my own experience of strike I know that this is true. There is exhilaration about taking power back into your hands, but also fear about losing your livelihood and knowledge that you will find it hard to manage without that week's, month's or even year's money. If workers are on strike you can assume they have good grounds; my own view is that it is therefore your duty to respect their decision and show solidarity. There is likely to be plenty of opportunity in the coming year.

And on a more personal level I pass on some advice from my comrade, 'radical uncle', and ex-boss Len Arthur. You can never really call yourself an activist unless you have a strike fund. Those of us working in the public sector are paid well and have the advantage over the strikers over the 1926 general strikers that we can put something away in preparation for a time without pay. I would recommend building up a reserve of about a fifth of your annual salary. And if we protect the public sector without the need for strikes, we can all have a big party to celebrate.

2 April 2010


I have been suffering a most unQuakerly frustration with the media recently. Taking a more constructive and co-operative approach, I have to acknowledge the extraordinarily difficult role they have in explaining a complex world in two-and-a-half minutes. We have had two recent visits to Stroud by a cameraman and journalist pairing to make what they can of the story of our local currency.

The first was Tim Muffet from the BBC Breakfast programme. His item was cool, involving camera tricks and that irritating background music that is wholly unnecessary and seems designed to avoid the risk that you might actually think about what the reporter is saying. The story was honest and Stroud looked great.

Then we had a visit from Hayley Platt from Reuters TV, who apparently sell their stories around the world. Her take was rather different, with a wider range of views and the narrative being developed by local people rather than by the journalist herself. Here I particularly liked the fact that three women talked about economics while the man was making the coffee.

Trying to communicate anything of interest in a soundbite is clearly challenging and it sometimes seem that the public debate is trapped by this unhelpful format. Who is imposing it? I think the journalists themselves. Most people are neither stupid nor have the attention span of a gnat. We are being trained to think and speak so briefly that any issue which requires systemic or deep thought becomes impossible. I would recommend the reading of German philosophy as a night-time antidote.

1 April 2010

Lies, Damned Lies, and Economic Statistics

The Chancellors debate was even more disappointing that I had anticipated. Perhaps I should be thankful that we were in the middle of a digital switchover debacle so the wise words of Alistair and friends were lost in an analogue wilderness somewhere between the Wenvoe and Mendip transmitters.

There were several examples of mislabelling that George Orwell would have been proud of. First, the idea of a debate, which surely should involve some element of fundamental disagreement, honestly explored, and with progress towards a resolution? What we saw was rather a performance, each man presenting a show of confidence that his obvious nerves revealed as dishonest. Each offering defensive responses intended to maintain face. The underlying premise of the debate was that capitalism works, an assumption that flies in the face of the financial catastrophe of the past few years, not to mention the environmental crisis that has been accelerating throughout the past several decades. Without this question being put, the whole event was revealed as a charade.

Then there was the fact that it was called 'Ask the Chancellors'. This seems to chime with the widely held, although deeply misguided, notion that believers in the catechism of neoclassical economics have anything useful to tell us about sorting out the economic mess we're in. These are the guys who learned this orthodox faith at university: it is hardly likely that they are going to be the ones to trace the path towards a stable and sustainable future.

Meanwhile the masochist of the year competition continues. Our three would-be chancellors are now wishing to match their prowess against Madame La Guillotine herself: putative Iron Chancellors competing with the Iron Lady. This is an embarrassing public display of posturing that does nothing to address the question of how we protect the vulnerable in our society in a situation where the economic system we have signed up to has allowed the money they have earned and the value they have created to be stolen from them.

All three must have seen the figures that will confront the person who actually walks into 11 Downing Street on May 7th. The graph illustrates how The Economist sees the situation (it illustrates the ratio of debt to GDP for a number of countries). These data were derived from World Bank sources. They seem to bear little resemblance to what the UK is reporting to the EU and offer no justification for the singling out of Greece for a particular beating by the foreign exchange markets. Given that these figures do not include either our private debts or our off-balance-sheet debts, it is a miracle that the pound is still trading at all