27 November 2010

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.

26 November 2010

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.

25 November 2010

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.

24 November 2010

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.

23 November 2010

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.

22 November 2010

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.

16 November 2010

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.


14 November 2010

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.

11 November 2010

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.


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.


9 November 2010

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


8 November 2010

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)


6 November 2010

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.

2 November 2010


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.

1 November 2010

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.