How Much Money Has the Fed Printed?

As we suffer under the cosh of the Tories' austerity, many are casting envious eyes across the Atlantic and asking whether our government could, like the US government, create money to help our economy out of the many and mutually reinforcing problems we are now facing. The answer seems to be 'no' and 'yes'.

The scale of US government money creation is staggering: according to an article published in the Post-Autistic Economics Review it amounted to $2 trillion dollars in 2009-10, with another £1 trillion coming this year. This represents approximately twice the economic value of the total annual activity in the UK over those three years. This money is being given to US financial institutions in the hope that they will lend it and thus stimulate economic activity. But as in the UK, the bankers are keeping that money to themselves, holding it as capital or paying it out in bonuses. The public is seeing no benefit from this massive money creation.

Meanwhile, internationally, the creation of dollars on such a vast scale is destabilising the whole financial system, leading to the understandable raising of currency barriers by the BRIC economies, particularly China, and the creation of a new grouping that is rejecting the continued role of the dollar as the major trading and exchange currency. China has now negotiated currency-swap agreements with Russia, India, Turkey and Nigeria. As Hudson explains:

'These problems are topped by the international repercussions that Mr. Dudley [Chairman of the New York Federal Reserve] referred to as the “limits to balance-of-payments expansion.” Cheap electronic U.S. “keyboard credit” is going abroad as banks try to earn their way out of debt by financing arbitrage gambles, glutting currency markets while depreciating the U.S. dollar. So the upshot of the Fed trying save the banks from negative equity is to flood the global economy with a glut of U.S. dollar credit, destabilizing the global financial system.'

So, to answer my initial question: could the UK follow a similar policy of quantitative easing? On the scale of the US money binge, the answer must be no, since the pound does not have the same international credibility. In addition, the policy is diplomatically unacceptable, since it is clearly unilateralist and destabilising. However, the actions of the US government do prove two things: austerity is a choice not an inevitable; and governments can and do produce money and spend it dirctly into the economy.

A policy of creating money targeting at specific sectors to stimulate the creation of jobs in pro-green areas of the economy could be exactly what we need in the UK just now. Such a programme was detailed in the Green Quantitative Easing report from Richard Murphy and Colin Hines. This would smooth our path to a lower-carbon, lower-growth future and is a strategic and forward-sighted policy to contrast with the ideological short-termism of the coalition.
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A Woman's Place is in the Home (Office)

For all Britain's women politicians the state of the cabinet is a deeply depressing one. You don't have to be a rabid feminist to be concerned about the fact that only one portfolio was found for a woman and that it is the brief conventionally labelled 'home'. The after-thought of the token Asian female without portfolio just rubs salt into the wounds.

Having Yvette Cooper, clearly Labour's most competent and popular politician inside and outside the party, in the Foreign Office was some comfort, but now she, too, has been moved out of the three main offices of state, as though all that foreign travel might have been too much for her children.

What has made people most disatisfied about politics in recent years is the cronyism and apparent old boys' network. If the representative assemblies of our land were to be truly representative (meaning more that half of their members would be female, as well as having a fairer scattering of ethnic minorities), some of these concerns could be assuaged.

It is clear that couples where both aim to be politicians have difficult choices to make about their children's care. Neil and Glenys Kinnock and Tony and Cherie Blair were two couples who faced this decision - and in both cases the man became the politician. How refreshing it would have been if Ed Balls had been able to rise above his personal ambition and recognise that his wife has the makings of a much better politician that he does.
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How do I love thee?

When Elizabeth Barrett Browning recited the catechism of her love to her husband Robert, she listed the spiritual alongside the mundane, and so it should be for our love of trees. Under the traditional British land settlement, there were a range of commons woodland rights to forage for food, fuel and building materials. Rights such as 'estover' (the right to smaller woodland braches for fuel) or 'pannage' (the right to graze pigs in the forests) enabled the subsistence of generations of rural people.

More recently we have recognised the literally vital role that forests play on a global scale, maintaining the stability of the climate. The wonderful balance between photosynthesis and respiration, between our need for oxygen and trees' need for carbon dioxide enables and requires a respectful sharing of the biosphere. Our pre-scientific ancestors had such an attitude towards woodlands and their trees.

In his excellent introduction to bioregionalism, Dwellers in the Land, Kirkpatrick Sale describes the propitiation necessary to ease the guilt of killing trees to provide so many vital resources:

Almost all early peoples had elaborate ceremonies connected with cutting and harvesting, asking exoneration for the painful removal of some of Mother Earth's children, and most had stories like the Ojibways', which speak of 'the wailing of the trees under the axe', or like the ancient Chinese tales which mention cries of 'pain and indignation' from fallen branches. (p. 6)

Sale characterises this 'well-nigh universal phenomenon' of respect and reverence for trees as 'innate recognition of the fundamental, life-sustaining function of arboreal life on earth'.

The government's plans to sell off the woodland now owned for the public benefit by the Forestry Commission are an afront to common law. How can we be required to purchase what already belongs to us? It is also a continuing affront to the commons law that tells us we already have a right to enjoy the benefits of our native woodland. Such a plan was not part of the election campaign and has no public mandate, but how might resistance be most effectively organised?

The coalition claims not only to be the greenest government ever, but also the government most willing to devolve power back to local authorities. So my suggestion is that we lobby our local authorities to revive our ancient woodland rights. This, together with a sudden increase in the number of applications for Tree Preservation Orders in woods likely to be sold, might ensure that, even if the sales go ahead, the new owners will find it difficult to profit from their purchase.

*An online petition is available to sign.
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A Modest Proposal in the Age of Google

Today's proposal from Graham Allen to commodify our children and sell profitable bonds in them could be read as the translation of the traditional fear of the feckless poor into the era of financialisation. No longer any need to fall into moral panic - rather see intergenerational disadvantage as a business opportunity.

The Labour MP's call for 'early years intervention' to prevent a cycle of 'dysfunction and under-achievement' appears so attractive at first sight that you may find me churlish even to question it. But it is when we get to the part about how the proposal is to be funded that my suspicions are aroused. Two things I have learned about capitalist innovation: it often involves shifting value through time, and it requires the commodification of some vehicle to carry that value. Children might provide just such a vehicle - and the younger the better.

Allen notes that this is not a good time to be asking people to invest in our future citizens, no matter how desperate their needs. According to Children and Young People Now website:

'the funding of initiatives is still a matter Allen is investigating. This month he made a public call for submissions of evidence to the review. "Given the economic climate, it's unrealistic to ask the government for funding," he says. "We want people with expertise in delivering financial tools to raise the money." Proposed ideas include social impact bonds that offer private investors the opportunity to earn a profit through social investment.'

This rampant desire to intervene when babies have barely emerged into the world is dressed up as concern for those who fail to share the hegemonic and culturally validated qualities of thrift and industriousness. Crack and computer games have replaced gin and the cock-fight, but the sentiment of disgust and the desire for control ring true through the ages.

In 1729 Jonathan Swift's Modest Proposal was that a solution to the problem of the fecundity of the poor be found in their children's sweet flesh: a source of cheap protein for the same poor who were having trouble affording enough to eat. Financial innovation has moved on apace in the past 300 years. In Allen's proposal the future value of the children of the poor is to be commodified and issued in profitable bonds, thus tempting private equity funds to invest, although not for charity but for profit. The main difference is not the moral content of the two proposals but the fact that Swift's was satirical whereas Allen is deadly serious.
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Celtic Land Values

I am grateful to The Land magazine for keeping tabs on the development of land use policy in Wales. In spite of the recent consultation over access to the countryside in England, there is little serious linkage between land ownerhship, sustainability, and food security in the English shires. By constrast, what is happening in the newly devolved territories of Scotland and Wales may be the beginnings of a revolution.

Perhaps because the history of exclusion from the land is still kept fresh in Scotland, the emphasis there was on taking control of land for local people and on the need for a land reform. Such demands are commonplace across the world but are less commonly heard in developed and industrialised societies, where people appear to find it hard to imagine any alternative to wage slavery. Unlike in England, these are not marginal ideas from cash-strapped campaigners, but significant planks of the policy platform of the governing party.

The Scottish Green Party is creating a buzz with an attempt to put onto the agenda the question of how to share fairly the proceeds from rent of the land: its survey of the potential for a Land Value Tax in Scotland is a useful model for England and Wales to follow. The proposals suggest a simple switch from the regime of business rates and council tax to a system of taxing the land itself. This would make 75% of Scots better off and achieve some wealth redistribution, but the data needed to make a more thorough assessment of how land is owned and used - and who gains the benefit - is still beyond the pocket of a political party like the Greens.

In Wales, meanwhile, the focus is on using planning policy to encourge sustainable lifestyles, and to replace the prejudice against low-impact lifestylers by offering them real legal support in developed sustainable livelihoods from the local land. With its technical guidance note TAN6, published back in the summer, Wales has followed the lead of Pembrokeshire County Council in supporting the right to build in the countryside of those who make their livelihood locally and in a sustainable way.

The policy is called Planning for Sustainable Rural Communities but includes the revolutionary section on One Planet Development, as well as support for self-build, the development of rural micro-business, and exceptions to uniform development bans to support such sustainable rural livelihoods.

As Simon Fairlie concludes, 'TAN 6 is a welcome departure from English planning policy guidance for the countryside.'
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Here's one for the Ladies

Almost all words can now be used freely. Only one final taboo remains: the c-word. But this word popped up unexpectedly in the mouths of three powerful men on the same day in early December: twice on Radio 4 (James Naughtie on the Today programme and Andrew Marr in Start the Week only an hour or two later) and Nick Herbert also accidentally used the word in the House of Commons. James Naughtie seems to really relishthe joy and liberation offered by female energy.

This seems to be more like synchronicity than mere coincidence. An explanation might be the celebration of cunt at the Cunny festival that took place on Sunday, December 5th around the Stone of Free Speech on Parliament Hill, London. The Rite of Cunt Liberation was performed by a group of women and men, young and old, to honour 'the sacred place where pleasure is found, life is conceived and natural birth takes place'.

The festival celebrants conclude that 'The unbalanced rule of the cock is melting,
and the cunt reasserting herself.' I wonder what Messrs. Naughtie, Marr and Herbert would make of this uprising of untrammelled earth energy.
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The Zen Road to Affluence?

Finding that there is more to economic life than growth is not news to many readers of this blog, but finding that this lesson is being promulgated by the Financial Times is a little bit more surprising. It immediately sends my mind racing in the direction of conspiracies to keep us bovine and submissive in the face of falling wage levels and growing inequality. But so long as our lower level of material wealth comes with greater well-being, more leisure, friendship and conviviality, why should we care?

David Pilling, the author of this article, is straying into dangerous territory for a pro-capitalist paper, by suggesting that politicians might not favour the accumulation of capital in their economies as a primary goal. This does not seem much of an intellectual step from the call for politicians to take control over finance, and reintroduce credit and exchange controls, as called for by most green economists. And that would certainly be the end of globalisation as we - and the corporate billionnaires - know it.

Japan appears to have reached a different sort of accommodation with capitalism, one which enables a high standard of living without growth, and with some independence. By selling its national debt to its own citizens, it is at least closing some sort of circle. Issuing money to run the economy itself would be preferable, and any system of national financing based on debt will always transfer money from poor to rich, but at least the demands of rapacious bond markets are not a threat, nor the political power that foreign governments can exercise through their sovereign wealth funds.

The article by my near namesake Professor Kato, as recommended by David Pilling, is also well worth a read. Again there is nothing new here: it is rather the source of the story and the outlet where it was published that suggest this debate is on the move.

Meanwhile, instead of working why not squander some time on pointless games? We had great fun with our revolutionary top trumps over the festive break, and now there is a game you can play while 'working at your computer'. Send it to all your friends: debtris brings a whole new meaning to education for the life of leisure.
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No Stabilisation without Escalation

Here's something unusual: an opportunity to agree with the Tories. Media discussion has returned to the issue of the damaging results of volatility in the fuel price, a problem which affects citizens as well as businesses. Back in 2008, the Conservatives published a consultation paper on the question of using fuel taxation to stabilise the price, rather than raise revenue.

More surprisingly, the paper made reference to the need for 'stabilising the price of carbon'. This was the time when the Conservatives had changed their torch of enlightenment to a tree of sustainability and were trying to persuade us they would be the greenest government ever. Now that they are the government the link between stable fuel prices and sustainability appears to have been severed.

As I have already argued, in a long-term perspective, government would help business most by establishing a clear upward trajectory for fuel prices, making the direction of travel towards low-energy production and renewable sources of supply clear, and pushing managers towards building this in to their organisational planning.

Abandoning the link between stable fuel prices and the transition to a low-carbon economy is an example of the threadbare nature of the Tories' green clothes. But more seriously it demonstrates their failure to understand where the global economy is going. Far be it from me to provide business advice to capitalist corporations, but it doesn't take much insight to realise that relying on fossil fuels in the era of peak oil and climate change is a recipe for business failure.
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Needing to Know What we Need

Green economists view markets as inherently social institutions, governed by rules which are subject to democratic decision-making. While this runs counter to prevailing economic orthodoxy – with its emphasis on ‘free’ markets – it is actually exemplified by legislation to protect consumers, such as environmental health legislation and building regulations, and more recently by increasing control over the activities of business in relation to climate change. Rather than proposing the replacement of the market system with a planning-based allocation system, how far can we develop the potential for democratic processes to adjust the incentives governing the market in a more environmentally benign direction?

A market economy is designed to meet needs so that resources are efficiently used and utility is maximised, but how do we know what we need? In a world where some societies suffer from consumption-related ‘status anxiety’ while in others people die from starvation it is difficult to find empirical justification for the theoretical position that markets ensure allocative efficiency. The environmental crisis adds an extra dimension to this question: as a closed system the earth has finite resources and a limited capacity to absorb the waste products of industrial society.

From the perspective of Green Economics, a human community that acknowledged ecological limits would also ensure that citizens managed the supply of products and services according to human needs. This is not the approach taken by Western societies, where consumption decisions are determined by ability to pay and individual choice. How might a green economy organise the allocation of resources for and the production of goods and services? Might there be a way of devising a scale of needs which was supported by some degree of social consensus?

In the middle of last year I was sent a research proposal to explore these questions. The idea (which came from Gareth Watkins of Ethical Propaganda) was to assess individual and societal need in relation to products and services that could be bought in the market. Gareth and I are hoping to work together to take some of this forward, his focus being especially the development of a 'scale of needs', scoring products and services to produce the scale, while mine is more related to socially determined economic planning.

The research plan, as we developed it, involved the establishment of a number of ‘citizens’ juries’ that would resolve the question of how needs might be defined at a societal level by comparing, within a limited energy framework, the priority they would accord to, say, a fertility treatment programme or a new computer game. The ultimate aim of the research would be to develop policies to resolve the conflicts between individual and societal needs in order to create incentives to bring them into closer alignment.

There has been a disturbing tenor of debate amongst those most concerned to curb consumption in the face of its ineluctable growth and our apparent inability to reduce CO2 emissions in spite of the clear evidence of accelerating climate change. Commentators suggest that it would all be so much easier to solve if we weren’t troubled by the problem of living in a democracy. How much easier to be China and have access to real political power.

The pitfalls of central planning of an economy, where one bicycle factory predicts and then satisfies the demand of a vast nation, was made plain by the poor-quality goods produced in inadequate quantities by the economies of what was once Comecon. But the Western ‘free’ market generates as many problems as it solves. Basic needs remain unmet while a whole range of pointless and unsatisfying consumer goods generate the CO2 emissions that are destroying our climate, while also squandering the earth’s resources.

A system of citizens’ juries, a technique in the style of participatory economic planning, would require people to rise above the selfish individualism that a market system encourages. Instead, they are expected to adopt something more like the ‘original position’ proposed by John Rawls in his A Theory of Justice. As a society we would decide how we spent our limited energy budget. Once the juries had established the hierarchy of needs the taxation system could be adjusted to encourage appropriate consumption.

At present the debate about sustainability economics is dominated by research into the failure of economic growth to lead to higher levels of human well-being, and the suggestion that we might be able to achieve greater levels of human flourishing with lower levels of energy and materials input and pollution outputs. Recognising the environmental limit of economic activity means growth cannot be employed as the means of raising the living standards of the poorest, and thus forces questions of allocation to the centre of political decision-making; sustainability and equality are hence inextricably related. However, so far there have been no attempts to categorise and measure different types of consumption and their social usefulness. The proposed research will help ensure that decisions about how limited energy and resources are shared are truly participatory, and truly democratic.
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