30 April 2011

The Future of Universities: A Rhetorical Question?

The higher education sector is giving clear evidence that the Tories are responding to their own rhetoric rather than the reality of the way a modern economy is organised. Cuts to university funding have been savage and sudden: 6% to the teaching grant and 54% to the capital grant for 2011/12. Universities are supposed to make up the shortfall through increasing fees, but these increases cannot be imposed until 2012/13, leaving a year with a massive spending gap.

These cuts are aimed particularly at teaching, penalising those universities which continue to focus on teaching rather than research and contribute to social mobility by accepting students from less wealthy backgrounds. As Sally Hunt, UCU General Secretary, put it:

'Exceptional universities that concentrate on teaching and widening participation have been told today that they are being left to scrap it out in an untried market place. In addition, institutions that focus on arts and humanities will be forced to charge higher fees to make up the shortfall when they are given the option to triple the current maximum fee to £9,000 in 2012.'

In the market for education of the government's imagining, a lower-quality university will compete on price, offering cheaper degrees to those with less money, first-generation hopefuls perhaps, rather than public-school leavers. If we were talking about shoes or beefburgers this rationale might work, but no university wants to think that its degrees or its students are second-rate. A full 57 of the 80 English universities that have so far revealed their fee structure have tripled their fees to the maximum £9000, with many more within a thousand or so of that maximum.

Universities, long the object of managerialisation, are now being treated as though they were private-sector businesses, but they are not and never can be: they face different rules and constraints. In the private sector, if you see your market share contracting you cut costs and change the quality of your product or cut output. Since standards of education are controlled by the QAA and numbers of students are fixed by government dictat, neither of these options is possible for university managers.

What we are facing in the UK's once proud university sector is a bloodbath as managers struggle to be impressively ruthless by engaging in a process of random downsizing without any sense of strategic direction. In spite of the continuing public support for higher education, courses of practical value to the country will be cut if they are not the ones favoured by students. Staff who have failed to make themselves fit for the purposes of corporate managers will be lost.

The threat posed a generation of politicians who cut their teeth under Thatcher, and imbibed market rhetoric with their mother's milk, is only now becoming clear. Their failure to understand that the public sector cannot behave like the private sector is a danger to us all.

28 April 2011

Where are you from, originally?

The extraordinary spectacle of the most powerful man in the world having to justify his parentage is one of the clearest signs to date that the US is having a collective nervous breakdown. The invention of the concept of birtherism is a tribute both to our American cousins' impressive inventiveness with language and their abysmal record of public education. Obama's reaction is tribute to the resilience of US humour.

Both the neurotic hounding of a man whose colour was always and will always be an issue for a large majority of his fellow citizens, and the creeping of the public debate in this country towards problematising immigration, draw attention to the hypocrisy over issues of birth, nationality and belonging in our 'globalising' world.

So how important is it to know where you come from? In Wales, where I lived for 12 years and still work, it is very important indeed. In its Welsh form 'O ble rwyt ti'n dod yn wreiddiol?' it is one of the first questions you are taught when learning Welsh. Knowing where somebody comes from, and perhaps identifying their family, helps to connect you. It is not a rude or nosey question, but one that seeks relationship. It is this need for connection with place that has been denigrated and marginalised by the globalised economy. The consequent dislocation is the real source of the rise in politics based on identification, whether based on race or nationality.

From the standpoint of economic theory, free movement of labour is taken as an assumption of the market model. Unless labour can move to the market where it will receive the best returns to its skills, efficiency will not be achieved. This is but one of many examples where the market model bears not relationship to the real world, where immigration is strictly controlled.

The struggle between the deterritorialisation that results from globalisation and our identification with place has been a hallmark of the past decades. The birtherism farce is one piece of evidence of this tension; the rising votes for nationalist parties in some of Europe's most enlightened countries a more disturbing one.

Rather than encouraging the destabilising and environmentally destructive advance of a globalised economy, we should instead be working towards a system of self-reliant local economies within a bioregional framework. Within such a structure the ability of the local, and especially the local land, to evoke powerful responses could make it an appealing substitute to the our unsatisfying consumer culture, rather than a threat to social harmony.

26 April 2011

Bringing Economies Down to Earth

What was so disturbing about the recent history of Iceland, and in this it merely represents a microcosm of the globalised economy, is the way that there needed to be no apparent connection between the size of the real economy and the size of the financial economy. Nominally Icelandic businesses could use each other’s collateral to borrow many times more than the country where they were based was worth. But the unravelling of the story demonstrates that this disconnect is more apparent than real.

When the financial intermediaries can no longer borrow the credit consider that the government of the country where the bank is registered has a duty to take on the losses and repay the creditors. Hence when British depositors in Iceland’s banks lost their deposits, Prime Minister Gordon Brown immediately insisted that the Iceland government should repay, leading to a lengthy legal battle the outcome of which is still undecided.

The myth of deterritorialisation was created by the Vikings of various national origins who had found ways to create money from thin air by the process of mutually supportive bank credit. But when the bubble burst the creditors ignored this myth and targeted national governments to support the debts that had been taken on by companies registered in their territories. Far from floating free in a globalised world without governmental authority, those seeking repayment reverted to nationally based legislative frameworks.

The legally enforceable contracts between banks and the national governments who register them are, it seems, still valid in the post-geographical world of globalisation. The lesson that was learned from the collapse of financial institutions, in Iceland and elsewhere, was that geography matters very much indeed.
And beyond the question of where the bank is registered and who should pay, comes the question of how the economic value that the money can make a claim on is to be generated.

Robert Wade has written of the Icelandic economy as Icarus, the Greek mythical hero whose hubris caused him to fly too close to the sun, and who was destroyed by his own arrogance. Following the bursting of the financial bubble in 2008, every economy that has lived through finance creation was forced to come down to earth with a bump. The apparent severing of the link between finance and the real economy was only ever apparent. Now that those who are left holding credit come to make a claim for real goods and services it is the citizens of those countries whose banks generated the artificial financial value who have to pay for it, with their work, and the resources of those countries that have to be exploited to produce those goods and services.

18 April 2011

Great Transformation: Phase II

I have finally overcome my inherent thrift and bought Karl Polanyi's Great Transformation, allowing me the leisure time to consider his arguments at length during train journeys, rather than in haste before his book had to be returned to the British Library stacks in Wetherby. What I found surprised and impressed me immensely.

At the level of chat, Polanyi is discussed, dismissed even, as an 'economic historian'. This is a familiar glitch in discussion of economics, where considering long-term trends is thought to undermine the quality of your contribution. After all, it might risk allowing in the possibility that there have been alternatives to the market, even that these have dominated human history and achieved high levels of well-being.

The popular view of Polanyi is of a social historian who offered an understanding of non-market provisioning systems. The motivation for his book, however, is clearly that of political economy. He begins with two chapters on the gold standard and its role in maintaining peace in Europe in the 19th century. Far from peasant economies and mutual aid, this is a story of political intrigue and the power of global finance.

Polanyi describes four institutions that held 19th-century Europe together: the balance-of-power system, the gold standard, the self-regulating market and the liberal state. He is in no doubt about which mattered most: 'Of these institutions the gold standard proved crucial; its fall as the proximate cause of the catastrophe. By the time it failed, most of the other institutions had been sacrificed in a vain effort to save it.'

While history never repeats itself, this quotation made me ask myself which of the institutions and values we hold most dear we are willing to sacrifice to support the existing reserve currency system, and particularly the power of the dollar and the euro. The political pressure required to service the needs of finance today are ripping apart the social fabric, leading to the rise of nationalism and racism, the destruction of social services, and the waste of our skilled young people to unemployment.

Perhaps even more familiar is Polanyi's judgement on the impact on equality of the currency wars of the 1930s: 'Internally and externally alike, dwindling currenices spelled disruption. Nations found themselves separated from their neighbours, as by a chasm, while ta the same time the various strata of the population were affected in entirely different and often opposite ways. The intellectual middle class was literally pauperized; financial sharks heaped up revolting fortunes. A factor of incalculable integrating and disintegrating force had entered the scene.'

It is said that Karl Polanyi is an influence on Maurice Glasman, theorist of the self-parodying ideas of Blue Labour. In such quarters Polanyi's book appears to be used unopened, as an iconic support for mutual aid and communitarianism. But if Glasman and ilk have the influence they claim on Ed Miliband, Polanyi may soon be a name worth dropping.

14 April 2011

The Bourne Derivative

Where is George Orwell when we need him most? The lasting contribution of his writing is not his lucid and baldly honest descriptions of historical events, valuable though these are, but his nailing of the operating mechanisms of a totalitarian state, whether of the right or of the left. While Big Brother and the Big Society seem locked in some process of intellectual dialectic, the concept of doublethink thrives in Cameron's Britain.

Let's think, for a while, about the Independent Commission on Banking. Who precisely is it supposed to be independent of? Given that it was established in the wake of the greatest financial collapse history, caused by the reckless behaviour of privately owned and profit-driven banks, one might hope that it would be independent of the finance sector.

This is far from the case. In fact, the most independent member is probably Martin Wolf, who has made his living as a financial jourjnalist. Hence he is entirely reliant for stories on the sector from which he is supposed to be independent. John Vickers himself was Chief Economist at the Bank of England, Martin Taylor is a former Chief Executive of Barclays, while Bill Winters had a similar post with J P Morgan until 2010.

The justification for this make-up is presumably based on expertise, in line with the oft-repeated and highly patronising thought that we the people are simply not smart enough to understand what goes on in the arcane world of finance. Like latter-day alchemists, the financiers make something from nothing, and then make things of real value disappear. Such knowledge is far too dangerous to be made available to the unwashed masses.

I have an alternative proposal: a truly independent banking commission. This would be made up of five ordinary people, drawn by lot in a process akin to the jury system. It would be chaired by Joanna Lumley, who would be responsible for reporting its findings to the general public. It could take evidence from a range of people: financiers, politicians and journalists, but also those who have been on the rough end of the miracle of finance: small businesses owners who cannot raise finance, single mums who cannot feed their children, and dissident economists of course.

The purpose of the commission will be to create the general principles within which technocrats can then make policy. If a derivative or other 'financial product' cannot be explained to them in a convincing manner, then they will be duty bound to reject its role in the finance world of the future. If we are truly to live in a democracy then finance must be required to submit to such rules, while the people, in an equally painful process, must take responsibility for understanding the financial system that is such a vital part of their lives.

Last night I went to watch Inside Job with some friends. I was frankly disappointed by the failure to nail the nature of the coup by the financial sector, which has effectively taken over the US government. The film was also short on remedies, ending on a platitudinous quotation about how the struggle to regulate finance 'will not be easy'. Hardly an insightful observation. My friend the Green Bean Counter has a better idea. Why don't we hire Matt Damon for one last vengeful performance, where he outwits the bankers and destroys their empire by force. Hence the title of this post.

A bouquet for the BRICS

The movement in economic power towards the populous and productive nations of Asia, and the resource-rich countries of Brazil and Russia, has been obvious. The Western nations' strategy of extracting an unfair share of the value of this work and taking resources that do not belong to them through the trade-and-currency system is finally being challenged politically.

The BRICs, once a theoretical grouping, are beginning to operate like a political force. Their call for a new reserve currency to replace the US dollar as the basis of global trade is a sign of frustration with the failure of the US government to tackle the injustices in the global economy. The invitation to South Africa to join this grouping is an indication that, much more so than the G7, it is beginning to represent a global decision-making forum.

To some extent the leaders of these countries are being polite in making statements. They hold the power in the global economy and, if the UK and US fail to negotiate, it can only be a question of time before our currencies are simply sidelined. At present the call is for the use of special drawing rights as a global reserve; it might just as well be a currency set up in common between the BRICs countries and their allies, sidelining entirely the Western countries that have dominated the global economy through power rather than performance since the end of the World War II.

13 April 2011

Take that, George!

Those who, like me, have been increasingly frustrated by the prevailing flavour of reassurance, and the serious absence of facts, around the Fukushima story, may enjoy the response to George Monbiot from Helen Caldicott.

11 April 2011

Ambassador for Outrage

It was Terry Jones, the Python not the Koran-burning cleric, who first made me conscious of the increasingly wayward behaviour of abstract nouns. First we were launching wars on them (Terror being the foremost example) and now we share diplomatic representatives with them. David Cameron has apparently appointed an Ambassador for the Big Society. It made me wonder whether we couldn't have ambassadors for a whole range of abstract nouns and concepts. And if you're asking, mine's a pint of outrage, although the position of Irony Tsar would also appeal should it soon fall vacant.

The latest target for my roving outrage is the abysmally poor quality of the campaign over AV. I have yet to receive my 'independent' leaflet from the Electoral Commission but have been out delivering the Yes leaflets and have received a No leaflet through my door. The arguments in both are tendentious, misleading and entirely negative. How can it be that the Yes campaign can think of no better arguments in support of the case for creating genuine democracy than that it might make politicians feel more insecure and that they would consequently work harder? This has only a marginal connection with relevance and also serves to reinforce the myth that politicians are lazy.

I was, of course, predisposed to feel more negatively about the No campaign's leaflet, although the level of deceit and determination to mislead shocked even a campaigner hardened by as many political battles as I am. Meanwhile the media debate, led by the now ennobled John Reid, scraped even lower into the barrel of vintage scare-mongering by suggesting that AV would serve the interests of the BNP.

Barbara Panvel, a challenging rival for my claim to the position of Outrage Ambassador, has produced an excellent blog post detailing the funders of the No campaign, which is portrayed as a 'coalition of City billionaires, Tory peers and trades union barons backing the campaign to oppose a change in Britain’s voting system'. Barbara's judgement on the message to keep the open and simple system we current use: 'It is OPEN: to lobbying. It is SIMPLE: those with the longest purses are heard with the deepest respect.'

5 April 2011

Elite's Marginal Productivity Challenged by Nobel Renegade

In spite of the fact that he is clearly right, and that he is in the sort of position where holding critical views could have some impact, I cannot feel warm about Joseph Stiglitz. It must be the years he spent at the World Bank drawing a fat salary while the Bank's policies caused starvation and death. Although the black mark is partially expunged by his dissent and subsequent sacking, it still recalls a bank boss who takes his large pension and then joins the Rotary Club after retirement. And of course Stiglitz has never returned his 'Nobel Prize', suggesting he still revels in the acclaim of his dubious peers.

But bitterness aside, let's enjoy his latest offering published in this month's Vanity Fair. The article begins with the commonplace and yet shocking statistic that the top 1% of US citizens take nearly a quarter of the country's income each year and own 40% of its wealth. As recently as 1986 the comparable figures were 12% and 33%. This extraction of value by the plutocrats has been bought largely at the expenses of the professionals.

There is a useful phrase in the article which I think we could make much of: 'Trickle-down economics may be a chimera, but trickle-down behaviorism is very real.' The lifestyles of the wealthy, which in an earlier age we would have considered beyond our station, are now advertised to us as something to aspire to. Such luxuries and long-haul flights and fast cars are considered as rights, and greens who suggest that they may need to be restricted are painted as killjoys if not oppressors.

Stiglitz argues rightly that the justification for the growth in inequality on the basis that wealth creators have to be rewarded so that the economy can boom, and that this additional output will benefit us all, is unsupported by evidence. What he fails to notice, and what makes the need to end the extraction of value by the wealth so urgent, is that this economic growth is actually undermining the conditions that enable any economic activity at all to take place.

This is the argument offered by the eco-socialists, their so-called 'Second Contradiction of Capitalism'. A green economist would probably find a more grounded and passionate response: the greed of the wealthy, and the economic growth it is linked to, is killing the planet and destroying all our lives.

2 April 2011

If you want to save the species, get political

Is has become increasingly apparent during the past couple of years there is an inability amongst a wide range of people in politics and media to think about more than one issue at the same time. Since the financial crisis and the advent of deficit-vision any thought of showing concern for the environment has entirely evaporated.

In a sad report on the Transition Network website we learn the consequences of a shift in one administration from fluffy Lib Dem to market-hard Tories (that of Somerset County Council). The article quotes the authority's new hardline budget strategy: 'some services will be stopped completely e.g. climate change work, work on renewable energy, natural environment policy and delivery'. They have also sacked their Climate Change Officer. In the world of deficit-think, the environment is entirely forgotten.

The absence of any analysis around political economy was one of the criticisms most frequently made in the early days of the Transition movement, especially by academic commentators. Rupert Read, for example, made the case some three years ago that Transition Towns play a valuable demonstration role but cannot offer a sufficient response without taking politics seriously. Rob gave a spirited defence of the need for unleashing the powers of positive thinking and creative community action.

Like Rupert, and many other green politicians, I have been engaged in Transition initiatives from the start. And from the start I was well aware that any political support demonstrated by 'grey' parties who have always been adherents of the prevailing political and economic culture, whose existence relies on the power structure that is killing the planet, could only ever be partial and opportunistic. What has happened in Somerset appears to validate the view that inspiration, hard work and bright ideas, while important, are insufficient without political analysis, strategy and action.