I have a running joke with colleagues and students about the Joanna Lumley society. This draws on a sketch from the Mitchell and Webb show, where various young men engaged in socially destructive but highly lucractive activity are reduced to ashes by a roomful of grey-haired ladies. How excellent, we thought, if derivatives traders had to seek licences from a committee of such women, chaired by Dame Joanna herself.
I had been trying to imagine what a society run along these principles might be like, and I am beginning to think I may have found it in Finland. If the USA is the testosterone-fuelled adolescent of nations, then Finland is surely the babushka: wise, caring and quietly in control. I was surprised by Finland: it is not the laid-back happy-go-lucky society I had imagined a Scandinavian society to be. Saunas are places of meditation and business, not of sensuality and titillation.
Being in a country where everything happens as planned, where trains and buses run to the minute and where good design is second nature is immensely reassuring. I had reached the point after a few days where, when I felt the need for something, whether a left-luggage locker or a napkin, I looked about to see where some foresighted Finn had placed it. And mostly I was not disappointed.
What is most skilful about the way the Finns approach the 21st century is there ability to portray themselves as successful players in the globalised corporate economy, when really they have retained much of what was good about a socialist approach to life. But this is not an oppressive state socialism, rather one informed by self-reliant and mutual values.
Finland has a greater density of co-operatives than any other economy: the number of members far outstrips the population of the country. Its dominant corporation, the S-Group, is itself a co-operative. So I was able to stay in co-operative hotels, shop in the S-market shops and the bus we travelled in refuelled at ABC!, the S-group's national network of filling stations. In total the S-Group is a €10.5bn business with interests in farming, retail, and tourism, as well as department stores.
Women play a powerful role in Finnish political life, with nearly 50% of the members of parliament being female. Data from the Fawcett Society indicates that, in terms of a ranking of the percentage of women in national legislatures, the four Scandinavian countries are all in the top five, together with Rwanda. Since 2000, Finland has also had a female President, Tarja Halonen. The influence of women is obvious in small ways, such as the children's rooms on trains and the special wall seats for babies in women's showers.
I would not like to paint Finland as a utopia, however. It seemed to me that the public imposition of social awareness had squeezed out more human neighbourly responses. For example, Finns have a joke that they emerge from their flats in the spring and greet their neighbours with 'Oh, I'm glad to see you have made it through the winter'. When everything works so well, there is no space for the shared whinge or the mutual self-help that we Brits rely on. There is also a sense of heavy social control which, while reassuring, might be stifling if a part of one's everyday experience.
Finland also has problems in its political system, with a massive vote - out of nowhere - for a nationalist party in this spring's elections, as has happened in the other Nordic democracies. The 'True Finns', who rode to success on the back of opposition to the Eurozone bailouts to become the largest opposition party in the parliament, are a frightening hint of the vulnerability of a democracy, not matter how strong, in terms of economic crisis.
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All other green campaigns become futile without tackling the economic system and its ideological defenders. Economics is only dismal because there are not enough of us making it our own. Read on and become empowered!
30 August 2011
21 August 2011
Who's Fooling Who[m]?
This posts begins with a conversation I had with my daughter about whether Banksy would be elected as Mayor of Bristol if he chose to stand. Everybody wants to know Banksy, to be like him. The pride we feel in somebody who manages to make political argument witty and accessible is unexpected in an era when we are told that people are not interested in politics.
Banksy's variety of street politics is more appealing because it is more open, and also more directly challenging without having any apparent victims. His anonymity adds to the allure as well as to the appeal. He has become an Everyman character: like Charlie Chaplin's tramp, standing up to authority and using ridicule to emerge victorious. We would all like to feel that we could legitimately claim 'I am Banksy (and so is my wife)'.
The trickster character plays an important role in mythologies across the world. In West Africa he is Anansi, who plays tricks on the Gods and takes the form of a spider. In Japanese mythology he is Kitsune, the fox. Tricksters are cunning and witty, but often end up with joke on them. In native American cultures Coyote often plays this role, while in historic mythological systems the Norse cultures had Loki and the Greeks Hermes.
The role of the trickster, like the fool in Medieval courts, is to prick the pomposity of those in authority. He is the antidote to hubris. Perhaps it is because our society, with all its scientific knowledge, has lost the wisdom of being able to laugh at itself that Banksy is proving so popular. He also tempts us to revel in, rather than eliminate, doubt and uncertainty. His first foray into film-making, the Oscar-nominted Exit through the Gift Shop, could itself be one extraordinary hoax. But whether the joke is on the duped majority, the art establishment, Mr Brainwash, or even Banksy himself, is hard to tell.
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Banksy's variety of street politics is more appealing because it is more open, and also more directly challenging without having any apparent victims. His anonymity adds to the allure as well as to the appeal. He has become an Everyman character: like Charlie Chaplin's tramp, standing up to authority and using ridicule to emerge victorious. We would all like to feel that we could legitimately claim 'I am Banksy (and so is my wife)'.
The trickster character plays an important role in mythologies across the world. In West Africa he is Anansi, who plays tricks on the Gods and takes the form of a spider. In Japanese mythology he is Kitsune, the fox. Tricksters are cunning and witty, but often end up with joke on them. In native American cultures Coyote often plays this role, while in historic mythological systems the Norse cultures had Loki and the Greeks Hermes.
The role of the trickster, like the fool in Medieval courts, is to prick the pomposity of those in authority. He is the antidote to hubris. Perhaps it is because our society, with all its scientific knowledge, has lost the wisdom of being able to laugh at itself that Banksy is proving so popular. He also tempts us to revel in, rather than eliminate, doubt and uncertainty. His first foray into film-making, the Oscar-nominted Exit through the Gift Shop, could itself be one extraordinary hoax. But whether the joke is on the duped majority, the art establishment, Mr Brainwash, or even Banksy himself, is hard to tell.
. Tweet
19 August 2011
Which side are you on?
Has anybody learned anything from the riots? The responses across the political spectrum suggest that people are reading into the events what they need to see to reinforce their prejudices. This is happening to me to: I am warming to Ed Miliband with his soothing words about diverse families and immoral bankers, and snorting involuntarily as Nadine Dorreys tells us about the Good and Bad uses of Twitter, as though she had barely left kindergarten.
In times of stress it is predictable that we will cling more strongly to what we know, rather than being opening to new ideas. The research into brain function initiated by Colin Firth as a playful attempt to discover what was biologically wrong with people who didn't agree with him in fact generated interesting results about the security levels of those who identify with Labour or Conservative world-views.
Clearly, I am not a neuro-expert, but it appears that the amygdala, the primitive part of the brain that was found to be enlarged amongst Tory voters, is associated with the foundation of emotional memories, and how we relate these to our responses. if the neuro-scientists will forgive me, I would like to suggest that this relates to our decisions about what should make us afraid and how we should act as a consequence.
The performance by a range of Conservative spokespersons in the past fortnight can be read as a live demonstration of their insecurity and need for strict boundaries. When we hear Iain Duncan Smith being so firm about the difference between Right and Wrong we should remember that, as a Catholic, he believes that these are clear categories determined by the Pope. For his emotional security he needs to believe that, just as he needed to join the army to gain some sense of structure.
Similarly, the talk of absent fathers is interesting coming from politicians whose busy work schedule makes it questionable how much they can really be there for their own children, and whose fathers were also presumably rarely present. For those who were sent early to boarding schools, family life must be something they yearned for, a yearning they are now happy to project onto others.
Might it be going too far to suggest that joining a political party is itself like joining a gang. Each party has its own code, its own set of firm beliefs, a togetherness gained from adversity - except for the Green Party they even have a whipping system to prevent failures of group loyalty. Nothing can repair the damage caused by a dysfunctional childhood, but clinging to a dogmatic belief system can certainly help you feel less insecure.
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Tweet
In times of stress it is predictable that we will cling more strongly to what we know, rather than being opening to new ideas. The research into brain function initiated by Colin Firth as a playful attempt to discover what was biologically wrong with people who didn't agree with him in fact generated interesting results about the security levels of those who identify with Labour or Conservative world-views.
Clearly, I am not a neuro-expert, but it appears that the amygdala, the primitive part of the brain that was found to be enlarged amongst Tory voters, is associated with the foundation of emotional memories, and how we relate these to our responses. if the neuro-scientists will forgive me, I would like to suggest that this relates to our decisions about what should make us afraid and how we should act as a consequence.
The performance by a range of Conservative spokespersons in the past fortnight can be read as a live demonstration of their insecurity and need for strict boundaries. When we hear Iain Duncan Smith being so firm about the difference between Right and Wrong we should remember that, as a Catholic, he believes that these are clear categories determined by the Pope. For his emotional security he needs to believe that, just as he needed to join the army to gain some sense of structure.
Similarly, the talk of absent fathers is interesting coming from politicians whose busy work schedule makes it questionable how much they can really be there for their own children, and whose fathers were also presumably rarely present. For those who were sent early to boarding schools, family life must be something they yearned for, a yearning they are now happy to project onto others.
Might it be going too far to suggest that joining a political party is itself like joining a gang. Each party has its own code, its own set of firm beliefs, a togetherness gained from adversity - except for the Green Party they even have a whipping system to prevent failures of group loyalty. Nothing can repair the damage caused by a dysfunctional childhood, but clinging to a dogmatic belief system can certainly help you feel less insecure.
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Tweet
17 August 2011
Man or Superman?
In the wake of last week's riots there have been no shortage of supermen rushing forward to suggest how the rest of us might live. I have found many of the prescriptions, frankly, sickening. The focus on the failure of families is especially troubling, because it slides so easily into blaming women for their failure to be adequate parents.
I also find the use of the phrase 'underclass' troubling. Like the idea of the 'undeserving poor' that preceded it, it suggests a natural hierarchy in society that actually arises as a result of a capitalist economy. The easy way with which Duncan Smith and Cameron talk about Right and Wrong, as though these were generally agreed categories, identifies them clearly as members of the dominant class and its hegemonic ideology.
The Wrong values are, apparently, about selfishness and greed; whereas the Right values are about hard work and supporting your community. I can't be the only person who questions whether the wealthy are more likely to find themselves in the first value set or the second.
As Cameron styles himself as some sort of Nietzschean Übermensch, the 'creator of new values' striding forth to save us mere mortal from chaos, I am reminded of the balancing word Untermensch, and the danger of defining human beings into more or less worthy categories. How much more wholesome is the Yiddish word Mensch, that comes without qualification or hiearchy and means, according to the Webster-Merriam online dictionary: a 'good person, human being, person'.
That is where most of us are at: struggling to do our best in a hostile economic system and without the advantages of wealth or elite status. We haven't broken society and, through our daily acts of mutual kindness, we make and mend it anew. Tweet
I also find the use of the phrase 'underclass' troubling. Like the idea of the 'undeserving poor' that preceded it, it suggests a natural hierarchy in society that actually arises as a result of a capitalist economy. The easy way with which Duncan Smith and Cameron talk about Right and Wrong, as though these were generally agreed categories, identifies them clearly as members of the dominant class and its hegemonic ideology.
The Wrong values are, apparently, about selfishness and greed; whereas the Right values are about hard work and supporting your community. I can't be the only person who questions whether the wealthy are more likely to find themselves in the first value set or the second.
As Cameron styles himself as some sort of Nietzschean Übermensch, the 'creator of new values' striding forth to save us mere mortal from chaos, I am reminded of the balancing word Untermensch, and the danger of defining human beings into more or less worthy categories. How much more wholesome is the Yiddish word Mensch, that comes without qualification or hiearchy and means, according to the Webster-Merriam online dictionary: a 'good person, human being, person'.
That is where most of us are at: struggling to do our best in a hostile economic system and without the advantages of wealth or elite status. We haven't broken society and, through our daily acts of mutual kindness, we make and mend it anew. Tweet
15 August 2011
Strange Fruit
I think it was Arthur Scargill who said that if people start attacking you, you are obviously shaking the right tree. The interesting thing is that when you post a plan to stabilise the global financial system it is Austrians who fall out of the tree. They feel duty bound to contest the fact that politicians can have any kind of positive impact on the situation.
I have some time for the Austrians because at least they are intellectually consistent. Their position appears to be that banks should be free to make money in a money market system with no inteference from politicians. If the banks fail, those foolish enough to deposit money with them lose it. Similarly, those who in vest in duff businesses lose their investment. The market is ruthless but fair, as are the Austrian theorists themselves.
The problem with this view of the world is that it is ethically, socially and politically untenable. What Hayek learned from the financial chaos of the 20s and 30s was that politics and economics did not mix. What he failed to learn is that unmitigated market chaos generates extreme politics, of both right and left. The role of politicians in a democracy is to mediate that, and they cannot do this without involving themselves fundamentally in the economic framework within which market transactions take place.
My ten-point stabilisation plan is no doubt flawed - and I am grateful to initiate a debate to identify and remedy those flaws. For fear of being seen to be fools, politicians are singularly failing to rush in and sort out the financial crisis. At the risk of appearing a fool I have made a proposal for others to support or attack.
Lee the Austrian makes some points typical of his intellectual wordview. However, when he responds that 'Suspension of government bond trading would push lending costs through the roof, bankrupting all world governments and ending the welfare state for good' he seems to miss my point about suspending such trade in sovereign debt. Perhaps he cannot imagine a world without markets, but I see this as analogous to the situation when a company is going bankrupt and trade in its stock is suspended. So there is no market and hence no price - so there cannot be an increase in the price of lending.
Tim Worstall raises another point that is worth debate in his comment that 'If we stop trading currencies then we've got to stop trade'. This suggests that most of the trade in foreign exchange is directed to settle external trade balances, rather than for speculative reasons. I don't have the proportions to hand, but the residual quantity of exchange between, say, pounds and Ukrainian Grivnya that relates to exchange of goods could surely be suspended for the six-month period, held as an external trade debt? Alternatively, IMF special drawing rights could be used for the purposes of external commitments, until a new global reserve currency has been negotiated.
The tone of the Austrians' comments is harsh, to match their philosophy. I would invite those holding other positions to join the fray. Surely it is worth the risk of appearing a fool!
. Tweet
I have some time for the Austrians because at least they are intellectually consistent. Their position appears to be that banks should be free to make money in a money market system with no inteference from politicians. If the banks fail, those foolish enough to deposit money with them lose it. Similarly, those who in vest in duff businesses lose their investment. The market is ruthless but fair, as are the Austrian theorists themselves.
The problem with this view of the world is that it is ethically, socially and politically untenable. What Hayek learned from the financial chaos of the 20s and 30s was that politics and economics did not mix. What he failed to learn is that unmitigated market chaos generates extreme politics, of both right and left. The role of politicians in a democracy is to mediate that, and they cannot do this without involving themselves fundamentally in the economic framework within which market transactions take place.
My ten-point stabilisation plan is no doubt flawed - and I am grateful to initiate a debate to identify and remedy those flaws. For fear of being seen to be fools, politicians are singularly failing to rush in and sort out the financial crisis. At the risk of appearing a fool I have made a proposal for others to support or attack.
Lee the Austrian makes some points typical of his intellectual wordview. However, when he responds that 'Suspension of government bond trading would push lending costs through the roof, bankrupting all world governments and ending the welfare state for good' he seems to miss my point about suspending such trade in sovereign debt. Perhaps he cannot imagine a world without markets, but I see this as analogous to the situation when a company is going bankrupt and trade in its stock is suspended. So there is no market and hence no price - so there cannot be an increase in the price of lending.
Tim Worstall raises another point that is worth debate in his comment that 'If we stop trading currencies then we've got to stop trade'. This suggests that most of the trade in foreign exchange is directed to settle external trade balances, rather than for speculative reasons. I don't have the proportions to hand, but the residual quantity of exchange between, say, pounds and Ukrainian Grivnya that relates to exchange of goods could surely be suspended for the six-month period, held as an external trade debt? Alternatively, IMF special drawing rights could be used for the purposes of external commitments, until a new global reserve currency has been negotiated.
The tone of the Austrians' comments is harsh, to match their philosophy. I would invite those holding other positions to join the fray. Surely it is worth the risk of appearing a fool!
. Tweet
The Voice of Reason
The following exchange from Hansard neatly illustrates the benefits and the limitations of having a Green MP:
Caroline Lucas (Brighton, Pavilion) (Green): Violence is always to be condemned, but as the Prime Minister said, seeking to understand violence is a world away from seeking to justify it. Indeed, we ought to try to understand it to stop it happening in future. Given the growing evidence, from Scarman onwards, that increasing inequality has a role to play in drawing at least some people into violent behaviour, can the Prime Minister reassure the House that comprehensive impact assessments will be undertaken before his Government introduce any more policies that increase inequality?
The Prime Minister: Everyone wants to see a fairer and more equal country, but I have to say to the hon. Lady that young people smashing down windows and stealing televisions is not about inequality.
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Caroline Lucas (Brighton, Pavilion) (Green): Violence is always to be condemned, but as the Prime Minister said, seeking to understand violence is a world away from seeking to justify it. Indeed, we ought to try to understand it to stop it happening in future. Given the growing evidence, from Scarman onwards, that increasing inequality has a role to play in drawing at least some people into violent behaviour, can the Prime Minister reassure the House that comprehensive impact assessments will be undertaken before his Government introduce any more policies that increase inequality?
The Prime Minister: Everyone wants to see a fairer and more equal country, but I have to say to the hon. Lady that young people smashing down windows and stealing televisions is not about inequality.
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Labels:
Caroline Lucas,
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Equality Trust,
inequality
12 August 2011
Ten-Point Stabilisation Plan
Spurred on by my recent realisation that I am better qualified for the job than Christine Lagarde, I have put together a modest proposal to resolve the turmoil in the global financial markets. Please send it around, discuss it with your friends, and most importantly: improve upon it.
The most obvious feature of the current crisis in the Eurozone, and the longer-term crisis over the rebalancing of power in the global economy between east and west, is the way that it is happening in a political vacuum. The sense of failure of politicians to manage these historic developments risks exposing us all to an extended period of chaotic change during which the vulnerable suffer.
This short statement is a summary of what it would mean for politicians to act in the interests of their electors to protect them against financial instability. It begins by listing the assumptions that are framing, and limiting in an unhelpful way, the present debate. It then moves on to propose 10 specific actions which need to be taken; further explanation for these actions and greater detail is provided in the following notes.
Failed Assumptions
The most striking feature of the present crisis is the limited range of policy options that are included in the discussion. The most constructive actions are being ruled as ‘impossible’ because of a number of mistaken assumptions which should now be abandoned. These include:
• That markets are efficient while politicians are not;
• That the problem of finance is essentially technical rather than political;
• That politicians should not have a role in managing the flow of money and credit within and between national economies.
Our proposal rests on the understanding that we need politicians to take strong and wide-ranging action to support the interests of their citizens rather than responding to the increasingly incoherent and inconsistent demands of a range of financial interests.
10-point Stabilisation Plan
1. The announcement by the finance ministers of the world’s leading economies of a six-month moratorium period during which all trade in their currencies and their bonds will be suspended.
2. During the period of moratorium, the negotiation of a global international agreement to create an agreed system of political control over finance.
3. The creation of a new reserve currency instrument, not linked to any single national economy.
4. The linkage of the new reserve instrument to carbon dioxide emissions.
5. The reintroduction of national democratic control over currencies, with a system of negotiated exchange between currencies.
6. The reintroduction by national governments of strict reserve requirements on their national banks and a parallel system of rationing of consumer credit.
7. The creation of public banks to provide a safe haven for citizens’ deposits and with lending designed to facilitate the transition to a sustainable economy.
8. The creation of an independent body to undertake the monitoring of country’s sovereign debts and the rating of their credit-worthiness. The majority of the membership of this Global Audit Committee should be comprised of academics and laypeople, rather than those who work in the finance sector.
9. The creation of national Audit Committees to evaluate the process by which current debt was acquired; where this debt was acquired by a process that was not in the interests of the citizens of the country it would be possible to repudiate that debt.
10. The elimination of secondary markets trading in the debt of nation-states and the establishment of a global body to register all derivative instruments on the basis of their ability to increase social and/or environmental welfare.
Notes on the Plan
1. At present politicians are finding it impossible to act because of fear of the immediate response from the financial markets. The moratorium would give them the space to consider a policy proposal.
2. Following the last period of international financial instability in the 1930s, which ultimately led to the Second World War, a global agreement to govern international finance was signed at Bretton Woods. It was gradually abandoned following the US’s unilateral decision to cut the link between its currency and gold in 1971, however, the role of the dollar as the global reserve currency, which depended on the link with gold, has continued. The story is told by Paul Davidson in ‘Reforming the World’s International Money’.
3. The role of the dollar as a national currency of the world’s largest economy, as well as the international numeraire, is a key cause of the instability in the global financial system. Such a call was made in UNCTAD’s Trade and Development Report 2009. Earlier this year the IMF proposed that its Special Drawing Rights might play such a role (Enhancing International Monetary Stability—A Role for the SDR?), however the lack of neutrality and representativeness of the IMF undermines its credibility in making such a proposal.
4. This linkage, first suggested by Richard Douthwaite in The Ecology of Money, would enable the new reserve currency to also introduce an ecological limit on the global economy, in contrast to the current emphasis on a return to rapid economic growth whatever the environmental consequences. A discussion of the proposal can be found in Molly Scott Cato’s paper ‘A New Financial Architecture based on a Global Carbon Standard’.
5. The fact that the Chinese currency the Renbinmi is under political management by the state has attracted attention in recent discussions, but less has been made of the fact that until the 1980s most western economies also managed their currencies. The history of exchange controls in the UK between 1939 and 1979 is described in an article by Brandon Hugget in the National Archives.
6. The financial crisis of 2007/8 was clear evidence of the failure of the Basel process for determining the capital requirements for banks, which is unsurprising given the domination of the financial interest in these negotiations. Simon Johnson, former Chief Economist at the IMF, has made this case in an article ‘Capital Failure’ published in the New York Times. Since as was made clear following the crisis, the citizens of nation-states are the ultimate guarantors, it should be the role of their democratic representatives to ensure that banks do not take on more liabilities than they are able to support.
7. Such a bank could operate in a way similar to the Banco do Brasil, which is state-controlled and uses credit to support the interests of the citizens of the country, while also providing a place for them to invest their savings.
8. Such a body would replace the increasingly discredited credit-rating agencies. It has long been apparent that these agencies have fundamental conflicts of interest, since they profit from the very system that they are established to monitor. They have also faced criticism for their failure to accurately assess the risk faced by banks as a result of the range of ‘exotic’ financial products before, during and since the financial crisis of 2008. Such a crucial role as assessing the costs national governments should pay for their borrowing should be undertaken in a democratic and transparent way. President of the EU Commission Jose Manuel Barroso is one leading European politician to have challenged the role of these US-based institutions; German Chancellor Angela Merkel another.
9. The prototype for such and Audit Committee is that established by President Correa following his election as President of Ecuador in 2005. In spite of the country’s oil wealth poverty was widespread because 50% of national income was being spent on servicing foreign debt. The Audit Committee was established to investigate who the creditors were and how they had persuaded governments to take on the debt. Eventually, it found that some 70% of the debt was illegitimate and the creditors were forced to sell at reductions of around 90%. Audit Committees have now been established in Greece and Ireland.
10. Such a proposal would help to democratise this centre of power in the global economy. During the process of registration, the onus will lie on the product’s originator to demonstrate that it is beneficial and there is no alternative way of achieving the same purpose. The root cause of the financial crisis was the deliberate obfuscation on the part of financiers of the riskiness of the activities. Under this proposal, only those derived investments which can be demonstrated to have a social value, say by spreading risks over a wider group of people, would be permitted.
. Tweet
The most obvious feature of the current crisis in the Eurozone, and the longer-term crisis over the rebalancing of power in the global economy between east and west, is the way that it is happening in a political vacuum. The sense of failure of politicians to manage these historic developments risks exposing us all to an extended period of chaotic change during which the vulnerable suffer.
This short statement is a summary of what it would mean for politicians to act in the interests of their electors to protect them against financial instability. It begins by listing the assumptions that are framing, and limiting in an unhelpful way, the present debate. It then moves on to propose 10 specific actions which need to be taken; further explanation for these actions and greater detail is provided in the following notes.
Failed Assumptions
The most striking feature of the present crisis is the limited range of policy options that are included in the discussion. The most constructive actions are being ruled as ‘impossible’ because of a number of mistaken assumptions which should now be abandoned. These include:
• That markets are efficient while politicians are not;
• That the problem of finance is essentially technical rather than political;
• That politicians should not have a role in managing the flow of money and credit within and between national economies.
Our proposal rests on the understanding that we need politicians to take strong and wide-ranging action to support the interests of their citizens rather than responding to the increasingly incoherent and inconsistent demands of a range of financial interests.
10-point Stabilisation Plan
1. The announcement by the finance ministers of the world’s leading economies of a six-month moratorium period during which all trade in their currencies and their bonds will be suspended.
2. During the period of moratorium, the negotiation of a global international agreement to create an agreed system of political control over finance.
3. The creation of a new reserve currency instrument, not linked to any single national economy.
4. The linkage of the new reserve instrument to carbon dioxide emissions.
5. The reintroduction of national democratic control over currencies, with a system of negotiated exchange between currencies.
6. The reintroduction by national governments of strict reserve requirements on their national banks and a parallel system of rationing of consumer credit.
7. The creation of public banks to provide a safe haven for citizens’ deposits and with lending designed to facilitate the transition to a sustainable economy.
8. The creation of an independent body to undertake the monitoring of country’s sovereign debts and the rating of their credit-worthiness. The majority of the membership of this Global Audit Committee should be comprised of academics and laypeople, rather than those who work in the finance sector.
9. The creation of national Audit Committees to evaluate the process by which current debt was acquired; where this debt was acquired by a process that was not in the interests of the citizens of the country it would be possible to repudiate that debt.
10. The elimination of secondary markets trading in the debt of nation-states and the establishment of a global body to register all derivative instruments on the basis of their ability to increase social and/or environmental welfare.
Notes on the Plan
1. At present politicians are finding it impossible to act because of fear of the immediate response from the financial markets. The moratorium would give them the space to consider a policy proposal.
2. Following the last period of international financial instability in the 1930s, which ultimately led to the Second World War, a global agreement to govern international finance was signed at Bretton Woods. It was gradually abandoned following the US’s unilateral decision to cut the link between its currency and gold in 1971, however, the role of the dollar as the global reserve currency, which depended on the link with gold, has continued. The story is told by Paul Davidson in ‘Reforming the World’s International Money’.
3. The role of the dollar as a national currency of the world’s largest economy, as well as the international numeraire, is a key cause of the instability in the global financial system. Such a call was made in UNCTAD’s Trade and Development Report 2009. Earlier this year the IMF proposed that its Special Drawing Rights might play such a role (Enhancing International Monetary Stability—A Role for the SDR?), however the lack of neutrality and representativeness of the IMF undermines its credibility in making such a proposal.
4. This linkage, first suggested by Richard Douthwaite in The Ecology of Money, would enable the new reserve currency to also introduce an ecological limit on the global economy, in contrast to the current emphasis on a return to rapid economic growth whatever the environmental consequences. A discussion of the proposal can be found in Molly Scott Cato’s paper ‘A New Financial Architecture based on a Global Carbon Standard’.
5. The fact that the Chinese currency the Renbinmi is under political management by the state has attracted attention in recent discussions, but less has been made of the fact that until the 1980s most western economies also managed their currencies. The history of exchange controls in the UK between 1939 and 1979 is described in an article by Brandon Hugget in the National Archives.
6. The financial crisis of 2007/8 was clear evidence of the failure of the Basel process for determining the capital requirements for banks, which is unsurprising given the domination of the financial interest in these negotiations. Simon Johnson, former Chief Economist at the IMF, has made this case in an article ‘Capital Failure’ published in the New York Times. Since as was made clear following the crisis, the citizens of nation-states are the ultimate guarantors, it should be the role of their democratic representatives to ensure that banks do not take on more liabilities than they are able to support.
7. Such a bank could operate in a way similar to the Banco do Brasil, which is state-controlled and uses credit to support the interests of the citizens of the country, while also providing a place for them to invest their savings.
8. Such a body would replace the increasingly discredited credit-rating agencies. It has long been apparent that these agencies have fundamental conflicts of interest, since they profit from the very system that they are established to monitor. They have also faced criticism for their failure to accurately assess the risk faced by banks as a result of the range of ‘exotic’ financial products before, during and since the financial crisis of 2008. Such a crucial role as assessing the costs national governments should pay for their borrowing should be undertaken in a democratic and transparent way. President of the EU Commission Jose Manuel Barroso is one leading European politician to have challenged the role of these US-based institutions; German Chancellor Angela Merkel another.
9. The prototype for such and Audit Committee is that established by President Correa following his election as President of Ecuador in 2005. In spite of the country’s oil wealth poverty was widespread because 50% of national income was being spent on servicing foreign debt. The Audit Committee was established to investigate who the creditors were and how they had persuaded governments to take on the debt. Eventually, it found that some 70% of the debt was illegitimate and the creditors were forced to sell at reductions of around 90%. Audit Committees have now been established in Greece and Ireland.
10. Such a proposal would help to democratise this centre of power in the global economy. During the process of registration, the onus will lie on the product’s originator to demonstrate that it is beneficial and there is no alternative way of achieving the same purpose. The root cause of the financial crisis was the deliberate obfuscation on the part of financiers of the riskiness of the activities. Under this proposal, only those derived investments which can be demonstrated to have a social value, say by spreading risks over a wider group of people, would be permitted.
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11 August 2011
The Just Price
I spent my usual lovely summer holiday at Clissett Wood - making another chair of which I am irrationally proud. Nothing beats working with your bare hands and spending time in a woodland living with a community of people far from the reach of the internet. It is equally valuable to learn something about craft, and to admire those who make their living from wood. You can find something about the skills involved, and browse the beautiful products, at the blog of the Green Woodwoman.
During the many peaceful hours we talked about the difficulty of making a livelihood in competition with Chinese children or factory machines. We waxed nostalgic about the role of Medieval guilds in protecting their crafts and their craftspeople. We have launched an idea about reviving the idea of the Just Price, which was enforced by medieval craft guilds. Some of the woodworkers showing their wares at the H.art festival have agreed to sell according to a double pricing system. Here is the text we agreed to explain the reasons for this.
'Before industrialisation, prices were fixed by guilds which protected the livelihoods of craftspeople. The 'just price' reflected their skill, the time invested and their needs. We are reviving this custom, which we see as analogous with the system of fair trade. If you earn more than the average wage - and therefore more than we do - please pay the just price.
We also list a 'bare price' which is a realistic comparison with mass-produced and imported goods. We will not sell for less than the bare price because this also prevents craftspeople from undercutting each other.
We are prepared to negotiate between these two prices on the basis of your ability to pay.'
.
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During the many peaceful hours we talked about the difficulty of making a livelihood in competition with Chinese children or factory machines. We waxed nostalgic about the role of Medieval guilds in protecting their crafts and their craftspeople. We have launched an idea about reviving the idea of the Just Price, which was enforced by medieval craft guilds. Some of the woodworkers showing their wares at the H.art festival have agreed to sell according to a double pricing system. Here is the text we agreed to explain the reasons for this.
'Before industrialisation, prices were fixed by guilds which protected the livelihoods of craftspeople. The 'just price' reflected their skill, the time invested and their needs. We are reviving this custom, which we see as analogous with the system of fair trade. If you earn more than the average wage - and therefore more than we do - please pay the just price.
We also list a 'bare price' which is a realistic comparison with mass-produced and imported goods. We will not sell for less than the bare price because this also prevents craftspeople from undercutting each other.
We are prepared to negotiate between these two prices on the basis of your ability to pay.'
.
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9 August 2011
Make Votes Count!
I've had my most successful year ever in terms of elections - after standing for the Green Party for a quarter of a century I have actually been elected. Please help me make sure this is not a fluke by voting for me in the Total Politics annual poll.
Some excellent green blogs have fallen by the wayside this year, so if you have enjoyed reading this blog or feel you have been informed please help me out with a vote or two. Well, only one each of course. We wouldn't want to be accused of political corruption on this site.
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8 August 2011
Christine Lagarde: Is She the Man for the Job?
The extraordinary thing about Christine Lagarde is not that she is a woman, but that she is a lawyer. In spite of holding the second highest political office in France, and now the most important position in the global economy, she is not trained in economics and does not have any experience or training as a politician. This leads one to the inevitable question: how has Christine Lagarde reached this position of power?
Lagarde's appointment to the head of the world's bank was not an accountable or transparent process. There was no election, no selection process, no job description. Had there been, she would certainly not have been selected, since she is not qualified. But in the murky process by which the IMF is governed, political influence and having the right connections is far more important than understanding the problem.
The majority of Lagarde's career has been spent with the Chicago-based corporate law firm Baker & McKenzie. Presumably in a drive to undermine the French reputation for a protectionist approach to international economics and to bolster its globalist credentials, she was chosen as Trade Minister of France in 2005. By 2007 she was Minister for Economic Affairs. Her credentials have passed corporate scrutiny, but can she really be expected to carry authority without a proper understanding of how the economy functions?
Christine Lagarde has skilfully used her sex to deflect attention from her lack of suitability and her dubious politics. The titillating headlines about her as the bankers' dominatrix, her Chanel clothes and her synchronised swimming medal should not be allowed to divert us from the fact that, in spite of appearances, the choice of US financiers has determined who will head up the IMF.
As Jayati Ghosh questioned on the Guardian site,
'Would someone like Christine Lagarde be better? [than DSK] Unfortunately, she may even be worse, if her record as France's finance minister is any indication. The irony is that she would pursue, even more enthusiastically, the same self-defeating and economically damaging measures whose only beneficiaries are the German, French, Dutch and British banks.'
Just at the time when radical change is necessary, the world can only expect more of the same from Christine Lagarde.
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6 August 2011
How can we solve the crisis in the Eurozone?
The growing tension in the Eurozone is matched by a total failure by the media to give space for alternative views of how our economic lives, and especially our monetary policy, might be determined. Last night's Radio 4 debate, hosted by the well-meaning and well-informed Paul Mason, Economics Editor of Newsnight, fell into the trap of setting up a false dichotomy between Keynesian and Hayekians. Three conclusions emerged: the audience was partisan and wholly unrepresentative, the two iconic figures around whom the debate revolved both had some arguments on their side, and none of this has anything to do with how our governments make policy. Plus, of course, the obvious fact that neither Keynes nor Hayek could imagine a world where ecological limits mean that economic growth can no longer happen.
Green Economics grows in strength and confidence: we are growing clearer about the design of our alternative future, and the expanding evidence of the failure of globalised capitalism adds to this confidence. An example is the new work by James Robertson, a book addressing the question of money to be published by Green Books next year. The publisher is allowing us all a sneak preview of Robertson's proposal for managing the national money supply.
James Robertson has been right about money for years. He has a claim to be one of our leading economists, and yet his work is excluded from the public debate. In this chapter he provides an excellent critique of what is wrong with a money system based on bank debt and, more importantly, cogent proposals for an alternative system.
It is important that we know where we are going, and all those who support a just and sustainable economy should read and understand the Roberthttp://www.blogger.com/img/blank.gifson proposal. But it does not help us with the transition. We cannot be naive about the vested interests dedicated to maintain the current system in place, and the courage required to politicians to stand against them.
What would a transitional policy look like? Presumably politicians would have to secretly agree to simultaneously suspend trade in the national debt of all the leading economies, and exchange transactions between their currencies. The moratorium would allow breathing-space for a new international agreement between nations to be drawn up: this would be a democratic agreement based on national control of sovereign debt and currencies exchanges: Bretton Wood with knobs on, as this blog has been arguing for since the beginning of the crisis. The market has no solution: only by taking political action can its destructive consequences be forestalled.
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Green Economics grows in strength and confidence: we are growing clearer about the design of our alternative future, and the expanding evidence of the failure of globalised capitalism adds to this confidence. An example is the new work by James Robertson, a book addressing the question of money to be published by Green Books next year. The publisher is allowing us all a sneak preview of Robertson's proposal for managing the national money supply.
James Robertson has been right about money for years. He has a claim to be one of our leading economists, and yet his work is excluded from the public debate. In this chapter he provides an excellent critique of what is wrong with a money system based on bank debt and, more importantly, cogent proposals for an alternative system.
It is important that we know where we are going, and all those who support a just and sustainable economy should read and understand the Roberthttp://www.blogger.com/img/blank.gifson proposal. But it does not help us with the transition. We cannot be naive about the vested interests dedicated to maintain the current system in place, and the courage required to politicians to stand against them.
What would a transitional policy look like? Presumably politicians would have to secretly agree to simultaneously suspend trade in the national debt of all the leading economies, and exchange transactions between their currencies. The moratorium would allow breathing-space for a new international agreement between nations to be drawn up: this would be a democratic agreement based on national control of sovereign debt and currencies exchanges: Bretton Wood with knobs on, as this blog has been arguing for since the beginning of the crisis. The market has no solution: only by taking political action can its destructive consequences be forestalled.
. Tweet
4 August 2011
Chote Chokes
Robert Chote, who heads up the Office for Budget Responsibility, is the sort of economist on whom our futures rely. His career profile is unusual, in that he appears to have no practical working experience either in government, academia or industry, the closest being two years he spent as an 'adviser' at the IMF. He is a former journalist who then moved on to head up the Institute for Fiscal Studies, a leading thinktank analysing economic policy. For a man in such a powerful position the biographical detail available on him via the internet is rather thin,* but it seems safe to assume that he has spent his whole professional life on the theoretical rather than the practical side.
The Office for Budget Responsibility he heads was invented by the Tories following the election as a way of artificially distancing themselves from economic policy-making. Don't blame us if we make a wrong move, they enabled themselves to say, we are following the path scientifically determined by our independent economic advisors. The Office's reputation, and hence its power, relies on its ability to predict the course of the UK economy. This morning Chote admits, on behalf of his Office, that his predictions have been wrong. Growth forecasts will be revised downwards: the OBR was wrong about the impact of the government's policies on the UK economy.
In an interview in this morning's Independent Chote belittles the importance of the OBR's forecasts, commenting that 'You shouldn't bet the farm on any macro-economic forecasts being correct. We set out to make key judgments and to see how sensitive our judgements are, for example to how strong the recovery is or the pattern of growth.'
But this is just too glib: in reality, the OBR's forecasts have been used to back up Osborne's policies. Because the Office for Budget Responsibility predicted that the austerity programme would result in higher growth rates the Chancellor accepted this course of action on our behalf. Now it is apparent that in fact these policies are devastating our economy and stalling growth, are we to see a change of direction? Is Robert Chote about to lose his job? Will the OBR be abolished so that politicians have to demonstrate convictions and the courage to act on them, rather than indicating a phoney adherence to a bogus science?
This morning's interview makes clear how dangerous it is to leave our economic future in the hands of men like Chote who talk a good talk and cover the government's back. What we rather need in these times of crisis is politicians with the courage to take responsibility and to take action.
*The short biography at the end of the Independent article appears to be taken from his Wikipedia entry, which is shorter than mine.
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The Office for Budget Responsibility he heads was invented by the Tories following the election as a way of artificially distancing themselves from economic policy-making. Don't blame us if we make a wrong move, they enabled themselves to say, we are following the path scientifically determined by our independent economic advisors. The Office's reputation, and hence its power, relies on its ability to predict the course of the UK economy. This morning Chote admits, on behalf of his Office, that his predictions have been wrong. Growth forecasts will be revised downwards: the OBR was wrong about the impact of the government's policies on the UK economy.
In an interview in this morning's Independent Chote belittles the importance of the OBR's forecasts, commenting that 'You shouldn't bet the farm on any macro-economic forecasts being correct. We set out to make key judgments and to see how sensitive our judgements are, for example to how strong the recovery is or the pattern of growth.'
But this is just too glib: in reality, the OBR's forecasts have been used to back up Osborne's policies. Because the Office for Budget Responsibility predicted that the austerity programme would result in higher growth rates the Chancellor accepted this course of action on our behalf. Now it is apparent that in fact these policies are devastating our economy and stalling growth, are we to see a change of direction? Is Robert Chote about to lose his job? Will the OBR be abolished so that politicians have to demonstrate convictions and the courage to act on them, rather than indicating a phoney adherence to a bogus science?
This morning's interview makes clear how dangerous it is to leave our economic future in the hands of men like Chote who talk a good talk and cover the government's back. What we rather need in these times of crisis is politicians with the courage to take responsibility and to take action.
*The short biography at the end of the Independent article appears to be taken from his Wikipedia entry, which is shorter than mine.
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