28 October 2011

Green Queasing Gathers Support

Last year Colin Hines and Richard Murphy of Finance for a Future called for money to be into businesses helping us make the transition to a sustainable economy, a call which has been by Green MP Caroline Lucas and repeatedly on this blog. If we are to create money it needs to generate truly effective demand, not just disappear into banking black holes.

A recent post to Power Switch, the UK's peak oil discussion forum details how such a scheme might work. Meantime, more rhetorical support was offered by Tim Jackson during his presentation to the Schumacher centenary festivities in Bristol earlier in the month.

Meanwhile a useful piece of research commissioned by WWF indicates another important direction that manufactured money should be directed: towards transforming our energy grid towards sustainability. The report's encouraging conclusion is that:

'This report makes it clear that decarbonising the UK power sector by 2030 in an environmentally sustainable way that avoids reliance on risky nuclear technology and high levels of unabated gas is achievable without compromising the security of the UK’s electricity system.'

27 October 2011

Mammom 1; God 0

The resignation of Giles Fraser, Canon Chancellor of St. Paul's Cathedral, is a clear sign that things may be about to get rather nasty for the economic justice activists claiming the church's sanctuary in the heart of the City of London. From the start he had welcomed their protest and made them welcome inside the church. The church hierarchy decided to to close the church to put pressure on the protestors - a decision that seriously backfired. Once it closed its doors a conflict seemed inevitable and Giles Fraser has been the casualty.

The worrying signs began with a news story, emanating from the cathedral, that it was losing £20,000 per day because of the closure. This immediately raised several questions: how could a house of God be so lucrative? Why had they voluntarily closed their doors to ensure that this income would be lost? And perhaps most important of all: what would Jesus have thought of all this?

Most historic churches now include a 'gift shop' which sells a range of tat to enhance church funds. While live chickens no longer change hands and the trade is always seemly and made in hushed, respectful voices, you still can't help thinking of Jesus overturning the tables of the money-lenders and questioning what should have been a house of prayer becoming a den of thieves.

This is a shame, because the various parts of the Christian church have a wonderful reputation for taking practical steps towards greater social justice. The fair trade movement arose originally from a Christian inspiration and grew up through the sale of coffee and tea on stalls at the back of churches. A more direct attack on Mammon was found in the work of the Jubilee 2000 movement for the cancellation of debt owed by poor countries, as well as the work of the Christian Council for Monetary Justice.

It seems that the final straw for Giles Fraser was a decision by St. Pauls to join in the legal action by the Corporation of the City of London to sue the protestors and achieve their eviction. We can expect ugly scenes in the City and huge damage to the reputation of the church, as those who are standing up for the poor against an oppressive economic system are battered and bruised on the steps of one of the nation's greatest churches.

26 October 2011

The Eurozone Crisis: A Warning from History

I am thinking of creating my own derivative, called a political default swap. This is how it works. We each choose a country and bet against the length of survival of its government as it tries to introduce enough austerity measures to keep the markets happy. It works like a sort of insurance policy, where the riskier the country, in this case the less able its politicians are to bear down on its people and extort their work to pay bankers' debts, the higher the cost of betting on it.

The manoeuvres by EU finance ministers in Brussels today conceal as much as they reveal and demonstrate that power is balanced between politicians and financiers. This is seen most clearly in the negotiation over the extent to which those who made risky investments in Greek debt will lose their shirts (or their hair). The risk seems to be approaching 50:50.

Harder to agree is how the effects of this on Europe's banks will be accommodated. If the banks take the full hit, the financiers argue, they will become bankrupt, leading to Credit Crunch II: Return of Debtonator. So the bank welfare fund has to be massively increased. We have grown tired of billions, yawn the financiers, we need to move into the zone of trillions.

But where is this money to be found? The devastated citizens of Europe, their bodies already straining beyond breaking point to keep the capitalist wheels turning, can offer no more. Eyes turn to the European Central Bank - can it be asked to create money from thin air, the sort of money bankers like best - power without responsibility? The Germans, with their historical fear of inflation, will not accept this option. The most likely outcome is a solution dreamed up by the very 'quants' who created this disastrous situation: a solution that uses a combination of mathematics and conjuring to make the money disappear through time, emerging at some future date enormously swollen in value.

In his masterpiece The Great Transformation, written in 1944 and reflecting on the last great capitalist disaster, Karl Polanyi describes the contortions that Europe's politicians went through in the 1930s to save the Gold Standard. They seem eerily similar to what we are witnessing today. The system must be saved, no matter what the sacrifice in terms of human lives and political stability.

In the 1920s financiers inflated a bubble which burst in 1929, but through the 1930s the economists defended the position of laissez-faire capitalism whose social costs were unacceptable to the people of Europe. The result was political polarisation, economic chaos and the rise of fascism. This crisis has already provoked the collapse of the Slovakian government, the government of Iceland, and the government in Ireland, and the Italian government could soon follow. Somehow the political system is still holding in Greece, but the massive civil unrest leaves it vulnerable. So, will you take my offer of a punt? Which country's political system would you bet on surviving this financial turmoil intact?

20 October 2011

One Cheer for Australia's Carbon Tax?

During our summer of discontent there was a very discontented debate happening on the other side of the globe over whether or not Australia, one of the world's worst carbon offenders in terms of emissions per head of population, was going to be the first member of the OECD to introduce a national carbon tax. In spite of the lobbying, lies and loss of three leading politicians, a carbon tax was introduced. That in itself seems to me to be worth celebrating.

It has also led to the production of some trite but rather useful short videos, made available via the Australian government's website. In typical aussie style, these make the points without any fuss - a far cry from what we could expect from our own DECC. These could be useful to share with friends and colleagues who find the rather abstract idea of 'pricing carbon' difficult to grasp.

The carbon tax is a policy proposal emanating from the Australian Greens, who are celebrating its acceptance by the ruling coalition. The fight over whether to control emissions through a trading system, which effectively gives the value generated by the right to pollute to companies - the sort of system we have in the EU - or through a carbon tax, where the value goes to governments and can be shared with citizens who will pay higher fuel prices, has been a bitter one, with Bob Brown becoming a hate figure amongst Australia's huge mining companies and in the Murdoch press.

Due to the power of this lobby, there are a large number of accommodations and compromises, limiting the effectiveness of the tax. The price of carbon, at around £15 per tonne, if massively too low, and the money raised has been used to buy off both citizens facing higher bills, but also the very companies that are guilty of producing the pollution. The target for emission reductions - at 5% by 2020 - is also totally unrealistic.

But Julia Gillard has looked weak since she knifed her own party's leader PM Kevin Rudd, and in that context this is a significant political victory. It also represents a historic victory for the Australian Greens, who first proposed a carbon tax for their country. We should build on this start and argue for carbon taxes in our own countries.

17 October 2011

Why is it easier to imagine the end of the world, than to imagine the end of capitalism?

This is the title of a new book published in Czech and it encapsulates an important thought given the extraordinary contortions we are witnessing at the G20 and amongst Eurozone leaders. It has been clear for several years that the money created during the banking boom was produced from thin air and could never be repaid, yet those amongst the elite who nominally hold this value are refusing to relinquish it now that their bubble has burst.

Initially, the extorted money from governments to pour into the debt black holes and maintain the value of their assets. This merely had the consequence of threatining the financial stability of the countries involved, in the case of Greece and possibly Portugal and Spain to the extent of bankrupting those countries. Now that more of the debts are coming home to roost the asset-holders are seeking another round of welfare payments from the 99% who are suffering the austerity cuts their profligacy has caused. No wonder that European capitals are filled with angry demonstrators.

The impasse is the result of a struggle amongst capitalist elites. On the one side we have the US, Christine Lagarde, the US puppet at the IMF, and the UK, the traditional US poodle. This group seeks to maintain the power of the dollar in the global financial system. On the other side the rising economies of China, Brazil, India and Russia are proposing a greater role for the IMF, which should no longer respond solely to US dictat.

Without a strengthening of the IMF bailout fund money must be found from the Eurozone countries to provide money to support European banks when their Greek assets are obliterated, some time later this month. Otherwise some, or perhaps all, the European banks and a large number of its countries, will become bankrupt. If European citizens cannot be persuaded to accept the use of public money in this way, then control of European and US financial institutions may have to be ceded to the sovereign wealth funds of the BRIC economies - the only group capable for finding additional money to invest.

Meanwhile the people of the world are calling time on an economic system that maintains the value of the corrupt assets of a tiny elite while the vast majority of the world's people suffer. The inchoate mass of political opposition camped around the world's capitals is waiting for a political leadership with the courage to proposed a new economic system, and for a media prepared to break the strangledhold of its pro-capitalist owners.

10 October 2011

Public Sector Jobs Carnage

Job losses in the public sector are happening much more rapidly than predicted, which will have serious knock-on effects in terms of reducing demand in the economy as a whole, as well as reducing tax payments and increasing the amount of money needed to repay the deficit. This is according to figures from the Chartered Institute of Personal and Development and published by the BBC this morning. Put together with the misguided comments from Cameron about people reducing their credit card debt, which were later pulled from his conference speech last week, this adds to the growing sense that Conservative politicians do not understand how to respond to the second Great Depression which faces us.

An early political move by the New Ricardians was to create the Office for Budget Responsibility - a figleaf to justify their unacceptable policies. Such an Office only has a reason to exist if it can provide informed judgements about the economy that are also genuinely independent. Yet it has repeatedly produced reports to support Conservative policy, and its predictions have been inaccurate to the point of uselessness.

In November 2010 the OBR predicted that the government cuts would lead to 410,000 job losses in the public sector between 2010/11 and 2015/16, a revision downwards from the 610,000 it had predicted that June. The CIPD statisticians indicate that the original figure was correct. So why did the OBR change it? Was this to support the government in difficult political times?

The hard news for the UK economy is that the risk-averse managers in the public sector are cutting jobs more rapidly than their immediate financial situation demands, so that the number of jobs lost since the beginning of this financial year is five times what the OBR predicted. With projections as far out as that, with consequent impacts on deficit management, what is the use of the OBR?

It proves its usefulness to the government by enabling a Treasury spokesman quoted in the article to opine as follows: 'Half a million private sector jobs were created last year and the independent OBR has forecast that there will be 900,000 more jobs created in the private sector than lost in the public sector by 2015'. But if this forecast is as unreliable as the rest then it provides no basis for policy-making, just an opportunity for the spokesman to save the government's face.

It begins to seem increasingly likely that the OBR is a research unit created to provide statistically impressive but factually inaccurate cover for a government bent on its own destructive course. As such, it is itself a waste of money in these days of austeria. It should either be funded from Tory party coffers or abolished.

8 October 2011

The Apple of My i

Much of the debate surrounding the consumerist culture focuses on the way we are sold objects apparently to satisfy a certain need when really they satisfy a deeper and perhaps even subliminal desire. Beautiful women draped over fast cars persuade young men that they will acquire sexual allure as well as a set of wheels. In this way our desires and needs are themselves distorted, ultimately leading us towards lives of dissatisfaction and longing.

It seems to me that excelling in this process was at the heart of what is widely being called the 'genius' of Steve Jobs. Here is Julian Baggini writing in yesterday's Guardian:

'Jobs's success was built firmly on the idea that you should not give consumers what they want because they don't know what they want. No one thought they wanted the first desktop Mac, iPod, iPhone or iPad before they existed. Jobs repeatedly created things that people came to want more than anything else only by not trying to give them what they already wanted. This challenges the idea that consumer culture inevitably means pandering to the conventional, to the lowest common denominator. Markets are not necessarily conservative: truly great innovations can become popular.'

A companion piece focuses on the 'soft-machine aesthetic' that Apple pioneered, making what had seemed geeky and cold appear friendly and cool: 'instead of chilling you out' they 'glow like fireplaces and nuzzle like digital pets'. Jones admits that he writes articlse on an impractical machine that does not facilitate the process of typing because he is 'captivated by the beauty of this piece of technology'. Jones goes so far as to suggest that the way an Apple computer slowly lights up suggests that is it coming alive.

The moment of the death of the God of such distorting desires has left many a lover of technology open in a way few experience probably do. I am grateful to Jones for laying out what I had long suspected to be the case. Many people, and I would hazard that the majority are male, actually love their personal technology. They relate to it with greater intimacy and trust than they relate to their friends.

There is a narcissistic aspect to this relationship with technology, which I can't help finding in the use of the letter 'i' before the name of the products: istuff is not for sharing, it is for relating to intimately, whether in public or private; it is for gloating over. Jones also admits as much when he writes: 'Perhaps the greatest insight of Steve Jobs, when it came to design, was that the most beautiful, marvellous creation on earth is not the computer, but the person using it.' Not the human race, or the people the user loves, or a tree or a real juicy apple or a minah bird, but the individual who has bought the Apple product.

In his 1996 book The Spell of the Sensuous, David Abram described how a relationship with industrial products diminishes us:

‘the mass-produced artifacts of civilization, from milk cartons to washing machines to computers, draw our senses into a dance that endless reiterates itself without variation. To the sensing body these artifacts are, like all phenomena, animate and even alive, but their life is profoundly constrained by the specific “functions” for which they were built. Once our bodies masters these functions, the machine-made objects commonly teach our sense nothing further; they are unable to surprise us, and so we must continually acquire new built objects, new technologies, the latest model of this or that if we wish to stimulate ourselves. (p. 64)

Natural products, with their endless unpredictability and randomness are, by contrast, stimulating and deeply fulfilling.

It would be easy to dismiss my criticisms as coming from a Luddite or a technophobe but I am neither. I just believe in keeping categories clear: computers are to support us in our work; friends and family are to share love with. There is nothing anti-technological in holding fast to the view that you should approach your computer as a tool and not as a lover, and yet I daily watch friends and strangers caressing their phones. The main reason I am still holding on to an ancient Nokia is that I cannot bear to acquire a mobile that I cannot using without stroking it.

In all the panegyrics the phrase that was often repeated was that Steve Jobs changed our world. Leaving aside the questions about the authenticity of somebody who attempts to portray a whole company of intelligent and hard-working individuals in the image of his own ego, should we not also be asking whether he changed the world for better or worse. With evidence of our disembedding from the natural world and its destructive consequences growing every day, and being matched by evidence of our dislocation from each other, this question seems a disturbing omission.

7 October 2011

Where is the social in social enterprise?

A good colleague of mine, Len Arthur, raised this question during work we were conducting into the theory of social enterprise. What we found is that is a portmanteau term: when almost anybody can claim to be one, the term itself becomes pretty meaningless.

This has become a live issue in my local community of Stroud, where the local health authority produced a plan during the summer to transfer a range of non-emergency health services to a community interest company. There was almost no consultation and what there was took place in August when most people had other things on their minds. During an emergency debate at Stroud District Council, Green Councillor Martin Whiteside produced a copy of the registration document for the 'social enterprise' he had obtained from Companies House. It indicated that there was only one shareholder: the Chief Executive of our local health authority.

Our story has now made the national media, thanks largely to the dedication of our Green mayor, John Marjoram, and the eloquence and determination of Michael Lloyd who is testing the legal process of transfer in the courts. Once local people got wind of what was afoot they were immediately activated, joined the rally, and spoke passionately in support of keeping their health services public.

So how do we answer the question with which I began this post? Again I think we do have a method for finding and answer: the useful scalpel in this dissection is made up of ownership and control. If you are being offered a social enterprise instead of a public service the questions you need to ask are: who will own it? and who will control it? If the process of being elected to the board is straightfoward and open to all, and the assets transfer to members then what you have is probably a multistakeholder co-operative and may have a good chance of providing you services that are responsive and meet your needs without extract value for somebody else's profit. If not, then you may be being handed a pig in a poke: beware of imitations.

5 October 2011

Currency War Lurches Towards Trade War

The growing power of China over the US resulting from its ownership of US treasuries, not to mention its superior productive capacity, is the driver of the currency wars that have been the subject of a series of posts of this blog. Earlier this week this power struggle took a dangerous new turn, with a bill that was accepted onto the floor of the US Senate by a big majority.

According to the Guardian website, 'The Senate bill, which does not specifically mention China, sets in motion a process for imposing punitive tariffs against a country with misaligned currencies. The bill also makes it easier for specific industries to seek higher tariffs on foreign competitors when undervalued currencies become a means to subsidize exports.'

The US it attempting to fight back against China's decision to keep control of its currency. This is of course a root cause of the under-valuation of the Yuan, but what would be the appropriate value. In a global trading system dominated by the US, its allies and the international organisations such as the WTO that they control, why would China feel any inclination to fight fair?

This is a high-risk strategy. Given that China is the US's largest creditor by far, it is only its decision to continue to hold and buy US government debt that keeps the country afloat. In a fair market the US looks almost as unsaleable as Greece, given its vast national debt and low levels of productivity.

The only safe way out of this situation is via international negotiations in which countries and their interests are fairly represented. The removal of the dollar as the global trading and reserve currency would be a necessary first step if China is going to accept an invitation to such a negotiation.

4 October 2011

George Makes King Mad

Proof that the economic crisis is still, fundamentally, a monetary crisis came during the Chancellor's speech to the conference yesterday, when he announced that he would be experimenting with another novel policy, which the policy advisors have decided to call 'credit easing'. This represents a worrying incursion by the Treasury into the realms of monetary policy traditionally reserved for the Bank of England.

You may have noticed the media pressure in recent weeks from 'financial commentators' attempting to force Mervyn King, governer of said bank and therefore the chap in charge of the nation's monetary policy, to resort to another round of quantitative easing, a policy that the media usually refer to as 'printing money' but which has actually consisted of the bank buying up a lot of corporate debt, thus making it easier for the corporates to take on more debt. Since that is the way that this form of capitalism considers appropriate to create money it is a novel but predictable response to a squeeze on credit.

It seems that King and his eight wise men of the Monetary Policy Committee (for such they are - no sign of skirt in the room when such decisions are made) have refused to put more money into the economy in this way, and so the Chancellor has found a way around this block by inventing a system of government guarantees of corporate IOUs, allowing them to issue bonds and get the liquidity flowing. Few details have been given yet, but it appears that the process of creating money through issue bonds is being privatised, with corporations now being allowed to create money in this way.

The Treasury will guarantee this process, which appears to mean the we, as taxpayers, will become entangled in the securitisation corporate debts that was the process that led to the credit crunch in the first place. With bank debts looking so dodgey, only debt backed by our obligation to work is acceptable. The problem is we have no say over who is allowed to create this debt, how they bundle and sell it, and what it is invested in. These deeply political decisions have been privatised and devolved to corporates.

I must confess that the arcane niceties of what is referred to in textbooks as 'open market operations' baffles my mind, but the political economy of this seems clear: the debt crisis has resulted in the sucking of money - liquidity - out of the economy at all levels. Everybody is clamouring for investment, whether in hospitals or from the corporate sector: it is a political decision that money will be allowed to be created in the private sector while the public sector will continue to be starved of cash.