29 July 2012

The Value of a Sceptical Economist

The summer is here and that means that at last there is time for some reading. I have finally had the pleasure to enjoy Jonathan Aldred's The Skpetical Economist, which has sat on my book tower no. 3 for several months. What I enjoyed most about the book was the way that he has put the mental effort into expanding my somewhat airy comment to students that costing the aspects of life we value most is 'spiritually offensive'. Aldred explores our objections to such processes and finds them not only ethically coherent but rationally sustainable.

Much of the content of the book was familiar territory for me, but the argumentation was excellent and the references to heterodox work, and work that tests the neoclassical theory in the real world and finds it wanting, are now all handily on one place. His central point is about the social and ecological threat of the system which respond to Gus O'Donnell's pithy phrase: 'If you treasure it, measure it', and more specifically, price it. Here is Aldred summarising his view of the risks this attitude poses:

'It is the practice of valuing things in terms of money which in itself leads us astray. Almost all of us have an instinctive sense that some things should not be valued in terms of money. But what exactly are we objecting to? . . . As well as the practical difficulties, monetary measurement presupposes a common scale of value; but the thing being measures may have multiple dimensions or attributes, with different kinds of values not reducible to being measured along a common scale. Or the thing being measured may have inherently qualitative attributes, which cannot be measured on any quantitative scale.' (p. 207).

The chapter that offered me most new and interesting insights was Chapter 7: 'New Worlds of Money: Public Services and Beyond'. This is the best account I have read so far of how the project to marketise the public sector has been driven by those who would privatise it and has been grounded in weak intellectual reasoning unsupported by evidence. Aldred makes a convincing case that ethics and motivations in the public sector are just different from those in those in the private sector. Assuming similarity, and introducing inappropriate systems of audit and incentive, is likely to reduce the quality of the service, while increasing its cost and impairing the performance of those who provide it.

Towards the end Aldred reaches one of his most pungent points: the danger of the performativity of economics. Performativity is one of those abstract, academic concepts that I can never keep quite clear in my own head, but how it translates is that if you spend enough time acting as if something were the case, it becomes habitual and starts to actually become the case for you. This was familiar turf for Dale Carnegie and exponents of assertiveness training, but its consequences in terms of economics are more sinister:

'The self-fulfilling nature of some economic analysis is one instance of a more general phenomenon: economics can be 'performative'. That is, the act of doing or performing it, of studying the world using the ideas and tools of economics, may change the world being studied. In other words, merely using economic theory can help to bend the world to fit that theory.' (p. 223)

Thus our own moral system may become skewed: we may begin to imagine trees with price-tags or to feel like looking after our patients less well because we have undergone a pay freeze. This is why the onward march of economics into the priceless areas of personal relationships and natural treasures should be strenuously resisted. Whenever somebody shares with you the now nearly common sense that you don't value something unless it has a monetary price, please join me in pointing them in the direction of their own children.

28 July 2012


In many ways the economic organisation of the Olympics can read read as symbolic of the organisation of late capitalism as an economic system. London has been hollowed out as its wary residents leave town to holiday in the country, or leave their own country altogether. The city that they call home, and whose riches they generate, has become the playground of an international elite. Those attending the games are profligate financially and in carbon terms, jetting around the world for hedonistic pleasure.

There will be spectators, but in global terms all will be rich, since no tickets are available within the price-range of the average global worker. Londoners have lost their city, their roads, their buses, their tube stations - even, as pointed out in an earlier post, their language. Rather than an economic opportunity, white-collar workers have been encouraged to 'get ahead of the games', which without further advice than walking to walk is surely encouragement to skiving on a massive scale. Small-scale entrepreneurs, on the other hand, are excluded from economic opportunities by the mother of all restrictive practices that the Olympic contract itself embodies.

At this stage in the games, the costs are guesses and probably deceptions. The 'round number' for the cost of the games is £9bn. Contributions from sponsors is known but secret: the Guardian has produced its best estimates as to how the suggested £1bn. total breaks down. What is clear is that, although most of the economic value arising from the games will be enclosed and extracted by the corporate sponsors, it is the people of the UK who will pay the majority of the cost. So just as we subsidise the roads that enable Tesco and their ilk to drive their goods from underpaid producers to overfed consumers, so we pay for global marketing opportunities that are then exploited by a narrow range of global corporations.

While such a message could hardly for the basis for a national pageant, the economistic approach to life was wonderfully subverted by the opening festivities. We, the citizens of the world, have utterly lost control of the economic sphere, and yet without our culture and creativity life would be meaningless even for the elites who extract the value of our work and control increasingly more aspects of our lives. This was the hugely powerful message of the opening ceremony, because it is surely the political message of both Danny Boyle and Stephen Daldry. They read our history, as I do, as a history of struggle and the triumph of humanity over economic oppression.

They had skilfully included the aspects of British culture that truly make us proud, particularly our self-deprecating humour and our favourite national institution the NHS. Before the TV transmission began, Boyle had dedicated the performance to the volunteers who made it possible, the people who worked without being paid, who he called 'the best of us'. In a games that seems more obviously controlled by corporate interests than any before, that is the message we must hold on to.

27 July 2012

Understanding A Job-Creating Recession

The strange paradox of the UK economy post-2008 is that figures for output and figures for employment do not match. While the numbers that measure the actual output of the economy look disastrous, and increasingly so, the story on jobs is that many more of them are being created. The level of employment in the economy as a whole is up by 159,000 jobs in the 12 months to May. Even allowing for the fact that many of these are part-time jobs, this is still an impressive performance for an economy in deep recession. While the unemployment figures illustrated in the graphic are less encouraging, and show a clear divergence between the claimant count and the actual rate of unemployment, this still doesn not look like an economy suffering the worst downturn on record.

Part of this is undoubtedly resulting from the sorts of social factors that economic statistics can never capture; employers protecting their staff, perhaps because they value their skills or perhaps because they know their children; people protecting each other, even though there is not really enough work for them to do. The rhetorical attacks on the unemployed and all those who seek social support in times of crisis has also undoubtedly led many of those who are functionally unemployed to assign themselves to a range of more acceptable social categories, of which self-employment is the most popular.

On the other hand we may be observing what economists like to call a break in the trend, a historic shift in the relationship between some of the fundamental economic variables. One aspect of the change is the shift in the focus of productivity away from financial services and towards real economic output. After all if the financial sector is famed for creating money from thin air, a relatively labour-light process, then we cannot be surprised if the value-to-weight ratio of the economy is lower since that sector has massively contracted.

As in the case of the ending of growth, this may be another sign that the economy is already in transition towards a more sustainable pattern. If one of the features we are expecting is the rehabilitation of manual labour then we would expect to see a shift in the balance of productive assets away from capital and towards labour. This trend will speed up rapidly as we approach the exhaustion of fossil fuels or their prices rise as we begin to take climate change seriously. Perhaps the job generation that we are seeing now is already an indication of the green economist's claim that a green economy will be an economy that creates jobs.

This paradox is, in reality, not much of a paradox at all, but rather another indication that the way we measure our economy is not rational. If we had always measured output that really generated well-being, rather than counting money and counting jobs, we would have been able to formulate policies to reinforce what we value. This shift away from accounting to true economics could be one of the best outputs from this period in our economic history, which, in its own way, is proving particularly productive.

26 July 2012

Green House Launches Post Growth Project

The growth figures released yesterday were shocking. They demonstrate clearly that Osborne is mistaken in his view of how an economy works, a point I have been repeating in somewhat tedious fashion over the past couple of years. The clear pattern of economic growth following the election and the massive cuts in capital expenditure make it clear to anybody who is not an utter ideologue that there is plain choice between a Keynesian or Hayekian response to this latest, and biggest, capitalist crisis. The Hayekian response smashes up the public sector and enhances the power of capital; the Keynesian response, if skilfully executed, might return us to over-stimulated growth.

Of course amongst green economists there is a totally different way of looking at this. Economic growth has ended: fact. Attempts to restimulate it via pressure on consumers, monetary injections, and so on will be chaotic and unpredictable, but more importantly will only add to the ecological pressure caused by an economy growing out of control. The alternative? Accept that the growth has ended, even welcome it, and begin to plan for a stabilised, post-growth economy.

To explore the implications of such a worldview the Green House thinktank has launched its Post-Growth Project. The aim of the Green House Post-Growth project is to challenge the common sense that assumes that it is ‘bad news’ when the economy doesn’t grow and to anatomise what it is about the structure of our economic system that means growth must always be prioritised. We plan to set out an attractive, attainable vision of what one country would look like, once we deliberately gave up growth-mania – and of how to get there. And we intend to find ways of communicating this to people that make sense, and that motivate change.

Over the next year we will be publishing a series of reports addressing various aspects of the transition to a post-growth economy. What will this mean for our politics, and how can we ensure that a post-growth society is characterised by social justice and democratic decision-making? What would the macroeconomics of post-growth look like, and how can we pay for excellent public services in such a scenario? How can we ensure that, this time around, we don't just return to the mistaken idea that we must stimulate further aggregate demand, whatever the planetary cost?

Please join this debate: read our papers, feel free to offer ideas of your own, and join us as we set up events and activities to spread the message. Together we can build a better world: the end of economic growth is an opportunity, not a tragedy.

19 July 2012

Sources of Critique and Hope

My friend and colleague Barbara Panvel has been doing an excellent job, sharing information about government corruption, the recent action by farmers defending their livelihoods, and the need for shared ownership. She also co-ordinates a group of like-minded researchers in the New Era Network, of which I am a part. Today she announces the award of the Goi Peace Award to Network member Helena Norberg-Hodge.

A couple of recent highlights from blogs you might like to follow:

On her 'political clean-up' blog on 15th July Barbara asked why the media story about the award of £10m. to the John Innes Centre to develop GM maize failed to mention the £45m. of public money that is being invested in the same project.  The Centre receives more than half its financing from the public purse, and yet private-sector interests are now determining the focus of its activities.

Way back in 2007, Barbara, a keen reader of the Farmers' Weekly, was already reporting on the devastating effect the supermarkets were having on farmers' livelihoods, an issue that is finally reaching public attention.

On her 'antidote' site she reports on the Bauen Hotel in Buenos Aires, recuperated by its employees in 2003 and still going strong:

'The hotel (video link) now has 150 workers, a street-side cafe selling many products produced by other worker-owned shops, and over 200 renovated hotel rooms. The co-operative makes its decisions collectively at assemblies of its 142 staff, pays all workers the same basic $800 (£540, €650) a month (with just a few incentives, of less than $100, for length of service, timeliness and for staff handling cash, for example) and prides itself on its alternative management philosophy.'

17 July 2012

The Road to Serfdom

When Hayek wrote The Road to Serfdom in 1944 it was one of several books reacting against the collapse of liberal values in Europe and the continent's descent into fascism. Hayek's argument was that an over-powerful state repressed the individual and that a system of markets, operating freely, and companies in competition with each other would best guarantee individual liberty.The organisation of the Olympic Games is a clear illustration of the way in which it is the private, corporate economy that is turning us into serfs, rather than the overweaning state that Hayek feared.

Those who have bought the expensive tickets to the Olympic venues will be prevented from taking in their own food and drink. The corporate sponsors have bought exclusive rights to advertising, meaning that small businesses will be prevented from using the games to increase their sales. Today we hear that a whole range of words are to be expunged from our vocabulary, since they remain the preserve of corporate marketeers who wish to use them to ensure that the Olympics and all words associated with it, bring profits to only the exclusive companies that have paid for the privilege. We are to be deprived of our freedom of speech. The fuzziness between public and private sectors also erodes our rights as citizens. As a trivial example, how are those with Olympic tickets to know, whether they are being searched by police officers, solidiers, or private security guards? And how are they to know whether they are being searched for weapons or sandwiches?

Karl Polanyi's The Great Transformation was also published in 1944, and like Hayek, Polanyi was a refugee from fascism who also studied and wrote in London. The current failures of democracy and erosion of individual rights have arisen as a result of policies designed in response to Hayek's vision. Polanyi would agree with Hayek about the dangers of an over-powerful, centralised state, but his target is the market system itself, which turns people into the 'ficitious commodity' of labour and ignores the primal value of the land itself. Hayek's vision of the market as a system of competing firms was always a theoretical fiction, since in reality consolidation leads to domination by corporations, against whom our primary defence must be the government.

The green vision of the economy accepts the need for individual liberty but balanced by our role as citizens and the political power operated on our behalf by democratic institutions. We would also emphasise the importance of scale. Whether public, or private, an institution that operates at national or international level will always be oppressive of the individual merely by virtue of its size, and therefore the power it can wield.

As the Olympic Games loom nearer, for the UK citizen it is hard to see what they offer. Our rights to choose what we buy, where we go, and even what we say have been sold to corporations that are becoming as threatening to individual liberty as the powerful states that inspired Hayek's wrath. Through Hayek and Thatcher our civil and political liberties have been sacrificed on the altar of free-market capitalism.

George Orwell produced a review of The Road to Serfdom on its publication that foresaw the more threatening tyranny of the unconstrained privatised economy:

'in the negative part of Professor Hayek's thesis there is a great deal of truth. It cannot be said too often — at any rate, it is not being said nearly often enough — that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamt of', but he was also able to see that 'a return to "free" competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the state.'*

*Review of the Road to Serfdom by F.A. Hayek, etc" As I Please, 1943-1945: The Collected Essays, Journalism & Letters, vol. 3, quoted on Wikipedia.

13 July 2012

Ferguson Lays Reith on the Tomb of BBC Credibility

I keep thinking that I have reached the final straw in my relationship with Radio 4, by my addiction is strong, and I hang on to my cultural comfort blanket through politically biased explanations of the banking crisis and trite commentaries on the issues of the day. While, in spite of the decision to give Niall Ferguson the extroardinary accolade of Reith Laureate this year, I am still listening, I have managed to prevent myself from downloading the podcasts of the talks. I caught one accidentally late at night and it completely ruined a night's sleep.

Who is this Niall Ferguson? A historian of moderate reputation who, having confessed that he did not receive the attention he felt his ego deserved in the UK, emigrated to a job at Harvard, where he made the common mistake of thinking that his rapid rise to fame was the result of his innate genius, rather than his views serving the financial elite. I am not sure where along the way he became accepted into the inner circles of the Bilderberg conspirators, but their official list says he was in attendance at the recent meeting at Chantilly in France. I assume this website is for real: since Bilderberg conspiracy theory became Bilderberg publicity it is really hard to know.

While I have political objections to these unaccountable elite gatherings, in this case my gripe is intellectual. My question is why Ferguson is called on to opine on economic matters, when his training is in history. His poor level of competence in the field is made clear by a very elementary mistake exposed by Paul Krugman on his NY Times blog. Ferguson has misinterpreted US historical data to reveal his mathematical mediocrity and drawn mistaken conclusions about how national governments should tackle the recession.

So why was Ferguson chosen for the most prominent annual lecture series the BBC has to bestow? Perhaps a brief glance at the Corporation's Executive Board will help us to answer this question. Marcus Agius, disgraced former Chair of Barclays, is a senior independent director on the board: Ferguson's views can be expected to find favour there. The four non-executive directors appear to be a fairly incestuous bunch. Robert Webb is a non-executive director of the London Stock Exchange as well as Chair of Autonomy. The CEO of Autonomy, Mike Lynch, is also on the board. Between 1998 and 2009 Robert Webb was General Counsel at British Airways, who also employed BBC non-exec. Val Gooding for 20 years. Simon Burke seems out of place, having worked for neither Autonomy nor BA, but he has been involved in venture capital activities.

My daughter is hoping to study history at UCL next year and so I find the prominence of Ferguson as historian role-model almost as unhelpful as the high level of fees she is expected to pay. She is receiving a clear message: debt is good and deceit pays. Rather than speaking peace unto nation, I would appreciate it is the BBC could just stick to spending my money speaking truth, preferably to power.

12 July 2012

Power to Which People?

After years of claiming that resources were plentiful and that human ingenuity would find a way to replace those that were becoming exhausted, the capitalist elites have changed their tune. The McKinsey report Resource Revolution, which has already been discussed on this blog, was a clue to the shift in focus away from finance and towards resources, and today's ReSource conference in Oxford is part of the trend. The rich and powerful are lining up to ensure that they protect the unfair share of the earth's resources that they enjoy. Now that the finance scam has fallen apart they are adopting more direct strategies.

The clue is really in the doublethink of the conference title: 'Food Energy Water (for all)', just as the clue to the failure of Rio was in the deceptive title 'The future we want' rather than 'The future we want you to have'. The breathless publicity tells us that 'great thinkers and leaders' will converge on Oxford (where else?) and 'From politics to philanthropy, from the arts to the military, from business to academia, ReSource brings together the best in their fields'. Whether these people are representative of the world's population or representing anything other than their own self-interest is not questioned. These are global power players making decisions, economic decisions, about how resources will be allocated.

The conference is hosted by the university's Smith School of Enterprise and Environment and, in case you were sceptical about my claim about the link between resource control and finance, funded by the Rothschild Foundation. As nature proves to us daily that the scale of our economic activities threatens our future, those whose power depends on the existing economic model are using their considerable resources to manouevre themselves into a dominant position within the new paradigm. Having lately accepted that there are limits to resources, they now move to suggest that private interests are best placed to make decision about how those limited resources should be shared. This will ensure efficiency, we are told, while equity concerns are sidelined and the question of the appropriate forum for decision-making is entirely off the agenda.

On the green wing of the economics profession it has been an assumption for several decades that limits to growth must be taken seriously, the the earth's resources are limited, and that once we acknowledge this then we must move straight along to raise the question of how we decide a just and inclusive mechanism for deciding the allocation. This is at the heart of my proposal for a Bioregional Economy, which includes the suggestion that a participatory process of decision-making is vital to decide how we share the resources within the planetary boundary. The ReSource conference has entirely the opposite motivation: its very structure makes clear that the future sharing of the wealth of the earth is being decided by unelected elites in closed session.

9 July 2012

Climate Justice

The Joseph Rowntree Foundation is to be congratulated on funding a range of research programmes that tackle head on the justice aspects of climate change. It is clear that within a market framing the wealthy can respond to carbon taxes or rising energy prices by changing their spending decisions; it is the poor who could suffer significant threats to the quality of life, and even their health. Those on fixed or falling incomes, especially the elderly, may not survive if they are forced to cut their fuel bills and not supported with energy-efficiency home improvements.

I already blogged about an excellent piece of work by Thumim and colleagues at Bristol University which explored the relationship between wealth and carbon emissions. Another piece of research under the same funding programme and carried out by the Fabian Society has recently been published: this time the focus is public attitudes to climate change and justice. The researchers challenge the policy focus on individual behaviour change and the emphasis on a consumer paradigm. They suggest that communitarian motives may be more effective in changing behaviour in pro-enviroment directions.

The most important findings were that:
  • Those who could most easily afford to reduce their CO2 emissions should be asked to carry the greatest burden of reduction;
  • That there should be compulsion to reduce household emissions, since individual decisions risked increasing mistrust that others' were not pulling their weight and hence reduced everybody's motivation to tackle the problem;
  • That members of the focus groups preferred regulation (i.e. outright bans) to taxation-based incentives.
 Unsurprisingly, the researchers also found that they were unwittingly involved in 'action research', that is to say that the research itself changed the attitudes for the members of the focus groups, who became more concerned about climate change and more supportive of environmental policy as a result of discussing these issues in small groups. This flies in the face of the emphasis on individual behaviour change and the politics of nudge that, together with the commodification of nature, is the main focus on official policy for the environment.

5 July 2012

Solidarity with Greece

The following is a statement launched by the European campaign for Citizens Debt Audits. They would welcome you support and your use of social media to spread the statement.
In solidarity with the Greek people, against illegitimate debts and austerity measures, let us mobilize!

For joint actions around the Greek elections, and
for large Euro-Mediterranean’s mobilizations in autumn 2012!

The response to the financial and economic crisis is the same everywhere: cuts in expenditure and austerity measures under the pretext of reducing deficits and the repayment of a public debt which is the direct outcome of 20 years of neoliberal policies. Governments in the service of finance and big European capital are actually using this pretext to further reduce social spending, lower wages and pensions, privatize health care, dismantle social benefits and deregulate labour laws, increase taxes on the majority while social and tax giveaways are generalized for the big companies and the highest net worth households. 
Measures of violence against the populations, similar to those tested in the Greek social laboratory for two years, are already being implemented in Portugal, Ireland, Spain, Italy, and in Eastern European countries. Latvia, Romania, Hungary and Bulgaria have inaugurated the same sad litany of austerity measures, with drastic fiscal cuts (significant decrease in wages, closure of schools and hospitals, partial or total axing of social benefits, rise of VAT rates...). All the European peoples are threatened. This political orientation, which results in growing unemployment and poverty, must be radically rejected. Everywhere, companies are closing down and industrial wastelands are created, all for the greater glory of immediate gains. Everywhere, social inequalities are increasing. The public debt grows whilst many countries enter into economic recession. 
Finally, while governments of technocrats are put in place by the creditors flouting universal suffrage and the most elementary democratic rules, new European treaties (ESM, European Stability Mechanism, and TSCG, Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) are adopted to the detriment of democracy, for the benefit of financial markets and behind the people's backs. These treaties grant immunity to senior civil servants, allow for the participation of the private sector in close collaboration with the IMF, impose a limit on deficits and give priority to the repayment of debt, no matter the consequences. 

Faced with such coordinated attacks on our social gains, resistance is getting organized among Euro-Meditarrenean peoples, there are national general strikes and the ‘indignados’ movements are increasingly active. In Iceland the people refused to pay the Icesave debt to the UK and the Netherlands. In Europe as in Egypt and Tunisia, initiatives for a citizens’ audit of public debt analyze how much of the public debt is illegal, illegitimate, odious or unsustainable, and must therefore be cancelled. Paying creditors is stealing what rightfully belongs to the population and payments will continue to be the cause of college and hospital closures, pensions cuts, etc.  The Greek resistance persevered for 2 years and recent election results in Greece show a strong rejection of current neoliberal policies. We here express our firm support of the refusal, by the Greek people in their ballots on 6 May 2012, to negotiate with the Troika and to apply its memorandums and the creditors’ villainous conditionalities.

However the neoliberal steamroller has not yet been stopped, and it is high time for the populations and their organizations to develop mobilization on a more significant scale.

Along with other European and international networks such as the Joint Social Conference, the International Citizen debt Audit Network (ICAN) calls for a common mobilization of all groups and trends within the social movement, without exception, including trade unions, ‘Indignados’ and ‘Occupy’ movements, women’s movements, alterglobalization associations and NGOs, political organizations, leading figures, grassroots citizens, intellectuals and artists.

Aware of the need of convergence of all mass mobilizations, we call for large Euro-Mediterranean’s mobilizations in autumn 2012, coordinating an international level of solidarity with the Greek people, against illegitimate, illegal, odious or simply unsustainable debt and austerity measures, to be organized around the traditional week of global action against debt and international financial institutions which, this year, coincides with the 25th anniversary of the death of Thomas Sankara.

In the same spirit, we call for the creation or reinforcement of grassroots’ committees together with local audit groups in all European countries – they would spearhead resistance against the EU’s attacks and give substance to our solidarity with the Greek people and all harassed peoples.
Together we can !

3 July 2012

Smile: It's a Co-op

Thanks to the swashbuckling adventures of Cap'n Bob I've been able to make some excellent headway in spreading the word about the dangers of privatising the money creation function. Sky News took a quote from me on the resignation of Mark Agius, when I said:

'What we see now is senior executives at Barclays playing some sort of chicken game with the FSA. British citizens need to know that the FSA is in control of our banks. They issue a banking licence which is a huge privilege enabling banks to make money and make huge profit, but they do that in return for responsible behaviour. Barclays executives have shown that they are not responsible and therefore I believe their banking licence should be revoked.'

At lunchtime today I was interviewed live by Dermot Murghan, giving me an opportunity to suggest that a threat to revoke the licence might have been what finally pushed Bob Diamond to do the decent thing, as though he were capable of doing anything decent. I was able to join the nation in the celebration of the demise of one corrupt banker. In spite of the questions focusing on the cultural aspects of the problem, I focused on the structural problems with the banking system. If you haven't signed the petition please do so.

I was asked what should be done next and I was able to argue that the banks we already own as taxpayers should be broken up into small community banks. The same point is made more emotionally in this short film, a summary of the US move It's a Wonderful Life, or the UK version in Mary Poppins, where the scarey bank is part of the sub-plot. If you haven't already moved your money into a mutual building society, a co-operative bank, or your local credit union, please do so now. More details on the Move Your Money website.