All posts by angrytunbridgewells

About angrytunbridgewells

I am a retired secondary school teacher and former social worker. Also a former Labour Party activist, who left when their politics deviated from mine. I loved economics as a sixth former, but became disillusioned with the subject while at university. Economics is badly served by its practitioners, who take a blinkered and often boring approach to the topic. I want to to introduce a new approach to the subject, which is hopefully a little more interesting.

Bankers the unruly and uncontrollable children in the family

Politicians seem to think that as they can manage their own family budgets, they have all the knowledge necessary to manage the economy. This results in statements such as the government needs to balance its books or that the country has maxed out its credit cards. Such statements demonstrate an appalling ignorance of the economy and how it works. However there is a competence that is lacking at the most elementary of levels,  as too many MPs are appalling at managing their own finances. Disraeli one of the greatest leaders of the conservative party was always on the verge of bankruptcy because of his extravagant lifestyle. Fortunately he had a rich wife and friends ready to bail him out. Politicians are as likely to follow his example as they are that of his prudent rival Gladstone. The recent expenses scandal when it was demonstrated that most MPs used their expense account to finance their comfortable lifestyle. People still remember the MP who used his expense account to pay for a duck house. If financial rectitude is not characteristic of many MPs This should give pause to any claim that they are capable of managing the economy.

If the analogy of family finances is to be made it should be said that the government resembles the nominal head of an unruly family, whose views are largely disregarded by the family members. The unruly children in the family take little notice of the head of the family, only listening to them and accepting their authority when they get into trouble. The banks are the obvious example as they pay minimal heed to the authority of the government except in times of crisis such as during the financial crisis of 2008.Once the crisis passed the banks forgot their need for government support and showed a lack of gratitude to the governments actions for bailing them out during the crisis. They successfully prevented the government from introducing a reform which would have separated their retail banking activities from those of investment banking. If a bank fails  in future the government is still on the hook, as it can’t protect the individual customers of the bank without bailing it out for the much larger losses incurred by its speculative investment banking arm.

This is no small matter as the combined assets of the banks are in total ten times the value of our national GDP.    Our national GDP is the country’s national income. There are four large banks in the UK and it is not unreasonable to suggest that the assets of each is in total a sum near to, equal to our GDP or greater than it. In the event of a failure of one of the large banks the government could be called on to raise a sum equivalent to our national income to bail them out. At one time during the crisis of 2008/9 the government of Gordon Brown had to pledge a similar figure to our banks creditors to prevent a run on their finances. Fortunately the banks creditors did not call on our government to make good this pledge, they were satisfied with the the pledge alone. When the next crisis occurs the country may be less fortunate.

When I describe the banks as unruly children over whose actions their parent has little control, there are numerous examples I can cite of such behaviour. Britains biggest bank is HSBC and Standard Chartered is its branch in the US. This bank almost lost its licence to conduct banking in the USA because of its money laundering activities. Only the pleas of the British Chancellor of the Exchequer prevented the American financial authorities from withdrawing its banking licence. It had lost its licence to bank in the USA, its parent bank HSBC would have been in serious financial trouble and it would have had to ask the British government for financial support to enable it to cope with the crisis.

The family finance analogy of which so many politicians are so fond of using describes so well the activities of the banks. The banks are the prodigal children who can behave as badly and irresponsibly as they wish as they know that their parent the British government will always come to their aid no matter how badly they behave.

In Britain as in most countries the politicians are content to remain in ignorance of these unpleasant truths. They believe that their homespun economics all they need, or they are ideologues who believe that the great prophets of economics Hayek, Friedman and Rand said all there is to be said about economics and the managing of the economy. This last group believes that all the answers to matters economic are to be found in books such as ‘The Road to Serfdom” (Hayek) or ‘Atlas Unchained’ (Rand).

There are a small group of politicians who understand the problems of which I have written, but they are only too willing to pretend that all is well in return for government office or employment as well paid lobbyists for the financial sector. Money is incredibly effective balm for soothing fear.

I am not the first person to express concern about the appalling ignorance of our politicians. Leo Amery looking around at his fellow politicians in the 1920’s said that the country would be better served, if there was  separate parliament consisting of industrialist and trade unionists to manage the economy and industrial policy.

Sensible economics and other nonsense spoken by politicians

Recently a speech given by our former Prime Minister on the topic of sensible economics caught my attention. There is growing agitation in the country for the end of austerity. An economic policy that has failed to achieve any of its targets. Realising his heritage was at stake he gave a speech explaining why it would be foolish to abandon this sensible economic programme which he had initiated. For this man and all practitioners of sensible economics, the growing numbers of people using food banks,  stagnant or falling incomes etc. are not a sign of policy failure. What people failed to understand he said was that these sacrifices were necessary for the greater national good. Sacrifices which were necessary to rectify the failings of past governments.The problem was not bad economic policies but the impatience of the ignorant majority.

Sensible economics is convincing because all the words in which it is spoken are suggestive of  good sense. It is so convincing that it has become the accepted dialogue in which the economic debate is conducted. Who could be against sensible economics when it states that the ‘books must be balanced’ and that we should guard against ‘paying ourselves more than is prudent’. Any deviation from the path of sensible economics such as a return to ‘tax and spend’ threatens to return the UK to the bad days of the past. However sensible economics is not economics, its just a number of moral and commons sense phrases that one would hear in conversations at the golf club bar or at the dinner parties in Notting Hill, which have become the authoritative dialogue in which all matters economic are discussed.

Sensible economics does appear to offer a number of simple policy solutions to today’s problems that all can understand. Everybody knows that civil servants contribute little of value to the economy, so the best policy is to reduce their numbers to reduce costs. An argument that is so convincing that all governments over the past thirty years have done this. A good government is one that employs less civil servants than it did than when it first came into office. Ignored by the various governments is that these civil servants provide an invaluable source of expertise necessary for good government. Our rail industry’s record over investment decisions is one of constant failure. Projects have been badly managed with so many cost over runs that they government has been forced to cancel a programme of electrification of the rail network, because it the funds for this programme have been squandered on other projects. While the government can blame incompetence in the railways on others what it cannot do is shift the blame for other major failures. Regardless of reforms implemented as part of sensible economics programme the economy is preforming as badly as ever or even in some examples worse than ever, as is demonstrated by the trade deficit. The UK’s trade deficit is not only the highest as proportion of GDP for a developed country but it is worsening.

I can quote an example of this thinking from my local community network. When I expressed concern about an overly slow response time (30 minutes) by the police to a serious crime in which a member of my family was involved; I was told by a number of correspondents that this was not due to a lack of police numbers, but bad police practices. According to them the police did not respond to a young man threatening shop staff and customers with a hammer;  because they were too busy completing their paper work, too which they gave priority. Sensible economics has permeated throughout society so thoroughly that even the most nonsensical of statements such as this one are believed. In fact the reason for the delay was that the police needed time to assembly a team armed with tasers. All such teams at the time of the incident were otherwise engaged.

Perhaps the best explanation of the sensible economics being the only dialogue in which the economic debate is conducted comes from the writings of Foucault. Risking over simplifying his work, what he states is that control of society comes from the control of language. Language is the language of the powerful, as the meaning of the words used in the public debate are  given them by the powerful. Such as the following: the poor are welfare scroungers, poor because they are indolent  and lacking in initiative. It is their personal failings that explain their poverty. Welfare programmes only encourage this indolence and should be cut back.  If welfare programmes are wasteful it provides a reason for the wealthy to avoid taxes, as there taxes will only wasted on the useless poor.  When this becomes the authoritative dialogue in which public debate is held  it becomes the prism through which any thing of any significance is viewed in society. Only yesterday I read in the papers that public servants have lost there public service ethos. What nurses today lack it is  the care and compassion that motivated their predecessors. When the public debate is conducted in terms that vilify them, it is easy to deny nurses their claim for a living wage.  This is the stuff of sensible economics, it nothing more than a means of entrenching the power of the rich and powerful, through denying a hearing to the alternative view.

Sensible economics or Neo-liberalism has had an easy ride. Rather than challenging the tenets of this dialogue, social democratic and opposition parties have been over impressed by the electoral success of the right and adopted its language. They remain the opposition in name, as they believe that elections can only be won by adopting the policies of sensible economics. It was the former social democratic government that introduced the unfair mean testing that the current government uses to deny the poor and disabled their welfare claims. When the opposition adopts the language of its opponents, it is signalling that it has lost the argument, its surrendered to its opponents.

What Foucault failed to understand is that the dialogue of the powerful is not all pervasive. There are other ideologies and dialogues in society.* Perhaps best described as the dialogues of the loser. Sociologists have a term that describes these dialogues, soteriology. These are dialogues that explain why certain groups are unfairly disadvantaged and discriminated against. Socialism is one such soteriology which was accurately described by Durkheim as a ‘cry of pain’.

These subordinate or challenger dialogues appeared to disappear because of the all pervasiveness of sensible economics. The media is largely controlled by billionaires who could deny a voice to any alternative messsage. The parliamentary left having adopted the ideologies of sensible economics for fear of losing the access to power have been a useful ancillary in suppressing the alternative dialogues, as to admit the validity of other dialogues would demonstrate the falsity of the current policies.

However as the failures of sensible economics has become more apparent, this dialogue has been losing its grip on the popular imagination. When the Prime Minister dismissed a nurse’s claim for a living wage, as there being no money tree, she stretched credulity too far. The narrative of nurses being forced to go to food banks because of low pay was to well entrenched in the public imagination to be so easily dismissed. Also a dialogue that claims to be authoritative discredits itself when it resorts to childish language borrowed from fairy tales.

Once a challenger dialogue or ideology is giving public space it becomes harder for the dominant ideology to maintain its dominance. Sensible economics strength comes from it being the authoritative source of truth. Once it is questioned its authoritative voice seems to become less authoritative and truthful. It cannot stand public scrutiny. This public scrutiny has come from the opposition party which has become infected with a challenger ideology. No longer does the opposition repeat the truths of the governing party but it challenges them. Often demonstrating that the ‘emperor really has no clothes’, the new social media gives a voice to these new challenger dialogues. They have been so effective that a media baron who considered himself the kingmaker, a man who believed that politicians could only succeed if they had they his support, discovered that social media had destroyed his power. He ran a sustained campaign of invective against the socialist leader of the opposition in his media outlets but failed prevent the opposition taking effective power away from his nominee.

This essay is not intended to argue the superiority or otherwise of challenger ideologies such as socialism but to suggest that when there is a dominant unchallenged dialogue the result is poor government policy making. If decisions are made in accordance with the established truths of sensible economics and are never subject to challenge from believers in alternative dialogues silly decisions can be made. The government as an economy measure reduced the naval planning and ship design departments to a bare minimum. Consequently when the navy wanted to build a fleet of modern warships they lacked the ship design expertise and had to buy in help from the Americans. Unfortunately the poor standard of oversight meant these billion pound ships when delivered to the navy proved to be faulty, they were prone to engine breakdown. At one time the new Type 45 destroyers were in dock together, unable to put to sea because of faulty engines. If there was a strong political opposition either inside or outside parliament such poor decision taking would be less likely to occur as policy decisions would be subject to criticism. In such circumstances the folly of dismissing nearly all of the navy’s ship design staff would have been highlighted. When sensible economics dominates the political debate, it being nothing more than a collection of common sense phrases it encourages policy making made in ignorance. It is a doctrine of no expertise, any politician can grasp its essence so why need to consult experts.

  • This idea of different ideologies competing for dominance I have borrowed from Antonio Gramsci

Spurious economic thinking from our politicians. Inflation is not the greatest of evils, in fact the opposite can be true

Over the last few days, there has been series of government ministers trotting out the same tired explanations of why a pay cap is necessary for the workers in the public service. These are two, the first is that the public finances are insufficient to finance a wage increase and that any such increase would only increase the national debt. There was the famous television broadcast in which the Prime Minister told a nurse that there was no magic money tree, an argument she has since undermined by her own actions. However what I want to demonstrate is the fallacious nature of the second reason giving for denying public sector workers a wage increase. This is the argument that it will be inflationary. The incorrect assumption these politicians make is that inflation is always bad. It’s not sufficient to say that taking a certain action is wrong because it can increase inflation. There are circumstances in which inflation can be good.

Price rises are welcome when the price increase is a consequence of the worker/s being paid a fair wage. Wages have fallen so low that nurses and other public sector workers are having to go to food banks so as to be able to feed themselves and their families. One of the unfortunate consequence is that now more nurses are leaving the NHS than are joining it. If we wish as a nation to have a health service that is able to deliver high quality care more money must be found to pay the health service staff. The cost of health care will rise but would this would be outweighed by the benefit to national as a whole.

The government would say that to increase the incomes of the thousands of public sector workers would be inflationary. These workers must continue to bear the pain of low incomes, as to do otherwise would be to threaten the nations well being. This is a totally fallacious argument, as what this inflation would represent would be a change in power relationships within the economy. Public sector workers will now as group have a much larger share of the nation’s incomes. As they spend there increased incomes demand for goods and services will rise and so will prices. One consequence of this is that other groups will find that there purchasing power is diminished.

There will be some unfortunate consequences in that workers in the private sector on low incomes will suffer disproportionately from price increases. However this could be offset by an enlightened government increasing the minimum wage to compensate for the reduced value of their incomes. Many workers will themselves solve this problem by transferring from poorly paid work in the private sector to better paid work in the public sector. There is within the economy an automatic adjustment mechanism, in that private sector employers will have to increase the wages they pay their staff if they wish to retain them. There is no great harm to be inflicted on the economy if inflation increases from its current rate of 2.9% per annum to 4 or 5%. This was the average rate of inflation throughout the 1950s and 60s and economic growth was then at its highest.

From within the private sector there will be siren voices arguing against this saying that they cannot afford to run their businesses with wage costs so high and that they will have no choice but to dismiss workers. Against this argument is the compelling moral one, if they are such rotten employers that they can only run their business if they pay wages so low that the employee is forced to turn to the food banks or to the government for wage supplements such as tax credits they deserve to close. There will be a temporary increase in unemployment and this will require a more generous approach to the payment of unemployment benefits from the government. This will only be a temporary increase, because the increased spending of the public sector workers will kickstart an economy which is at present in the merely idling mode. Economic growth will increase and so will the demand for newly unemployed workers.

One particular imagined scenario gives me pleasure. The City banker with an income of £100,000 plus will now find that as a consequence of the increased wages to the barista, there morning cappuccino will have increased from say £2.50 to £3.00. Having worked with such people I can imagine the indignation they will express at having to pay more for their coffee. Such people will see it as threat to their life style. Rich and super rich people will be able to buy less of the time of the less well off than they did formerly, which will hurt. There will be a return of the servant problem of the 1960s, when the rich found it difficult to recruit people willing to work long hours for low pay in personal service. Once wage rates and employment opportunities were available elsewhere the number of young women willing to enter domestic service dropped dramatically.

What needs to be prevented to stop inflation getting out of hand, is measures to stop the group that has most benefitted from the low wages of the past decade from over compensating for the loss in there purchasing power by disproportionately increasing their incomes. These people are those in the private finance sector, those whose wealth comes from large property holdings and company directors. This can simply be done by re-introducing a progressive income tax, together with a wealth tax and an effective capital gains tax.  The effect of these taxes will make it less desirable to earn excessive incomes, as a significant part of any increase will be taken in tax.  The tax take from this new taxes would help with funding of the public service sector.

There is one group that would be the losers from an increased inflation rate and that would be pensioners such as myself. The income I receive is fixed for a year and it would diminish in value as the year progressed, and although I do receive an increase in my pension at the end of the year equal to the new rate of inflation, that will not compensate for the erosion my income during the past year. However I will benefit from knowing that the health service is better funded and that my generation are the ones most likely to benefit from increased spending on this service.

Alice in Wonderland Economics

The book that I would recommend to anybody wishing to understand the economy is Lewis Carroll’s ‘Alice in Wonderland’. Not as a book to replace all the books that can be found in the economics section of any library, but as a first text which to give a good grounding in all things economic. What any budding economist needs to know about the economy is that things are not as they appear.  Alice is able to get through a door for which she is to tall by drinking from a bottle labelled ‘drink me’. After drinking that she shrinks in size to such an extent she is now able to walk through the door. She can be both giant and of normal stature in Wonderland. Later in the book she meets the Cheshire cat, who not only can become invisible but is able to become visible in place other than that in which he first appeared.  What the good economist should do is to be prepared to surrender their belief in a world of common sense. Just as for Alice the rabbit hole is a portal to another world, so a public corporation can equally be a portal to a world in which strange behaviours predominate.

One good example of this strange new world of economics is the strange behaviour of Starbucks. I was puzzled when I read that Costa Coffee a British coffee shop chain was more profitable than Starbucks. Starbucks seemed to be everywhere and I could see no evidence from what I observed that the business was doing badly. Then on reading more I realised that is was yet another example of a company not wanting to earn profits. Yet all the textbooks state that all businesses are profit maximisers. Profits earned are subject to corporation tax, so companies will do all they can to minimise their profits and tax bills. This is usually done by having a head office located in a low tax country such as Eire and that head office then imposes such a high level of charges on the business (for services provided) that the profits are reduced to such  a low level that the company is either ceases to be liable for tax or it only has to pay a minimal amount.

However the process becomes stranger and stranger the more it is examined. Usually the ‘charges’ that are paid to the Head Office are through a chain of offshore companies remitted to the multinationals homeland. Yet the profits declared then are only small part of the companies income. Such companies sit on vast cash piles which are located in various tax havens. This cash pile increases the companies wealth and the price of its shares. Shareholders are in many cases happy to have a reduced dividend but a reduction more than balanced by an increase in the value of their shareholding. Banks recognise that the shares held in such as Starbucks, Apple. Google etc. are extremely valuable assets. They will then lend large sums of money to these people against the security offered by there shares. These loans which are rolled over from year to year and which can be increased in line with the increase in the value of these shares. Loans have the advantage of not being income and are therefore exempt from tax. Many shareholders are content to enjoy their income in this way. Although there are a significant number who would still want to enjoy a cash return from their investment.

There is a passage in ‘Alice in Wonderland’ where Alice comes across a group of the Red Queen’s servants painting white rose red. This because the Queen wanted red roses and they mistakenly planted white roses. They hope that the Queen won’t notice the red paint. Similarly there is the many thousands of financial advisers who role in life is to paint earned income as anything but earned income. Anything that is either not liable for tax or which is taxed lightly. Unlike the Red Queens gardeners they are very successful in that the tax authorities never see through the disguise.

Apple is described as the world’s largest business. Although they are  the company with the largest sales revenue are not necessarily the most profitable. Much of the profit earned is changed into something quite different, such as a charge to Head Office at least in all the European countries. What profit Apple declares is largely resting in some offshore tax haven beyond the reach of the US tax inspector.

What any economist needs to realise is that to understand the behaviour of multi-national companies,is that the economics textbook is of little use. The book describes the behaviour of an ideal and imagined company, not a real one.

I could go further and relate other features of the book to the real economy. There are frequent examples in the book of nonsense verse, such as the song of the Walrus and the Carpenter. What the economist needs to know is that in the real world economy there are plenty such similar examples. All too often when a company goes bankrupt it is usually one that has received a successful audit. The auditors seem unable to notice those gaping black holes in the company accounts. This is because they use a set of industry agreed accounting conventions when analysing the companies accounts, conventions that serve to conceal rather than reveal mismanagement and a shortage of funds. While company accounts are not nonsense verse, they are often intended to deceive as often as they are intended to reveal the true state of a company’s affairs.

Politicians come the nearest to uttering nonsense verse on the economy. They are found of uttering what seem to be profound mantras on matters of the economy, but which are in fact meaningless phrases. Phrases such as the country has ‘maxed out its credit card’ a phrase uttered by a politician, when his government was doing all it could to encourage a borrowing binge to kick start the economy back to life.

Why I recommend Lewis Carroll’s book for any budding economist is that it reveals to the reader a strange world that is and is not ours. It prepares for them recognising the unfamiliar and strange amongst the familiar and it is often the strange and unfamiliar that make seemingly inexplicable behaviour explicable. Conventional or bad economists are unable to see beyond the fog that is the received economic wisdom. This is why these economists were unable to see the financial crash of 2008 looming in front of them, when all the danger signals were showing red.

Memories of a childhood spent in the countryside of post war Britain

When I recount stories of my childhood spent in the countryside of the late 1940s and early 1950s, people always tell me that I had an idyllic childhood. While to some extent I did, I had many wonderful childhood experiences. One of my earliest memories is being placed between the shafts on the hay cart seated directly behind the cart horse. The man that placed me there told me to take the cart back to the farm. Being a small child in charge of a cartload of hay and huge shire horse gave me a tremendous sense of excitement. I was dwarfed by both the loaded hay cart and the horse. Obviously I was not really in charge, the horse knew the way back and went on its way oblivious of the small passenger shouting commands to it. While I can paint an idyllic picture of a post war country childhood, I was even as a child aware of the darker side of country life.

One of my other early memories is of my father, a gamekeeper,  nailing a grey squirrel skin to a board. Once it dried out it was sent to the ministry for a bounty. The bounty was one shilling (5p) per squirrel skin, which in the hard times of the post war era was a substantial sum. Particularly if the gamekeeper sent in several skins at once. When I explain that my father’s wage was £3 10s (£3.50), it is obvious that the squirrel bonus was a useful addition to the family income.

There were other ways in which my father supplemented the family income. On such a low income meat was something of a luxury and all to often our meat was rabbit. What I should explain was then that rabbits existed in large numbers in the countryside. Farmers regarded then as a pest, as they consumed large numbers of their young plants growing in the open fields. Although my father’s  primary role was to breed and nurture pheasants for the winter shoots, his secondary role was as a pest controller. Quite simply this meant controlling the number of rabbits on the farm.

Now as an adult I can see how inefficient were the methods he used, which were trapping and snaring the rabbits. He studied the hedgerows and when he found a rabbit run he would put either a gin trap or a snare there. Then the following day he would go back to collect the rabbits caught in the trap or snare. Surprisingly the rabbits could often set off the gin trap and not be caught. When he did come across a trapped rabbit it would often be still alive and he had to put it out of its misery.

It was not only us who benefitted from this rabbit bounty, but also our neighbours. I can remember my father giving our elderly neighbours the Hugget’s nice plump young rabbits to make into a pie. Other workers on the farm similarly benefitted from this practice.

This brings me to the most disreputable of characters,  the ministry pest controller. This was a man who could be called in by farmers to remove the rabbits from their land. He was disreputable, because of the way he went about his trade. Once on the farm he would identify the areas most popular with the rabbits. Then he would lay traps in this area, but he was very selective in his trapping, as he never bothered with those areas where there were few rabbits. In this way he could always demonstrate to the farmer that he had killed a large number of rabbits and had largely solved the rabbit problem. However he always left enough rabbits to ensure that by the following year there were enough them to cause a nuisance, so he would need to be called back again. Countrymen such as my father despised him because he would make all the easy kills, leaving to the gamekeeper and others  to kill the more difficult to get at rabbits.

In the immediate post war years meat was rationed and then when it ceased to be rationed it remained an expensive purchase. Therefore families where looking for alternative sources of fresh meat. This man had a very profitable trade selling these rabbits to market stall holders or local butchers.

In January when the pheasant shooting season ceased  it was the rabbit drive season.  The pheasants now had been shot and could no longer be scared away by the noise of shooting. Also the vegetation had died down depriving the rabbits of cover, making them easier to shoot. This was a very popular event as it was the one time of the year that the lower social orders could gather on the land and shoot the rabbits. At other times of the year they would be regarded as poachers for and would be prosecuted. Local magistrates who were usually the local landowners dealt with poachers harshly.

These January shoots were an expression of the class divide, as only the lower orders shot rabbit. The gentry only shot game birds, shooting at rabbits was something they regarded as an affront to their dignity.

Sometimes the landowner or farmer would demand a larger cull of rabbits than usual. The only way to do this was to gas them in their burrows with cyanide gas. There was danger in this method, as the pump which pumped the gas into the burrow usually had one or two small leaks. Unfortunate gamekeepers could be killed by cyanide leaks. I can remember my father remarking on the gamekeepers whose obituaries appeared ‘The Gamekeepers Gazette’; men who had been killed by a gas leakage from the cyanide pump.

Gamekeepers regarded this as an unnecessarily cruel means of killing rabbits. I think memories of the First World War accounted for this feeling. Gamekeeper were invariably in times of war turned into infantry men. Certainly the older of my fathers work colleagues could remember the horrors of gas warfare. Also it represented a waste, all those rabbits were left in the burrows to decay; if other methods had been used they could have been used to feed a family.

While as an economist I can note is that this form of rabbit control was a labour intensive and relatively ineffective. As regardless of how many rabbits my father killed there were also a large number happily consuming the farmers crops the next year. Yet these same rabbits provided a source of food for the low paid workers of the countryside. Rabbit pie was for us a cheap meal which he had once or twice a week. Although rabbits consumed a large quantities of the farmers crops the crop yield in those days was still large. The methods used by my father and others to control rabbit numbers was sufficiently effective to prevent the rabbit problem getting out of hand. Farmers never seemed to be put out of business by the rabbit. In fact the farming industry produced a similar proportion of the nations food to that produced today by the same industry.

Farming in the 1940s and 50s was relatively low tech and as a consequence employed large numbers of workers. Such labour intensive industries are less productive per worker than capital intensive industries, so the wages of such workers were low. However such a labour intensive industry demanded a large labour force. When mechanisation became more common jobs began to disappear. As a teenager in the 1960s I can remember seeing abandoned country cottages being left to decay, as they were no longer needed to house workers.

Often when I talk to people about my childhood they say it must have been idyllic. The same belief prevailed amongst my mothers relatives who visited us from town. What they never understood was  that country life could be a hard demanding life. In summer my father would rise at dawn and work through to dusk, that is a day starting at 4.30 and ending at 9.30.They wanted the romance of the country, which they got as in there visits they never engaged with the realities of country life. Somehow they managed to be obvious to the brutal killing of wildlife, even when they were enjoying the rabbit pie for dinner.

In this essay I have chosen to emphasise the harsh realities of country life. Living what could be a hard and demanding life meant country people aged in a way that people do not do today. Ageing was noticeable once people passed the age of 40. However despite what I have written country people believed that they had a better lifestyle than those living in the urban centres. They were not oblivious to the beauty of the surroundings in which they worked. Also the nature of their work meant that they were unsupervised. They worked free from the constant intrusion of a supervisor. They were judged by the end product of their labour, the ploughed field or in my father’s case the number of pheasants seen on a shooting day. Although they might be paid as an agricultural labourer, they knew that they were highly skilled in the tasks that they undertook. They with a few exceptions took pride in their work and it was this pride that ensured that the unsupervised work they undertook was always completed.

What I believe is that the working environment on the land in this period created a group of men who were satisfied with their lives. The nature of their work made them tough resilient individuals. One writer in the 19th lamented the decline of agriculture as  means of employment, because it meant that there less of such men in the country. To this writer these agricultural workers were the backbone of the ‘thin red line’ that secured so many British military victories.

While I have no illusions about the nature of country life, I do believe the low tech lives lived by such as my father were in many ways superior to the lives lived by many today. It seems to me that the choice is living a more fulfilling life in a low tech economy or in living in a high tech economy with a higher income but with uninteresting working life.

Why we need economists

Being a former social worker and state secondary school teacher I am used to belonging to a profession that is disparaged in the media. Now I find that being an economist means that I am subject to similar vilification. What made economists (or rather the good economist) so disparaged is that they tell inconvenient or awkward truths about the economy and society. When faced with such truths politicians and the powerful will resort to abuse to silence the truth tellers. What is remarkable is that we have a parliament dominated by graduates from our elite universities and yet they are in greater ignorance of the world around them, than the parliaments of the past! Parliaments that were mocked for having too many of trade unions and country squires, men supposedly lacking in education and knowledge of the world around them.

Having made this declaration I must now produce the evidence to defend my assertion. These awkward truths usually are warnings about coming troubles that politicians would prefer to ignore. When the great crash occurred in 2008/9 politicians claimed that it was a once in a lifetime event that could never have been predicted. An economic act of God. The truth is that all the warning signs were there and instead of acting on them politicians refused to act, as any action taken would have been cutting spending and that would have been unpopular with the electorate. There were two causes of this crash were the banks irresponsible lending policies, such as 125% mortgages. The other guilty party were the governments and central bankers who rather than regulating the market for the greater public good, preferred to turn a blind eye to the irresponsible behaviour of the bankers. Their justification for their inaction was the doctrine of neoliberal economics, which states that economic well being is maximised under the free market economic system.

I suspect that those trade unions and squires of the past would not have been so gullible, as they had a superior understanding of human nature. They from their dealings with bankers would have known that these men were not the giants of the financial world but men as fallible as themselves. These men would have recognised that greed for ever greater and greater financial rewards motivated these bankers.

Awkward truth warning – little has changed since 2008 bankers are still lending irresponsibly and the government is still turning a blind eye to such behaviours. One area of concern is car finance, it is suggested that car dealers in their desire to sell more and more cars are not paying sufficient attention to the ability of their customers to fund their repayments and the risk is that these buyers will default in the future on their loans. This will cause the defaulting customers to return their cars leaving the dealers with an unsold mountain of cars other hands. This would in itself be sufficient to cause another economic downturn. The banks who source the funds which enable the car dealers to offer generous financial terms to buyers, rather than offering a word of caution or refusing to increase there lending to the dealers just continue to shovel cash in their direction.  Other forms of bank lending such as to the property market suggest that bankers have not learnt the lessons of 2008 and unfortunately neither has the government.

As an economist you learn to read the runes, in my case as I have no access to government statistics, it is those short comments in the financial section in the newspapers that give the game away. In this case it was a short piece of no more than three or four lines. A financier was asked if the Bank of England was now cracking down on irresponsible lending to prevent a repeat of 2008/9. His answer was no, as the governor knew that if he reduced borrowing he would cause an economic slowdown, which would increase unemployment with all its associated problems. If I read the article correctly little has changed since 2008.

I also realise that the banks have fought tooth and nail to stop the governments of Europe and the USA to make them resilient in the event of any future crisis. British banks have successfully persuaded the government that reserves of 3% are sufficient to enable them to ride out any future crisis. European banks have even smaller reserves. These reserves are either cash or assets that can be easily turned into cash to meet the demand for cash from their customers. (A greater ratio of assets to lending would limit the money banks could lend and in consequence reduce their profitability.) The suggestion is that in an event of a repeat of the financial crisis of 2008 the banks will lack sufficient reserves of cash to enable them to meet their customers demands for money. In a crisis customers fearing the future will withdraw their savings from the bank, either because they doubt the loudness of the bank or they want money in hand to deal with any future crisis. It will only take one bank to close its door for a general panic to ensue with the consequence that the government yet again will have to step in to bail out the banks. If the banks held greater reserves as have happened in the past such temporary crisis could easily be resolved  The banks would have sufficient quantities of cash in reserve to be able to pay those panicking customers who wanted their money back. Once it was seen that the banks had plenty of money the panic would cease. However if banks have insufficient cash reserves the whole system is liable to collective failure. If only one bank has to close its door, because it cannot meet its customers demands for cash, the contagion will spread and there will be a major run on the banks. Yet again the government would have to rescue the banks from their follies of their own making.

However we tellers of awkward truths have a problem. We cannot predict exactly what will happen or  when. We are tellers of possibilities and probable truths and us such we can be easily discredited. Economist predicted that a vote to leave the EU would have a negative impact on the economy. Then when in the days after the Brexit vote, the economy failed to collapse the naysayers could claim that they were wrong and that the collective opinion of economists was worth no more than that of the collectivity of politicians. What these naysayers overlooked was  that the Governor of the Bank of England being all too aware of the negative impact of a Brexit vote took immediate action to offset its negative economic impact. He simply increased the amount of to the nations borrowers enabling them to go on spending spree which prevented the economy from taking a nose dive. What the naysayers don’t realise it that it is a crisis postponed  not as they believe an imaginary economic ghoul or nasty conjured up from the feverish imaginings of the economists.

There is one prominent economist or truth teller who has consistently, warned of the impending credit crisis but is consistently ignored by governments and that is Anne Pettifor. She is never called to sit on the committees that governments set up to advise them on matters economic, as they don’t want to hear her truths. She has written extensively about the impending first world debt crisis, yet like some unheard of  Old Testament prophet her writings remain in obscurity.

Our one weakness as economists is that we cannot say exactly when or how or what we predict will happen. Even more frustratingly we can be right but events prove us wrong. There are no economists that can accurately predict the future, we are the scientists of the possible or the perhaps. The economy is such a volatile and complex construct that sudden and unexpected changes can make fools of us. This is why a leading politician* can say with confidence  ‘we have had enough of experts’ (meaning economists) and be praised in the media for his sagacity and foresight.

Yet our awkward truth remains the economies of Western Europe and the USA are over indebted and not one government has taken any realistic debt reduction measures. The fact that Britain with Japan shares the unwanted title of the most indebted of developed countries has passed our politicians by. They will speak endlessly about the public sector or government indebtedness, but they are focusing on the mice in the room while ignoring the elephant that is private sector indebtedness. Prior to the crash of 2008 government debt was less then a tenth of private sector debt. While great pains have been taken to reduce government debt little has been done to reduce private sector indebtedness*. This indebtedness will possibly rise to unheard of levels as the Governor has said that he is relaxed about the possibility of banks increasing their assets to nine times the size of GDP. Banks assets are loans, so he is relaxed about the banks increasing the nations debt to nine times the total of its wealth!

*Michael Gove a prominent politician who campaigned for Britain to leave the EU

* A policy practice that is common to all Western European governments.

A suggestion from an economist as to how the free market could be made to work for the benefit of all

All the evidence from the economy suggests that the free market system is failing. The list of markets that are failing seems almost endless. Perhaps the most obvious failing market is the housing market. In 1973 a minister (when the state directly provided social housing) could state with some justification that there were no homeless people, today the reverse is true. Yet despite the evidence of thousands either living in temporary local authority accommodation awaiting rehousing andthe  countless others living in unsatisfactory private rental property, politicians deny that the housing market is broken.

Why do politicians not recognise the failure of the free market system? One answer is political fashion, which to paraphrase George Orwell pigs ‘public sector bad, private sector good’. This belief in the supremacy of the market system for providing goods and services can be traced back to one influential thinker, Friedrich Hayek. In his book ‘The Road to Serfdom’  (1944) lauded the supremacy of the free market over any alternative economy model. In this very readable book he states that freedom is the free exchange of goods and services between individuals. When the state decides what people want it is tyranny, an economic tyranny comparable to the political tyranny exercised in the fascist and communist states of Europe. Although to this economist cannot see how the provision of state subsidised social housing is a deprivation of economic liberty.

Hayek was a voice speaking in the wilderness until the economic crisis of the 1970s happened. In Britain in 1976 inflation hit the unheard rate of 27%. Politicians desperately looked for a solution and found one in the writings of Hayek and his prophet Milton Friedman. The next twenty years saw a bonfire of regulations and a rush to transfer what public sector services and businesses to the private sector. What politicians hoped and believed was that the introduction of the free market economy was the once and for all solution to the economic ills of the this decade.

Hayek still grips the imagination of the political classes. The privatised railway system in Britain is one of the most expensive and inefficient in the developed world. Yet despite polling evidence suggesting that a majority of British voters would welcome the re-nationalisation of the railways, the majority of politicians regard this as beyond the pale. Only an outsider such as the current opposition leader would argue for this popular cause. There is one certain outcome from this election and that is even if the opposition won the election, the consensus view within parliament would effectively nullify any attempt to return to a nationalised rail service.

There is one failing in the free market philosophy of Hayek that is always ignored. He assumes that the exchange of goods and services takes place between individuals who are equals. The worker for him is free to bargain with the employers to obtain the best possible wage. In Hayek’s impossible scenario the worker and employer equally benefit from the exchange. What he does not recognise is that there is no equality of power in this exchange. While the employer is free to buy the workers labour at the lowest possible wage he can negotiate, the employee very rarely has the power to negotiate the highest possible wage. History demonstrates that in a market lacking employment protections and trade unions, the worker rather than being able to negotiate the best possible wage has to accept the going rate, no matter how poor. It is a market in which Says law applies. Rather than workers negotiating for the highest rate of pay possible, they have to accept the wage whatever rate of pay the employers are prepared to offer.

When the market works well it is unrivalled as a means of exchange of goods and services. The problem is that in Britain it rarely works well. It is the unequal distribution of bargaining power that prevents the market working to the benefit of all. When one person has significantly more bargaining power than the other, be that person an employer or landlord, the other person is at a significant disadvantage. They will inevitably lose out, whether it be having to accept a low wage or by paying a high rent for inferior accommodation. The only way to make the market work is to introduce some equality of power into the relationship. Only then will the more powerful not be able to exploit the less powerful.

One solution would be to introduce legislation to remedy the imperfections in the free market, as was the practice in the 1950s and 60s. However this is not possible when the majority of political classes are committed to Neo-Liberalism or the free market economy. A majority of the of the current generation of politicians would oppose any such policy. There is another solution that might appeal to the free market politician. Greater equality could be introduced into the market and through the legal system so making the exchange of goods and services a more equal relationship. At present civil law with its remedies for civil wrongs is unavailable to the majority of the population, because of the high costs of legal action. Not only is there the high  cost but the wealthy subject of a legal action can spin out a case almost indefinitely so discouraging all but the most determined and wealthy of plaintiffs. A reformed legal system that made justice available to all could make Hayek’s free market work in a manner which he intended. The free market politician would have no reason to object as such a change would only be to enforce the rights of the individual and not subject the business to the whims of the almighty state.

This might seem an incredible statement but the legal system of the Roman Empire particularly that of Justinian was in some ways superior to that of contemporary Britain. Under this system the aggrieved individual could bring their case before the local magistrate. These magistrates seem to have had more power than contemporary British magistrates. They could interrogate the plaintiff and witnesses before arriving at a verdict. From what I understand of the Roman system there was an approximate equality of position of the plaintiff and defendant, something lacking in British courts.

There already exist in Britain a network of small claims courts(1). The remit of these courts could be extended to include a new category of civil wrongs. These courts would retain the principle of not penalising the less well off plaintiff, by not privileging those defendants that have legal representation and through preventing the defendant claiming their legal fees from the plaintiff. What matters would be that the court proceeding do not privilege the wealthy, making these courts accessible to the poorest.

There is one example demonstrates the ugly nature of our current legal system. The British Human Right act gives every person the  ‘right to enjoy the privacy of your own property.’ In our unbalanced legal system a rich property developer was able to persuade the high court, that privacy meant the right to develop their property regardless of the noise nuisance it caused the neighbour’s. In a fairer legal system there would have been a counter claim by the less well off neighbour, which would have prevented this nonsense becoming law.

One further requirement would be an amendment to the Human Rights Act, an amendment that included new rights such as a fair recompense for work. These rights could be incorporated in a relatively short document as they are only statements of principle and it would be the role of the courts to define what these rights meant in practice.

What I am proposing is a remedy for market failure. A remedy that restores a measure of equality in  the bargaining process in the free market. Rather than looking to government to remedy market imperfections, individuals working through the court system will able remedy the failings of the free market. Employers and landlords will be less inclined to adopt exploitative or abusive practices, if they know doing so will involve them in having to defend such practices in open court. Instead of a race to the bottom in which employers vie to adopt most exploitative cost cutting practices to save, there would be a move upwards towards a fairer employment regime.

A salutary lesson for this left of centre economist is that the legislature cannot be relied upon to protect the rights of citizens. Individual legislators are too easily corrupted by powerful corporate interests. As the recent past demonstrates they are only too willing to legislate away the right of citizens to further the corporate interest. Not so long ago a senior member of the government (of a party claiming to represent the workers) saw his role as frustrate the EU commissions attempt to increase the rights of agency workers.There is an old adage that states that the person who can be best relied upon to defend your rights is yourself. The record of the Westminster parliament over the past forty years only too clearly demonstrates the truth of this adage.

This is only intended to a sketch of how the free market could be changed to the benefit of all. Today’s news has demonstrated the need to find an alternative to seeking remedies through parliament. The Prime Minister announced that she would be introducing a policy which entitled all workers to a 12 month period of absence to care for an ill relative. What she failed to make clear was that this would be unpaid leave. A meaningless reform on a par with all the rights of the Soviet citizen that were written into that country’s constitution. Rights that in a police state were meaningless.

(1) There are a number of tribunals that at present that consider these wrongs,but I have left out reference to them for ease of writing.