Category Archives: economic history

Greece and the Sceptical Economist

July 7, 2015economic history, Economics, Philosophy, Politics#classical greece, #economics, Anglo Saxon Free Market, Baathist, European Central Bank, European Union, Greek Crisis, International Monetary Fund, Iraqi Economists, Keynesian Economics, Neo-Liberal economics, Putin, Sceptical Economics, Soviet Unionangrytunbridgewells

Three kinds of economics

http://www.neuerope.eu

From a glance at the media it would seem that there is only one economics, usually what is now termed free market or Neo-Liberal economics. People are familiar with the mantras of these economists whether it spoken by them or a politician. Mantras such as a country must live within its means and it must reduce its debts to a sustainable level as is constantly repeated in the debate on Greece. However economics can be divided into three separate schools, Neo-Liberal economics being but the most dominant strand in but one school of economics. What ever school economists belong to will determine their approach to the crisis such as that in the Eurozone and Greece?

Neo-Liberal economics derives from the school of economics that sees the economy as an integrated system that when working well maximises the welfare of all. Economists from this school will see their role as to explain how the system works and how to make it work better. Changes such as removing restrictions or impediments that prevent the free market from working at its optimum. This has lead to the emasculation of trade unions and worker protections,as each are seen as an impediment to the smooth working of the free labour market. A loss it is believed that will be offset by higher incomes the now more efficient workforce. Ideally there should be no restrictions on how and where individuals choose to work and how employers choose to use them.

There are other schools of economics within this school that sees the economy as an integrated social system that can be made to work for the benefit of all. Although disregarded by policy makers today, they are the Keynesian economists who believe that through intelligent government intervention the economy can be made to work for the benefit of all. Their concern is ameliorating the damaging effects of the trade cycle, that is the economy goes through a repeated series of bans and busts. In the upswing period they are determined to stop the worst effects of the boom, which is inflation, by regulating credit; similarly they wish to avoid the worst effects of a recession which is unemployment by using various measures such as increasing public spending to stimulate economic recovery. This school is anathema to the Neo-Liberals who believe that any government intervention in the economy can only have a malign effect.

Next there are a group of economists who see the economy as working for only one privileged group and merely providing the majority with the means of survival. These are the Marxist economists of whom there are few today. At the core of Marxist economics is the labour theory of value. This theory at its simplest states that it is labour that in the production process that adds value to the product, but that added value is skimmed off by their employers the bourgeoise. This group take a disproportionate share of the added value (profit) leaving the worker with only the minimal means of income. Marxist economists advocate measures to reduce or eliminate the power of the bourgeoise to take a disproportionate share of national income to achieve a more equitable sharing of that income.

There is a third school of economics of which I am a member, we are probably the smallest of all the economic schools. These are the sceptical economists who believe that seeing the economy as an integrated social system that works as fallacious. (I use the term sceptic after the sceptical school of philosophy, whose most prominent recent exponent of whom was Nietzsche, from whom I take my understanding of scepticism.) This is not to deny that the economy does not produce goods and services that add to the sum of human welfare, but to see it as working mechanism or a well functioning social system is wrong. There was a film realised in the 1965 about an air race from London to Paris that took place in 1910. In it there was song about ‘Those Magnificent Men in their Flying Machines’ which included the words if my memory is correct, that these machines fly but I do not know how they stay up in the air. A sceptical economist has this view of the economy, we know that somehow the economy works but not exactly how. Parts of the system we do understand but not the whole, we even doubt if it correct to describe the economy as a system, we only use the term system to imply a something. What we deplore is seeing the economy as a mechanism that is capable of being perfected, that can be made the best of all possible economic systems, as is the claim of Neo-Liberal economists. Not that we don’t believe that changes cannot be made to improve the working of the economy but those changes will have only a limited impact. The revolutionary economics of the Marxists or Neo-Liberals who claim to have the ability to transform society and its human members we see as misguided. Economics is the science of small changes that have been proved to work not the messianic social science promising a better future for all.

Greece and the sceptical economist

Greece provides the perfect example of the fallacious nature of much of economics. When the financial crisis of 2008/9 came it exposed the frail nature of the Greek economy without its over dependence on foreign loans. The European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB) provided the loans Greece needed on the condition that it adopted a programme of austerity and embarked on a series of Neo-Liberal reforms. These reforms were to cut welfare spending, remove labour protections and embark on a large scale privatisation of state owned assets. After five years debts have increased to 177% of GDP, youth unemployment has reached 50% and many individuals especially pensioners have been forced into poverty. Despite the disaster that is now the Greek economy the EU insists that Greece most continue to follow the programme of austerity and Neo-Liberal reform. Even the election of a government opposed to austerity and the issuing of an IMF report saying that the continuation of the current policy will make it increasingly unlikely that Greece will ever repay its debts,has failed to make the EU change its policies. The Neo-Liberal politicians and economists that control policy making at the EU believe that in spite of the evidence to the contrary that the Neo-Liberal reforms imposed on Greece will eventually deliver. It is a matter of holy writ for these people that only the truly free market can deliver the best of all possible worlds.

A sceptical economist such as myself might point out to the failure of a similar radical Neo-Liberal programme in the former USSR. This programme of radical reform had such disastrous effects that some Russian nationalists believed that it was a programme implemented to deliberately weaken the Russian economy and nation. There was in the 1990s after the collapse of the communist system, the wholesale privatisation of state run businesses. The least efficient were closed for lack of buyers so creating large scale unemployment and poverty. Those businesses that were bought were purchased at knock down prices from the state by the oligarchs (often former officers of the KGB), with the result that control of the economy was transferred from the state to the oligarchs to the detriment of the Russian people. Economic reform was introduced by a government that had no real understanding of Western society and economy and into a society that lacked the social institutions to make the reforms work. Instead of the free market reforms creating a new Russian liberal democracy, they created a new authoritarian state. All the old methods of repression are returning, political dissidents are confined to mental institutions or imprisoned. Poverty is still persists and it is no coincidence that Russian men have the lowest life expectancy in Europe.

Perhaps a phrase for describing the policy towards Greece would be Iraqi economics. When George Bush successfully conquered Iraq he ordered the destruction of the existing governmental system. He intended to create a liberal democracy out of the ruins of the old Baathist political system. Instead this overly optimistic programme created a political wasteland which has lead to a decade long period of internecine warfare, as the authoritarian government that existed was replace with nothing more than misplaced optimism that once freed the Iraqis would by themselves create a democratic state. The radical Neo-Liberal economic policies that have introduced to the former USSR and Greece have created an equivalent economic and social wasteland.

At some subconscious level of thought it does seem that the European politicians do seem realise that radical Neo-Liberalism can only be imposed by an authoritarian government. They have been trying to remove the democratically elected Syria government and replace it with one of technocrats that will do their bidding.

What the sceptical economist would have done is to work within the existing political system and with its leaders to adopt a gradual reform programme, consisting of those measures that would bring some amelioration to suffering of the Greek people. The obvious one is some measure of debt relief, this would mean that the European banks that made irresponsible loans to the Greek government would suffer financial loss as their would the Greeks would be defaulting on their loans. However they would be paying their price for their irresponsible lending, which is what should happen in a free market economy. There would be no ‘big bang’ reform of the economy but a series of negotiated and sensible reforms. Reforms that would be made with the consent of the Greek political leadership and people. There would be sufficient incentive to reform as the downgrading of Greece’s credit status, would make raising international loans difficult and costly until the Greek economy showed signs of recovery. The reforms would be modest in scope, there would be attempt to destroy Greek ‘clientelism’ as it is one of the key elements of the existing society. Reform certainly of its worst features but recognition that it is part of the unique nature of Greek society. No attempt would be made to make it a southern European equivalent of Germany or free market Britain.

What I am trying to say is the politicians and economists of the EU should recognise the limits of their knowledge. They are the last people that should claim to have a knowledge of the ideal society and economy, as people in glass houses should not throw stones. One of the criticisms is that the Greek tax collection system was ineffective, as one writer stated it was as if the state was putting out a collection plate. Yet these European critics are in their own countries encouraging rich individuals and business corporations to avoid tax. Many business corporations locate their head quarters in Luxembourg, Ireland and the Netherlands to avoid tax. Soon the UK will be added to their number as our government is developing new tax avoidance schemes to encourage business to locate in the UK.

The sceptical economist has no one big answer to the problems of managing an economy, instead they have a series of small answers. These small answers are to be tried and if fail to be replaced by alternate measures that might work. What the sceptical economist recognises is the uniqueness of different societies, which come up with different solutions to solve common problems. Is the Greek system of ‘clientelism’ really much worse than the employment practices of the United Kingdom? If clientelism produces over employment, the Anglo Saxon free market produces under employment. Government departments in Greece may have been over staffed with political place men, but British business corporations such as supermarkets are staffed with the under employed, that is workers working on split shifts on low incomes, who desperate for extra hours of work to boost their incomes. The Greek practice of clientism is far from perfect but so are the practices of the Anglo Saxon free market. What I want but don’t see is a recognition of the fallibility of social institutions and that what might work in one society does not necessarily work in another.

The Corrupted Human Spirit

June 29, 2015economic history, Economics, Education, Philosophy3 r's, bankers can do no wrong, Belle époque, Charles Dickens, free market economics, Hegel, Neo-Liberalism, zeitgeistangrytunbridgewells

What economics lacks is the space to include other human sciences such as philosophy in the scope of its subject matter. Philosophy has the grand vision that is usually lacking in economics, which is all too often a science of the minutiae of life. One concept outside the understanding of economists is Hegel’s zeitgeist or the spirit of the age. What Hegel means by this is that there is one overall idea that animates a period of human history. It is an idea which expresses the characteristics of an age, such as the ‘bélle époque’ of 19th century Paris. A Paris of the freeing of human spirit, painting was freed from the old conventions demonstrated in the art of the impressionists, the vitality of popular culture was epitomised by the exuberance of the ‘Can Can’ yet this was a freeing that also allowed the darker side of the human spirit, corruption and venality to thrive. French politics of this time was characterised by a series of corruption scandals. As a believer in the zeitgeist, I wondered what was the spirit of this age? What was the spirit that informed human behaviours in our contemporary world?

Usually this is seen as the age of Neo-Liberalism , yet that phrase needs explaining. According to its advocates the freeing of the markets will lead to a freeing of the human spirit. Yet the art of the age does not seem to embody the freedom of the human spirit, rather it embodies the spirit of reproduction or copying. One art work that epitomises this spirit of reproduction is an art work by Damien Hirst, it was a series of dots on a white background. These dots varied only in colour but not in any other way. They seemed to have been placed in lines on the screen only the colours of the dots seemed to be chosen at random. I as a viewer could see little creativity at work, it was a machine like picture, a picture that for me could only be produced by a machine. What it lacked was the spark of human imagination. Damien Hirst work demonstrative of an age that is lacking in originality and creativity. A lack of originality that can be seen on any new housing estate, which consists of houses which are copies of those built for generations by the builder’s predecessors. They are inferior copies of the house of the past as they are being built of inferior materials and to much smaller dimensions. Houses that were built according to a least cost formula, a least cost that necessarily implies a lack of originality. Why go for the expense course of employing an architect to create a contemporary house incorporating new materials and bold design, when it is cheaper and easier to copy an old design?

What Neo-Liberalism has given to the age is a dominant mode of thought. Policy decisions are not to be made of according to values or any grand vision but according to a cost benefit calculation. A government project such as the High Speed Rail link from London to the North is made on this basis. Do the demonstrated costs outweigh the benefits in cash terms? This leads to all sorts of strange calculations to render values such the enjoyment of living in the undisturbed countryside in cash terms. Decisions can only be made on quantifiable or cash terms, this thinking leads to a diminution of the human spirit, as decision making is reduced to a process of calculation. Human values have been reduced to a simple cash nexus, it is a corruption of the human spirit.

It is a world in which the heroes are the bankers and speculators, those who are the masters money. There heroic status derives from the fact that they handle vast quantities of money, money a product which is the holy grail of contemporary society, in that those who are greatest possess the most of this asset. We know a footballer is a footballing genius as much through the income he commands as for his skill on the football pitch.

There is embodied in Neo-Liberal philosophy a realism of the most naive form. What is valued is what is tangible, what can be counted and weighed, not abstraction? There is the belief that abstract universal values have no place in contemporary society. What counts is the practicality of a belief or ideology. Neo-Liberalism is the most practicable of beliefs in that only those outcomes that can be quantified, the benefits be counted, are valued. Only those practices that have a quantifiable end result matter. The result is the target culture in the public sector, where performance is measured in terms of targets achieved. The emphasis is on ‘through put’ not on quality. In hospitals the target culture has damaged good practice. What matters is that the target is met, not the quality of service. This results in some bizarre practices, because there is a time limit set for treating patients in Accident and Emergency (A&E), patients will be deliberately kept waiting in ambulances, as by so doing the patient has not yet been admitted to A& and is not counted as an in patient. This means that the time they spent waiting in the ambulance does not count when it comes to measuring how successful the A&E department has been in meeting its performance targets.

One of the most damaging aspects of the Neo-Liberal zeitgeist is to found in our schools. What is causing great excitement is the new stem subjects, the officially defined list of subjects in which students are expected to do well? These stem subjects are little more than a sophisticated version of the 3 r’s ‘reading, ‘riting and ‘rithmetatic’ that formed the curriculum of many state schools in the 19th century. Dickens’ Wackford Squeers would feel very much at home in the new academies. This change has happened because schools are now measured by output. The output that matters is in that of the skills that business wants. Businessman want employees that are competent in the 3 r’s, if they do want painters it is a painter who can paint a wall, not an artist. There is in our schools a deskilling and narrowing of the curriculum. A deskilling in all that matters is those skills that can be quantified and measured, so creativity achieves a zero score while the rote repetition of the agreed answer gets the highest score.The narrowing the curriculum is caused by the downgrading of the creative arts, that is art, music and drama get few marks in the current system, so headteachers that wish to do well, discourage their brightest students from doing anything but the stem subjects. There cannot have been a curriculum more designed to create a dull, boring and miserable education for children than the current one.

When economists look for reasons for the poor performance of the economy, the look the reasons that do not relate to the human spirit. The reigning zeitgist is one that is unimaginative, it only values the measurable and is one of uninspiring dullness.A corruption of the human spirit, one that discourages all that is best in the human personality. Are not some of the failings of the British economy to be found in a zeitgeist that discourages innovation and creativity. If economists raised their eyes from their desks they might see that there are studies pointing them in this direction. A recent study of the booming computer software industry in East London showed that one of the reasons for its success was that it was perceived as a ‘cool’ place to work and live and as a consequence attracts some of the best computer software engineers in Europe. Rather than worrying about how to make workers more productive, perhaps economists should look more to creating a zeitgeist that encouraged creativity and innovation. A zeitgeist that would drag the society out of its current doldrums.

The Return of Serfdom to Britain

June 20, 2015economic history, Economics, Philosophy, Politics#ModernFeudalism, Democratic State, Emil Durkhiem, Hayek, Liberal Democracy, Modern Feudalism, Neo-Liberalism, privatisation, Robber Baronsangrytunbridgewells

Friedrich von Hayek published in 1944 his very influential book “The Road to Serfdom,” a book which is the mainstay of today’s policy makers. He warned of the dangers of an over mighty state, one in which professionals such as doctors gave up their independence as private practitioners to become servants of the state. The doctors would no longer be able to practise medicine freely but have to follow the dictates of their employer, the government. He warned of the same trend happening to all professions whereby independent lawyers etc would be giving up their freedom to become to be subject to a new form of bondage which denied them the freedom to practise as they wished, they would become the new serfs, bound to the new state. However he was living in the age of totalitarianism and he feared what he saw the makings of a new totalitarian state in Britain. Britain did not become a totalitarian state, in fact the totalitarian state that Hayek so feared, the Soviet Union collapsed in 1990.

Image of Chinese serfs working in a field taken from http://www.chinadaily.com

This was a prophetic book in that it was right to predict a new serfdom, but wrong in predicting the source of this new serfdom. He believed that the free market was the organisational mechanism best designed to ensure freedom, as in the free market the individual was free to make their own choices, as there was no powerful over arching organisation making the choices for them. However what Hayek failed to realise that the free market would be a source of the new serfdom. What he overlooked was the inequality in power relationships, in free market it the most powerful players have the most influence. The most influential players are the big business corporations, they determine the conditions under which the free market operates and these are often detrimental to their employees and customers. What Hayek failed to realise was that the state could be a liberating factor as much as an enslaving one. He failed to see the wood amongst the trees, he could not envisage alternate model of the state, for him the state was an authoritarian organisation,one that always threatened to take away an individual’s freedom. Given that he was a refugee from Nazi Germany this misconception as to the nature of the state is understandable.
Perhaps the best understanding of the role of the state as a liberating force comes from the writings of the 19th century sociologist Emile Durkheim. He explained that the state in the 19th century through introducing laws to protect the citizen from oppressive landlords and employers was liberating the individual from these many local tyrants. Legislation to protect employees from unsafe working conditions, working long hours and being given the right to form associations (Trade Unions) to protect their interests gave people a freedom that they had never enjoyed before. Throughout the 20th century developments in legislation gave rise to the welfare state, in which the individual was guaranteed freedom from want and protection against the evils that can result from individual misfortune. The significance of this freedom from want was never understood by the intelligentsia, the freedoms they valued were the political freedoms, freedom of expression, freedom from excessive state control. Economists overwhelming came from the privileged classes, two of the 20th century greats Hayek and Schumpeter were aristocrats and for them what mattered was being free from an oppressive government, not from want.
Hayek despite witnessing the horrendous poverty that he saw in Europe in the period of the Great Depression, never ceased to believe that the free market was the best means to solve these problems. State control and intervention in the economy he associated with the totalitarian states of Nazi Germany and Communist Russia. He saw freeing the economy from state control as the only way to ensure the survival of the democratic state, for him there could be no democratic state without the free market. It was from his work that the Neo-Liberal economic and political philosophy of developed. This has become the dominant philosophy of the political classes, but its adoption as the practical philosophy of government has not lead to greater freedom and a more democratic society, but a new subtle form of serfdom.
What the Neo-Liberals with their demand for a small state and minimal interference in the economy were creating was a society for most that has less freedom than its predecessor, as it was the state that guaranteed so many freedoms. It was these freedoms that were attacked by the Neo-Liberal economists, as they saw them as an obstruction to smooth running of the free market. Labour regulations restricted the hours for which businesses could employ staff, placed limits on how they could be used and made workers more expensive by imposing payroll taxes to finance social welfare benefits. Successive Neo-Liberal governments removed these restrictions and cost impediments on how employers could use their workers and have created what is called a flexible labour market. However this market has created by removing all the protections that labour enjoyed from abusive employment practices. What the Neo-Liberals have created a new social system that has many aspects of the old feudal system, such as being bound to one employer.

Our leaders in Britain boast that they have created the most flexible and competitive labour market in Europe, ignoring the many abuses practices in this new labour market. The most obvious abuse is the practice of zero hours contracts, where workers are contracted to work for an employee, but are not given any fixed hours of work or even guaranteed any minimum hours of work, instead they must be ready to work when the employee needs them. There is a clause in these contracts that forbids them to look for alternative work in the hours when their employer does not need them, as that would prevent them being free to work for their employer when needed. They as with the feudal villein are bond to their employer, the first could not leave their village to find work elsewhere and the zero hours worker is forbidden to find any additional work with a new employer. This new serfdom is a little more humane as employees are free to change employers, not a right enjoyed by medieval serfs.
However this right is severely limited as the new serf must have found a job before they leave. They don’t have the option of leaving an abusive employer, unless they have alternative work as the new benefits system will deny benefits to any claimant they deemed to have made themselves intentionally unemployed.
Then there are the workers of split shifts, usually this is in the retail trade. Workers are expected to work two short shifts a day, when the shop is busy or the employer needs them. Again they cannot look for alternative work for those hours of the day when they are not employed in the shop, as they must leave themselves free for the unexpected call from the employer who might need them if a staff member is sick. Again they as with the zero hours employer are bond to their employee.
Britain can boast of one of the highest employment rates in the European Union but this is because labour in Britain is cheap and employers are free to employ workers using the most exploitative labour practices. Is it really a success story when a postgraduate student from Spain comes to London to find work as a barista?
Initially this practice was confined to the fast food outlets but the practice has become widespread within the services industry and has begun to spread to the professions. Increasingly new staff at the universities are employed on these contracts as are some technician posts within hospitals.
What the proponents of the free market have failed to understand is the inequality of power relationships within the free market. The market is not a meeting place of equals but of unequals, and the latter will if not constrained by law exploit their power. Unequals are the rich and powerful and the big business corporations. Freed from the law restricting how the business can use it staff, it will use them in the ways that suit them best and that best is treating the staff badly. It should be of no surprise that slavery is now a concern in modern Britain. At present it is foreign residents importing bringing in domestic staff with them who are largely responsible, but there are disturbing cases of it happening with exploitative UK employers who force vulnerable people into what can only be described as slavery. When the law is removed from the from market employers can behave as badly as they please. Even those agencies that are supposed to enforce the few remaining employment laws are reduced to ineffectiveness through constant staff cuts.
The Neo-Liberals failed to realise a free the market in which there is freedom of choice, frees people to behave badly as there is no sanction on bad behaviour. Perhaps it is not unfair to compare the big corporations with the medieval robber barons as both sought to enrich themselves at the expense of the wider community. While the medieval baron would levy a charge on goods passing through his territory, a more sophisticated robbery is practised today. One example of this is the pharmaceutical industry. There a small company will discover a new drug but lack the resources to market it. They then enter into a marketing relationship with a large company to market and distribute this drug, usually this relationship becomes a takeover and by the larger company. However this large company adds a further cost onto the price of the drug, which they call development costs and then sell it at many times its original price. These new robber barons rob both their staff (through paying them minimal wages) and their customers by overcharging for their products.
What Britain as do many other Western countries seem to be doing is to be lurching into a Neo-Medieval society which is dominated by the business corporation. A glance at the last election demonstrated this when all the parties claimed to be busy friendly, the people barely got a mention. Despite the dire housing crisis in London caused by lack of affordable accommodation not one political party in the election proposed any measure that would put have effectively ended the crisis, as that would have threatened the income of the large property companies that dominate the housing market.
History never repeats but older historical patterns can reoccur in later historical periods. Contemporary serfdom is not as cruel or restrictive as that of medieval Britain, but it is similar in its essentials, that is the great corporations can as did the medieval Dukes freely dispose of the people at their command. While the medieval Dukes could direct the lives of their serfs in a number of ways, they for example could compel them to join their armies, transfer villages and the people that lived in them to another lord without any regard to the villagers wishes and could in addition control most aspects of their lives, today the great corporations can exercise similar powers over their workers. In today’s Britain the government can decide to transfer a public service into private ownership, usually with the consequence of a worsening of working conditions for the existing employees. In the name of cost efficiency wages are reduced, pension schemes terminated or emasculated and employment protections removed. All these negative changes occur without the workers being allowed to voice their opposition to these changes. Also the new privatised owner is free to dismiss any number of existing staff. These new petty tyrants have a similar decree of control over their workers lives as did the medieval baron. The withdrawal of the state has meant any pressure to ameliorate or remove the most abusive of employment practices has been removed. Now increasing the British people are entering into a new form of servitude quite alien to the freedoms of a modern democratic society.

The Lazy Greek A Contemporary Myth

June 14, 2015economic history, Economics, Politics#austerity, #Freemarketeconomics, #liberty, Cafe culture, Coffeeangrytunbridgewells

The Myth

When I first went to Greece several years ago I bought like many visitors a guide book. There was in that guidebook a picture of a group of Greek men at a table in a cafe idling away the time and playing back gammon and drinking coffee. I imagine that image or similar appeared in several guide books and is responsible for the image that most northern European’s now have of the Greeks, that is a people who spent hours idling their time away gossiping.

There are many erroneous stories circulating in the press about work shy Greeks, but I intend just to focus on one, that is the pensions story. This one unlike many others appears to have an element of truth.One the reasons the International Monetary Fund (IMF) has given for pulling out of the current negotiations is that the Greeks extend further financial support to Greece is their refusal to reduce the size of their pension bill. At present the pension bill accounts for 10% of GDP, while the average for European member states is 2%. It seems from this that the Greeks are molly coddling their pensioners by paying than far more than other states pay. However this ignores two key facts and the first is that the austerity measures imposed on Greece have reduced the size of the economy by 25% which means if the economy shrinks and the pension bill remains the same, it will become a proportionately greater share of the GDP. If this is taken into account in pre austerity Greece the pension bill would have been about 6.5% of GDP, a figure not too different from that of the UK and Germany. Also this 2% average is a figure much reduced by the minimal pensions paid in many of the new Eastern European states. These states pay minimal pensions or none to their retired and this drags down the European average. It does seem that the EU and its member states want to push Greek pensioners not poverty through reducing their pensions to a nearer the Bulgarian average . Any astute observer would have noticed that reports in the newspapers that pensions in Greece had been reduced so much in response to the demands of the EU that most represented more than the lowest of living wages.

What the EU seems to doing is using Greece as a template for a Europe that is fit for bankers and big corporations but unfit for people. This is not to deny that there is much that is wrong with the Greek economy, but that the wrong problems are identified and the solutions that are imposed to solve the problem are the wrong ones because they are addressing the wrong problems. The austerity programme can be best explained by the use of metaphor, the programme has wrecked a badly built but functioning house and left it its place nothing but some waste land.

In Praise of the Greeks

What economists particularly those in government employ forget is one of the first lessons they learnt, which s that wealth is anything that is valued by people. Economists much prefer wealth that can be measured in monetary terms and don’t factor into account in their calculations, wealth that lacks monetary values, yet this wealth can regarded as equally valuable by its receipts. If out of work time was not valued, people would want to work as many hours as possible. Instead much to the frustration of employers they want time at home with family or friends or just leisure time to enjoy. In consequence there has been a move in northern Europe to increase the economic cost of out of time work to high as possible, so as to discourage workers from taking it. This has been achieved by reducing wages (particularly in Britain) so employees are forced to work for many more hours to earn a living wage. Employers have persuaded successive governments to weaken all the protections that workers formerly enjoyed at work. This means that workers with insecure employment, who are in fear of losing their jobs are much more willing to sacrifice their out of work time to meet the employers demands. Workers for instance on zero hours contracts in Britain risk not getting work ,if they refuse their employers request to come into work, no matter how unreasonable the request. Greece represents a throw back to the time when workers had rights, the right to refuse to adopt modern flexible working practices.

It looks to the politicians of Northern Europe and the USA that Greek society as a whole is conspiring to prevent the obvious and much needed structural reforms, most especially in the labour market. Labour flexibility means in simple terms that workers are at the disposal of their employers, who can use them in what to the most efficient ways, unrestricted by trade unions, politicians or culture. This can mean as in Britain that a split shift system is employed, so staff are only called in at busy times, times such as early morning or evening when the family needs the working parent most. Therefore in a low productivity society such as Greece it was obvious that it would incur debt problems, as it was paying its workers too much for too little work. Greece needed to be carried kicking and screaming into the modern age. Once Greece had adopted the reforms so desired by the Northern Europeans it’s newly productive workforce would produce the surplus goods for export which would reduce the deficit.

Part of the same story was that as the Greeks were paying themselves too much and as the local economy did not produce enough to satisfy their demand, they turned to buying goods from abroad. This obviously created a trade deficit, and the solution to the problems of debt addicted Greeks was to cut their incomes. Incomes were reduced by cutting average wages, reducing pensions and welfare payment and finally the cruelest measure reducing people’s income to poverty levels through unemployment. This shock treatment was deemed essential to reduce the deficit.

There goes unremarked another story, that a large part of Greece’s debt problems had little to do with Greeks over paying themselves or doing too little work. German and other European banks had huge surpluses of cash and rather than invest those funds in industry with it’s relatively long pay back time, they wanted an alternative that generated quick returns. Only speculative investments in property and other assets can earn the big returns, so the German banks in particular made huge speculative investments in the Greek property market . When the financial bubble burst in 2008/9 these banks had potentially lost millions of euros in foolish property investments. They were saved by the European Central Bank who lent millions of Euros to the Greek government to bail out is stricken banks, who were holding millions of euros of worthless investments. Then through a clever sleight of hand these debts were no longer those of the banks but those of the government, as the European money was given to the banks to bail them out, but it now counted as a government debt. This made it much easier to portray the Greek problem as that of feckless Greeks and not foolish German bankers.

While it is hard to argue that the austerity imposed on Greece which has caused national income to fall by 25% and increased youth unemployment to 50% has been a success. What matters is how this story is portrayed, which is that if you give the workers too many rights and privileges they will abuse them and the economy will lapse into chaos. This is why it matters that British newspapers print nonsensical stories about young women marrying old men so as to earn an entitlement to a lifetime income. There are many similar stories in the British media about the feckless Greeks, which have convinced the British that the problems of Greece are all its own fault. Greece is a useful horror story to be used by employers and governments when workers claim addition rights and protection against abusive employers. They can claim that when workers get too many right they abuse them and the result is national bankruptcy. If workers are given few rights and protections they must understand it is in their own interest and they won’t use them responsibly. In Britain all three major parties accept this mantra and when the last government restricted workers access to employment tribunals on the grounds that all these needless appeals against dismissal were costing the employers millions of pounds, this change was understood as necessary by all three main political parties.

Why a paean of praise for the Greeks, a country with one of the worst performing economies in Europe even before the financial crash? One reason they put a higher valuation on non monetary wealth, workers did retire early but this was symptomatic of a country that valued its people above its output. The patronage system did lead to abuses such as over employment, when too many party loyalists were employed in public sector jobs. Yet for whatever its faults it valued its people, compared to their British counterparts they had security of employment and could look forward to a well paid retirement.

Human society is not a perfectible creation, whatever the society there are always problems. What I am stating is that Greek society for all its faults found one of the answers to the problems that society faces. It was a society that attained a more equitable division between non monetary or material wealth and material wealth. Greeks because of the unique nature of their society were able to enjoy a much higher standard of non material wealth than their Northern European counterparts. It is perhaps no coincidence that Greece as with the southern European nations family relationships flourish they are the nations of the extended family. Only in the Anglo-Saxon country such as the USA could somebody write a book called “Bowling Alone” a book about the loneliness of contemporary life. In Britain the nation of overwork and underpay family breakup is at record levels, with some estimate suggesting that under current trends 1 in 2 marriages will end in divorce. Countries such as the USA and Britain that put little value on non monetary or non work wealth have some of the most serious problems of social disharmony.

Can democracy survive in Free Enterprise Britain?

June 3, 2015economic history, Economics, Politics#AuthoritarianState, #Neo-Liberalreforms, Authoritarian State, Free Market Reform, Mafia State, Predator Capitalism, Vladmir Putinangrytunbridgewells

The collapse of the Soviet Union and the Communist bloc of Eastern Europe was greeted with a sense of triumphalism in the West, which was marked by books such as that Francis Fukuyama (The End of History and the Last Man) in which he stated that human development had reached its apogee in the development of the free enterprise liberal democratic state. Amongst the rubble of the collapsed state Soviet politicians, businessmen and writers were eager to learn from the West how to remake Russia as a successful nation state. In response academics and businessmen rushed to Russia to help remodel the state into one similar to those of the successful West. Rather than these reformers helping Russia to rebuild they precipitated an economic collapse. A collapse only halted by the return to authoritarian rule and I will argue that the free market reforms are more likely to result in an an authoritarian state than a democratic one.

It was not only the old Soviet Union that suffered from this enthusiasm for the free enterprise liberal democratic state. Surprisingly one of the victor states, the United Kingdom has suffered from an excess of the same excess of enthusiasm. Whether it is in the financial markets and the service sector or manufacturing, all have suffered from the malign practices engendered by the free market.

The ‘hands off’ state has created an economy in which ‘the dog eats dog’ market but not as Neo-Liberal economists envisioned . Markets are not dominated by the most efficient companies who grown to dominance through outperforming their poorly performing rivals, but they are dominated by the most rapacious of businesses. Poorly performing banks such as National Westminster and the Midland Bank were swallowed up by predator rivals, The Royal Bank of Scotland and HSBC. Instead of the banking market being dominated by a group of super efficient banks, it was dominated to large to manage corporations that monopolised the banking market. The rapacious nature of these monsters was demonstrated by huge salaries they paid their senior staff. These cumbersome financial giants inevitably failed in the crisis of 2008/9, but rather than being allowed to fail they were either taken over by the state or survived through an implicit state guarantee, that it would do whatever was necessary to ensure the survival of these banks. The state mortgaged itself to enable these too large to fail banks to survive. Even after the failures of 2008/9 these banks remained powerful enough to fight off any significant attempts at banking reform.
One criticism of the Russian Federation is that the chaos that followed the collapse of the Soviet Union, made possible the rise of the Mafia state which now effectively controls the economy. Vladimir Putin is described as the boss of bosses within this Mafia state. Something similar has happened in the UK, which while it lacks what can be termed a criminal Mafia, business enterprise is in the hands of a non homocidal Mafia. In a market from which law has been effectively banished (in the name of free market reforms), it is not the most efficient that thrive but the most ruthless and rapacious. These rapacious business corporations exploit their customers and staff, by overcharging customers for their services or products and by condemning their employees to low pay and insecure working conditions. Other better run businesses are forced to follow suit if they wish to avoid going out of business. Also these rapacious businesses treat the state as an ever open purse to be raided when needed.
There is hardly a sector of British business that does not benefit from generous state handouts. The government facilitates the poor treatment of employees by giving a cash handout (tax credits) to those employees of firms that pay less than the living wage.
Much as with Moscow’s much criticised government, the UK government collaborates with these Mafia like bosses. The Westminster government has legislated to destroy labour protection laws, I think this must be the only country in which it is legally permitted to dismiss an employee because their face does not fit. In Russia the state either collaborates with local mafia’s to destroy the opposition or uses its own security services to do the job. Similarly the British state has worked to undermine and emasculate any organised opposition to corporate Britain. Legislation has made it very difficult for unions to organise effectively on behalf of the workers, huge fines can be imposed on these unions. When the trade unions in Scotland organised against threatened wage cuts in an oil refinery, they found that not only did they face a hostile employer, but a hostile government and media. Even the Social Democratic Party in parliament refused to lend their support to the strikers. Legislation has also been introduced to make protests against corporate Britain difficult or impossible. Legislation that was intended to control stalkers is used against individuals protesting against business corporations. Even the courts do as in Russia work to support the limit the effectiveness of the opposition, any business corporation guilty of wrong doing can use the law to silence their critics. The libel law and the super injunction are the means by which they are achieved. When comparing the UK and the Russian confederation the difference is in degree as in both the government and legal system combine to hide the failings of the corporate state by silencing their critics and by destroying the opposition.
Freedom of speech has not yet disappeared in the UK, there is considerable opposition to the over mighty state and its business friends. Unfortunately as the UK government becomes more and more authoritarian the scope for the freedom of speech and organised dissent will become increasingly restricted. The opposition tends not be to within parliament but outside it, which makes it easier to criminalise it as extra parliamentary opposition. The convergence that Francis Fukuyama predicted between the old Soviet Union and the West, has in the case of the UK been a matching convergence movement towards a more authoritarian state.

Why is the politics of our country so focused on headline grabbing? Is politics any longer an activity for grown ups?

March 11, 2015economic history, Economics, Politics#NeoLiberalEconomics, 1976 financial crisis, CIA, International Monetary Fund, Jimmy Carter, Neo-Liberal economics, Socialismangrytunbridgewells

Recently a prominent member of the opposition complained about the behaviour of the back bench MP’s of the governing party. She said that their behaviour was that of a group of three year olds. What she was referring to was the infantile sexual gestures made by these men whenever a woman spoke. This seems to be symptomatic of a change in the behaviour in the commons, the practice of politics does seem to have become more infantile. What makes this more surprising is that this change has occurred when we have the most educated parliament in our history. There are more graduates with good degrees from good universities in our parliament than ever before. What I will argue is that politicians have since the 1980’s increasing adopted a self denying ordinance which prohibits them from engaging in what most would consider politics. Instead too much political debate is devoted to trivia. Possibly the best example of the new politics comes from the USA, where Congress under pressure from the food industry decreed that the tomato topping on pizzas would count one of the five day fruits or vegetables needed for a healthy diet. The fact that this decision was meaningless in terms of improving the health of nation mattered little to Congress.

This self denying ordinance which effectively prevents politicians from decision taking dates back to the 1980’s and the revolution in political thinking that was Neo-Liberalism. Prior to that time the management of the economy was considered part of the practice of government, now it was to be considered as something alien to the art of good government. As the former practices of economic management appeared to have brought the economy to its knees. The economy was to best left unregulated, as government intervention no matter how well intentioned only had a negative impact on human welfare. This ‘avoidance of doing’ became so ingrained that the policy of doing nothing began to be applied to other parts of government. Politicians of both the right and left developed a phobia about the nanny state.

http://www.mitchell the taxman

One of the best examples of the fallacious nature of the current political debate is that on alcohol consumption. In 1914 strict licensing laws were introduced to limit the hours in which licensed premise could sell alcohol as it was feared that the excessive consumption of alcohol was a threat to the war effort. These strict limits on the sale of alcohol were largely kept in place until 2003 when most restrictions of the sale of alcohol were removed. Now alcohol could be served 24/7 and it was argued that this would lead to the adoption of the ‘civilised drinking practices’ of the Europeans. It would lead to the introduction of the European cafe culture. Instead it led to introduction of the vertical drinking establishment in which the number of table and chairs were reduced , which enabled the pub/bar to cram in as many drinkers as possible. These pubs can be compared to the assembly line, the process of serving alcohol was simplified down to its minimal elements so as to speed up the sale of alcohol. The consequence was a massive increase in the consumption of alcohol with all its attendant social and health problems.

There is one simple example that illustrates this change in social behaviours towards the more negative. In the 1950’s being drunk and disorderly was a criminal offence, now such disorderly behaviour has become normalised and being instanced by a as a senior officer in London’s police force said they no longer considered the stopping of such behaviour part of their role. Was this officer merely recognising the inevitable in that alcohol based disorder has become so common a behaviour that the the police can no longer control it?

The reason I have highlighted the alcohol issue is because it’s a useful illustrative of the fallacious nature of so much political debate. I saw a late night TV programme in which politicians were debating the merits of raising the price of alcohol to reduce its consumption. All of the politicians on the panel agreed that it would be wrong, because it would penalise the less well-off sensible drinker. They argued vehemently that these sensible drinkers would be unable to afford their usual tipple. My reaction is the one my was wife has when interviewing parents about their misbehaving children hi say that they don’t want to upset their child by stopping them from doing what they want, event if it’s wrong bad and that is – who is the adult here? When the price of alcohol is increased, it will mean that the less well off will be able to buy so much alcohol, but that is the purpose of the legislation.

What characterises the political debate debate on this issue is the avoidance of any action to reduce alcohol abuse. Politicians debar themselves from any action that would limit alcohol consumption, such as increasing the price of alcohol by increasing taxes on it, reducing the number of places that are licensed to sell alcohol or limiting the hours for which those premises can sell alcohol. These politicians through believing any regulation of the free market is misguided have in effect prevented themselves from effectively intervening in the alcohol market. Their role is reduced to one in talking about alcohol they have no other role.

The political dialogue about alcohol consumption demonstrates how out sourcing decision making to others removes any meaningful role the for politicians in so many areas of society.Their self denying ordinance not to interfere means they are reduced to talking about the problems that affect society, while playing down the ineffectiveness of their role. This is why they command of the media is so vital to them, media noise will hide their ineffectiveness and insignificance.

Why have politicians given up on the exercise of power

Today’s politics cannot be explained without reference to the traumas of the 1970’s, when economic crisis threatened the stability of Western society. It came to a head in Britain in 1976 when the government was forced to ask for a record loan of £2.3 billion from the International Monetary Fund (IMF) to avert national.bankruptcy. The IMF saw the problem Britain faced as a fundamental structural dysfunction. The political and economic institutions of Britain were not fit for purpose. They insisted as a start of the necessary reforms that the government cut its spending programmes. Cuts in government spending would mean the transfer of investment from unproductive government programmes to productive private sector businesses.

Neo-Liberals the over mighty state, caused the crisis as it had expanded far beyond its area of competence. Industry was shackled by regulation and suffered from too much political interference. What was required was what is now termed as supply side reforms. The labour and financial markets were to be freed of regulation which would create an economy flexible enough to respond to economic change. If for instance the government put money into a failing business such as British Leyland, it was investing in a business in which the returns were minimal and by keeping those workers on in a failing business it was preventing them from moving into a more productive business, so holding back economic growth.

This new political philosophy not only demanded that government should get off the backs of business, but that it should get out of those parts of the economy and society, where it would be better managed by business. This meant the wholesale privatisation of the nationalised industries and the outsourcing of many government services to the private sector. What was a crisis of political confidence meant that politicians were now willing to abdicate much of their powers of decision making to others. These others are referred to collectively as the free market.

One consequence is that decisions that would have been taken in parliament are now taken by ministers in negotiation with outside contractors. Prisons and probation services are now the responsibility of various private contractors, not something that is considered to be within the remit of MP’s. Politicians have constantly acquiesced in the diminution of their authority. The Department of Trade and Industry once one of the mightiest of departments is now a departmental backwater serving only to facilitate the requests of various business corporations.

Given that parliament has diminished itself and become only a peripheral player in society, politicians will constantly over compensate for their insignificance by shouting as loudly as they can to draw attention to themselves. This means that they must constantly attract the media with new policy statements (of little real purpose) to demonstrate that, yes they still do matter.

Coda

There is an alternative reading of the history of the 1970’s which suggests that the problems of Western Democracies were not a product of structural dysfunction, but events unrelated to structural dysfunction. One such event was the attitude of Jimmy Carter’s government in Washington towards the Labour government in London. They were concerned about there being a socialist government in London, which could act contrary to American interests. Great Britain with its command of the North Western European sea ways off Europe was a key strategic asset for the Americans. London was also home to the largest CIA station outside the USA. They wanted a friend in London, which could not be a socialist government. When the financial crisis occurred in 1976 they saw it as an opportunity to destabilise this government. When the London government asked for American financial support they refused and discretely encouraged the financial speculation that threatened to undermine the British economy. This worsened the financial crisis forcing the London government to ask for an IMF loan, which came at a heavy price. The price was the acceptance of the free market ideology of the Neo-Liberals and an end to any possible policies of state socialism.

There are other events, but to discuss them would needlessly lengthen the essay to no purpose and would not alter the conclusion of my essay, that the immaturity of the current political debate is in a large part due to the loss of confidence within the political classes. Politicians need to find a new sense of purpose, possibly hope can come from the margins, with parties such as the Greens with their plans for a renewal of British society.

In Praise of Idleness

January 12, 2015economic history, Economics, Philosophy, Politics#classical greece, #economicsofidleness, #liberty, #socrates, Britain's flexible labour market, contemporary teaching methods, D-Day, EU reforms, idleness, J.S.Mills, leadership skillsangrytunbridgewells

Aristotle writes an the end of the ‘Ethics’ that the greatest possible human good is contemplation, a life lived remote from endless activity. Another example of the benefits attributable to idleness is the life of Socrates, possibly the greatest of the Greek philosophers. He gave up his work as a stonemason to engage the citizens of Athens in discussions on philosophy. He wanted to educate them as to the real nature of good and so reform the behaviour of their behaviours. This meant he neglected his work as a stonemason and his family were left in want. Xanthippe his wife got an unfair reputation as a scold, as was constantly trying to persuade him to work. Despite his neglect of his family Socrates was revered by the citizens of Athens as their greatest teacher. Yet while the ancient Greeks could value leisure as one of the greatest goods, the rich countries of contemporary Europe look on leisure or idleness as an evil. Germany is trying to impose a work culture on the work shy Italians who take three hour lunch breaks. Good is equated with the hard working German labourer not the idle Southern European. What Germany and the European Union is attempting to do is to remove those rights workers have to create in Italy a British style flexible labour market where workers only right is to receive payment for their work. A country where Tesco’s the largest supermarket chain is applauded for scrapping it’s worker’s pension scheme.

There is an unfortunate axiom of business practice which states that if something has to be done, give the task to a busy man. Probably the task will get done sooner but probably not very well. The culture of overwork is now thoroughly embedded in British institutions,and the example I shall give us the one that one I am most familiar and that is teaching. When I started teaching in 1972 the breaks for play and lunch were periods in which teachers got a respite from the students. Children were discouraged from coming to the staff room and disturbing teachers during their rest period. Now any sense of break from work is strictly discouraged, teachers are expected to spend those periods of break on productive activities. Activities defined as productive by the management. The freedom to have time to think and speculate is strictly discouraged; what they don’t want is teachers questioning today’s battery hen methods of educating children. If they can fill teachers time with relatively mindless paper work, they can prevent this questioning and discontent.

Teaching is one of the professions most unsuited the production line methods. Contemporary teaching practise is good at instructing but poor at educating. When I was in teacher training I learnt that the process of learning was incredibly complex and could not be reduced to one simple method of teaching. This truth eludes education managers and politicians who want one simple method of instruction that yields quantitative measurements that can be checked to ensure that teachers are not slacking. What matters now is appearance, work that matches up with some externally imposed standard or concept of goodness and one that is easily recordable. A good teacher is now one that has excellent records, not one that inspires children with the love of a subject.

The problem idleness poses for the economist

Idleness is one human activity that economics have difficultly coming to terms with. For the economist any activity that leads to human satisfaction counts as contributing to human welfare. Socrates sitting at the rivers edge speculating on the nature of philosophy with a friend was enjoying himself and adding to the sum total of human happiness in classical Athens. Yet to the economist this idling by the river adds counts as nothing unless Socrates charges his friend for his time. Then it would be a recordable cash increase in the income of classical Athens. They would not recognise any inconsistency in their reasoning.

Economists have used the concept of opportunity cost to value idleness. They say what would it cost to persuade an individual to give up one hour of leisure time to work for one extra hour. If they demand £20 extra that is the value of leisure to that individual. However it is an inadequate response as in reality the vast majority of workers have little discretion as to whether or not they work extra hours. In contemporary Britain increasing numbers are on poverty level wages and are desperate for any extra hours of work. Often overtime is not at the discretion of the employee but the employer. Not to work overtime can put one’s job in jeopardy, so the coerced worker provides a very bad example of opportunity cost. Also in many of the professions many hours of unpaid overtime is the norm and refusal can harm job prospects or even out one’s job in jeopardy.

Obviously Socrates is an extreme example and reducing his family to penury is not perhaps the best example. Idleness I do believe when taken in moderation is one of the greatest of all human goods. It is a time to reflect and enjoy the pleasure of thinking, which contributes immeasurably to human happiness. The cost benefit analysis of economics has no role in valuing idleness. If sleep is necessary for human welfare and good mental health so is idleness.

The case for idleness

There is another historical example of the benefits of idleness that I would like to cite. Idleness has always been the weapon of choice of the poor and weak in their struggle against the over-powerful. Even the slaves of Rome managed to organise go slows, an action noted as ‘mumurings’. Roman slaves were one of the most oppressed groups in history. Unfortunate slaves could end up in the arena being killed for amusement in gladiatorial contests, yet they discovered an effective weapon of resistance. However the example I want to use is the one quoted by Anthony Beevor’s in his history of a World War II. Officers in the British army in the initial days after D-Day were frustrated by the habit of their men stopping for brew ups and so delaying the advance. He as with these junior officers had a very poor view the quality of the British fighting man. He is writing from the perspective of the officer corp and as so frequently in history ignores the views of the ordinary soldier. He ignores the fact that these officers were often referred to as ‘Ruperts’, a negative comment on their leadership skills. How many men were killed through poorly thought out plans or tactics? What he ignores is the stoicism of the British infantry man, who even when having little confidence in their leaders would attack the enemy regardless. Brew-ups etc. were one of the ways in which the infantryman coped with the horrors of war. Much has been made of the Polish cavalrymen attacking German tanks (which never happened), yet similar incidents occurred in the British retreat to Dunkirk. There on at least one occasion British infantry regiments bayonet charged German tank regiments. Taking time out has been the time honoured way in which the working men coped with the horrors of a situation into which they had no control, as well as being the best method for striking back at their over mighty rulers.

In today’s Britain when workplaces are becoming more and more oppressive, taking time out is is the one way of copping with the stress. It is also an effective way as the Roman slaves demonstrated. Once Britain had trade unions that effectively organised go slows to curb abusive work practices, with an increasingly disaffected labour force and worsening conditions of work perhaps a modern day equivalent of the Roman ‘mumurings’ is needed.

However I want to praise idleness for its liberating effects, when you reflect or idly speculate you are freed from the constraints and oppressions of everyday life. Even the most oppressive of employers cannot control an individual’s thought, only the public expression of that thought. Individuality and human freedom for me is best expressed by Socrates idling the time away with a friend on the river bank on a hot summers day. I see no freedom in the frenzied round of activities of the supper rich who go from one ‘to be seen at’ approved event to another. J.S.Mill defined liberty as the freedom to think free of external constraints, the chance to escape from the thought police.

The New Generation of ‘Wreckers’ (at Westminster)

November 24, 2014economic history, Economics, Politics, religion, society#Neo-Liberal Society, Chairman Mao, Cornish wreckers, Family structures, Jack the Ripper, Middle class short sightenedness, muslim extremism, Neo-Liberalism, Privatisation of Royal Mail, The Great Leap Forward, The Victorian Great Fear, Victorian army wivesangrytunbridgewells

Originally the wreckers were inhabitants of the costal regions of Cornwall, who during stormy weather would lure ships on to rocks, where they would kill the surviving crew members and loot the wreck of its cargo. While today’s wreckers are very different, in that they are politicians that inhabit Westminster, their motives are very similar to those of the Cornish wreckers. They want to break up the public service organisations and sell off the most profitable parts to favoured buyers. Parts of the NHS are sold to Virgin Care, prison and probation services to Care4, the list is almost endless. These politicians would never view themselves as wreckers, they instead are the new Neo-Liberal thrusters, breaking up the old complacent society to remake it as a dynamic free market society.

The recent privatisation of the Royal Mail provides a good example of this wrecking process. The Royal Mail was established in 1840 to provide a universal mail service at a fixed price to all customers. In Neo-Liberal Britain this in the words of one expert is an anachronism. The service could be broken up into its various parts and sold to for profit providers, who motivated by the need to make profits would provide a better service. What this means in real terms is that the customers of the most profitable parts of the mail delivery service would get a better service and the least profitable customers a worse one. Consequently the government first disposed on the profitable corporate mail shot business to private contractors, then permitted these same companies to cherry pick the profitable London mail delivery service, leaving the high cost universal mail delivery service to The Royal Mail. Now the now privatised Royal,Mail is requesting that it be relieved of the burden of providing a six day a week universal service. Inevitably its request will be granted as the universal service obligation is contrary to profit making. Soon Britain will,have an expensive fragmented mail delivery service similar to that in the Netherlands, where profit making rather than service delivery is the priority.

While a dysfunctional postal service may cause some problems it does not pose a major problem for British society. We can all learn how to manage with delays in post, however the wreckers in politics seem unaware of the damage that they are inflicting on the social fabric damage in their effort to create the perfect Neo-Liberal society. It is as if they have taken a ‘wrecking ball’ to the fabric of that society, they are on the same spectrum of political leadership as Chairman Mao. He was responsible for the death of millions, when he tried to impose a communist agenda on China with the ‘Great Leap Forward’. I guess we should be content that our current leaders are content with the remaking of society only involves the immiseration of the majority, and not their death in service the higher cause. Food banks, zero hour contracts, low wages, insecurity of tenure and homelessness are the price to be paid for the ‘Great British Leap Forward’. Our leaders as with Chairman Mao hope to recreate a new society out of the ruins of the old state. Any price paid is regarded as one well paid for the creation of the day new society.

The Real Price paid for the ‘Wrecking Ball’ of Westminster politics.

As with Chairman Mao’s ‘Great Leap Forward’ the real price paid by the people for this misguided reform is largely hidden from view. The losers are the poor, the underclass largely hidden from the view of the media, unless they are needed for examples for the purpose of scapegoating the feckless poor. Strangely enough for a political class that lauds the family as the cornerstone of society, it shows little concern about the destructive impact of its policies have on the family unit. It is recognised that financial stress in one of the main factors in family breakdown, yet successive governments have imposed more and more financial stress on the family unit.

Their Neo-Liberal or supply side side reforms require a labour force that is infinitely flexible, one that can and will move from one job to another, at a moment’s notice and one also that is so cheap to employ that high wages are no bar to employers wishing to take on extra staff. By removing employment protection laws, wage councils and emasculating the trade unions the government’s of the UK have achieved this flexible labour force so desired by businessmen and economists. Recently a think tank of Swiss millionaires lauded the UK for having the most flexible of labour markets.

The price paid for this free market in labour is high in terms of human suffering. A comparison is the family structure within the Victorian army, offers a useful parallel to today’s family. Then because of the high mortality rate amongst the soldiers a fluid family pattern developed. The loss of a male partner meant poverty for the family, so frequently the woman in the relationship had more than one partner so as to avoid the poverty that would be attendant on the death of the breadwinner. For the same reason serial monogamy was a necessity as women would need a succession of male partners, if the woman based family unit was to survive. Many middle class commentators saw army wives as little better than prostitutes, as they failed to recognise the financial stresses that made this a necessary way of life. Any reader of today’s papers will recognise this description of family life as that ascribed to the underclass. Stories abound in the tabloid press of the amoral underclass, not recognising that it’s the way the poor have of coping with the stresses of everyday life. Only a fluid weak family structure can survive in a situation of extreme financial stress.

There is the impact on the men in low wage insecure occupations, which impacts negatively on family life. As demonstrated in Wilfred Foote Whyte’s book ‘Street Corner Society’, there the men he interviewed had numerous liaisons and partners. What is he discovered was that it was not so much amoral behaviour, but shame that drove these men into having numerous sexual relations. What forced them to move on from one relationship to another was the shame of being unable to support a family properly because of their low income. Running out on the relationship was the only way to avoid the humiliation of not being able to buy one’s children clothes. This explains the prevalence of so many one parent families in the UK.

Family breakdown is not unique to the underclass, it is spread throughout society. A society that regards people as resources of labour to be used when and as the employer pleases is bound to be destructive of social relationships. Social change has made once secure jobs, such as the professions insecure. One comment strikes me as typifying today’s destructive society, a neighbour said that if she became pregnant she would have to have an abortion, as her partner’s salary would be inadequate to pay the mortgage and support a stay-at-home wife. A society such as Britain which has bought wholeheartedly into the Neo-Liberal agenda is uncaring of damage inflicted on its members if it boosts the bottom line.

What prompted this essay was the evident damage shown in our society from just a few years of the Neo-Liberal experiment. In primary schools there are an increasing number of children starting who lack social skills or in some cases language skills. (There are children of five who can only only communicate, with sounds lacking any language skills.) There are even children attending school who have rickets, the illness of poverty, once thought to have been eradicated. Blame for this is put on inadequate parents, but with the destruction inflicted on the family, it can be no surprise that damaged families produce dysfunctional, inadequate adults. Are these the people that made up the mob so feared by Victorian society?

There has been another warning sign, it has been estimated that societies where average income is less than $7,500 social discontent is endemic. Just recently recently our major cities were subject to a spate of rioting in which the police temporarily lost control of the streets. It goes almost without comment that the riots were the young on disproportionately low wages. If current trends continue with average wages continuing to fall, inner city violence may become endemic.

The Return of the Old Fear of Revolution

Strangely the best educated generation of British politicians has an appalling ignorance of the past. When at university in the 1960’s it was an age of optimism. My teachers in common with the rest of society thought that the evils of the Victorian cities were a thing of the past. Society had been remade along social democratic lines, so as to eliminate the evils of that time. Too many politicians could remember the horrors of the ‘Great Depression’ and wanted to ensure that they would never return. Yet our current generation of politicians seem to want consciously or unconsciously to return to the divided society of Victorian times. The Victorian middle classes had a constant fear of revolution and the masses. When the Chartists marched through London in 1848 to demand universal suffrage, the fearful middle classes turned out in force as special constables to police the marchers, such was their fear of revolution. Such was their fear of the masses that a series of murders in the East End of London, became magnified into the ‘Jack the Ripper’ scare. For a fearful middle class it was all to easy for to imagine that the poor areas of the East End, were the breeding ground for monsters such as Jack the Ripper. This fearful middle class fled the city and the mobs for the green suburbs. I now live in one such suburb created by the mill owners of Leeds who wanted to distance themselves from the city poor.

Now having started to create an divided and unfair society, politicians and the middle class have rediscovered their fear of the poor. Such is the fear that the rioters of 2011 that judiciary under pressure from frightened politicians handed out draconian sentences to deter future rioters. A practice common in the 19th century when hard labour and hanging were the punishments for rioting and offences against social order; however in such a divided society such punishments had little impact on reducing violence.

Today the East End of London is an area of new city blocks and affluence, yet in the recent past it was a place in which the well off feared to venture. I remember a professor telling me that when he ventured there in the 1930’s he was driven out for being posh. He was subject to stone throwing from the local youths.

Although it might be disputed by some but the fear of revolution has returned in the guise of Muslim extremists. Only today the Home Secretary warned that the likelihood of a terrorist attack was at the greatest since 9/11. It is from those areas of the ‘Other’ in which the fearful rich and well to do never venture, that they fear attack. They have declared a war on terror, they fear Muslim minority, regardless of the fact this minority has integrated well into society. While there is a justified fear of Muslim extremism, extremists are a minority and it was largely complacent policing that allowed them to thrive.

There is however a disaffection amongst the young, they see a society that is indifferent to them. It is a society that cares little for its young people, denying them good wages and housing, it is a society in which disaffection will grow. At least in the majority it’s protests that are legal, but in minority groups that are feeling oppressed a small number while turn to more violent means. Even history teaches us that this minority can be contained through good policing. The Fenians in the late nineteenth century were as dangerous as any modern Islamic terrorist and yet the police successfully contained them. Unfortunately the return of the ‘great fear’ of the dispossessed ‘other’ means that our political leaders will inevitably overact to a small disaffected group. The best advocates for the extremist cause are the politicians who constantly over estimate the power and success of them. They cannot see that Islamic extremists are as much a creation of their making, as of their religion. If a people are impoverished and brutalised through political and social change, social order and peace will be undermined, but our current complacent political class never realise that. They will instead resort to more and more repressive measures to control the simmering discontent. The 1950’s and 1960’s were an unusual period in British history, one of social peace, achieved because the vast majority felt they had a stake in maintaining the well being of society.

Mass Men and Exceptional Women or Foxes and Lionesses

November 14, 2014economic history, Economics, Philosophy, Politicsclimate change, complacency culture, Jonathan Swift, laputa, lilliput, Lions and foxes, London Barrier, mass man, Neo-Liberalism, Ortega y Gasset, Paretoangrytunbridgewells

Jose Ortega y Gasset (The Revolt of the Masses) when writing in the 1920’s made some acute observations about society that are more relevant for today’s society than when he made them then. He bemoans the rise of what he calls mass man, a man of limited vision who because of the material wealth and plentitude in developed western societies has become self satisfied, sees no need for change. This vision less man he compares to primitive man who accepts the natural environment in which he lives as a given, one that he is incapable of changing. What mass man never sees is that society is not a permanent construct that will be there for ever yielding a plethora of material goods, but that it is a fragile human construct that needs to undergo a constant process of renewal and change if it is to deliver for its members. The danger of mass man society is that the complacency of vision will lead to an ossified society one that is incapable of change or adjusting to the challenges that it faces. Societies leaders now having discovered what believe is the perfect society in Neo-Liberalism see no change to the model, failing to recognise the dangers inherent in this very human fallible human construct.

If he lived today Ortega y Gasset would recognise in the political class the dominance of the mass man, a man incapable of seeing any threat to their current beneficent existence from either the natural or made made environment. Despite the obvious threat of climate change because the current society delivers in terms of material wealth and human comfort, they see no urgency to act. Last year the London barrage was raised so many times to prevent flooding that engineers were unable to conduct essential maintenance, so that if this year and following years continue in the same pattern the barrage will eventually fail and London will flood. No matter what the evidence politicians will never conceive of a situation in which the economy they manage never delivers for them. Their time frame is limited to the present, they cannot consider a time when the present parameters no longer apply and because of their inaction the circumstances which were benign will then turn malign. Climate change will not stop with producing warm winters and hot summers but will instead cause food shortages and with concomitant threat of mass starvation.

One of the guiltiest groups of mass men are the economists. Ortega y Gasset claims that scientists are exemplars of mass men, they know just one thing, their science and for them it is sufficient. Scientists have succeeded by specialising in ever narrower and narrower fields disregarding the wider realm of human knowledge philosophy and history for instance. Having succeeded in one very limited field of human endeavour they assume they know all. Of all groups in contemporary society economists are the most guilty of this arrogance. They as with the medieval theologians see their’s as the queen of sciences, politics, ethics philosophy must all bend their knee to the greater realism that is economics. Bill Clinton’s aides comment that when asked what will determine the result of the election said ‘it’s the economy stupid’ has become the accepted political truth of our times. All politics has become as a consequence a branch of economics, particularly in the Neo-Liberal Anglo Saxon economies. Here politician’s have outsourced decision making to the free market. However this free market does not exist except in the imagination of economists and politicians, what does exist is the large business corporations that dominate the energy market and an are becoming increasingly dominant in the health care market. Blindness to reality, they see only the imagined world of beneficent free markets.

Only a contemporary Jonathan Swift could describe the contemporary political leadership.in the country of Lilliput the chief ministers are chosen by their according to their ability to skip and dance on a rope, this being the primary qualification for managing the affairs of state. In the age of mass man the skills needed for high office in the UK are similarly irrelevant to the skills needed to manage the current troubled society. Just as with his sky city of Laputa floating above the earth, where the scientists try to capture moon beams in cucumbers, the debates are actions of our parliamentarians cocooned within the Westminster bubble are equally fruitless.

What Ortega y Gasset failed to see that mass man would predominate amongst the political classes, while outside that class there would be many who defied that category. Only in the Westminster/Whitehall village could the screening process be effective in only selecting mass men for positions of power and influence. There number of candidates are so small that it is easy to screen out exceptional men. Outside the privileged environs of power the influences on men are so diverse and the gene pool so wide that mass men don’t predominate to the same extent. Exceptional men and women rise to the top in institutions that are remote from Westminster or marginalised by the Westminster power bloc. In trade unions now marginalised and emasculated, exceptional men and women occupy leadership roles. People such as Francis O’ Grady (General Secretary of the TUC), the late Bob Crow of the railway union, Natalie Bennet leader of the Green Party. However such people are remote from the seats of real power and lack the influence and power of mass men.

However Ortega y Gasset does offer hope for society in the form of the exceptional men. These are a natural aristocracy, the men dissatisfied with society. Men such as Giuseppe Mazzini the Italian revolutionary thinker who spent his life largely in exile as he was thought to be a constant threat to socially conservative Italian governments. The exceptional men believe in a higher order, possibly a higher spiritual order, that of a God. These people are dissatisfied with the assumed natural order of things, they see the need for change and want to make it happen. Without them society ossifies into fixed model incapable of change. The USA demonstrates what happens when mass men dominate politics to the exclusion of exceptional men. In Washington there is legislative gridlock, a government that is unable to offer policies for change, only policies for a retreat into a safer imagined past.

When trying to think of exceptional men in the field of politics it is exceptional women that spring to mind, Elizabeth Warren (US Senator) or Wendy Davies who successfully filibustered the Texas Senate on abortion law. The mould breakers tend to be women, probably because they have been so long excluded from the seats of power that they have an innate dissatisfaction with the system that marginalises them and a desire for change. In the UK the existing power structures effectively exclude women from power. The exception being Nicola Sturgeon leader of the Scots Nationalists, a former marginalised party. Theresa May the current Home Secretary who is spoken of as a possible leader of the Conservative party, is a women who has positioned herself squarely in the mass man camp. If she becomes leader she will be no challenge to the dominant political complacency.

There is another writer Pareto who tried to understand why politics was dominated for long periods by clever mediocrities, men good at playing the political game but incapable of initiating or managing change. Such men were good at winning elections but they would leave society untouched or unchanged after their period of office, if was as if they had never held office. Gross inequities were never challenged and society remained in the hands of its corrupt rulers. He called such men foxes, however these men were unable to resist the challenge of the men he called lions, men of character and bold vision. These men only came to power when circumstances permitted, in times of revolutionary upheaval. One such man was Garibaldi the military leader of the Italian revolutionary forces. However these men of vision only remained in power for a short while as the would inevitably be ousted by the machinations of the cunning foxes.

Whatever the complexion of government politics in the Anglo-Saxon countries is dominated by the clever mediocrities, who have cleverly manipulated the political system to exclude any possible lions entering government and disturbing the current political complacency. In the UK the leaders of the opposition party, the Labour Party have the power to exclude unsuitable candidates from the process for choosing MP’s. Only people that subscribe to the current political complacency will be accepted as candidates. Similarly the corrupting power of money is effective at excluding able candidates (the exceptional men) from the political process. The demands of the large party funders mean that nobody who challenges the current orthodoxy can be selected as a potential MP or leader. Since so many of the exceptional men are able women, there is a further barrier which keeps them distant from the seats of power and that is institutionalised sexism. Demonstrated when a conservative MP asked the newly elected female MP for Walthamstow to get out of the MP’s lift, as she should be in the one reserved for secretaries and admin staff. He could not conceive of a young woman being an MP. One key factor preventing women politicians reaching the top of British politics is the sexism of Westminster and the media. Any female politician that puts her head above the parapet risks being in receipt of a torrent of sexist abuse from the media. Only female politicians that are not tainted with feminism can hope to avoid the worst of this abuse. The only way of ending the destructive complacency of the mass men is to open up politics to those who they currently exclude, the exceptional men and women. However that would require an act of imagination and boldness generally lacking in the mass man.

What is the USA and the UK need desperately if not to be pushed into a long period of decline through the follies of mass men, is a more open society one that allows exceptional men and women access to power. Unfortunately what is happening is the reverse both the Anglo-Saxon societies are becoming more and more closed societies. Both Anglo Saxon democracies are turning to an imagined past. Although they would be unwilling to admit it our current political leaders have a mindset not too different to the religious fundamentalists of Islam, they both want a return to a past untroubled by modernity.

Philosophical scepticism the antidote to Neo-Liberal fantasies

September 29, 2014economic history, Economics, Philosophy, Politics#philosophicalscepticism, Friedman, Hayek, Neo-Liberalism, Nietzsche, philosophical scepticism, Polyani, Rand, Schumpter, Speenhamlandangrytunbridgewells

Although I have read economics, philosophy and theology at university, I am not an academic and I want a description that distinguishes me from the professional philosophers and economists. I think I can best be described as a ‘Hedgerow Philosopher or Economist’. It is a steal from Thomas Hardy’s ‘The Return of the Native’, at the end of that novel Clym Yeobright becomes a hedgerow preacher. Lacking the formal qualifications necessary to become a preacher in an established church, he takes to the roads literally preaching to the country people in the fields. The hedgerows being the walls of his church and the place where he sleeps most nights. He is a figure that has always fascinated me and I Identify with Clym. I am a hedgerow philosopher because I speak as an outsider, looking in from outside the academy. This is not a viewpoint soured my malice or envy, but a viewpoint that expresses freedom and my independence, as outsider I am not obliged to follow the disciplines of any school. It is this distancing that gives me a different perspective on the practice of economics.

Country people such as myself believe that our being in constant contact with nature gives us an understanding of the world denied to town folk. It is the experience of witnessing the sunrise or sunset over a country landscape that makes us feel we are closer To those elemental forces that govern nature and the world. Probably this arrogant assumption is totally unjustified, but nevertheless country people do assume a superiority over their townie cousins.

As a philosopher I would suggest that economists are making a similar error to that made by philosophers as described by Nietzsche. One of the assumptions that under pins any moral philosophy is that humans are responsible for their actions, they make choices good or bad. However as Nietzsche write psychology demonstrates so many of actions that an individual makes are predetermined, so how can they be responsible for their actions? He accuses moral philosophers of falsely attributing behaviours to men which are absent in reality. They fall at the first hurdle in constructing their their moral philosophies. Similarly economists fail as they fail to understand the relationship between the economy and the host society of which it is part. One exception to this common misunderstanding is the economist Michael Polyani.

Contemporary economists know the writings of Friedman, Schumpeter, Hayek and Rand, yet never Hayek’s great rival those of Polanyi. Polanyi is absent from the economics curriculum of universities. Probably because he puts the economy back into the society of which it is part, he makes it one social science among many, relegating it from it’s position as the Queen of social sciences. He writes that the market economy is a threat to the social order and must be regulated so as to control its destructive tendencies. The example he use to demonstrate this is the Industrialisation of Britain in the late 18th and the threat that posed to society. The new textile factories produced cheaper and better cloth and in greater quantities than the home workers, That is the hand loom weavers. With the collapse in demand for their cloth these weavers were impoverished and faced the very real threat of starvation. The government responded to their misery by introducing the ‘Speenhamland system’, which as with today’s working tax credits was a supplementary payment made to the weavers to enable them to pay for the necessaries of life. He suggests that it was the system that prevented there being an English revolution to match the French one. Desperate starving weavers would have had no option but to resort to violence to obtain the food for their families. It was a series of bad harvests and hunger that drove the Parisian mob to violence and it was that mob that was one of the driving forces behind the revolution. Any economist that preaches a message contrary to the ‘feel good’ philosophy of Neo-Liberalism is unwelcome in today’s economics departments and Polanyi would not be found on any departmental book shelves.

Fear of the damage an unbridled free market can wreak on society is slowly becoming better understood within the governing classes. Recently the Head of Transport for London spoke of his fears that the high price of transport could provoke social disorder. He feared that what happened in Brazil could happen in London, when the poor took to violent street protest to express their anger at high fares. Neither economic or social history intrudes on the unreal world of Neo-Liberal economics; if it did they would know that the propertied classes of Victorian London lived in constant fear of the mob. A similar fear seems to be developing now with the spread of gated communities in London whose intent is to keep out the violent feral underclass of popular imagining.

If economists were also philosophers they would be familiar with philosophical scepticism, which teaches that all schools of philosophy are flawed and blind faith in one such system is an error. Neo-liberal economics as one such grand theory of everything is flawed. Human knowledge is at best limited, they are unaware of Socrates dictum that he as the cleverest Athenian knew that he knew nothing. The practice of economics would be improved if it’s dictums were subject to a healthy degree of scepticism.

What economics lacks is any understanding of ethics, which is essential for any human science. In the 1960’s, Says Law was discredited because of its very lack of humanity (and because of the existence of better alternatives). Says law states that governments should never control wage rates, as if wages are allowed to fall to their natural level, employers will start to employ this new cheap affordable labour. Employment will pick up and competition between employers will push up wage rates and all will be well. Without openly acknowledging it the British government has been an advocate of this law. By removing all protections from the labour market they have allowed wage rates to fall to such a level that employers can buy lots of this new bargain priced labour. It matters not a jot that many of these new jobs pay less than the living wage and the recipients of the new poverty wages live a life of misery. This is why in the UK there is a recovery that few experience as they are stuck on poverty wages with no chance of increasing them. Rather than the recovery pushing up wages, employers will use agency workers who they can employ at less than minimum wage, by adopting various legal subterfuges. The government and the community of economists are unaware that an economy which fails to work for the majority of people in reality works for no one. Having a childlike or naive faith in Neo-liberalism and lacking the perspective of a philosophical sceptic they will also mistake the fantasies of Neo-Liberalism for reality.

An Unusual Economist

After the crash of financial 2008/9, it was obvious that the current model of economic analysis was broken. I want to develop a new approach to economic analysis.