Category Archives: politics

Les Miserables and the economics of revolution

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Towards the end of the film ‘Les Miserables’ there is a very moving scene in which the young radical students who rose in revolt against the government are shot by the police. The revolt is doomed to failure as they fail to gain the support of the wider Parisian population and the authorities are easily able to suppress this uprising. This is the popular perception of revolution, that is a futile uprising by the young against the tyranny of the old order one that is easily put down by the authorities. Any history of the 19th century consists of a long list of failed uprising, the Poles in particular participated in number of uprisings against their Russian overlords, all of which ended in its participants being imprisoned or going into exile. However this is a misunderstanding of the nature of revolution, the successful ones usually don’t involve violence and generally take place over a number of years. What I mean by revolution is the shift in people’s attitudes that can be best described as a sea change in their behaviour and attitudes. 
Revolution of the Right
Often this type of revolution is initiated by the right, as instanced by the successful revolution by the right against the welfare state. If Britain is taken as an example when the welfare state was introduced it was seen as a bulwark against the twin evils of sickness and unemployment. It was seen as an individual right that the state should provide an income for those unemployed through sickness or bad luck. The political right in Britain never really concealed their dislike of the welfare state principally because they saw it as an injustice, that the rich were expected to pay more tax than the poor to fund welfare programmes. They ceaselessly campaigned against the iniquities of the welfare state. Now they have practically succeeded, welfare payments are now seem as benefits to a group of undesirables the work shy. The emphasis now is on reducing benefits and targeting the claimants with sanctions to force them into work. Only last week the welfare minister announced to general a claim that he would target the disabled forcing more of them to take work, through making it harder to claim benefits and by reducing individual welfare payments. The assumption is that by making life progressively more difficult for them, they will take up employment to avoid the unpleasantness of life on benefit. As one who has worked with disabled people, I can only see this minister as an uncaring monster largely lacking the human traits of empathy and compassion.
Now the philosophies of such as Ayn Rand are the guides to life for the decision makers in society. While it may seem harsh to suggest that a writer who would welcome the death by starvation of hundreds of the useless poor provides the distorting ideological glass through which these people view the world, evidence suggests otherwise. Recently our rulers withdrew the Royal Navy from the task of rescuing refugees adrift in the Mediterranean, on the grounds that by making the journey across the sea safe it would encourage migrants to attempt the crossing. The unspoken assumption was that if some refugees drowned at sea it would discourage the rest from trying to enter Europe. This policy was not questioned by any of the opposition leaders, so demonstrating that the spirit of Ayn Rand flows through our the veins of all our political leaders. Now it is ‘cool’ to be uncaring, as this is regarded as hard nosed realism, as distinct from the naive sensitivity of the political left. 

Revolutions of the Left

Unlike revolutions of the right which are initiated at the top of society, revolutions of the left are initiated by those in the middle and lower orders of society. This means that they are inevitably doomed to failure as the top orders of society command the instruments of power. The legal system can be directed against the insurgents. Imprisonment being but one of the means of suppressing such people. Yet such revolutions are not futile even if they end in defeat. They can despite their repeated failures change the nature of society and ultimately achieve their desired ends. This can be demonstrated through a metaphor, these revolutionary movements are as a wave from the sea smashing against a rock, the rock at first repulses the wave leaving it to fall back into the sea, yet the constant pounding sea will eventually destroy the rock. Similarly while the revolutionary movements of the left are initially doomed to failure, they can through insurgencies change society. By revolutionary surges I don’t mean violent revolution, so much as oppositional social movements which constantly rise and fall, but which eventually undermine the existing social structure, which leads to change.

The sea metaphor has further applications. British society at present resembles a placid sea but which under the surface there are currents swirling which can change the nature of the sea. One such current which has surfaced in the insurgency which threatens the Labour party. In the current elections to find a new leader it is the outsider Jeremy Corbyn who seems to have an unassailable lead in the contest. He represents a very different politics to that of the main stream party, a politics well to the left of the current parliamentary consensus. It is quite likely if elected his term as leader will be brief, as the parliamentary party will find means of rejecting a leader they don’t want. However he is representative of a much larger social movement, a left insurgency that rejects the harsh austerity programmes endorsed by the parliamentary party. This current which is sweeping through the party will change it whatever happens in the leadership contest. There are other similar examples of insurgency in Europe such Podemos in Spain and Syriza in Greece. Whether these individual insurgencies succeed or fail, what matters is that the initial process of undermining the unequal social order has begun.  
Then there is in the USA the ‘Fast Food Forward’ campaign whose aim is to secure a national minimum wage of $15 an hour, if it succeeds it will transform US society and economy, it is yet another insurgent movement. What these movements have in common is that they form outside the political system, as that system is constructed so as to prevent change, rather than facilitate it. Change of this significance will only take place in response to change from outside the political process. The established political process is dominated by the dogmatists who believe that the existing social and economic order is the the best possible one as it is founded on the universal truth of the free market. Politicians believe their only role is to implement changes to make the market system work more effectively, keep things as they are and if necessary repress those movements campaigning for change.

The economics of change and revolution

Society comprises of competing social groups with conflicting claims on its wealth. Rather than stable social order organised around one universal organising principle  that of the free market, it is a kaleidoscope of competing different groups all wanting very different orderings of the social system and its wealth. Society at best is the ring in which these groups compete, but according to rules of the competition.  Violence for example as a means of effecting change is ruled out. However if the dominant group refuses to recognise the legitimacy of the competing groups and tries to suppress them, violence will be resorted to as the social order or the rules of co-existence have been destroyed by the dominant social group.

Economics to have any relevance must be a dynamic subject one that can accept change, not a subject that believes that it has found the holy grail of social existence in the free market. It must recognise that the society of today can be very different from that of yesterday and so should accommodate that change. Economics cannot be a subject of universal truths, but one of partial truths, it must establish which of those truths in its current content list can be used in the study of different societies. A modest subject that seeks to find truths in very different economic and social systems, rather than have a universal blue print to which all societies and economic systems must conform. 

Public servants and their inefficient ways

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Society has always needed scape goats for its many failures, it makes it easier if one can identify a person or group responsible for these failures, it avoids any difficult soul searching into the real cause of the problem. Usually these scapegoats are from an ethnic minority, it was only 50 years ago that boarding houses would have notices stating that the Irish were not welcome. Since that time new scapegoats have appeared usually from the new immigrants at one time is was Afro Caribbean’s who were blamed for the increase in crime in the 1980s, a role they have now vacated, which is filled by Eastern Europeans. However what is unusual is the addition of an occupational group to this list of scapegoats, that is the public servant. We are blamed for the lack of dynamism in society or as it is more usually termed economic growth. Public servants either through their adherence to bureaucrat practices make change so or impossible or they just syphon off tax revenues to little productive purpose.  
The outing of this parasitic group that feeds off the life blood of the economy was the work of the American public choice theorists. They highlighted our bad work practices, in the words of Charles Murray the public servants solution to a problem was always the same, to ask for more money to create a new department to deal with the solution and promote themselves to run this department. All that motivates us is the opportunity to increase our own status and incomes. Job security means that we don’t have to respond to public demand. Our customers the public lack any sanction to compel us to perform better. The solution is to break up these public sector monopolies into competing businesses that are forced to compete for the public’s custom if they are to survive. 
These theorists confirmed what society had always thought that we were a group of jobsworths who were only interested in feathering our own nests who provided the public with an abysmal service in return for our inflated incomes and job security. This is such an obvious truth that journalists such as Simon Jenkins can state with certainty that the education, health, legal and defence systems waste public money on a vast scale and that profligacy with public money produces little of value. It is such an obvious truth that he does not have to produce any facts or figures to prove his assertion, everybody knows that he is right.
Governments have long been persuaded of the truths of public choice theory, so much so that they have contracted out, wherever possible services to the private sector. Where services have remained in the public sector, they have created large external costly bureaucracies, whose only task is to ensure that public sector workers do their job, according to the principles of the free market. These inspectorates have names such as, the Care Quality Commission and their sole role is to police public sector workers. Neither the government or the advocates of public choice theory see the irony of having to introduce a large and costly bureaucracy to ensure that the public sector now works according to the principles of the free market. Public servants instead of experiencing the freedoms of the so called free market are in fact part of a new ‘Big Brother’ society. Winston Smith’s world is that of the new public sector.
Given that public choice theory teaches that public servants are only self interested of individuals who have little interest in serving the people the new inspectorate and public sector managers have to be vigilant to root out any of the bad practices and habits that are associated with bureaucracies. The only way they can achieve this is to monitor every minute of the public servants working day. However even the new bloated management teams and inspectorates cannot be physically present at every minute of the working day of each staff member. Consequently they have devised a system of targets which is constantly growing as inspectors are constantly thinking of new ones and workers are expected to provide evidence that they have been working to achieve these targets. This involves members of the staff team completing paperwork to demonstrate how they have achieved these targets.The demands on staff time for record keeping have reached such level that in teaching for instance the time spend on record keeping is creeping up towards 50% of time spent in work. The priority in the public sector has become not service delivery but record keeping which enables the manager to demonstrate the ‘appearance’ of staff adopting good working practices which is thought to be indicative of the quality of service provided. 
These new managers and inspectors have a fear of staff having free time on their hands, teachers provide perhaps the worst example in their minds. They have breaks when the children are going out to play or having lunch. Unfortunately for these new ‘public choice’ theorist children cannot be keep working without a break. This gives the teachers an opportunity to get together and talk, this give rise to the greatest fear of the public sector reformer, which is ‘canteen culture’. Given free time the teachers have the opportunity to discuss their teaching with their colleagues and what this enables is the dissemination of ‘worst practice’,the so called canteen culture or what others might call the ‘work ethic’. These reformers are terrified of the older staff passing on bad practice to new teachers. The only solution is to turn free or non teaching time into work time, this time can be used to complete some of the many records required of teachers to demonstrate good practice.
I can confirm the worst fears of the public choice theorists, we did not spend non teaching time discussing good teaching practice, but we gossiped about television programmes, who was having an affair with who, argued about politics. In other words we never used this precious time to discuss how to improve our teaching practice, we were of target or whatever the management speak is for wasting time. I can remember that is one school a group of staff had set up in one of the staff rooms the board game ‘Risk’ and spent all their lunch times playing this fiendish game. This surely demonstrates best the horrors of allowing staff to do what they wish with non teaching time.
Fortunately reformers were able to see the horrors of the old well established service practices and were able to sweep them away. Now in schools staff are constantly on target and the obstructive ‘canteen culture’ of the past is fast disappearing. As an example of the latter I can remember receiving a survey from the education ministry asking to complete and return so they could work on the results to improve teaching practice in all schools. I with all my senior male colleagues threw the survey in the bin. Today no teacher would contemplate treating with such contempt a directive from the education ministry.
What I going to suggest is that when we consider the fruits of these reforms the question to be asked is have the expensive reforms achieved what was intended or could improvements have been better managed at a much smaller cost. As a sceptical economist I tend to the latter view, perhaps an example from teaching will demonstrate my view better. The governments of today and the recent past keep trumpeting the success of their reforms as demonstrated by the improvement in school exam results. What these politicians fail to understand is that there is a different between coaching students to pass an exam and educating them. Educationalists will admit what makes a good education is open to debate, as is how students actually learn, yet our education ministers claim they know, in fact they have very little understanding of what makes a good education. It may be elitist to say so but throwing out a few spurious statistics will impress a gullible press and media but that all it is the appearance of an improvement in the education system.
Unlike most critics of the recent reforms I am not going to argue that the previous education system in which the public service ethos was seen as the main motivator was perfect but that the reforms introduced at great cost have failed to achieve their purpose. There were much better ways to improve a system that actually worked quite well, methods better than adopting a ground zero approach to reform. What reformers believe is only by destroying the old system and practices will they will be able to change the system. 
What Simon Jenkins the journalist and all the denizens of Fleet St., Westminster and Whitehall fail to understand is that public sector work is undertaken by people for other people, it’s a personal relationship. People are different and have different needs they cannot all be fitted into one schema developed some Whitehall bureaucrats under the direction of a politician. Policy is directed in way that will win favourable headlines. The teaching of reading demonstrates this, any educationalist or teacher will say that children learn to read in a variety of different ways.Yet the education ministry has declared in all ignorance that only one method is acceptable and that is phonics. Good practice or reality matters little to the Whitehall bureaucrat or politician, why matters is conformity to what is seen as good practice.
What politicians and the media are good at doing is seeing perceived failures or inefficiencies and acting in a way that is often counter productive to good practice. Certainly it is frustrating when you are queuing at the Post Office when the counter clerk takes what seems to be an inexplicable break, when there are huge queues in the office. Yet this may be the only way the stressed staff can cope with the myriad list of rules, understaffing and the sheer monotony of the work. However it is on this perception of the service that our political masters decide policy. When I was in the teachers staffroom myself and my colleagues would often express in disrespectful attitudes our attitude to our managers and the latest government initiative. Our disrespect was often a way of coping with the stress of the job, can I suggest it was no more than skin deep moaning. Today that would be considered as heresy and such negativity would be discouraged quite actively in the staff room, denying the staff the opportunity to let go, now everybody has to be on message. 
When prejudice becomes policy it makes for bad policy, the fact that every body knows that public sector works abuse the system to their own advantage, is the poorest basis on which to form a policy. The evidence for the poor performance of public service has never been more than anecdotal, yet it is on the basis of this anecdotal evidence that the reforms of the past twenty or so years have been based. While there may be some evidence for improvements in quality of service the evidence is not overwhelming. Policy based on an obsession with the minutiae of the workers daily routine it is obviously going to miss the ‘wood for the trees’. Success is now measured in small percentage increases in statistics, the sight of the bigger picture has been completely lost. The old British civil service had the skills and resources to focus the whole nation’s productive effort towards fighting the war, the new British civil service was unable to organise the competitive tendering by rail companies for right to operate the West Coast railway line. It was so poorly organised that the losing bidder Virgin Rail was easily able to get the decision reversed at a court hearing. If mistrust is the abiding characteristic of the relationship between ministers and civil servants the quality service provided is going to be poor.
To this sceptical economist it appears that the politicians having identified faults in the public sector have devised reforms that instead of improving the service have on the whole made it much worse public service.  

The Demise of the Liberal Democratic State and the rise of the Corporate State

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Francis Fukuyama was wrong the 1990s did not herald the triumph of liberal democracy, but its showy demise. George Bush’s attempt to impose democracy on Iraq by force demonstrated the folly of this premise. Even the democratic programme that he sketched out gave a dominant role to the business corporations that would effectively control the new Iraq. Giving lie the all the claims about remaking Iraq on democratic lines. Prior to the invasion there was a quarrel between two of the main participants in the invasion over the distribution of the spoils  between the victors. British oil companies believed that the post invasion constitution gave too much to American and too little to British oil companies. The chaos of the post invasion Iraq denied the business corporations the influence and income they expected. Although the part of the profitable oil industry that is not under the control of Isis, is run by American oil corporations.

  
Perhaps it is in Europe that the evidence of the new nation state is best demonstrated. What is developing in Europe is a new corporate state, a state which functions primarily for the benefit of the business corporations? The financial crisis of 2008/9 illustrates this all too clearly. Due to irresponsible lending practices the banks failed, even if only a few crashed all threatened by the crash. Rather than let the banks fail the governments of Europe injected cash into the banks to prevent them failing. In Britain the bailout was equivalent to 10% of GDP, although given the huge size of the banking deficit the government was effectively mortgaging the countries assets and wealth to save the banks. It was not the banks that had to pay the price of their failure but the peoples of Europe. Europe wide austerity was regarded as necessary to reassure the banks creditors of the financial worthiness of the nations that were the guarantors  of their debts. A government with small debts would be regarded as a better guarantor of the banks credit than one with large debts. Surprisingly the banks got of almost scot free apart from a demand that they increase their cash reserves to 3% of total liabilities and ring fence retail banking, on which the banks are stalling. The Banks are now asking for the government eforms of an increasingly dysfunctional financial sector. In response to the pleas of the banks the demand to increase their cash reserves to their required total has been constantly put back, nowhere more so than in continental Europe. Despite claiming a government of financial prudence Germany has been one of the worst offenders. Only the other week the government in Britain refused to renew the contract of the chief executive of the Financial Conduct Authority as the banks had accused him of being to hard on them. In Britain as in Europe, what the banks want the banks get.

There are many serious problems that the government in Britain needs to tackle but one of them is not the reform of the state funded broadcaster the BBC. The agreement under which the BBC is funded is up for renewal soon and the government has used this as an opportunity for root and branch reform of the broadcaster. One of the main backers of the winning Conservative party was News International, the largest shareholder in Sky TV. The directors of this company has long argued for a change in the nature of the BBC, a change that would make it less of a competitor to Sky News. Its former Chief Executive James Murdoch argued for a change that would benefit Sky TV. He said in a lecture that the BBC  had a role as an innovative producer of TV programmes but it was not its role to exploit those innovative programmes. Once those programmes had been developed they should be given to the commercial broadcasters as the role of the BBC was to experiment not create popular TV. Unsurprisingly the main conservative spokesman on the media has echoed these views. He wants to end the BBC’s role of producer of popular programmes that compete with those of Sky TV. There is little doubt that one of the priorities of this government is to repay its corporate sponsors with favours.

Rather than continue with list of items that illustrate the increasing corporatisation of Britain, I want to compare the British governmental system to that of Russia. The Russian system of governance is often referred to as a mafia run oligarchy. All these commentators that do so fail to recognise the similarities between the Russian and British system of governance. Probably the only difference is in the level of criminality of the oligarchs in each country.

When the Soviet Union collapsed in 1990 the reformers in charge of the country wanted to adopt the free market of the West, so as to enjoy a similar level of prosperity. However they rushed into privatising their stated owned industries, without realising that the free market economies of the West were only successful because the market operated within a strong legal system that prevented the many abuses that occur in an unregulated market. Given what was literally a ground zero, the oligarchs were able to remake the Soviet economy to their own liking. They bought up the businesses at bargain prices and controlled the various sectors of economy, however for complete control they required control of the governmental system. This they achieved through bribery, intimidation and violence. Now President Putin runs a collective oligarchy, an oligarchy that exploits Russia wealth largely for its own ends. Opposition to the oligarchy is suppressed in ways similar to the former communist system, critics are subject to intimidation, often including violent assaults, and if that fails they are sent either to a mental asylum or camp where the mistreatment continues.

The oligarchs in Britain and Russia believe in a similar free market system, that is a free market in any obstacle to the free operation of business enterprise is removed. Obstacles such as trade unions, labour protection legislation and government interference. In Russia there was little too prevent the rise of the oligarch as in a ground zero economy (one in from which the state was largely absent) there could be no effective opposition and by controlling the government they can ensure that none arises. The task for the British oligarchs was much harder they had to create a society that was favourable to the free market (as they saw it). This meant they had to capture government and ensure that it introduced measures to remove all the obstacles to the smooth running of the market. Chief of these is the trade union movement and not surprisingly one of the first measures of this new corporate friendly government is legislation to further emasculate the trade union movement, so as to ensure that it cannot interfere with the smooth running of the market. The proposed legislation will effectively prevent trade unions from striking, so removing the  threat they pose to employers.

There is however one significant difference between Russia and Britain. Elections in the former are largely controlled by the state and there is never any likelihood that the opposition can come to power. In Britain elections are open and fair and the opposition can become the government. However the two main political parties are coming to resemble each other, when the opposition criticises a government policy, it is not so likely that they disagree with the policy as believing that they could implement it better. Increasingly the two main parties are becoming the mirror image of each other, but are committed to the philosophy of Neo-Liberalism. Unfortunately elections are increasingly becoming a competition between the groups  competing to be the representative of corporate Britain. One of the main concerns voiced by competitors for the leadership of the opposition party is that the previous leader was too distant from the corporate interest. Unfortunately too many politicians now see politics means to win a seat on the board.

The recent history of the Greek crisis shows how dominant is the corporate interest in Europe. When the Greek crisis caused by the nations over indebtedness occurred, the European policy makers could have agreed to a restricting of the Greek debt. This restructuring would have either involved pushing debt repayments in some time in the distant future or forcing the nation’s creditor to take a ‘hair cut,’ that is force them to accept a downsizing of the Greek debt. Either of these policies would have hurt the corporate interest, that is the banks would have lost billions of Euros in the ‘write down’ of the loans that they had made to Greece.  Instead the European politicians forced on to the Greek government a programme Neo-Liberal market reforms. These policies were intended to make the Greek economy more competitive and boost exports. The surplus earned on the export trade could be used to pay of the Greek debts. Unfortunately this Neo-Liberal experiment failed and after five years of austerity, economic growth has stalled and GDP is down 25% making it increasingly unlikely the debt will be paid.The International Monetary Fund states that payments on Greek debts should be deferred for thirty years, as only then will the economy have grown sufficiently to enable the Greeks to begin to pay off their debt.  Despite the urging of the USA the European politicians stubbornly support the banks cause and refuse to allow the Greek nation any debt relief.

Quite possibly the triumph of the corporate state is best demonstrated by the proposed Trans-Atlantic Trade and Investment Programme (TTIP). When this treaty comes into force any business corporation that believes government policies have caused it a loss, can refer their case to an international arbitration panel. This means that if government legislation aimed at limiting the harmful effects of tobacco restricts the sale of this product, the tobacco company can go to the panel asking for compensation or a revoking of the act. There is one such dispute between a South American company and an American Tobacco giant. Soon such actions will become common place  and the sovereignty of European governments will be undermined. In Britain at least too many politicians are in favour of this policy, as they believe their support for TTIP will earn that a well paid position with one of the business corporations, they will willing surrender power for cash.

There is one failing of the corporate state and that it is remarkably incompetent, in that it lacks the competence to deal with a major crisis. The banks only survived the crisis of 2008/9 because they were supported by the government. There will be other such financial crisis in which business corporations will only survive with the support of government. There is in Europe the unresolved debt crisis, not the one of popular imagination but the combined private sector banking debt. A debt that in Britain exceeds 400% of GDP and in Germany 324% of GDP.

These business corporations have only a narrow minded view of the world a view one that is focused on their own self interest. The banks in Britain have been campaigning successfully for an end to restrictions on their less desirabale activities and the government has complied. It has largely passed unnoticed but at a recent City of London banquet the governor of ‘The Bank of England,’ said he saw no reason why banks should not be allowed to increase their assets to 900% of GDP.  The majority of a banks assets are loans which are funded by borrowing from others, so if Mark Carney has his way the debts of British banks will rise to astronomic levels. There will at some time be a crash that in scope will exceed that of 2008/9. A crash of these dimensions would force  a collapse of the corporate state as the government will be no only body with the authority and power to avert the collapse and rebuild the damaged society. One economist Anne Pettifor has written a book called ‘The First Word Debt’ crisis, a book which is ignored by all European politicians. Rather than act on the basis of the precautionary principle, the European politicians seem to act on t’he eyes firmly shut’ principle.

All political systems contain within themselves the seeds of destruction, in the social democratic society of the past it was the conflict between the major business corporations and society. A conflict that the former won. The corporate state is more unstable than other political systems as there is no great vision or commonality of view that unites the community of business corporations. The only commonality is their hostility to any regulation of the free market and in reality they are a number of social units all pursuing their own self interest. This means that the corporate society lacks the strong mechanism for directing society to towards a greater end other than mere self interest, lacking this overarching powerful body, society can only fall apart in the event of being struck by an economic or social tsunami.

The great floods that devastated New Orleans demonstrate how the new corporate state fails to cope with  crisis. Cuts made to the emergency and environmental services made at the behest of a business dominated tax cutting government had left these services unable to respond adequately to the floods and their inaction prior to the flooding worsened the devastation. The levies that protected the town were in a state of disrepair and unable to resist the tidal surge and broke. All the world could do was watch in horror as the American government failed to halt the destruction of New Orleans.

The failure to resolve the Greek crisis points to a future crisis in Europe. Greece is but a small country accounting for but 3% of the European Union’s GDP, yet the European Union struggles to find a solution to its problems. It’s only success is in replacing the various democratically elected governments that are hostile to its austerity programme. Greece only rid itself of the military junta popularly known as the Greek colonels in 1974. The Greek army is the one institution that has not been devastated by the Neo-Liberal reforms imposed by the EU  and it may be the only body that is capable of eventually restoring social order after the havoc caused by the latest austerity and reform programme. Possibly this is the future for us all as the failures of the Neo-Liberal or corporatist state can only result in its replacement by authoritarian state supported by the military. The pro business agenda so having hollowed out the democratic state its institutions lack the resources to respond to a major crisis. This is demonstrated by the financial crash of 2008, the Chancellor of the time commented in a newspaper article that the crash was imminent. Yet despite this knowledge the government and Treasury were incapable of taking any action to avoid the crash, much like a rabbit that is frozen by fear when faced with the headlights of an oncoming car.