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Charles Dickens’s was a far better economist than either Nick Clegg, George Osborne or Ed Balls

February 11, 2014Economics, Politics, societyCharles Dickens, Ed Balls, Food Banks, George Osborne, Martin Chuzzlewit, Nick Clegg, Pecksniffery, ponzi scheme, supply side economicsangrytunbridgewells

If I wanted to understand the nature of our current economics problems I would be better turning to the novels of Charles Dickens’s than by reading articles on economics by the current generation of politicians. Rooted at the heart of the political consensus is a misunderstanding of the current economic crisis. Any politician if asked will say that its a crisis brought on by government overspending, which can only be resolved by a prolonged period of austerity which will reduce the deficit that is at the heart of the problem. This week this misunderstanding has been put into words by Ed Balls, George Osborne and Nick Clegg. They have all stated that the priority of government should be to reduce or eliminate the government deficit. All claim ‘responsibility’ as their guiding principle, all must suffer because of the foolishness of past governments. They all assume a highly principled stance of statesmen making the painful but necessary decisions to secure the nations future.

The cleverest of them must know that they are spouting nonsense, but go along with it as they it’s what everybody or so they believe, in the gilded circles of power believe. (The speculative frenzy that resulted in the crash that bought society to its knees in 2008/9 is never mentioned.) Lying was never a barrier to a successful political career. What we most need now is a Charles Dickens’s to expose the charlantry, hypocrisy and foolishness than passes as informed political debate.

Nick Clegg Deputy Prime Minister, a millionaire owner of luxurious homes on the continent preaches the need for self restraint on an impoverished people, as do the fellow members of a cabinet of millionaires. The country cannot afford to pay the living wage to workers on part time contracts but instead pays the minimum wage or less if agency workers; but it can afford to allow Barclay’s Bank to pay bonus’s of £1.8 billion to its staff. (most of which will go to top executives and highly paid traders). I read somewhere that City bonuses this year could top £80 billion. A word has been coined to characterise such behaviour ‘Pecksniffery’. Seth Pecksniff was a character in one of Dickens’s novels, an unpleasant hypocrite who affected benevolence and high moral principles. Best illustrated by the Conservative Minister who characterised the large numbers going to food banks as going there because the food was free. Those who would rather depend on charity than work for a living. Conveniently ignoring the fact that free food is only given to those in possession of vouchers given by a charity to certify real need, many of whom were the working poor.

Self deception and hypocrisy should be regarded as two of the principles that inform economic policy making. These two attitudes are embodied it what is called supply side economics. It states that people are unemployed because of regulation and restrictive practices in the labour market. Trade unions, regulations on hours worked and on conditions in which people are employed only serve to push up the cost of labour, meaning that fewer workers are employed that might otherwise be the case. If trade unions are emasculated or abolished, labour protection laws removed the cost of employing labour will fall (wages) and many more people will be employed. All benefit because more are employed and the economy becomes more productive. This increased productivity will push down prices, so wages become worth in terms of what they can buy. Actually this has elements of a fairy tale in it. In the 1960’s when wages were relatively high compared to the other costs of production unemployment averaged 2%, today when wages are relatively low as a cost of production unemployment is 7%. If the unemployment measure used in the 1960’s was used, unemployment would probably be about 10%. Many of those now employed struggle to make ends meet.

There is one beneficiary from this change, the better off upper middle classes. Mark Harper the recently resigned immigration minister was able get as a cleaner for four hours a week at the cost of £22. This woman was an illegal immigrant who was probably desperate for the money. One consequence of the change in the labour market is that people are now cheap to buy. The Mark Harpers and Nick Clegg’s of this world can now benefit from a plethora of cheap services provided by people on poverty wages. I imagine there is much less concern about the servant problem today. In the sixties I lived on a country estate and my social betters were concerned about two things, the high cost of servants today and the insolence and less than respectful manner of those servants. Lack of respect deriving from the fact that servants would have no difficulty finding another job, so they were unwilling to adopt the demeaning behaviour expected of them. They as human beings had rights and exercised them to the perceived detriment of their betters.

Charles Dickens’s would have understood the behaviours of our governing classes and predicted that their economic policies would be designed to benefit the better off no matter in what guise they appear. Nick Clegg, George Osborne, Ed Balls etc. are all blinded by hypocrisy, unable to recognise that they govern in their own interests and that of their friends and not the nation. One image from ‘David Copperfield’ characterises today’s society for me. While David Copperfield and the other orphans sup on thin gruel, Bumble the Beadle and his friends enjoy sumptuous meals funded by money intended for the orphans. What better image to capture the nature of today’s society.

How an Economist would stop the trade in illegal drugs.

February 5, 2014Economics, Politics, societycorruption, ending drugs trade, illegal drugs trade, mafia, robert mckenzieangrytunbridgewells

Philosophers, sociologists, criminologists are asked to advice on crime, in fact everybody but economists. I want to right this imbalance, because as an economist I have a unique take on this problem not considered by others. Others may for instance study the effects of drugs legislation, but none of them will look at the gangs as business organisations, to whom the usual economic analysis applies.

What I observe is the the drug laws have had the unintentional effect of creating large profitable monopolistic businesses making vast profits. It is these profits that are the key to their success, as these profits give them the resources to finance their trade and in particular the money to corrupt the law enforcement agencies that are supposed to stop the trade in illegal drugs. There are innumerable stories in the world’s media about police forces being corrupted by drugs money. In Mexico the phrase ‘mafia government’ has been used with some justification. As an economist my first effort would be directed to reducing these monopoly profits and which would reduce the significance of these gangs.

Anti-drug laws rather than stopping the trade in illegal drugs, have eliminated the unsuccessful players from the scene leaving the control of the supply in the hands of the most skilful and ruthless players in the game. The jails are full of minor drug dealers who lack the skill to evade capture, while the members of the largest and most successful gangs usually evade capture. Even if a major gang is broken up it is soon replaced by another. However they are rarely caught. If the money was taken away from these gangs they would lose their power. The most obvious way to do this is to legalise the sale of drugs. This would cause a flood of small time dealers into the market forcing the price of drugs to drop.

Obviously the major gangs would resort to violence to eliminate rivals and maintain their monopoly. However the flood of drugs onto the market would be impossible to stop and prices would inevitably fall. Those major gangs that remained in the drug trade would inevitably shrink in size and become minor players in the criminal world.

My favoured approach would be to return to the system that prevailed in Britain in the 1960’s. Then drugs were available to drug users from doctors licensed to prescribe drugs. Obviously there would still be a criminal trade in drugs, as a number of users would not want to register as users. However the criminal drugs trade would be much reduced.

This would also ensure the purity of the drugs taken and avoid the personal tragedies that result from the use of impure drugs. If drug usage was seen as a medical problem it would remove the glamour from drug taking and reduce the demand for them. It would also give the medical authorities to engage with users and educate them in the harmful effects of drugs such as ketamine and reduce their use.

I should explain that as a student in the sixties I was one of a large number who developed a distaste for drug use, but the genie is out of the bottle and cannot be put back in. The relevant question for me is how do we live with drug use and minimise its harmful effects.

There is another player responsible for the success of the drug gangs and that is the bankers. Unfortunately wherever there is evil you will find a banker facilitating it. Governments have in the UK for the past thirty years favoured ‘light touch’ regulation and encouraged rich corporations and the super rich to use tax avoidance schemes. This they justify by claiming that these policies attract multinational companies to locate in Britain. One unfortunate consequence is that he schemes used by bankers to help the rich avoid tax, can also be used by criminals to hide their money from the law enforcement agencies. Several years ago the British government set up a special unit to recover money from the drug gangs. It has managed to recover practically nothing. It lacks the resources and wit to recover this money.

It was not so long ago that the London bankers successfully opposed plans by the EU to introduce stronger anti money laundering laws. While it is hard to judge the complicity of the banks in illegal money laundering, what is known that a British Bank, Standard Chartered (part of the HSBC group) was convicted of money laundering for the Mexican drug cartels. One suspects their crime as viewed in banking circles was to be so careless as to get caught. Without the banks being willing to move around large sums of money for these gangs, they would not be able to finance their large scale criminality.

Then there are the drug cartels in the countries that produce these drugs. If it was not for the international banking community, they would remain large fish in a small pool. There is a limit to how much farm land a drug baron can buy in Columbia, they want the personal jet, the yacht etc. items that are to be acquired from the rich countries of the developed world. It is impossible to be a cash buyer for such expensive items. There is the difficulty in carrying such large sums in cash and the law enforcement agencies etc. would make such a transaction impossible. Fortunately the drug baron in Columbia can take advantage of the tax havens in the West Indies. Their drug money can be deposited in one of the many offshore accounts in the banks which are effectively branches in all but names of the major US and British banks. This ‘clean’ money now deposited in banks in Miami or London can now be used for a variety of transactions, either purchasing luxury items or using the money to ‘oil the wheels’ to facilitate major drug trades.
What the law enforcement agencies fail to recognise is that these international drug gangs are more akin to international companies such as Shell or Ford, than the old criminal gangs. Their use of violence disguises their true nature. Just as multinational companies are embedded in the governance of countries so are the multi national drug gangs. Therefore a completely different approach is required to tackle these gangs. They just as with any other business depend on a constant cash flow to function and if this cash flow can be stopped, they will cease to exist.

The means in the form of computer technology exists to make this possible to interrupt this cash flow, but there is a reluctance of governments to go this far. Low level criminality is embedded within the banking system, banks have for many years worked with their clients to frustrate the government tax collectors. Tax avoidance and the concealment of the the origin of the money deposited with them has become standard practice within the banking community. Too tackle this culture of secrecy and it’s associated criminality will require a reversal in government policy towards the banks. Also tax avoidance has become the norm amongst the rich and multinational companies and there would be much opposition to such changes from these quarters. This is an opposition not to be under estimated, it would be organised by the City of London to whom the government is used to acquiescing to its desires.

A representative of the City of London sits behind the Speaker’s Chair when Parliament is in session and is able to represent the City’s interests to government ministers on issues that might affect the City. What is in effect a veto on government policy must be removed.

At present the City and the Banks are ‘self policing’ on matters of money laundering. It is up to them to ensure that they comply with the government’s legislation on this subject. Given that the handling of such money is very profitable the controls are very lax and most laundered money passes through the system unnoticed. The only real threat is the New York District Attorney’s Office or the American SEC. There is no real threat in the UK to such misbehaviour in the banking community. When prosecutions are made usually the initiative comes from the USA.

What I believe is essential to control the trade in drugs is proper regulation of the banking system. Government audits of the banks to check for money laundering are necessary and the sanctions must be effective when abuses are discovered, not just fines but jail sentences for offenders. It would be very easy to design the computer software to check on the origin of accounts above a certain value. If the US and Israeli government can develop computer viruses to infect the computers of a security conscious Iran and if the Chinese government is able almost at will to hack into the computers of British companies and government, designing software to check on the origin of accounts will pose no great problems. The only freedoms that would be infringed are those of wealthy tax evaders and avoiders and the large criminal organisations. The rest of us would never hold the amounts of cash likely to attract the attention of the financial police.

Obviously the banks would try to frustrate such government activity and they may well have some success, but the activities of the international drug cartels would seriously be impeded.

In Italy Pope Francis has pledged to clean up the Vatican Bank. A bank sometimes unkindly referred to as the ‘Mafia’s Bank’. The Mafia certainly recognise this as a serious threat to their activities. It was reported recently that the Mafia may make an attempt on the Pope’s life to preempt this threat to their very profitable activities. The attitude of the Italian mafia to their bank merely confirms my view of the relationship between banking and organised crime.

Economists such as myself can’t change human behaviour, but we can suggest means to mitigate the harmful effects of criminal behaviour.

There is however one caveat I must make. When a student I attended lectures given by Robert McKenzie. He told us of a conversation he had with a senior Italian politician. He was discussing the impact of US government policy on Italian politics. He said we know who are bribed by the CIA in Italy, who are they bribing in Britain? Robert McKenzie left it as an unanswered question. Similarly we know who the mafia have corrupted in Italy, the Christian Democrats and the Socialist Party, but we have no idea of who they have corrupted in the UK and it is these ‘hidden’ politicians who would try to frustrate any attempt to check the trade in illegal drugs.

Misplaced Scepticism – Public Choice Theory

January 22, 2014Economics, Politics, societyCharles Murray, Libertarian, Political Parties, Public Choice theory, Scepticismangrytunbridgewells

Today when reading my paper my eye was caught by the headline for an article on the ‘Benefit Culture’. The journalist is a self proclaimed sceptic and his articles exposing the follies of the great and powerful make good reading. Scepticism is the necessary tool of the journalist, only the journalist has the licence to speak the truth to the powerful. This scepticism has permeated upwards from the journalists to the politicians in contemporary Britain. Disappointingly the scepticism in its upward trajectory has morphed into a shallow scepticism, a scepticism of the type that ‘everyone knows’, known as ‘public choice theory’ it is one that sees public servants as only interested in feathering their own nests. A scepticism derived from the stories circulating amongst the great and good. They know for instance that NHS consultants don’t operate on Friday afternoons, as they want an early exit so they can get a round of golf in before tea. If they are making an early exit so it is more likely to being doing so to attend to their profitable private practice to service the needs of the great and the good.

Public choice theory states that it is mistaken to put more money into a public service to improve the quality of service, as that money will be spent on public servants on increasing their salaries, recruiting more staff so as to push the existing members up to higher levels of management to manage all the new staff, anything except improving the service. The solution is to introduce the free market into the public service, if public servants had to work for a private corporation they would be motivated to provide a better service. If service users become customers they will have a choice of service providers. Those that provide a poor service they won’t be used, so they will lose business and income putting so salaries and jobs will be put at risk. Only the discipline of the market can ensure a good quality service for users say its proponents. This is why the UK government has put most of its services out to tender. Security is no longer provided by the public services but is increasing replaced by private contractors, mercenaries instead of soldiers contractors provide security on dangerous overseas missions. Mercenaries instead of the army provide security on merchant vessels under threat from piracy.

Public choice theory is a foreign import, imported from the USA. Where it’s most vocal exponent is Charles Murray, a libertarian who has written ceaselessly on the evils of the state provision of public services. Know doubt his books are required reading for government ministers, along with Hayek and Friedman.

Kierkegaard devised a classic phrase to describe the thinking of the type ‘everyone knows …’ or what passes as public opinion. It is the ‘dog’s opinion’, that is equally meaningless as the noises that emanate from my dog’s mouth.

Being imbued with the spirit of scepticism the government is paralysed by a crisis of indecision. If it wants to undertake a large scale infra structure project, such as the construction as the high speed rail link between London and Birmingham, it can’t trust the project to civil servants. Civil servants would spend a large proportion of the cash on themselves on either self promotion to higher grades or spending it on new departments to take on the responsibility for the project. All of which would make the project far more expensive than if undertaken by a private construction company. To avoid this problem, the government employs for-profit private consultants. At present a £1/4 billion has been spent on HS2 largely on consultant fees. To this outsider it does not seem to be the cheaper option.

Entrusting private sector companies to project manage and construct government infra structure projects can lead to all sorts of problems. When the Labour government decided to upgrade the London Underground system, they awarded most of the work to a consortium of construction companies, who would project manage the project and also undertake the construction work . They awarded the contracts to themselves at very generous prices, with the result that the money long ran out before the project was completed.

Public choice theorists in government believe that the civil servants can’t be trusted, as they are only interested in feathering their own nests. To reduce the scope for the abuse of public funds, as few as possible of them should employed. Conservative and Labour governments have made it a priority to get rid of as many state employees as they can. This can have unfortunate consequences, the HMRC has been slimmed down so much that it tax collecting powers have been severely diminished. Now as a consequence the UK comes increasingly to resemble Greece, where large numbers of individuals and businesses avoid paying tax. Three of the multi national giants (Google, Microsoft and Starbucks), while earning vast revenues in the UK pay little or no tax on their incomes.

There is a solution to the crisis in government and that is a return to the mixed economy or Social Democracy. In the Social Democratic state it is recognised that it is the role of the government to provide those services which the free market cannot provide effectively, such as universal health care and education. This however will not happen while the current generation are in power. Conservatives, Labour and the Liberal Democrats are all wedded to the ideas of Neo-Liberal and ardent practitioners of public choice theory. Only when the next financial crises comes is there any chance of change. Hopefully after that the three main Neo-Liberal parties will be decimated at the polls and replaced by a new generation of politicians with very different ideas.

Economic Primitivism, a doctrine for the 21st century

January 17, 2014Economics, Politics, societyeconomic moderniser, economic primitivism, George Osborne, Gin Street, Hogarth, socially regressiveangrytunbridgewells

George Osborne (British Chancellor of the Exchequer) words on the EU prompted me to write this essay. He said that unless the EU modernised it would decline. What struck me was his understanding of the verb to ‘modernise’, what he meant by this was the freeing of the labour market and society from those regulations that hamper business. He wants the end of employment protection laws, those that limit the ability of firms to hire and fire workers as they please and that those keep wages unnecessarily high, the elimination from the workplace of all organisations such as trade unions which limit the freedom of the employer to innovate (particularly in employment conditions, insisting on minimum and maximum hours of work as opposed to the flexible British practice called ‘zero hours’ contracts.) There was a recent example of what George Osborne means by ‘modernising’ in Scotland. Jim Ratcliffe the owner of Ineos a petro-chemical plant in Grangemouth, Scotland, wanted a change in working conditions that would benefit the company but of little benefit to the employees, he wanted the ending ‘final salary pension schemes’, a no strike deal etc. To get the workers to comply, he shut down the plant, threatening unemployment for all the staff employed there. Added to this was pressure from both the UK and Scottish government’s on the employee’s union to agree terms which included government ministers supporting the company in media appearances. Obviously the unions and workers gave into to the employers demands. It was a good example of that effectiveness new phenomenon, the employer’s strike. Ineos now has a modern flexible labour force, willingly adopting modern work practices which enable Ineos to extract the maximum profit from each worker. It is this new barbarism of contemporary labour relations that I find unacceptable.

Society must also be modernised to achieve a good fit with modern industrial society. One enemy of the modern economy is the settled community. The British Treasury has long complained that the pattern of housing tenure limited labour mobility. Security of tenure, either long term tenure in social housing or as home ownership, stopped workers from moving from areas of high unemployment and low wages to areas of low unemployment and high wages, because they did not want to give up their good homes for less desirable ones in the areas of high growth. The Treasury achieved its aim through changes in government policy; now increasing numbers are living in private rental accommodation with little security of tenure. This means such housing can be put to its most productive use. When the Olympics came to East London, hundreds of tenants could be evicted to make room for higher paying Olympic visitors. Modernism in society means the breaking or dismantling up of any community organisation that might threaten ‘economic progress’. Perhaps the best example is the remorseless attack by all governments on local authorities, all changes in legislation have prioritised the needs of the business corporation over the local community. The powers that local authorities have to control unwelcome planning developments have been constantly diminished by government after government. Even if the council rejects an application from a ‘fracking’ company on the grounds that it was environmentally damaging, all the firm has to do is appeal to the government minister. It is extremely unlikely their appeal would be rejected.

From what I have written I cannot be called an economic moderniser; I need to find a term to describe myself. Reflecting on this I remembered a city trader who described the restrictions imposed on some dubious trading practice as Neanderthal and that made me realise that I am an economic primitive. As a believer in the regulation of the market place, I must be a believer in economic primitivism, or better put as economically regressive and socially progressive. I am amused by the screams of protest that echo round the board rooms, when it is suggested that their should be quotas for women on their boards. Obviously these men don’t recognise women as fully functioning human beings, capable of making the decisions necessary to run a successful company. Not much has changed in the City of London since I worked there in the 1960’s, when one senior member of the company explained his opposition to equalities legislation by saying ‘women are for the night’. What economic progressives such as George Osborne want is an end to all that regulation that has modernised society that is incompatible with business profitability. Gay marriage is fine but legislation that improves the conditions for women, ethnic minorities and disabled people in the workplace is wrong because it places burdens on business. All that most of us believe that makes modern society the good society he wants removed. What is his demonisation of the sick and disabled other than socially regressive. This is the same attitude as that of the Parliamentarians in the nineteenth century who opposed regulation to protect children in the workplace on the grounds that it would place an intolerable cost burden on employers. The economic moderniser is the one who opposes any social improvement that could possibly adversely affect the profits of any business.

Legislation to reduce the harmful effects of excessive alcohol consumption are vigorous opposed by the economic moderniser. They employ the strange argument that a minimum price for alcohol would penalise the poorer sensible drinker; ignoring the fact that the whole purpose of increasing the price of alcohol is to reduce consumption by making it more expensive. Also alcohol includes a toxin, ethyl alcohol and it can be damaging at even low levels of consumption. In fact the modernisers in government are very supportive of the drinks industry, ensuring that local authorities lack the power to regulate this industry in their own city. Both modernisers and the drinks industry think there is nothing wrong in recreating the conditions that gave rise to Hogarth’s 18th century painting ‘gin street’. A policy that looks to the 18th century for its inspiration is retrograde.

Unlike the members of the political class I don’t want Europe to be ‘modernised’, the modernity experiment has gone far enough. A good society cannot be one in which the average income is insufficient to pay for good housing. Does George Osborne really believe the modernisation of Greece, Italy and Spain has brought any real benefit to the people of those countries? Yet he wants the modernity experiment to continue.

If George Osborne is right, there is at choice between being an economic moderniser and a social regressive or being an economic regressive and social moderniser. There for me is no choice, GB business must accept some cut in its paper profits and some ‘regressive’ social legislation to bring about the good society. Paraphrasing George Osborne, if there has to be a choice between the ‘good economy’ and the ‘good society’, I would always choose the latter.

When Nonsense masquerades as Economics

January 13, 2014Economics, Politics, societyDavid Cameron, Good National Debt, National Debt, Nonsense posing as economicsangrytunbridgewells

Perhaps the most most abused subject by the practitioners of politics is economics. As an observer I frequently get the impression that politicians make economic policy according to their own personal preferences or prejudices. Professional economists usually follow the trend dictated by their leaders. One such nonsense is the claim by our political leaders that it is necessary to get down the government debts to produce a healthy growing economy. It seems to have escaped the notice of our leaders that the reverse has happened. This has been the feeblest recovery ever from an economic downturn, Britain’s GDP still has not returned to the levels of 2008/9. That is the pre crash GDP. This insistence on cutting government expenditure to cut the deficit, has ruined the economies of Spain, Italy, Greece and Ireland and done little more than spread the misery to the rest of they EU.

Economics has become deformed by the simplistic morality of the right. Government indebtedness has become one of the great moral wrongs. David Cameron was explaining this week that over half the money borrowed by the government was accounted for by payments to debt holders. This figure is an over simplification, but any story will do to fool the voters. What is so noticeable is that debt is only wrong if its government debt, debt is fine if its private debt. The debt fuelled housing bubble in London is fine. This government sees nothing wrong with the accumulation of large debts in the private sector. The latest figure shows that private sector debt totals 123% of GDP, even the massaged figures for bank indebtedness shows that bank debt is equal to 150% of GDP. Bank indebtedness according the Bank of England’s deputy government was almost equal to 600% of GDP. Given that the banks have not mended their ways it is unbelievable that government statisticians can claim that bank debt has fallen rapidly to only 150% of GDP. Of all these debts, government debt is the smallest, rising even after years of austerity to about 86% of GDP. To be a politician requires a certain blindness to economic reality, a myopia shared by all the leaders at Westminster.

Prior to the crash and the EU forced austerity, Italy had government debts of about 100% of GDP, yet the same time had a successful economy. There was a trade deficit with Germany, but their deficit was small compared to the debt addicted UK. The public sector debt was not a problem because it was funded debt, the majority of the debt was owed to Italians. That debt would only have been a problem if it had been owed largely by foreigners, as is the case in much of the developing world. There unlike Italy debt is a major drain on the countries resources, particularly as vulture funds frequently buy up this debt and enforce repayment terms that effectively bankrupt the country. Italy was not in the same situation of say, the Republic of the Congo, it was in no danger of being pushed to the edge by foreign creditors. The same applies to the UK.

There is an amnesia about the past in political circles about the past. UK public sector debt in the 1950’s and 60’s was for much of the time well in excess of 100%, probably fair to say it averaged 150% over this period. Yet this was also the time that the UK recorded the highest levels of economic growth in the twentieth century. Similarly the national debt for the period of the wars with France 1786-1815, national debt was in excess of 100% of GDP. Yet again this was a period of exceptionally high growth. What matters is not the size of the debt but whether it is funded and to what use it is put. Part of the high levels of national debt were due to the huge American loan (Marshall Aid) used to help finance the reconstruction of the UK economy.

Politicians accept that it is a good that people borrow to buy a house, that business borrows to fund investment, yet its bad if the government borrows to invest in the national infra structure. The consequences can be of this belief can be seen all too clearly in the USA. Republic President’s Regan and Bush took action to cut government spending on the domestic economy in the USA so as to reduce government debt. The result was the inter state highway was neglected and only recently a road bridge collapsed through lack of maintenance. One government report there stated that a large number of road bridges were in varying states of disrepair, but not I think could be classed as unsafe, they were just on the right side of the safe/unsafe boundaries. California one the richest states in the USA has cut funding to such an extent it is unlikely that they could cope with an emergency caused by an earthquake. It would be a repeat of the New Orleans scenario, where neglect of the flood defences led to catastrophic funding. Fortunately in Britain we have not had as yet to cope with such a major emergency. Could our emergency services cope with a major disaster given the cuts to such services? How much was the failure of the police to respond in sufficient numbers to the riots in London due to financial considerations?

What the Right and the current generation don’t understand is that there is good and bad public sector debt. Borrowing to build the national infra structure is good, borrowing to finance foreign wars of conquest is bad. Borrowing to cover shortfalls in tax revenue is good as it enables the government to continue with its activities and avoids any disruption to the economy.

The 1950’s provides a good example of good government borrowing. Billions of dollars were borrowed from the USA in then form to Marshall Aid. The money was used to rebuild an industrial infra structure damaged by war.

There is one problem caused by this government myopia. When the government of 1980/81 took drastic action to cut the deficit, the resulting recession wiped out 20% of our industrial capacity. A problem that still bedevils the British economy. The current recovery in the housing market is threatened by a shortage of bricks, due a reduction in capacity in the brick making industry. If there had not been North Sea oil, the 1980’s would have witnessed a series of economic crises brought on by the UK’s ever increasing trade deficits. The austerity programme of the current government has had the same effect, investment in British manufacturing has sunk to very low levels. When the recovery starts it will be cut short by a trade crisis, the recovery will suck in imports of goods that a decimated UK manufacturing will be unable to provide. Already at our current low levels of growth, the UK is predicted to have the highest trade deficit of any developed country. A debt fuelled consumer boom can only make that situation worse.

How can the naivety of our current leaders be explained. Our government is one of the best educated in history, almost all have been educated at our elite universities. The same applies to Parliament, it’s full of Oxbridge graduates. Yet the level of debate on matters of economic policy is abysmal. The yah-booing of Prime Ministers Question is a true measure of the lack of sophistication in the political debate. Possibly this contempt for reality and preference for the imagined world of the Neo-Liberal, is due to the simplicity of the Neo-Liberal story. Hayek’s ‘The Road to Serfdom can be read in the brief span of a wet afternoon. It over simplifies the economic reality, providing a few simple phrases that even the dimmest of MP’s can grasp. In the jargon of today it is not intellectually challenging. It is the illusory promise that Neo-Liberalism makes of easy but decisive policy measures that will change the world, that makes it appealing. It offers simple ( if wrong solutions) to complex economic problems. Given the concentration of political minds on the mechanics winning political points in the context of the Westminster debate, any intellectually lite discipline is welcome, as it economic decision making will require little effort and time freeing the politicians time to concentrate on the real business of politics, the machination of intra and inter party politics.

Perhaps another reason is the loss of confidence within our political class. In the 1960’s a confident USA boasted that the space race cost less than the USA spent on cosmetics. Today the space race is too expensive. The US and Britain seem to be opting out of the grown up world, the governments of both being unable to make decisions. British leaders at present present a pitiful spectre, travelling the world begging it to invest in the renewal of Britain’s infra structure.

Alice in Wonderland Economics – understanding government debt

January 10, 2014Economics, Politicshow to make the banks pay for the financial crisis, simon jenkins, wonderland economicsangrytunbridgewells

When a politician asserts in a confident tone that he knows that public spending must be cut by £25 billion in the next Parliament you know he is wrong. There are no statements of economic truth that are as if they were sacred texts carved in stone. Economics is a subject of nuances, the likelihood of an event occurring are possible or probable, never so certain that they can be cast in stone. Even such a renowned sceptic as Simon Jenkins ( The Guardian, 8th January, 2014) states that everybody knows that public spending must be cut by £25 billion in the next Parliament. He falls into the trap of quoting economic think tanks such as the IFS that say it must be so, yet he has castigated such think tanks in the past for the fallibility of their predictions. If I can misquote Kierkegaard who said that public opinion is the dogs opinion, the same can be said of the consensus of economists. It’s invariably wrong, why were so many economists caught by surprise when the economy crashed in 2008/9. The few that got it right can be numbered on the fingers of one hand.

Two things can happen in the next Parliament, either the economy can grow faster than expected or slower than expected. Never as predicted by the economic forecasters, they don’t have the insight of Gods. If the economy grows faster tax revenues will grow faster than expected so public expenditure will need to be cut by less than £25 billion or if more slower by more than £25 billion. The IFS report will include these caveats in small print at the end. That is the part that politicians choose to skip, because they want to facts that will fit their purpose, not truths.

There is one thing that economists learn in their first year course which they then promptly forget. They learn that all economies are dynamic, that is they are constantly changing in what are often unpredictable ways. Acknowledging this makes the art of economic forecasting very difficult, only if economic forecasters ignore this insight can they make predictions about future trends.

II Real Wonderland Economics

Westminster in in a ferment of excitement about George Osborne’s proposal to put into law that there should be a limit on government expenditure. This is despite the failure of the EU to ensure that the countries that signed up to the Euro should limit their budget deficits to 3% of their GDP, which nearly all found impossible to achieve. Only a politician could believe that passing a law will make the impossible possible.

If George Osborne gets his wish there will be statutory limits to what the government can borrow. Yet nobody can know what a future borrowing requirements might be. Governments always need to borrow to cope with emergencies. There will be at some future time be a flu pandemic, which will require an immediate response. Does the government limit its response and let thousands die because the extra borrowing needed to fund a response would lead to a breach the agreed borrowing limits? Unfortunately we cannot say with any certainty that the government would prioritise saving lives over breaching the borrowing limits. Once such laws are passed they tend to become regarded as part of the hallowed texts of government and should be followed to the letter of the law. All that could be said with any certainty is that George Osborne’s proposed new law will hamper any future governments ability to deal with any future crisis.

There is something very strange about the public sector deficit. It involves a financial sleight of hand. To bail out the banks in 2008/9 the government had to borrow between £28 and £32 billion from the financial markets. Two of the big four banks were effectively bankrupt, but given the large sum to be borrowed all the banks would have contributed to the loan. Therefore there is the strange situation of the two of ‘bust’ banks lending money to the government to be given back to them as bail out money. This borrowed money was used to recapitalise the banks, through the purchase of shares in these banks. By some strange cleansing process bad money from Lloyd’s/HBOS and RBS became good money when passed through the cleansing hands of government. Too put it more simply the two bankrupt banks were lending money to themselves or financing their own bailout. When the financial community clamours for budget cuts to balance the books, it should be treated with scepticism given the chicanery it is prepared to countenance to maintain business as usual.

Even if the majority of the funding came from other banks, they were largely zombie banks kept afloat by state guarantee. In the year 2009 the British government stated its willingness to guarantee all the banks liabilities against default. This guarantee amounted to 86% of the UK’s GDP in 2009. A major run on the UK banks would have ruined UK Plc and its people. What do the people of the UK get from the financial community in return for this self sacrifice? Lectures about the spend thrift government and the need to mend its ways. Not a hint that the city has learnt anything from its foolish past prolificacy.

III A proposed solution to the budget deficit crisis

There has been something unmentioned in this debate about for the need for public spending cuts. The £25 billions of cuts is probably equivalent to about the total of the government money remaining invested in the banks. Why is there no suggestion that part of the cut in public expenditure could be financed in part by cuts in the funds lent to the banks? The reason given is that to sell the bank shares now would result in a loss, because their sale price is far below the purchase price paid by the government. To save the banks the government overpaid by billions for relatively worthless shares. If the government off loaded its current shareholding it would cause a catastrophic fall in the share price of both RBS and Lloyd’s/HBOS that would result in their bankruptcy. All that can be done is to sell those shares off gradually over a period of many years, as the price of those shares has rises.The financial community understands this all too well and in an incredible act of hypocrisy it insists that everybody other than them should pay for the misdemeanours of their community.

There an alternative solution that would cut public spending by a large sum and ensure that the city bears the cost of the bank bailout. Consols are a type of borrowing little used by governments today. They are government securities that do not have a date for redemption. I remember my economics teacher telling our class in 1965 that the country was still paying for the Crimean War in 1854, as the government still paying interest on consols issued at that time. The government should be prepared to force the city to accept the undated securities equal in total to the bank bail out fund. This could be done by exchanging securities with a fixed redemption date for these new consols. The bank bail out debt could then be parked in a special fund which could be run down if and when the government sold its shares in the bailed out banks.

The advantage of having the debt in the form of consols is that the government repays them at times at which it is convenient to them. There is also a penalty that bankers could face in any future speculative crisis. These undated securities are very price sensitive so in any future speculative frenzy they are likely to see their holdings of securities devalued so will they share in the losses experienced by the rest of the country. Unlike now when any speculative frenzy is always a ‘win win’ situation for the banks.

In the government accounts this bank debt should be shown separately and be excluded from the total of government borrowing, as is any money raised by PFI schemes. It would be one giant ‘suspense account’ whose debts were owed neither by the government or the city.

The Uncommon Man or the Right to a Better Life

January 8, 2014Economics, Politics, societyCharles Dickens, Hodge, Little Nell, The Common Man, The Great Reform Actangrytunbridgewells

What I want is the right to be the uncommon man, the right to a life lived on my own terms, not a life lived in conformity to somebody else’s expectations of me. The English used to value individualism, as key feature of their national character. Whether it was the English eccentric or the stubborn figure of Hodge. The first is reflected in Noel Coward’s song, in the line ‘that only Mad dogs and Englishmen go out in the midday sun’, a reference to the behaviour of the English in colonial India. Hodge was very different he was the backbone of England, the man that formed the core of the regiments of the line, that won many a battle for England. He was a country either a farmer or farm labourer, who had the following English characteristics. Fashion left him unmoved, he was always a little behind the times. Personal characteristics included stubbornness, stoicism and a strong sense of personal rights. A person with a strong sense of individualism. Hodge is now a forgotten figure, now replaced the ‘reality TV star’, a hollow figure of all show and no heart. A confection created by the media industry lacking any real identity or sense of self.

I would like to rehabilitate Hodge as a national icon. In these current times there is a need for an iconic figure that personifies liberty and the best human values to oppose the Stakhanovite model of man urged upon us by the ‘new’ employer. The employer who believes that the best way to get a task done is to give it to a busy man. The man whose business embodies the philosophy of overwork. For whom the good employee is the one who uncomplainingly will work many ours of overtime. Recently a young intern died at one of our city banks from an epileptic attack brought on by working excessive hours. This young man was the ‘good employee’. Faust is a story that could not be written today, because every man has already sold his soul to the company.

Hodge in the form of ‘Ned Ludd’ and ‘Captain Swing’ made his opposition to the inhuman values of the new Industrial Age in machine breaking and rick burning. At the beginning of the 19th century there was widespread and violent opposition to replacement of human labour by machines. Although the authorities suppressed this violence, it was partly the fear of this violence that made the authorities agree to political and social reform. The Great Reform Act of 1832 which extended the suffrage, was passed in part due to the rumours of armies of the disenfranchised gathering in the Midlands and other industrial areas, which were planning to march on London.

What I want to celebrate is the creative Hodge. Growing up in a rural village I had the privilege of taking part in a mumming play featuring St. George the perennial English hero. Hodge being a seasonal worker had unlike the contemporary worker an ‘off season’, post harvest in which there was little to do on the farm. This left time for creative activities, all which were embodied in what is called the folk tradition. There was time for dance and music. It is from this rural community that our great heritage of folk music comes. Unfortunately much of the drama of the time has been lost, mumming plays are now a rarity in village communities. The significance of has now been largely lost.

What is forgotten is that Hodge’s opposition to the machine age was not the hard work entailed by factory work. Hard work was common to all farming communities it was the loss of liberty. Men now worked to the rhythm of the machine. There was no longer a season off for the worker to enjoy. It was no coincidence that much of our traditional culture disappeared in the 19th century. People no longer had the time and liberty for play.

Hodge’s successors in the new industrial towns worked to bring back the liberties of the past. The new trade unions and socialist parties had by the middle of the 20th century brought about some amelioration of working conditions. Hours of work were limited and the weekend became an agreed period of rest. Shop workers had one day a week was early closing, in which they had a free afternoon in lieu of the hours worked at weekends. The weekends were the time people used as they pleased whether it was gardening, DIY or sport. The Right saw this social regulation as non work time that damaged the nations productivity and they campaigned ceaselessly against it, as they believed all these restrictions contributed to the relatively low productivity of the British worker. They were able to take advantage of the periodic crisis that befall any society to sell to the political classes the idea that all problems of the 1970’s where due to social democracy. All the gains of over a hundred years of struggle disappeared as politicians eagerly adopted the cruel philosophy of Neo-Liberalism.

II
In Britain and much of the West the poverty, insecurity and inequality of the Victorian times is being recreated. Social commentators such as Charles Dicken’s can teach us a lot about contemporary society as they were all too familiar with a world of insecurity and poverty. How often does a Dicken’s story feature a family reduced to poverty. There is a scene in ‘ The Old Curiosity Shop’, where a group of school girls and their teacher come across the impoverished Nell sitting at the side of the road. Seeing Nell the teacher asks the girls what the role of a poor girl should be in life. Dissatisfied with the answers of the girls, the teacher answers her own question, ‘it is to be as busy as a bee’. Obviously the teacher regards the poor as little better than an insect. Poverty has removed from Nell the chance to choose her own life. Instead it has given somebody else the right to choose their life for them.

In contemporary Britain decreasing wages, increased hours of work and increased job insecurity deny many the right to have any real control over their lives. Poverty or relative impoverishment gives power to the employing classes, people are so desperate to boost their income that have to give the power on how to live their lives to their employers. In Britain job centres could compel a young person to work in the sex and porn industries, if it was the only suitable vacancy available to them, as a refusal could result in loss of benefit. Not as yet as sex workers, but in a host of ancillary roles, such as receptionist or bar staff. More usually the use of zero hours contracts reduces many workers to serf like status. Coffee shops may guarantee 20 hours employment a week, but staff must be on all for 15 hours a day. In this new serfdom it is the employers who dictate what life their employers must live, a life of servitude.

There is a solution to this current malaise, and that is ‘Hodgism’ so named after the sturdy yeoman of Britain’s past. ‘Hodgism’ is nothing new in 1885 Joseph Chamberlain campaigned for the right of every rural worker to ‘own three acres and a cow’. This has been scoffed at for its naivety by politicians and historians, yet that is based on a misunderstanding. I don’t know how literally Joseph Chamberlain meant it, but this was a time of great misery for agricultural workers. What he was really proposing was to give farm workers to the means to achieve some independence by giving them the means of subsistence. They will still have to work for the farmers for part of their income, but they would have sufficient independence to be able to bargain effectively with the farmer. (Farm then was casual and workers were hired for the year at fairs at the beginning of the year. This new found independence would mean they could turn their back on the cruelest of employers who paid the least and imposed the worst working conditions.

I prefer to use the word ‘Hodgism’ to either socialism or Marxism. The latter is discredited through its association with the utopian communist state and the former is too easily misunderstood as meaning absolute inequality of income which can easily be discredited. There is just too much ideological baggage attached to socialism. If any politician campaigned for socialism there campaign would be lost within a stale debate from the past. What I propose is a more realistic alternative.

‘Hodgism’ to me means giving everybody sufficient independence to live their life on their own terms. Insecurity is the bane of our time, people lack security of employment and tenure. Life lived in fear of losing your job or home is destructive of the human personality. There is a photograph from the Victorian era of a young woman in her twenties, but the harshness of her life makes her look like a woman in her sixties. Current trends might make such women a feature of our society in future. What I want is the independence for all to live a life on your own terms which will come from the regulation of work and housing, neither of which will be granted easily by employers or landlords. Income and the cost of living need to be addressed. Regulation could ensure that people received the living wage and rents were kept under control.

Today in Parliament at Prime Ministers Question Time, David Cameron rejected the idea of extending the minimum wage to agency workers. He claimed that this would lead to increased unemployment as firms would no longer be able to afford to employ these workers. Wages in the UK are at the lowest level historically as a share of national income, yet unemployment remains stubbornly high. Apprentices from the job centre can be paid as little as £2.50 an hour yet youth unemployment stubbornly remains at 20%. If wages were higher employers would have to treat their employees better as they would become too valuable a source. Society has forgotten that in the 1950/60’s when labour benefitted from labour protection laws, when trade unions or wage councils ensured that all received a reasonable income, many lived in low cost social housing, unemployment was below1% all items that feature in the economists nightmare, economic growth was far higher than it is now.

Karl Polyani is a forgotten figure, yet what he wrote in his seminal text, ‘The Great Transformation’ is still true today. The free or unfettered market is destructive of the good society. What our governing classes should not be the imagined or illusory Neo-Liberal paradise, but the best possible achievable society. The Britain of the 1960’s is a good place to start.

The New Paganism

January 1, 2014Economics, Politics, religion, societyBoris Johnson, free market economics, Non European and Women Priests, popular religion, the new idols, The new paganism, Varroangrytunbridgewells

My early education was in a Church of England primary school, in which we the pupils were taught the superiority of everything that was English. Our Head Teacher always spoke of regret of the passing of the empire and its replacement by its much inferior substitute the Commonwealth. Although I’m sure that she called it the British Commonwealth. Religious education as should be expected formed a significant part of the curriculum. However our religious education was infused with a strong sense of Britishness. We learnt about David Livingstone who took Christianity to the primitive idol worshipping tribes of Africa. Of Gladys Aylward who took Christianity to the barbarous Chinese. What we were taught was the superiority of the British religion to that of the barbarous foreigners. The religion of England was surely the culmination of religious development over the past two thousand years, it was the physical embodiment of Christ’s promised earthly paradise. Heaven was very much an incidental feature of this religion. It was an unspoken assumption was that a heavenly paradise was hardly necessary if you were fortunate to be born an Englishman.

A phrase was much used then in the description of the non white commonwealth as ‘idol worshipping’, a phrase used to insinuate the superiority of English culture. It was a strange education, as my only knowledge of Hinduism was the practice of suttee or widow burning, a practice stopped by enlightened Englishmen. I am being a little unfair as I also learnt about the practices of a cult of Kali called the thuggee, who murdered people as a sacrifice to Kali. Another devilish practice stopped by enlightened Englishmen. We also learnt about the paganism of classical Greece and Rome, which was brought to an end by St. Paul and the Christian fathers. It was a curriculum I imagine that had remained largely unchanged since the height of Empire in Victorian times.

The purpose of this digression into the nature of primary education is to suggest that this superiority is unjustified. There is in Britain a new paganism in which the idols worshipped are as barbaric and cruel as those of classical Greece, Rome and the non-white British Empire. However it is not recognised as such.

At the risk of over simplification the Greeks and Roman’s made deities out of natural phenomena. Vesuvius was the workshop of the blacksmith God Vulcan, night was the work of the Goddess Nocturna and Aeolus was the God of wind. Natural phenomena were given human like personalities, which made communication with these formidable powers of nature possible. While control of these phenomenon was impossible, through sacrifice and prayer they could be persuaded to look favourably on mankind and not release their destructive powers on them. Romans of the late empire even took to the practice of chaining up statutes of their Gods in their temples in an effort to control them. Mars the destructive God of war was one of those most frequently chained up, as if he ever left the temple devastation would follow in his wake.

Contemporary practice is very different instead of deifying natural phenomena, human practices of a certain kind are deified. The purpose of giving certain human practices and institutions the status of Gods, is to give them power over us. Once they are defied the rules and practices of these institutions cannot be questioned. Any questioning or disobedience of the rules and injunctions will bring about human suffering. The human institution that has been given this God like status is the market. Belief in it is so complete amongst the political, financial, commercial and industrial elites that no action contrary to its mores can be contemplated. This belief leads to practices as nonsensical as chaining up the statute of Mars to prevent wars.

One such bizarre practice is the payment by results inflicted on the probation, employment and welfare services. Worshippers (politicians) of the God Free Market, believe that probation will be made more effective if the service is incentivised by a payment by results system. Probation officers will be incentivised to work hard and use the best methods of reforming former criminals if they know that the income of their business and ultimately theirs depends on their success at reforming former criminals. While this practice betrays a poor understanding of human nature (one motivated primarily by fear and greed), it is as unworkable as chaining up the God, Mars. The only real measure of the success of this scheme will be at the end of the life of this former convict. If they had after probation lead a relatively blameless life, then the payment should be made. However no business could wait thirty or forty years for payment, so instead a series of arbitrary and meaningless targets are imposed. I am not sure of the targets but if an ex offender has not offended say within six months payment is made. This says little about the effectiveness of the scheme as they may go on to offend at a later period. In the profit driven companies since profits depend on results, all types of statistical manipulation to massage the figures to suggest that they are more successful than they are in practice. The short time span of the memory that is that of the average government minister is remarkable, as the manipulation of the statistics for the tagging of offenders by G4S and Serco has already been forgotten.

What can be expected is that violent offenders who have been declared reformed as they have not offended within a given time span, will inevitably offend again. There appears to be no scope the reclaim payments made for such ‘apparent successes’. If cash payments motivates people to do their job well, the fear of losing that payment should make them even more eager to work well. Its a scheme that does not seem to have any consistent logic. However for true believers in the free market, there can be no flaws in the market driven schemes they propose.

Blindness to reality is suggested by the fact that the most difficult of cases will be left in the hands of the rump of the old public service motivated probation service. If the scheme works for one group of offenders it should work for all.

There can be objections to my use of the word religion to describe the actions of advocates of market economics. However if religion is seen as set of non rational beliefs (not open to rational debate) or first principles that guide human practice, belief in the superiority of the free market is a religion. Men have created a new idol to worship, the free market. The principles of the free market should guide and inform any human action. It is not a philosophy a coherent set of rational principles which can be subjected to debate. If in doubt listen to the words of any government minister, as their speech is full of unquestioned assumptions about the superiority of the free market.

It was Varro who coined the term popular religion, by which he meant the stories and festivals that captured the popular imagination. The market is the new popular religion, it has subverted religious festivals into festivals of consumer over indulgence. Easter the time in which Christ’s sacrifice and rebirth is commemorated has been replaced by a celebration of pleasure, chocolate Easter eggs are eaten, it is the time of spring holidays, the benign Mediterranean spring climate making it a popular holiday destination.

There are also a set of new stories of the popular imagination that explain the world in which we live. Stories that can only be called consumer morality tales. On such is rooted in the housing market, stories of wonder about house buying and selling. Morality tales about the successful home buyer, the one who brought and sold at the right time and who now is a millionaire abound in the popular culture. Boris Johnson is one of the prophets of the new popular consumerist religion. In his speech as Mayor of London, he extolled the virtues of greed and envy to the assembled dignitaries. Self servicing virtues that justify the activities of London.

Given the lack of any counter ideology or religion within the governing classes, change can only come from outside of them. Is Occupy the precursor of future popular movements that will be needed to reclaim Western society for the people from the plutocrats? However any resistance movements will need to be motivated by a greater vision, a religion of optimism. Is Pope Francis with his reforms of the corrupt Roman Curia, a sign that the time of the old religion of the market is finally in decline?

One final thought the Roman Catholic Church is dying within Europe through lack of recruits to the priesthood, as was the Church of England. They have both sort solutions in different ways, the Roman Catholic Church is importing priests and nuns into Europe from the developing but Christian Third world and the Anglican Church is replacing the missing male priests with women. Is this the solution that Western societies salvation as the churches must come from former marginalised groups. Groups who through their very exclusion from power were not tainted with the religion of pessimism, that permeates the dominant white male culture. Do they only have the vitality and enthusiasm necessary to transform society?

The Poverty of the Political Imagination

December 31, 2013Economics, Politics, religionPoverty of Imagination, Religions of Pessimism and Optimism, social democracy, Sorelangrytunbridgewells

What concerns me is the smallness of the thinking of the current generation of political leaders. British politicians have never been noted for their intellect. John Major best typified the thinking of British politicians when he spoke of the need for the ‘vision thing’. This smallness of thought is an accelerating trend amongst the political classes. We have a prime minister who was regarded by his tutor a one of the brightest in his class yet all he has given us is a vague vision of the ‘Big Society’, which turned out to be little more than an election slogan. However it is in the so called ‘nudge unit’ that his true vision is exemplified. There is to be no challenging of the political or social consensus or any powerful interest group. Instead there are to be small changes in policy, so small as to be unnoticeable that will persuade people to improve their behaviour.

I guess for a conservative it is comforting to know that the current society is ‘the best possible’ of all of societies. For an extremely wealthy man and his circle of friends there is no need for any change that might diminish or threaten their wealth. The homeless and hungry are so because of their idleness. Any attempt to improve their circumstances is wasted because they any attempt at improvement would be self defeating. They share the attitudes of their predecessors who opposed putting bathrooms in the houses of the working classes, as they would only use them to store coal.

This time of year we are all constantly treated to showings of the Dicken’s fable ‘Scrooge’. At the beginning of the story Scrooge is visited by people collecting money for the poor. Scrooge’s reply is that are there no workhouses? He refuses to give any money as he believes that idle poor deserve no better than the cruel workhouse. In the course of the story he learns the error of his ways and repents his meanness. The story is always seen as a story from our cruel past, rather than seen as an accurate depiction of the cruel present. Can anything be more contemptible than the well feed rich who are our rulers condemning the poor to a lifetime of suffering for their assumed idleness.

Both our Prime Minister and his deputy relied on family connections to find well paid work in the world of commerce and media. How can they condemn those that lack those advantages to advance their career?

When analysing the causes of our current social malaise, economists are all too ill equipped to suggest solutions. One of the best analysis of our current malaise was put forward by the columnist Simon Jenkins, who said that our political decision makers suffer from the curse of indecision. This is not only a UK phenomenon, the current crisis has brought out the worst in political classes of the West, they cower before the dysfunctional all powerful market proclaiming their own powerlessness. Rather than a Roosevelt we have an Obama, or a Merkel rather than a Kohl, all who in unison proclaim their powerlessness before the all powerful market. The religion of pessimism has them firmly in its grasp, as all they can suggest is a minor amelioration of people’s misery by appeasing the all powerful market.

Appeasement always takes the same form, cut government expenditure, reduce taxes to release the energies of the powerful giants of industry to rejuvenate the the economy. Failing to notice that our leaders of industry are as frail and impotent as our politicians. They are like so many Wizard of Oz’s, small men who when viewed through the distorting lens of the business corporation appear as giants. Such men are reassured by the fairy tales of such as Rand, Friedman and Hayek who portray them as the movers and shakers of our society, when in reality they are diminished human beings interested only I n increasing their ‘take’ from the business. Others such as politicians believe in this myth and like some pre-historic priest make gifts to these new Gods of the market in the hope that they will smile benignly on them; gifts such as generous tax breaks, indulgence the worst of tax avoidance schemes.

Our legislatures engage in endless rounds of meaningless activity to disguise their inability to tackle the real problems of society. In the face of the worst housing crisis in history all the government can do is offer some funding for new house buyers. A policy that won’t upset the supposed giants of the construction industry, as it does no more than provide a few more new homes at great profit to that industry. Facing a much worst crisis the post war governments of the 1950’s and 60’s embarked on the largest house building project in British history. A project way beyond the imaginations of our current rulers. The great industrial power house that is the USA is scarcely any better at decisive and imaginative policy making. How would the former giants (Fulbright etc.) of Congress view a Congress than can only unite on such trivia as agreeing to classify the tomato sauce that goes on pizzas as one of the five vegetables/fruit that Americans should eat everyday? Its irrelevant that food scientists would regard this decision as a nonsense. What matters is that the powerful food processing industry should be appeased, it must be protected from legislation that might be harmful to its profits.

What has happened? In the 1940’s and 50’s the House of Commons would fill when there was an expectation of a debate between the two titans of right and left, Churchill and Bevan. Who today would willing rush to the Chamber to hear a debate between Cameron and Miliband? In the USA former Presidents such as the two Roosevelt’s and Kennedy bestrode the globe like colossus, now their like has disappeared from the American political scene. Eisenhower the much under rated President warned of the power of the ‘industrial military complex’, while today President’s Bush and Obama seem only to willing to do their bidding.

What has been lost is the vision of a better world that inspired these men to achieve great heights. Certainly they were flawed individuals, yet their vision enabled them to over come their flaws and offer real leadership to their nations. Our current society would disqualify Roosevelt from high office because of his womanising and Churchill because of his excessive drinking, preferring modesty in behaviours and thinking. What is required is a new religion of optimism, which would inspire a new generation of leaders to create a better society. Not a religion of pessimism that forces politicians to view themselves as flawed weak individuals who can best serve their society by doing nothing, believing that their meddling would only make things worst. All that is allowed in policy making is measures to appease the Gods of the market.

III

It is dispiriting to look to our political classes for leadership. They all proclaim their helplessness in face of the current crisis. One suspects that they find comfort in this shared sense of helplessness, if their rivals espouse helplessness, there is no pressure to come up with solutions. In the UK the coalition government have the good luck to have their understanding of the current crisis shared by the opposition. The opposition share the belief that their priority should be cutting the size of the government deficit. Given that neither have an effective policy for achieving that, any future government will waste its energies on cutting the deficit to the exclusion of everything else. Policies that one would expect of a Social Democratic Party such as reversing the privatisation of the health and education services will be excluded on the grounds that they would cost money and do nothing to reduce the deficit. A mean shabby policy that suits our mean spirited times.

If we consider the raw material of our leadership classes, they appear no worse and possibly even better than those of the past. Charles Kennedy was forced out of the leadership because of his alcoholism. Yet by common consent one of our greatest leaders Winston Churchill was a depressive and heavy drinker. Given such unpromising raw material why did Churchill achieve a greatness, that is impossible for the current generation of politicians? Churchill was moved by a religion of optimism, he believed that the English had a unique heritage and future and it was his destiny to help the English attain this greatness. He believed in the genius of the a English speaking peoples. A contrast to the preference of the current generation for small minded and modest thoughts. Ed Miliband epitomises this trend, he believes in ‘under promising’ and ‘over achieving’, such philosophy has no place for the grand vision that motivated Churchill and his political rivals.

I see a solution to the current impasse in the writings of Georges Sorel. He concluded that what mattered was not the embedded truths of an ideology, but the myths that inspired people to action. He used the history of socialism to demonstrate the truths of his proposal. What changed society was not the superiority of socialist thinking, but the willingness of socialist activists to endure untold pain and suffering to attain their ends. A socialist could die happy in prison knowing that his sacrifice was merely part of the struggle that would lead to the success of the working classes. Such activism was responsible for the introduction of cheap social housing and a health service free at the point of use. Greed the main motive of the capitalist classes could never produce martyrs willing to die for the cause, which is why for much of the twentieth society they were on the defensive. They had rely upon the organised church to provide a spiritual vanguard for capitalism. Bishops were always able to distort the Christian message into one of support for a capitalist ideology by sanctifying the political and social leadership of society, as being God given.

What our current political classes need is a new religion of optimism to enable them to overcome their inertia. Flawed individuals can achieve greatness, our greatest leaders have been depressives, alcoholics and womanisers. Unlike the current political class they did not believe that their frailties disqualified them from greatness. Our current leaders having such a pessimistic view of themselves and humanity, that they believe they have no moral right to prevent the nastiest and most anti social of behaviours. Behaviours that in more enlightened times which were discouraged by government action are now encouraged. Restrictions on gambling despite the misery it can cause have been removed. The same applies to excessive alcohol consumption. In the recent past
our legislators debated banning boxing because of the damage it inflicted on its participants, now our government is encouraging the spread of the most violent of sports, cage fighting. The philosophy of our politicians is that anything can be permitted for which there is a demand, now matter how demeaning, damaging or barbaric. With such a philosophy they are unable to turn their their gaze upwards and encompass a different vision of mankind. A new religion of optimism is needed to drag them out of the mire.

Dark Religion the Return of the Old Gods

December 11, 2013Economics, Politics, religion, societyOld Religion, Religion of Optimism, Salvationist Religion, The age of Fearangrytunbridgewells

There seem to be two competing strands that make up contemporary religion. There is the compassionate Salvationist strand and the much older harsh dark religion which sees mankind as but a minor player in a cruel world, that is largely indifferent to man’s needs. The first began the flourish in the last centuries BCE beginning as early was the 5CE with the teaching of Buddha. As Christian I would see this trend culminating in Christ’s life in 1BCE. Others would see this compassionate religion of hope triumphing in the other Abrahamic religions of Judaism and Islam. However this religion of hope has always been in an unequal struggle with the older dark religion. From 1CE societies were dominated by religions in which these two strands intertwined to make up the common religion. Unfortunately the older dark religion has tended to prevail in this relationship, as that religion best suited the interests of the most powerful groups in society.

One of the oldest best known examples of the clash of the two religions is demonstrated in the trial of Socrates in 399 BCE. Historians have tended to dismiss the validity of the charge of impiety, as as a trumped up charge used as a means of silencing the foremost critic of Athenian democracy. However I would argue that the charge of impiety was justified. Socrates defence was that he did worship Apollo, but his Apollo was a different Apollo to the Apollo of the Athenian City State. There was the Apollo of the city of Athens, a God that celebrated the triumphs of Athens and protected her against her enemies. Opposing this was Socrate’s Apollo a moral God, the source of all that was good. These two Gods would have had very different attitudes to the Athenian attack on the island of Aegina and the subsequent enslavement of its population. The God of the Athenians would have celebrated the triumph of the city, but the God of Socrates would have regarded it as unjust. Socrates had to die as he was an enemy of the city. He was corrupting the youth, by teaching that the moral code than governed Athens was unjust. He was proposing an alternative morality. When it came to an exercise of power the old cruel religion must triumph.

There was a revolution in religious thinking in the latter centuries BCE. Siddhartha Gautama the founder of Buddhism taught his religious philosophy in the 5th century BCE and in the 2CE to 3CE, Hinduism was reformed, Krishna becomes the Supreme God in the Bhagavad Gita. Moral philosophy flourishes in Classical and Hellenistic Greece in this period. The imprint of Greek moral philosophy is found throughout Christianity from St John’s Gospel to the writings of the Christian Fathers such as Tertullian and Augustine. There were the numerous reform movements within Judaism, such as the Pharisees and Essenes at the same time. There must be some commonality to this religious flourishing in this period. That commonality must be the rise of an educated class that developed in the great trading cities. Cephas or St Peter is said to relocated to trading City of Tarsus from Jerusalem. What better place to preach a new religion. Is it no coincidence that both St. Paul and Mohammed the creators of two of the great Abrahamic religions were both traders, members of the new wealthy educated merchant class? This wealthy educated merchant class were the groups from which the prophets of the new religions sprang.

This new trading class that developed in the great cities of the Mediterranean and of the Middle East would not be satisfied with the crude simplistic religions of the past. They were educated and would not be satisfied with stories such as those which explained the seasons, in which Demeter (Goddess of Agriculture and the Harvest) who by returning to Hades every Autumn to be with her daughter in Hades caused the onset of winter and plants to cease their growth. Members of this class had through astronomy discovered the earth revolved round the sun and this caused the change in the seasons. They knew the earth was circular, so all mythical stories about Atlas holding up the earth they knew to be untrue. Old religions were the religion of the collective, the city or the state. Performing the rites of the old religion protected the state, but ignored the interests of the individual. These religions were devoid of any morality, Zeus demands Agamemnon (leader of the Greek army attacking Troy) that he sacrifice his daughter to him, before he will change the winds so the Greeks can sail on to Troy. Needless cruelty to mankind is inflicted on them by the Gods in all the stories of the Olympian Gods. This newly confident educated class demanded a better religion, one that met their aspirations, one that recognised the value of the individual life, not one that did not suggested that the supreme good was to sacrifice their lives for the collective.

Christianity was that religion it valued individual life, a virtuous life was rewarded with a heavenly after life. It was the religion of achievement, one that rewarded the good life. A religion that promised redemption from earthly suffering, the hope of a better life offered more to the individual than the old religions of the collective. It was the religion of change not social stasis. ‘The last would be first and the first last’. Inherited status and position meant little to this new religion, the aristocrat was no better than the slave.

It is forgotten that the barbarians who sacked Rome and conquered the Western Roman Empire were Christians. The Goths were no dark age people, but believers in the new religion of optimism. Within a brief time Christianity, the religion of hope had become the religion of the Mediterranean and the Middle East. A few centuries later a new religion of hope (Islam) replaced Christianity in much of the Middle East. A society dominated by a newly confident trading class needed a religion that expressed hope for the future, not the pessimistic religion of the old ruling classes. Who opposed change as it threatened their dominance of society.

What I find hard to understand is the disappearance of the religions of hope from the public consciousness in the present century. Ours is a scared age, the confidence of the past is lacking in our commercial and governing classes. Construction projects that our Victorian predecessors would have tackled with gusto are indefinitely postponed or passed on to more capable others. Our governing classes are like a beggar appealing for crumbs from the table of the international finance asking for their help to complete projects they lack the confidence to undertake. The Chinese are constructing new docks in the Thames basin, Dubai runs our ports and now David Cameron is begging the Chinese for their help in constructing HS2. A cynical view could be taken of the constant abasement of our leaders before significant others, notably the Chinese; when in fact it is their belief system that compels them to do so. They practise a religion of pessimism, which minimises the role of human agency. The world cannot be changed for the better, that for them is naive social engineering. The best that they can do is to appease the powerful market forces that shape our world, forces beyond their control. If to reduce unemployment means requiring workers to work for poverty level wages, that is better than going against the market by imposing high minimum wages, which they believe would only increase unemployment and poverty.

The newly acquired religion of pessimism suits a scared ruling class, who are fearful of any change that could threaten their wealth. Technological innovation can provide new sources of wealth and finance a new class who would replace them in the social pecking order. What they want is a policy of social stasis, an acceptance that things will remain as they are. If they can poison the public discourse with the religion of pessimism, they can indefinitely delay any threatening changes. This religion of pessimism dominates thinking within the governing and thinking classes. There is not one politician that promises more than a small amelioration of the cruelties of the current social system.

The belief in a malevolent world in which human beings are the mere plaything of market forces, is merely an updating of dark religions of pre-modern times in which humanity was the plaything of the Gods. Human sacrifice was seen as necessary to appease the Gods in Iron Age Britain. Now the market requires the sacrifice of the welfare state, and those social artefacts that make for the good life, for some imaginary better future. As imaginary as the Iron Age visions of the after life. There is a persistence in the practice of the dark religion by our rulers, they always resort to it in time of difficulty.

I realise that my understanding of religion is not the conventional one. I do not believe a religion requires a belief in supernatural beings. It is possible that there can be a secular religion that lacks belief in such beings. A religion can be defined as a non rational belief system that informs a person’s conduct. It is non rational in that its truths are self evident and not open to question.It is the unquestioned source of all truths. The secular religion of our governing classes is a curious mixture of Neo-Liberalism and Social Darwinism. Inconsistencies and contradictions within this belief system don’t matter, it’s an article of faith that is never questioned. Envy is both a virtue and a vice, a virtue when it motivates members of the right class to emulate their betters, but a vice if its the class envy of the lower orders.

Secular religion has as with other religions has a meta narrative which explains the world and the individual’s position in that world. People are both suppliers and consumers and it it their position in the seller consumer nexus that gives them their identity. A material cosmology in which individuals are understood in their relation to the market, as buyer or sellers. No other identity is of any consequence.

While lacking a supreme being who is the source of all truths; the secular religion does have the market which is the source of all truth. Believers in the market don’t have to demonstrate the superiority of free enterprise over state enterprise. Even if the East Coast Railway is making a profit (unlike the former private enterprise owners of this railway), believers know it will be better off in private hands. Evidence to the contrary is ignored, without being unfair it can be said that the free enterprise fantasy is preferred to hard truths of economic reality. It is at the opposite end of the continuum of fantasy beliefs that culminates in mass suicide cults such as ‘The Heaven’s Gate’. Both religions are destructive of the well being of humanity.

Perhaps one of the factors in the decline of the religion of hope, is that is it no longer fulfils a need for the governing political and commercial classes. They see a hostile world that is constantly threatening to deprive them of their status and wealth. What they cannot see is a bright future for them. In domestic society all the discriminations that helped assure them of their status are being swept away. Women and openly gay people now hold positions of power, the power of rich white hero-sexual men is under threat. Why else do Tory MPs resort to crude sexual gestures when female Labour MPs are speaking? Its a rear guard attempt to drive out women from the last remaining bastion of male power, the House of Commons. A failing economy and rapidly weakening military deny them influence abroad. The jibe about David Cameron’s failed sales trip to China; resulting in only an order for pigs semen has the echo of truth about it. This is why they cling so desperately to icons of past glory such as the Trident weapons system.

What this group needs is a religion of reassurance. This is why the rediscovery of the old dark religion is so important to them. It pictures a malevolent world that constantly threatens them and to meet these threats they need to be as brutal as the world that threatens them. As Boris Johnson so eloquently puts it, the intellectually defective 16% and the ‘socially ineffective’ have no place in this world. They should consider themselves lucky that they are allowed the means to survive. These people are no asset in the competitive struggle which the powerful titans of commerce and business wage against each other. Their poverty level wages are the price of their non success. When Nietzsche spoke of the superiority of the Teutonic ‘blond beast’ he was merely predating the stories Rand and Hayek tell of their capitalist successors. A religion of pessimism gives a failing but predatory capitalist caste their myth of superiority. It justifies any action they might take to cling on to their power.

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.