Category Archives: Politics

The Corporate Superman Myth and the decline of British industry

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Image of Superman taken from bbs.sxrb.com

The of Theory of the business superman or why the British economy is constantly under performing

The readers of Marvel comics are not the only believers in superheroes and supermen, so are British politicians and other members of the various elite groups. Readers of ‘Superman’ realise that it is only a story but that is not true of the British political class, they do believe not only in one but several supermen. In the original ‘Superman’ can be rendered helpless and weak by kryptonite and the belief in British political and business circles that there is a kryptonite in the British society which turns business supermen into ordinary weak fallible human beings. It is this kryptonite which is responsible for the constant poor performance of British business.

What is this kryptonite that turns members of the business elite into mere ordinary mortals, that prevents these supermen from ever shedding their Clark Kent persona and revealing their true nature? This kryptonite is something known to us all, it is high taxes and over regulation, the familiar red tape. Governments have responded quickly to remove this poison from society. Taxes for the productive entrepreneur have been reduced by staggering amounts, from a marginal tax rate of 79% in the mid 1980s to 50% today. In fact few executives pay the 50% income tax, as a pro-business has made it possible to reduce that tax burden to 2%, through offshoring income to what in effect are shell companies. In fact the government through Her Majesties Revenue and Customs (HMRC) have collaborated with rich individuals and big corporations to help them reduce their tax burden.

The other poison which paralyses these supermen the government has reduced to such a minimum that its toxic effects are barely noticed. The government has reduced the cost of labour by removing all those employment protections that pushed up the cost of labour for the employer. Trade unions have been so emasculated by legislation that they can no longer effective bid up the price of labour or even resist the reduction in its price. The recent industrial problems at Grangemouth illustrated this when the government supported the employer Ineos in its planned programme of wage cuts for refinery employers. In the same vein the government has removed most of the employment protections that prevented employers using their workers as they please or how they believe they will be used most effectively. No longer does dismissing a worker involve expensive redundancy payments or trip to the industrial tribunal to defend against the claim of wrongful dismissal. (The government has reduced the possibility of employees taking their employer to an industrial tribunal by imposing a tribunal fee of £1200.)

If the stories of the business superman had any truth in them Britain would now be one of the most productive and prosperous countries in Europe, as it would be not only the fastest growing economy in Europe but also the world. However the reverse has happened economic growth has remained mediocre, increasing numbers of people have been falling into poverty and the productivity of the British worker has fallen. What political and business classes failed to realise was the main cause for failure lie not within a poisonous anti business society, but in the very ordinariness of the business class. Rather than being a superior group they are very like the other members of society, no better or worse. They don’t have any special talents. People such as Michael O’Leary the Chief Executive of Ryanair are unique, few business leaders have their acumen. Rather than liberating the inner superman the changes have liberated the inner Clark Kent. A series of mediocre managers claim the mantle of an O’Leary vastly overpaying themselves and underperforming.

At present I am reading Robert Burton’s ‘The Anatomy of Melancholy’ and the words that he quotes from an unidentified philosopher on leadership which ‘Of an infinite number, few alone are senators, and of those few, fewer good, and of that small number of honest, good, and noble men, few that are learned, wise, discreet and sufficient, able to discharge such places’ (p.82) these are words that our hero worshipping politicians should heed. What instead of there being a group of supermen running our business corporations, there are instead a group of Clark Kent’s who should never aspire to leadership positions.

What economists of a Neo-Liberal persuasion, politicians and business classes fail to realise is that high status and superior position does not confer greatness on an individual. Yet all too often these people assume the role of Demi Gods, regarding themselves as superior to the ordinary run of mankind. Again I rely on the words of Robert Burton to express the reality of this situation. He writes that where the wrong type of men are in power ‘all things are ugly to behold, incult, barbarous, uncivil,a paradise is turned to a wilderness” (p.86)

Given that men in power whether in business or politics are more often than not men of mundane abilities and wisdom, they are unfitted for roles of leadership. They will abuse the position which they are granted, often using it to extort from the company large sums in payment for their services. There are occasions when it is hard to believe that these people are working in the interests of the company rather than themselves. Given positions of responsibility for which they are unfitted, these men will either through their mediocre performance turn the business is into a underperforming one or through their recklessness bankrupt the business. Despite the claim that in a competitive market economy there is no reward for failure this is untrue for senior company executives. The failing director is dismissed with a generous severance package, so generous that they will never experience want. If the company fails through their incompetence they will have taken steps to ensure that their income and wealth is protected. Any observer of the Stock Exchange will be able to name companies that thorough the incompetence of their senior executives have ended up in the hands of the administrator.

It is not the interest of the common good that these mediocre individuals should be allowed to run large business enterprises as they please. There needs to be some legislative or regulatory framework that forces senior executives to improve their performance. What is notable is that there has been a collective dumbing down of business management since the bonfire of regulations that was the Neo-Liberal economic revolution, as these executives are accountable to non one. The one exercise in democracy the company Annual General Meeting is but a stage managed show in which the company directors talk about how well they have performed.
One change that would improve the performance of these under performing executives is a change in the law that made company directors and other senior executives accountable for the poor performance of the business under their stewardship. A financial charge on those directors incomes and wealth made in the event of the firms failure would see the end of much poor and irresponsible decision making. Bankruptcy law as it protects poor performing senior executives from any financial penalty as all debts to creditors are charged to the failed business, never to the executives who drove the business into bankruptcy.

The author believes that what is desperately needed is a new statutory regulatory framework to force senior executives to work to a higher levels of performance. A system that imposes no penalties for failure allows many corporate duds to thrive in the board rooms of British businesses. Neo-Liberalism goes against the grain of human nature as evidence demonstrates that the corporate geniuses are few and far between, and the so ordinary people that dominate businesses are incapable of performing well in a regulation free world. A much tougher regulatory regime would not prevent the few corporate geniuses such as Michael O’ Leary from thriving. What it would do is prevent British board rooms being dominated by the corporate duds, as is so often the case now.

Bad Economics and bad politicians, why the West is heading for yet another financial crisis

When I read any accounts of the debates conducted by the Republican candidates for the role of President, I am filled with despair. They all demonstrate astounding degrees of economic illiteracy, a tendency all too common demonstrated by politicians this side of the Atlantic ocean. The only economic topic deemed worthy of debate here is how to reduce the government debt. Economic illiteracy rules out the obvious solutions such as reversing the trend to reduce the tax take from the super rich and business corporations, as one conservative politician said increasing tax on the rich is immortal. Instead in one of the richest countries in the world there are constantly circulating in the media stories about how this poor country cannot afford to provide for the welfare of its citizens.

Economic illiteracy also prevents politicians in Britain discussing the more serious deficits that is those of the private sector and the banking sector, which are x2 and x5 greater than the government deficit. Only a self denying ordinance based on nonsensical theories about economics could possibly explain this strange politics.

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Ronald Regan image taken from the internet

America provides a good example of nonsense economics. Before George Bush Snr. was chosen as Vice President by Ronald Regan he described his economics as ‘voodoo economics’. What Ronald Regan was proposing was to cut federal taxes, spending on environmental and welfare programmes while increasing spending on defence and military aid to friendly states. Ronald Regan also said while doing these he would cut the government deficit. What his advisors had failed to understand was that defence spending was one of the great sources of ‘pork barrel’ politics. Many Congressmen and Senators had large defence industries in their states and what they wanted was massively increased spending on defence. The voodoo or nonsense was that while they paid lip service to cutting government spending, they constantly voted for the opposite. Under the presidency of Ronald Regan the government deficit spiralled upwards and none of the constant hand wringing over the problem did any good. It was not until the Presidency of Bill Clinton and the introduction of more economically literate policies that the budget deficit declined.

It is a truism but economic good sense is always rejected by politicians if it goes against their long held prejudices. Unfortunately British politics as with American politics is dominated by nonsense economics. One of the most common foolish prejudices is that if its not hurting its not working. This is a very selective hurting as the hurt about which British politicians enthuse is the hurt that they inflict on the poor and those on middle incomes. Great efforts are made to ensure the pain is not registered by the better off, who benefit from tax handouts or tax cuts to protect their income.

Hubris a neglected economic concept

While some economics is nonsense there are significant truths in the body of economics that politicians ignore at their peril. The temptation for any politician is to rewrite economics according to their own prejudices and personal beliefs. They can achieve this because the economy has constantly grown since the beginning of the century (apart from a few downs) and they can claim that this growth is a result of their policies. It is extremely hard to disprove such claims as the economy is such a vast complex mechanism and it is extremely difficult to distinguish cause and effect. Once in an economics seminar I and my fellow students argued for over an hour whether or not it was possible to identify the effects of a particular economic policy as by the time it began to take effect the economy had changed and it could not be known to what extent the improvement in the economy could be down to a particular policy measure or a change in the economy. The smartest of politicians took advantage of this uncertainty to rewrite economics according to their own personal preferences, as it was extremely hard to produce evidence to prove or disprove their theory. They were aided by a certain complacent belief amongst economists that the economy was self sustaining and that even the worst of economic policies would only have a small negative impact on the economy. In addition there is the Lysenko factor, that is many economists are only to willing to rewrite their economics in deference to the wishes of their employers, as that the way to preferment and prestigious academic positions.

Once politicians realised economics could be bent and reshaped according to their own personal whim, they began to treat economists as propagandists and not advisors. Economists became a servant of their political masters to be used and abused as they pleased. Whatever the failings of particular economists they are nothing as compared to that of the politicians. The arrogance of politicians is such that they are unaware of the dangers of the policies they practise. The classical Greeks had a word for this hubris, that is when ambition led men to overreach themselves. Greek tragedies featured a hero in conflict with his fate and often the Gods. In tragedy of Orestes it is foretold that Orestes will kill his father and marry his mother, yet in spite of this he continues on his path to his tragic fate, when after realising that he has killed his father and married his mother he is despair puts out his eyes. In the UK we have a number of Orestes that manage our public affairs, who as with him are blind to their fate, despite the warnings of economic soothsayers blindly commit themselves to a policy that will lead their nation into disaster. If they cared to look beyond the hermetically sealed world of Westminster they might realise that there are dangers out there of which they are ignorant.

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The chorus from Orestia

Recently I read that the British government pledged £1.2 trillion of monies to support the banks in the crisis of 2008/9. The significance of that figure is that it was almost the same in total as the country’s national income. In other words the government was willing to pledge the whole of the nation’s income to bail out its banks. Fortunately the bank creditors were sufficiently satisfied with this pledge not to demand it be honoured, it is very unlikely this pledge won’t be cashed in during the next crisis. Our politicians being supremely self confident don’t realise that they have put in place a process that will lead to the destitution of the UK.

The cause of the next disaster will be the over extended British and Western European banks. At the root of this crisis is what is termed Fiat money, money that is no more than a promise to pay. Our banks can create money by making an entry in their computer records and the only limit to their powers of credit creation or money making is what they think is reasonable. What the banks believe is reasonable is what others may term unreasonable. In 2008 the banks backed their loans or bank money with cash reserves of 2% so for every £100 of bank money they created they only had £2. In the event of a crisis the banks quickly ran out of money to pay their customers who wanted their money back and a run on the banks and a collapse of the world financial system was only avoided by the prompt intervention of governments.

Our arrogant political class has learnt nothing from the crisis of 2008/9 and foolishly believe that by manipulating the money supply and interest rates they have beaten one crisis and have the tools to beat the next. Only the foolishly arrogant could believe this as all indicators show the economies of the West are desperately weak. Interest rates (that charged by the Bank of England on loans to banks) for example cannot be increased from there historically low levels of 0.5%, without fear of that increase sparking a major recession. The complacent politicians have even encouraged the governor of the Bank of England to announce that they see no reason why our ‘financially sound’ banks should not be allowed to increase their assets to total x9 our national income (GDP). Those assets will largely be loans or bank money, which has no value other than that given to it by the banks. Already with the slow down in China there is evidence that the new recession is starting, given the arrogant blindness of our political leaders they will be helpless to prevent a rapid spiralling downwards of economic activity as they have not the policy tools at hand to prevent it.

Can I finish this essay with another metaphor, that of the ship of fools. This was a popular subject for art in the medieval world and these pictures showed a boat crewed by all the political leaders of the time, kings, great lords and Popes, often this ship was shown heading to disaster on the rocks pictured in the background of the painting. The current ship of fools is driving Western society on to the rocks of yet another economic disaster and it is their arrogance that prevents them from seeing that their world is being put in peril from there foolish misdirections.

In Praise of Being and Black Metal (and other counter cultures)

When I was a student in the 1960s a popular subject of study was futurology, that is a study of how society would change in the future. It’s a subject that seems not to have lost its popularity, there was not so long ago the seminal text by Francis Fukuyama “The End of History” and more recently there is the book I have just finished reading Paul Mason’s “Post Capitalism – A Guide To Our Future”. However while enjoying reading such books I as a sceptic look for different answers, answers that will satisfy my scepticism. Such answers I find in classical Greek philosophy as I am one of those who believes that old answers are the best.

Amazing-Facebook-Statuses-12534-statusmind.com

One such author who shared my views was Jonathan Swift. In one of his short stories he imagines “A Battle of the Books’. A battle in which the books in the library shelves fly off the shelves and form up into two rival armies. In one army there are the books written by the classical Greek and Roman writers and in the other the books written by Swift’s contemporaries. In a short but vicious battle the books of the classical Greek and Roman authors prove their superiority by triumphing in battle.

Aristotle provides my inspiration for this short essay. What I what to appropriate is his concept of being and give it a more modern context. Not only was Aristotle a philosopher but he was also a biologist and as such was aware of the diversity of life between and within species. He wanted to solve a simple classification problem, that is what do we mean when we speak of man or any other creature. These creatures change with age so the young creature is different from the adult and they differ markedly within each species. He wanted to know what was the chief characteristic or essence that enable one to call a man a man. How was man to be identified, what was the characteristic that gave man his identity. His answer was being, that is what was it that each individual evolved into, what was the perfection or ideal for their species. There was he believed a template for perfection into which the best of the species would evolve.

What was the essence or being of man, it seems to Aristotle it is man as the philosopher. The ideal man was one who reached that stage of intellectual maturity which enabled him to think. At the end of ‘The Ethics’ Aristotle writes briefly that the best type of life is the one spent in contemplation. The essence of man is that of a rational thinking being who spends his time contemplating the nature of their own existence. Any other type of human existence does not participate fully in the being of human nature.

To give my musings some contemporaneity, I want to consider the trend towards the 24/7 society or as the writer Negri wrote the means by which ‘society has become the factory. What he was referring to is the networked society and the ubiquity of the smart phone, which means work is no longer tied to the workplace. Once a person is in possession of a smart phone they can take their work with them. A friend of mine explained to me how when on a beach on holiday in Southern Europe, he received calls from work and carried on his consultancy work from the beach. What I am more familiar with is the individual working from the coffee shop using their laptop, tablet or smartphone. In our networked society the home can as much be the workplace as the office.

The downside of this networked society is the lack of privacy. I am reminded of a study in the 1960s of politicians who had nervous breakdowns. One cause of these breakdowns was the merging of the private and public spaces of these politicians personalities, the had lost the sense of the private. They could no longer cope because they had lost their individuality all that was functioning was their public persona, they were an empty shell or husk having lost the kernel of human individuality. What on concerns me is the very intrusiveness of the networked society and the diminishing scope for privacy. Work becomes an increasingly controlling factor in people’s lives. They are becoming less themselves and more somebody else’s person. The space in their life for personal development is becoming increasingly restricted. Their scope for achieving their potential being is increasingly limited. People are becoming increasingly ‘outer directed’ and lacking inner direction or creativity.

One commonality of the recent popular protests is their resentment of the controlling ‘big brother’, the oppressive monitoring of work and social life. Interiority is discouraged as it might conceal subversive thinking. The fear of dissent is the greatest fear of the new manager, everybody must be on message. Rather than there being a collective societal breakdown there will be increasing resistance to big brother. People will become increasingly creative in creating personal private spaces for themselves. Already it’s happening on an interpersonal level with under the screen events, when raves and music events are organised through social media, pop up events which lack legal sanction. Increasingly non big brother events will be organised, events at which individuals are free just to be. The social network will be increasingly used to create under screen events. The fog of social media messages make the control so loved of big brother impossible. Already protests have been organised through peer to peer networks; whether it be protests in East London about gentrification and the lack of affordable housing or Chinese factory workers protesting about poor pay and working conditions.

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bringthenoise.oulfm.fr                                              whitbybayl.bandcamp.com

What I believe is that the organised network of ‘big brother’ is contrary to human nature. If I can modify Aristotle’s concept of being, human nature contains within it the urge to fulfil individual potential, that is to be a something. Whether it be Aristotle’s philosopher or something else this potential cannot be ‘other directed’. The monitoring of individual behaviour whether it be by the security services or employers can only provoke hostility and a counter reaction. In a relatively free society such as the UK individuals will come up with ways to subvert big brother and make their inner selves increasingly impenetrable to big brother. There is a thriving under the screen counter culture which appears to be about music and clothes, yet for anybody who is familiar with these cultures it is far more than that. Clothes and music are but the visible appearance of the new man or woman, one who has created a personality separate from that imposed by the societal big brother. When I read any literature given to me by my nephew who is a Black Metal enthusiast, I am made aware of this resistance amongst the young to an oppressive culture that wishes to deny them their individuality.

Reading this last paragraph I realise that I identify being or individuality with non-conformity. I am a serial non conformist a non joiner in, when teaching I was described by one colleague as being one of the three eccentrics, who taught in that school. My non conformity was sought in emphasising my individuality and I think my personal experience can be generalised, the good society is one that allows individuals to exercise their individuality, to develop their potential or being in ways free from the direction of society’s big brother. A society that calls itself free cannot impose big brother through the social media it will meet with resistance. Resistance to the brutalities of the industrial workplace in the early 19th century developed within small private rooms in public houses and resistance to the brutalities of the new social order, poverty pay, insecurity and poor housing will develop in those under the screen places made possible by the new social media.

Fear of the outsider. moral panics – why governments alway fail to respond to the impending crisis

Colin Wilson wrote a book in the 1950s which became a sensation, it was titled ‘The Outsider’ and it caught the mood of the time. This was the era of the beatnik and French existentialism and his account of how he became an outsider through dropping out of society and rejecting the culture mores of the time captured the sense of angst of the time. It was a book of its time and is no longer read. Although Colin Wilson claimed a uniqueness of view, viewing society critically from the imagined position of an outsider has a long tradition. The tradition is demonstrated most clearly in the Christian religion as human society is constantly judged as failing from God’s perspective. Jeremiah the Old Testament prophet gave his name to a pessimistic philosophy of human failing.

Society needs the outsider as the stranger to society is the best person to question its mores. Too often a complacency sets in amongst the classes that make up the leadership of a society. They develop a fixity of view and regard anything outside the consensus of agreed thinking as heretical. While it may be unfair to claim that they view society as the best possible of all societies, it is they believe the best that can be achieved given the limits of human nature. In Britain the growing impoverished underclass can be ignored, as they are the price that has to be paid for the attaining of the good society. If all the members of this elite group of leaders have a similar background, this consensus of views is unlikely to be challenged. Britain provides an exemplar of this closed group think, the majority of our political leaders, lawyers and journalists have been to one of the elite colleges all having studied for the same degrees, whether intended or not Oxbridge does impose a fixity of views on our elite. From within this elite there may be critics but their criticisms are very muted. Only the outsider or stranger can question the views of this elite group as they are not bound into the group think.

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The outsider or stranger does not have to be a foreigner just somebody from outside the elite groups. In America this outsider status is so highly valued that even insiders such as the billionaire Donald Trump claim to be outsiders. However when this claim to outsider status is real, the political establishment can become upset over the perceived threat to their status. Jeremy Corbyn a serial outsider in British politics has become the leader of the Opposition Labour Party. The reaction from the political and media class has become hysterical, he is challenging their world view. No greater threat can be conceived than a non sharer of group values being leader. Horror best describes their reaction, last week a popular tabloid stated that he intended to abolish the army, then rumour had it that all the senior leaders in the armed services threatened to resign if he became Prime Minister, threatening mutiny in the armed services. All Jeremy Corbyn has done is to question the unfairness of the current social system and why the . He is not an armed terrorist yet the modest threat poses to the existing inequality, demands that he be treated as one.

A similar tendency is demonstrated in Europe where the elites have thought it necessary to demonise Tsiparas and Syriza the Greek outsider and his outsider party. They are criticised as being naive, unrealistic and even childish. The purpose of the negotiations over the Greek debt was to nullify the threat posed by the outsider. Tsiparas it goes without saying was not a member of the existing political class but an outsider and as an outsider he had to be marginalised.

Outsiders may not always be correct but in not subscribing to the group view of the majority they ask the questions that will force the “insiders“ to reconsider their policies. There is in British politics one question the outsider would ask would cause a significant shift in policy. At present all the main three parties are agreed on the need to reduce the government deficit. Yet there is a much larger deficit which is never mentioned, the banking sector deficit which is five times greater than the government deficit. An outsider would ask if debt reduction is so important while is all political debate and decision making focused on the one smaller debt. A debt is a debt, whether its run up by the government or the banks. Interestingly this is a question that never asked in other European countries. Germany for example has a banking deficit of 324% of GDP, yet German politicians never question whether this is sustainable.

Fear of the Outsider

However all too often the outsider is feared and disregarded by the governing classes and the much needed change in the policy direction does not happen. Maynard Keynes a respected academic but an outsider to the conventional economics of his time (1930s) was at first ignored and later accepted. His outsider views of how to manage the economy had become the views of the insider by the 1950s. More usually the governing classes react with horror and fear towards the outsider, ignoring the very valid claims they make for change.

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The fear of the rich and powerful insiders can be understood in the sense that outsider groups threaten their wealth and privileges. Naturally they would act against any such threat, however the reaction of the rich and powerful insider groups to the outsiders goes beyond this and borders on hysteria. One British army general was reported in the press as saying that there would be a mutiny in the army if Jeremy Corbyn the radical Labour leader became PM. Given that this nameless general was not exposed and dismissed, it seems likely that his views are shared by many senior officers. Yet this can only be seen as an over reaction, as the policy changes proposed by Jeremy Corbyn are quite modest, he is not advocating violent revolution.He is a Gandhi rather than an al Baghdadi (leader of Isis). A man who seeks to persuade, pacifists don’t tend to practice violent revolution. All abuse and fears expressed in the reaction of the insider groups seems out of all proportion, however there is an explanation for this behaviour.

One is that there is a moral panic developing amongst these powerful insider groups. The best example of a moral panic comes from the writings of Stanley Cohen (Folk Devils and Moral Panics). There were he said a small number of shuffles between two youth sub cultures on popular holiday beaches. The two groups where the mods and rockers, while there was plenty of noise there was little real violence. Yet the press wrote up the story, these young men were a feral group threatening the existing social order. What disturbances there were few and easily put down by the police. Similarly the press particularly the tabloid press have conjured up a folk devil in Jeremy Corbyn. He is seen as an agent of anarchy and disorder who threatens the very fabric of society. This fear justifies a variety of measures to disempower the social movement he represents. In this atmosphere the general who threatens an armed insurrection to prevent this radical coming to power is applauded. Other plots will develop to prevent this radical ever becoming Prime Minister, such as a parliamentary coup which removes his as leader. Just recently one senior party was reported as discussing when would be the best time to remove him through a parliamentary coup.

This over reaction by the political, financial and industrial elites will prevent them from acknowledging that his support comes from a mass movement that has a number of very justified discontents with the contemporary social order. A disproportionate number of his supporters are young and they are the group that has been dispossessed of the greatest wealth. The politicians have imposed high tuition fees on those going to university, so ensuring that they will be in debt for the rest of their lives. They have presided over a growing dysfunctional housing market in which it is increasingly impossible for the young to buy a home, leaving them at the mercy of rapacious private landlords. Just as the aristocratic elite were deaf to the cries of the impoverished poor in the 18th century, so the parliamentary class of today are deaf to the cries of the young. This deafness is not just simple callousness, but having created a folk devil out of Jeremy Corbyn and his supporters they are incapable of dealing rationally with them and their demands for change.

This moral panic is not just limited to the British elites and insider groups but this fear is widespread throughout the governing classes in the West. The horrified reaction of the European Union politicians to the leaders of Syriza attempts to ameliorate the harsh bail out terms imposed on Greece was typical of those in the grip of a moral panic. The politicians of Syriza were childish, naive, unrealistic dreamers. Once having demonised these politicians they did not need to treat them as equal negotiating partners. Instead they could abuse the power they had to compel the Greeks to accept the harsh austerity terms they wanted. This was done through the simple expedient of denying Euros to Greek banks forcing the country into near total collapse through the collapse of its banking system.

The leadership groups in society are often gripped by these moral panics, panics which blind them to the real nature of their opponents. Perhaps the McCarthyite panic that gripped the USA in the 1950s, when the country was gripped by the fear of a non existent communist conspiracy is the best example. What this fear does is to prevent the governing classes from coming to terms with the outsider groups and never dealing with the very real problems that have caused these movements to form. Whatever very real problems Britain faces the major problem is getting the governing classes to admit there is a problem, to accept that the outsider groups have a valid viewpoint and that they should listen and not suppress them. Our governing classes have seen the ‘canary in the mine die’ yet they ignore the warning signs of imminent danger.

Bad economics, bad politics – Britain’s policy towards Syrian refugees

There has been an ongoing public debate in Britain about what the country’s policy should be towards the refugees arriving in Europe from Syria and other war torn countries. The consensus is that our Prime Minister’s response has been determined by the hatred expressed for refugees in the popular media and fear of losing votes to the anti immigration party (UKIP). However there is another compelling reason as to why our Prime Minister is so opposed to Britain taking its fair share of the immigrant population now arriving in Europe and that is bad economics. This government has claimed the mantle of fiscal probity and as such is committed to keeping public spending to minimal levels. If the government admitted large numbers of refugees to the country it would be committed to increasing it’s spending. Much of that increase would go to local authorities (to house the refugees) just at a time when the government is committed to reducing their budgets. It is fear of breaking its fiscal rules that prevents it from admitting these refugees.

The government has as a consequence made a pig’s ear of its policy and produced a immigration policy that will please no one. It has made a commitment to admit 20,000 refugees over five years or 4000 a year on average. This will be financed from the foreign aid budget, money that would otherwise be spent in developing countries will instead be used to finance the accommodation needs a modest number of refugees for one year. After that the councils will have to fund from their much reduced budget all the extra services that these new arrivals will require.

What the government fails to understand is that economics is unsuited to providing policy goals at what can be called the ‘summum bonum’ policy level. Economics is a servant subject a subject that when used correctly determines the feasibility of government policy proposals, it cannot provide the grand objectives that determine all policy decisions. The object of economic policy making is to set intermediate goals whose attainment will make possible the attainment of the greater goals of universal policy making. This government has reversed this process, the grand overall objective is to attain a budget surplus, whereas good economics would demonstrate how to or whether an open door policy to refugees is economically feasible. If this government is trying to disguise its greater policy goal of keeping Britain a predominantly white non-muslim country through rejecting these immigrants, this would count as a greater policy goal.

What I am trying to state is that economics is a terrible subject for providing the greater goals that should be at the heart of any government policy making, that is the role of ethics or political philosophy and economics should not intrude areas into which it is unfitted. Formerly the conservative party was a practitioner of “One Nation Toryism”, a philosophy that stated while the aristocracy, financial and industrial elites were best fitted and entitled to rule, they owed an obligation of care to the lower orders of society. This is why the Conservative party of the 1950’s was able to embrace the National Heath Service and full employment. Now the vision of the Conservative party has shrunk to accommodate the goals and principals of Neo-Liberal economics, which can offer nothing more than series of lower order objectives. The philosophy of Ayn Rand dominates this government, a government that like her sees the lower orders of society as nothing more than a drain on the nation’s resources. While the only people it see’s as demanding of respect are the giants of business and finance. These people it rewards with generous tax allowances and government grants. Hume, Oakshott and all the great conservative philosophers of the past would despair of a government that only had good housekeeping as the only summum bonus of its policy making. Minimal government of the sort practised by this government makes for ineffective and bad government.

The folly of an economics first policy is demonstrated by the government’s policy towards Syria. It is now proposing armed intervention to end the current conflict so as to halt the flow of refugees from that country, yet its policy of budget cuts have denied it the means to make any effective intervention. The cuts have reduced the fighter bomb force to a total of six planes and its cuts to the army budget have made it impossible for the army to make any effective contribution to any overseas conflict through lack of resources. Realism demands that the policy becomes not one of intervention but one of appealing to other countries to fight the battle on Britain’s behalf, not the most effective of policies.

The Flawed Belief in TINA (there is no alternative)

Today there was yet another article in my daily newspaper by a prominent politicians disparaging those on the political left that fail to recognise the realities of life and want to make impossible changes in society. This disparaged group who are abused as fantasists, protest voters but never by terms that suggest that their choices are made on the basis of rational judgement. The only surprise is that he did not suggest taking the vote away from these ‘childish’ voters. Actually one former leading politician did suggest that by suggesting that the vote for the new leader of the Labour Party should be sabotaged by the other candidates withdrawing so making the contest invalid. If this had happened the same politician would have advised on how to rig the voting mechanism to ensure the right person was elected.

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18th Century Aristocrats (counter-factual.net)
What is barely understood is that we are governed by an elite comparable to the landed aristocratic elite that dominated politics in the eighteenth century. This elite is composed of politicians, media persons, technocrats and financiers educated at the elite universities. (There are other groups that could be included but for brevity I have excluded them, what they all have in common is an education at one of the elite universities. It is this education that sets them apart from the rest of society.) What they practice is a policy of exclusion, only the dialogue between the members of this selected group is considered valid. They only listen to themselves, the rest of society is to be a childish rabble whose views and opinions are not worthy of consideration.

What I want to attack is the shared understanding of this group, an understanding which ‘things must be as they are’ or as it is more familiarly known TINA that is the society in which we live is the product of economic, social and technical forces that are beyond the control of individuals. What the politician must do is understand those forces making for change and work within the constraints imposed by them. Social democratic politicians recognise the pain of people working on zero hours contracts and that caused by job insecurity, but their role is not to change the cruel inequalities in society. Their task is to explain that low wages and job insecurity are a feature of modern society and must be accepted and that it is only through individual efforts at self improvement can circumstances change. The only amelioration they offer is the most modest of reforms, which will have little impact on there working lives. The social democratic party refuses to accept policies that would reduce or end job security by insisting that it is not the role of government to ensure that employers treat their employers well, what they instead offer is a way out of this appalling way of life through self improvement via education.

This new elite remains isolated by its adherence to things must be as there are ideology from the wider discontent in society. They believe that they are the ‘grown-ups’ in the words of Christine Lagarde (Managing Director of the International Monetary Fund). The new left in Greece (Syriza), Spain (Podemos) and Britain are childish fantasists trying to ignore the reality of the grown up world.

As a sceptical economist I must doubt such understanding of society I would ask why is it society is as it is? The reasons given are irreversible technological and social changes. Yet on examination they are only partial truths. Technological change has taken place but the distribution of incomes is determined by the social order. The company director in Britain earns a hundred times the salary of the average of the incomes of the employees in his business. In the 1960s the director’s salary was only 30 times greater than the average. Why the change, if the answer is that company directors have become more productive, that is open to objection. The profitability of companies as a return on capital invested in very similar to that of companies in the 1960s. The falsity of this view is demonstrated by the fact that in many failing businesses the directors are paid excessive salaries, how can huge salaries be justified for such corporate dimwits?

What as the sceptical economist I would say that there are different reasons for gross income inequality. While it cannot be doubted that some income differentials are due to technical change in that information technology has made many former skilled occupations redundant, the growing prevalence of the low wage culture has origins elsewhere. One is custom and tradition which decrees that unskilled occupations only deserving of low incomes.There is one interesting example which demonstrates this fact. When at university I read a book on applied economics by a Professor Brown and one example from that book sticks in my mind. He stated that the evidence suggested that wage differential between craftsmen and unskilled labourers had remained the same since Roman times. This suggests to me that much the justification of current income differentials comes from custom and tradition and does not reflect the real contribution each employee makes to the business. Why should the cleaner or the sales assistant be paid so little?

The other factor is power, the financial and industrial elites have cited custom and tradition as the reasons for low pay. Their mantra is unskilled staff make such a small individual contribution to the businesses profitability that they are only deserving of low pay. Yet I have never read of any study which has successfully identified the contribution to the firms productivity of say the cleaner and the financial director, yet the salary of the latter is more than that of the former. Businesses are a collaborative venture in which it is impossible to identify the contribution that each individual makes to the success of the business. Is the cleaner really that unproductive? It is the cleaner that maintains the workplace as a clean and healthy environment in which to work. Dirty toilets and uncleaned washrooms would lead to outbreaks of illnesses associated with unhygienic environments. How productive would the company director or IT specialist be if struck down by dysentery? There is good reason to suggest that cleaners are vastly underpaid, yet employers continue to pay the minimal wages.

Governments have enabled this power grab by the business elite by passing legislation to weaken or destroy those organisations that are the only means of equalising power in unequal labour market. Ever since the Neo-Liberal revolution politicians have constantly weakened the power of those groups that threaten the power of the over mighty employer. In Britain it has meant the emasculation of the one powerful trade union movement, changes in the law now make it very difficult for the unions to effectively organise industrial action. Therefore there is little restraint on the employer who wishes to pay as little as possible to his staff. It is no coincidence that some of the most profitable businesses with the highest paid directors in Britain have been the supermarkets an industry where low pay and job insecurity are endemic.

Scepticism as a philosophy is misunderstood, sceptics don’t believe are no truths, in that all philosophies or ideologies are fallacious. Instead it is the belief that in subjecting an ideology, philosophy or belief system to sceptical enquiry the truths it contains can be discovered it is the stripping away of error.

Being a sceptic is not contrary to a belief that society can be improved through reform, it is just a scepticism about the nature of such much contemporary reform, reforms whose fundamental truths are based on custom, tradition and exploitation of market power. I am a left of centre sceptic who believes in the superiority of left of centre ideology because it contains less wrongs than the alternatives and that with its emphasis on fairness those wrongs are likely to be less damaging to humanity than the wrongs of alternatives that exclude any notion of fairness. A sceptic also favours democracy as in a democracy there are always contending philosophies and ideologies as the proponents of each that will be subjecting each to scrutiny and through that many of the errors of policy associated with the mono-thought of the Neo Liberal world view can be avoided.

Unlike the interchangeable Neo-Liberals and New Keynesians who dominate the political process with their uniformity of view, I want a political culture that recognises many ideologies and philosophies as valid and that a recognition the aim of politics is not to destroy the opposition but to create a political culture in which many views can thrive. Contemporary politicians are so assured of the rightness of their beliefs that they cannot concede that they may wrong. They are as in Christine Lagarde’s word the grown ups who understand reality and who don’t indulge in childish fantasies. What a sceptic would say is that any believers in any ideology that denies it contains any errors or wrongs are the childish and naive ones.

Words of advice from a sceptical economist to any aspiring politician

No politician has requested my advice but as so many people particularly journalists proffer uninvited advice, I feel free to offer my own. Sceptics have a special duty to offer advice as they stand apart from the common run of intellectuals who are always promoting their own ideologies and schemes, as we offer a warning as to the traps into which a politician can fall.

Any politician when entering the great Houses of Parliament or the chambers of the other legislatures will be in awe of the senior practitioners of the craft of politics who display a mastery of the chamber. This mastery only extends as far as the boundaries of the legislature. In Britain it is acknowledged that George Osborne (Chancellor of the Exchequer) is the master of the house, he dominates debates and sets the agenda for policy making. However this does not mean that this mastery is any more than a dominance of the members of the house,he like many masters of the politic art achieves his dominance through his avoidance of any of the intractable problems that face the country. The palace politics of Westminster and other chambers is dominated by series Ozymandias who pretend to a control of events that they in reality lack.

Ozymandias image taken from blogspot
Ozymandias image taken from blogspot

The sceptic’s duty is to remind the politician that they don’t know and not to be taken in by the many Ozymandias that dominate parliament, who show their ignorance. Greek sceptics such as Sextus Empiricus were the philosophers who claimed that the philosophies of Plato, Aristotle and Zeno were unsound and did not embody the universal truths their adherents claimed. Rather than trust to a new unproven truth of a philosopher they recommended that the people stick to the tried and tested ways of their ancestors. A contemporary sceptic such as myself would amend the original sceptic philosophy to say that all philosophies and ideologies while not containing within themselves the ‘big answer’ to life and society’s problems, do contain many partial and useful truths. It is the task of the sceptic to suggest methods by which the few partial small truths can be disinterred from the big lies contained within political ideologies and philosophies.

Sextus Empiricus Greek philosopher of scepticism a source of inspiration to the author
Sextus Empiricus Greek philosopher of scepticism a source of inspiration to the author

If the Neo-Liberal or free market philosophy that dominates political discourse really contained the big truth and not the big lie, Neo-Liberal Britain would be a prosperous and happy nation. Instead it is a nation in which there is much social division, great income inequality and much poverty. One ill is the dysfunctional housing market, a market which is making London uninhabitable for middle and low income families. Yet even within this malign philosophy there are valuable truths, which can guide good policy making. One truth is that the government cannot fine tune a complex mechanism such as the market to achieve such ends as full employment without there being adverse consequences, such as increasing inflation pressures in the economy. The big lie of Neo-Liberalism is that because the markets are so complex and incapable of being fully understood by politicians they are best left unregulated, which can result in powerful market players abusing their power to the detriment of others. Powerful players such as the landlord who can exploit their monopoly of the housing stock to force tenants to pay exorbitant rents that can equal half of the tenants income. It is the role of the politician to choose a middle position between over intervention and non-intervention to deliver legislation and policy changes that benefit the community as whole.

In today reform obsessed society it is easier to identity problems with any existing government policy or public service organisation and even easier to suggest reforms. However these reforms are unproven and are usually rushed into operation without any real consideration of their impact on society. What appears to be broken and dysfunctional may be less broken than the reformers suggest and often delivers a better service than the organisation that exists after their reforms.

Perhaps the example of the private finance market most clearly demonstrates this point. The banks and members of the financial services complained that the restrictions under which they operated in the 1950s and 60s hampered them when competing with their international rivals. What the banks complained of bitterly was the way in which the government restricted their ability to create credit (money) , the government would compel banks to limit their mortgage lending to avoid an inflationary increase in house prices. They complained that their foreign rivals were not subject to such restrictions and were able to take business that would have otherwise been that of the British banks, although there was little evidence of this happening then. A more telling example could be found in the Stock Exchange, there was an individual called ‘the government broker’,who dealt exclusively in the buying and selling of government stocks. In the morning he dealt with customers on the phone and in the afternoon he donned a top hat and morning suit and went to the stock exchange were he would conduct government business from his stand. Bankers and other financiers looked at the American financial market with its corporate giants and wanted the same freedom to practise free of regulation. In 1986 the government obliged and removed all restrictions on the financial markets in the so called ‘big bang’. Businesses merged and grew and new mega giants came to dominate the financial world. However this legislative free-for-all had a down side, with no restraints on bad behaviour either legislative or cultural the worst happened. One consequence was one financial crash after another. Lloyds Insurance market which was once the byword in financial probity crashed because of the reckless and sometimes fraudulent behaviour it’s the underwriters. Seemingly sound banks got into trouble over reckless speculation, one of the first to go was National Westminster which lost billions on foolish American purchases. It was only saved by being purchased by the Royal Bank of Scotland. Then there were the series of bank failures in the crash of 2008/9, in which the banks were only saved from collapse by government money and guarantees totalling about 10% of GDP.

What appeared in 1986 to be a cosy gentleman’s club was in fact an efficient financial system that worked, it only fault was that it did not enable its members to earn the mega bucks of the American investment bankers. This market had evolved since the 18th century from coffee houses and financial exchanges and developed a series of working practices that protected and benefitted the customers of the financial sector. The relatively small size of the members of the market meant that the collapse of one did not equate to a financial catastrophe, as it did not as today bring down with it with it the other over indebted giants of the market. When a series of fringe banks crashed in 1973, they were easily absorbed by the larger banks and their customers suffered no real loss. The separation in the Stock Exchange of the role of broker and stock jobber had prevented the manipulation of shares to the detriment of the customer. Now with the merger of the two roles there is frequent evidence of insider trading and share manipulation by the banks which are to the detriment of the customer. There was the infamous Goldman Sachs case in which company emails revealed that the bank had sold ‘crap’ shares to their customers, whose sale benefitted only the Goldman Sachs traders. The overnight scrapping of the old established practices in 1986 which ensured the probity and soundness of the financial markets, created a market in which the reverse is true and which is prone to sudden and catastrophic breakdowns. A market which is so dysfunctional that it can only continue to exist through the continued explicit and implicit guarantees of government support which will compensate all in the event of a crash.

As a sceptic I am tempted to say that all reform is misguided, but that is wrong as society is constantly changing as governments have to adapt policy to changed circumstances. What I as a sceptic say is wrong is the belief that only ‘big bang’ reforms or those starting from ‘ground zero’ assumptions are wrong, it is the nature of reform that is wrong not reform or change itself.

Only if a politician understands the character of the reformer will they be able to judge the value of any proposed reform. All reformers are either ‘missionaries’ or ‘salesmen’ which is why such bad judges of the reforms they suggest. Once that is understood many proposed reforms can be seen as unsound, as they self interested proposals that only benefit the ‘missionary’ who have their sense of being the prophet that saves society from itself confirmed or the salesman who gets a cash benefit from the successful promotion of a reform.

The reforming Neo-Liberal economists are missionaries, they are on a mission to save society. These missionaries will always claim adopting their methods will result in some desired end. In the 1960s they were campaigning for an end to government policies that ensured full employment, they argued that allowing unemployment to increase to its natural level would reduce inflation. In the 1970s they argued for an end to the managed exchange rate system which they claimed would lead to an ending of international financial crises (history soon demonstrated the fallacy of this claim). Then in the 1980s that introducing the free market into the public services would reduce their cost and improve their effectiveness (as a rail user I and many others would dispute this claim). I compare them to the Jehovah’s Witnesses, who claim that only by adopting your religion will you get to heaven, the Jehovah Witnesses among the political reformers claim that only by adopting their practice and method will the best of all possible societies be attained. What they also have in common is that both their claims are faith and not evidence based.

The best example of the salesman type of reformer are the financiers of the City of London who argued successfully for the removal of all restrictions from the financial services. They as with the successful salesman gained an increase in income from the sale of their ideas. Obviously salesman are most frequent type amongst the financiers who recommend the privatisation of various government services. These financiers will gain from the consultancy fees from advising on the sale of a public service or as in the case of Royal Mail from handling the resale of its assets. (The financial advisors were guaranteed a proportion of shares in the newly privatised Royal Mail at a price they suggested. They were then able to sell the shares they had acquired at a much higher price making a large profit.)

From the viewpoint of this sceptical economist all proposers of reform should be regarded with extreme scepticism. Those reforms proposed by the missionary or the salesman are particularly suspect.The motives of any reformer should be treated with scepticism as it is more than likely the proposed reform includes a strong element of self interest.

One final word of advice the reforms that a politician proposes to introduce will inevitably be wrong, in that it will disadvantage one group in society. The role of the politician is to choose the least wrong of all possible options, the one that will wreak the least damage on society. Hopefully the reform may even produce more benefits than injuries, although recent policy measures in Britain have tended to damage rather than mend the social fabric.