Tag Archives: Neo-Liberalism

A God for an Economist

December 2, 2015christianity, Economics, Philosophy, religion, UncategorizedBertrand Russell, God, Hannah Arendt, Heidegger, Karl Jaspers, kierkegaard, Les Miserables, Nazism, Neo-Liberalism, Sturm und Drangangrytunbridgewells

Whenever I confess my belief in a God my friends are incredulous. They cannot understand how a person who they consider an intelligent rational thinker can believe in such a superstition. What makes my position seem even more ludicrous is that I am a negative theologian, that is I believe that God in his essence is unknowable. Bertrand Russell pointed out that is illogical to believe in something or someone that is unknowable as a knowledge of such a being is impossible, it’s a logical contradiction. How could you know if you did not know? However I want to turn these arguments on their head. As an economist I talk about the economy but I as with my thousands of fellow economists don’t really know what the economy is in its essence. I can talk about markets, the balance of payments but they are only certain highly visible parts of the economy. Classical economists and those of a Neo-Liberal persuasion will claim that the economy consists of a number of inter related markets. The falsity of this claim is demonstrated by this simple truth, if economists understood the true nature of the economy they would have at their disposal all the tools necessary to manage and control the economy. Economic crises would disappear instead of occurring at regular intervals and the economy would be on continuous trajectory of growth. The welfare of all would be maximised. History demonstrates the fallibility of economists, all to often they get it wrong. It should not be forgotten that when the financial crisis struck in 2008, the majority of economists were caught by surprise. Only a small minority expected a crisis, but they were a small disregarded and isolated minority.

I do then believe in the existence of two entities neither of which I can really know in essence. It can be argued that while I may not understand the real nature of the economy, I am every day affected by the reality of it, it is not something that I cannot ignore, it is just there. The economy generates the tax revenues from which my pension is funded, everyday I participate in this self same economy that has the shops and chains of distribution from which I buy the essentials and good things that make my life bearable. One such good thing is the cappuccino that I buy daily at my local Salumeria. Similarly nobody would deny that they are affected by the good and bad actions of others. What hurts most, being betrayed by a friend or being unable to buy the latest IPhone through lack of funds? We all participate daily in a network of relationships whose nature determines our sense of well being. However whether they are defined as spiteful, hurtful, mean, bad or evil actions, the consequences of such actions can be devastating for the victim, more so than any economic loss. Similarly friendly, helpful, kind or good actions can transform the life of the beneficiary of such actions.

Fiction provides the classic example of a life transforming good action. The Priest in ‘Les Miserables’ who forgives Jean Valjean for his theft of the church’s candle sticks. If he had not forgiven him, Jean Valjean would have been sent back to the prison galleys where he would have lived out a short and wretched life. Human relationships can be explained or described in many terms, but all too often they are permeated with a sense of good and bad. Theologians such as myself identify that sense of good with God.

There is a tradition of Christian Neo-Platonism that goes back to St.Augustine, a tradition to which I belong that identifies God with the Good. Identifying God with the good, transforms God into a solely moral entity, an identification which I find sufficient. God as the Good, that is the source of that sense of goodness that informs all moral actions. Constantly we speak of good actions that is actions which have in common that thing which we call good. Yet this good is indefinable except through descriptions of good actions. It is this indefinable essence that theologians such as myself call God.

Describing good as a moral sense derived from God is a pre modern concept, but one that is given a contemporary guise by the theologian Caputo. God he sees as a weak God in the sense that his is a God of moral sensibilities not power. This weak God exists outside human society but is constantly pushing in and that pushing in takes the form of a pushing in of moral sensibilities. Sensibilities which mankind is free to accept or reject. Given that all accept that good in its essence is indefinable I see this explanation of the origin of good as the most acceptable. Neither Caputo or I know God but we both know God as this moral sense or good itself. This to me is the most acceptable explanation of the existence of that moral sense known as the good. This understanding of good and the nature of God is a myth in the Platonic sense. It is a truth than can only be spoken of in terms of a myth, the myth of a weak but moral God, exist beyond but in constant contact with human society. Framing truths in mythological terms does not make them less true. Some truths because of their nature cannot be explained in other than the language of religious mythology.

There is a simple story that explains my reasoning. Heidegger was one the greatest 20th century German philosophers, the one who subjected the nature of being (humanity) to forensic scrutiny, yet he almost completely lacked any moral sense. When Hitler came to power he became an enthusiast for the Nazis. He refused to help his Jewish lover Hannah Arendt, he in fact abandoned her to her fate. Fortunately she was able to escape to the USA, but with no help from Heidegger. This supreme rationalist thinker eagerly participated in all the intellectual nonsense propagated by the Nazi regime. He believed that the of the philosophy of ‘sturm und drang’ captured the essence of the Germanic nation. A man who never understood why after the Second World War that is was right that he should be excluded from teaching in German universities. In contrast to him there was the lesser philosopher the catholic Jaspers, who opposed the Nazis and had to flee to Switzerland. What cannot be denied is that Jaspers moral sense was greater than Heidegger’s, although he was the inferior thinker. Jaspers had far more of the nature of goodness about him than did Heidegger. Hannah Arendt later described Heidegger as a man devoid of any moral sense. Perhaps because Jaspers knew that myth was a valid means of demonstrating truth, that he was able to comprehend the true meaning of the Christian myths and resist the evil of Nazism. An understanding denied to a purely rational thinker such as Heidegger.

At the end of his life Heidegger began to turn away from rationalism and began to look for truth as expressed in poetry. He found truth in the poetry of Rilke and Holderlin that was absent from his great work of philosophy ‘Being and Time’. This new searching for truth found him attending Sunday Mass at his local Catholic Church.

If I give an identity to good surely it is necessary to give an identity to evil, a theology such as mine requires a devil as the personification of evil. Admitting the existence of the devil would take my theology back to the Middle Ages. Fortunately Augustine provides an answer as to why there is evil in the world without needing to reference a devil. Evil acts according to Augustine are undertaken by those who do not know good or God. Rather than evil being a thing it is a not knowing, a not knowing God. Men with no moral reference points commit bad acts, because they have no knowledge of good. Knowing good means more than just knowing the word, it a knowing that penetrates the very fibre of existence. It’s a knowing that involves changing one’s persona according to the strictures of good or God. As Plato said once you know good you will not wish to do evil. The most extreme practice for the knowing of good was that undertaken by the hermits such as St. Anthony who spent a lifetime as a hermit living in exile in the desert struggling to know God or good. However Kierkegaard provides a more achievable alternative, he recognises the frailty of human nature. A Christian life for Kierkegaard is one of slipping in and out of that ecstatic knowing if God (good), it is impossible he says to constantly be know good, as we are all moral backsliders. In Augustine’s word we are the ‘not so good, saints but our actions are influenced by our understanding of the good.

The problem with theology as with philosophy is that once one starts to unpick the ideas that make up the content of the subject, the investigation into their significance and meaning can be endless. Rather than undertake such an investigation I prefer to state that this theologian and economist finds it sufficient to identify God with that moral sense we know as good. Other understandings of God are unnecessary, God might be a creator God, the Triune God (the one in three God) or the God that brings the world to an end at the end of days, but they are all irrelevant to how I act. They are questions that I don’t need answering. To put it in the language of the past I am an adept in two separate spheres of knowledge the non rational knowing of God and the rational understanding of economy. As with Jaspers I subordinate the knowledge of the second to the first, as moral sensibility must always take precedence over and inform my rational thinking. Never unlike many current economists and politicians could I subscribe to Says Law which states that in any recession unemployment and falling wages must be allowed to continue until the wages of the unemployed as so low that they price themselves back into employment. The misery that is consequent on adopting this policy disqualifies it as a viable policy option. How can it be right in a rich country such as Britain to have children going hungry and living in squalor? Yet our political class practises a more sophisticated version of Says law under the cover of globalisation, which states that to keep people in work in face of competition abroad it is necessary to reduce incomes to the lowest level to retain employment in this country. There are many alternative policies which could be adopted with better outcomes for all but which are never considered.

The Corporate Superman Myth and the decline of British industry

November 13, 2015Economics, Philosophy, Politics#Freemarketeconomics, Business Corporations, Corporate duds, Corporate Superheroes, Michael O'Leary, Neo-Liberalism, Poor British Economic Performance, Ryanair, Supermanangrytunbridgewells

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.

The Flawed Belief in TINA (there is no alternative)

August 24, 2015economic history, Economics, Philosophy, Politics#Greece, aristocratic or elite politics, Britain, inequality, Jeremy Corbyn, Labour Party, Neo-Liberalism, Podemos, Social Democrats, Spain, Syriza, TINA (There is no alternative), Tradition, Wage Differentialsangrytunbridgewells

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.

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.

Public servants and their inefficient ways

July 29, 2015economic history, Economics, politicsCharles Murray, inefficent bureacratic practice, jobsworth, Neo-Liberalism, prejudice, Public Choice theory, sceptical economist, simon jenkinsangrytunbridgewells

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

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

July 21, 2015economic history, Economics, politics, short term ism, society#austerity, #Freemarketeconomics, Anne Pettifor, European Union, Francis Fukuyama, Greek Crisis, Iraq Invasion, Liberal Democracy, mafia, Neo-Liberalism, New Orleans Floods, Oligarchs, Soviet Union, The Corporate Stateangrytunbridgewells

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Machiavelli and the Madness of Politicians

July 17, 2015Economics, Philosophy, Politics#austerity, #Freemarketeconomics, European Commission, Greek Crisis, IMF, Machiavelli, Madness, Neo-Liberalism, Syriza, Troika, Tsiparasangrytunbridgewells

What puzzles me is why when we have the best educated politicians in history, the governments that they lead are so abysmal. At least one European leader has a doctorate and most were educated at the elite universities in their own countries. Why are these so well educated leaders so awful at the business of government? The only plausible answer that I can find plausible is that they are affected with a degree of madness in that they consistently mistake the world of their fanciful imaginings for reality.

Perhaps this is best demonstrated with the current crisis in Greece. The leaders of Europe insist on repeating the changes they have forced on the Greek economy which rather than solve Greece’s debt crisis has worsened it. The programme of imposed austerity and so called structural reforms pushed Greece into a situation which resembles the Great Depression of 1929 to 1939. Obviously a country in suffering an economic recession is less able to pay its debts than one that is booming. Yet the so called Troika (the European Commission, the International Monetary Fund [IMF]) and the European Central Bank) insist that the Greeks must accept even greater levels of austerity if they are to receive the bailout funds necessary to keep their banks open. It is obvious to all that this a policy that won’t work, yet our European rulers insist that it must continue.

Reading this it seems that there is a hint of madness in the decisions of the European policy makers. They were all the time confusing the world of their imaginings with the Europe of today. Anybody can misunderstand the reality they face yet to consistently do so suggests madness. The IMF has twice produced reports saying that Greece is incapable of repaying its debts, the latest report suggests that Greece should be granted a moratorium of 30 years before it has to repay any of it debts. Yet despite the evidence from the Greek economy demonstrating that the policy forced on it by the Troika has put it into long term decline making it less likely to the economy will ever achieve a level of growth that will enable it to repay its debts, they continue to insist that the policy must not change. While it is possible that the European leaders directing the policy of the European Commission can be deluded as to the effectiveness of their policy, what is most surprising is that Christine Lagarde as managing director of the IMF is supportive of this failed policy when her own organisation is writing the reports stating that the policy is wrong headed. Why this level of delusion, why do these politicians fail to see what is in front of their eyes? Why are so self evidently mad?

The best explanation for the behaviour of our contemporary leaders comes from the writings of Machiavelli. In ‘The Prince” there is a chapter in which the following scene is described. The son of one of the Greek tyrants is accompanying his father on a walk. Then as they are walking past a field of wheat, and the son he asks how is it possible to remain in power when their are so many potential enemies in society. Rather than answering his son directly this man picks up a stick and knocks of the heads of the tallest stalks of wheat. European leaders in their dealings with Greece have adopted a similar policy. Whenever a Greek leader appears who might threaten their policy of austerity, they destroy them. The greatest threat the European leaders have faced is Tsiparas so they had set about undermining him and destroying his power base. In denying the Greek banks access to much needed Euros they have reminded him that they possess the power to close the banks and with that wreak havoc on the Greek economy and society. Rather than risk chaos, Tsiparas has capitulated. The leaders have calculated that the terms that they have forced him to accept will force his eventual resignation and destruction of his radical Syriza party. Not only these politicians cut down the tallest wheat stalk in Greek society, they have made it clear that they will do the same to any other wheat stalks in any other European country that might threaten their authority.

This leadership style that Machiavelli demonstrated is not a style of leadership appropriate for a democratic society, which depends on political dialogue and consensus to function effectively. If the opposition is destroyed or emasculated the political dialogue becomes extremely limited, as all the potential leaders realise that only by following the accepted script can their careers advance. Consequently there is a political echo as what leaders hear from the political dialogue is but an echo of their own views. ‘Yes’ men and women become the vogue in politics, individual thinkers self exclude, as they must pursue careers outside politics as the system penalises individual thinkers. They realise if they entered politics would be marginalised in the political set up or more likely as in the Greek example have their political reputation and career destroyed by a hostile elite of non thinking conformists, who hate any threat to their authority. This gives leaders a sense of omnipotence as all they ever hear is their words repeated back to them. Political difference is viewed in the words of Christine Lagarde, as not being ‘adult’ and not worth consideration. The views of Tsiparas and the Greek leaders were not worth considering as they were not spoken in the language of the elite. They were children who failed to understand the grown up world of the political elite.

Never having to engage in serious dialogue with your rivals and their alternative views, leads to an arrogance of power. By never facing contradiction these leaders cannot but believe in the rightness of their views. These leaders have been driven mad by power, they believe the acquisition of power sanctities the rightness of their views. What they say is true, anything else is heresy. They are like so many Kim Jong-uns who don’t have to pay regard to any view but their own. Kim Jong-uns that will resort to any tactic to destroy the reputation and career of rivals.

There is one great failing in Machiavelli’s book ‘The Prince’ he failed warned leaders that acquisition of power does not equate with greatness of mind. What we have in the West is a series of mediocre leaders who have attained power by Machiavellian means, but who lack the greatness of mind to govern effectively. In Britain and Europe the means to power is also the means by which great individuals are excluded from power. Mediocre thinkers who have attained power by manipulating the political system overestimate the significance of their success, playing the system well does not equate with greatness. The technocrat governments appointed in many southern European countries are not experts in economic management but timeservers willing to do the bidding of their political masters. The technocrats that Europe will put in charge of the running of the Greek economy, will be no more successful than their predecessors. The misery and damage they inflict on Greek society will be hidden behind a serious of dubious statistics that appear to shw success. Britain and Europe are ruled by a number of petty Napoleons who are blinded by power and in the madness, they believe that their insane visions represent what is best vision for humanity. We are ruled by the self deluding inhabitants of a political madhouse.

The Corrupted Human Spirit

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

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

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

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

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

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

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

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

The Return of Serfdom to Britain

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

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

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

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

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

The Deceivers

May 25, 2015Economics, Philosophy, society#St.Augustine, Apollo, Ayn Rand, Jupiter, Neo-Liberalism, Olympian Gods, privatisation, Public Choice Theorists, The City of Godangrytunbridgewells

Theology with its emphasis on ‘other worldly’ experiences appears to be at the opposite end of the spectrum of thought to economics which deals with the mundanity of every day existence. It’s a science of facts far removed from the speculative thinking of the theologians. Yet this is a false understanding of theology, as it can be as every day as economics, the only difference being the approach to life. A theology that had no relevance to daily existence would be pointless subject of study. Adopting something of the perspective of theology would be of benefit to economics.

What I intend to do is demonstrate how an analytical framework taken from St.Augustine’s Fifth Century classic, “The City of God” can be used to explain developments in the economy of today.

The City of God & the City of Man | Koinonia palamas.info

Although Augustine’s book is primarily intended to explain why the eternal city of Rome fell to foreign invaders, what interests me particularly is Augustine’s account of the role of its Gods in Roman society. The Roman’s assumed one of the reasons for their success was their fidelity to their ancient Gods. Castor and Pollux the heavenly twins were thought to have intervened in a crucial battle to assure the Roman army of victory. In gratitude to the two Gods the Romans constructed temple in the forum for their worship. When Rome fell it was thought by some that the cause was the abandoning of the worship of the old Olympian Gods, the Gods who had always stood by Rome and ensured its survival and success. Augustine suggested a very different Christian version of Roman history

The Olympian Gods were for Augustine not Gods but demons who lead mankind astray. Stories about these God’s such as Zeus’s rape of Europa in the for of bull demonstrated their demonic nature. The nature of these Gods was capricious and cruel. Apollo was for instance challenged to a music contest by the satyr; unfortunately for Marsyas he was judged the loser and for having had the impudence to challenge a God Apollo hung him upside down and flayed him alive. Roman cities that had temples of Mars, chained the statue to the temple in the hope that the God would not wander and provoke war with a neighbouring city.

Augustine saw these God/demons as having bodies of air and circulating around the earth in the atmosphere waiting for the opportunity to intervene in the affairs of men and cause mischief. Misleading mankind was not difficult for them as all men were corrupted by original sin and easily corrupted. Despite pretending to be protectors of Rome, they had according to Augustine in fact allowed it to be sacked in the past by the Gauls; so the sacking of Christian Rome by the Visigoths was little different from the sacking of pagan Rome by the Gauls in earlier centuries. The visions and dreams that Roman’s had of the God’s which they thought gave them insight into future events, were nothing more than trickery intended to mislead the dreamer. On innumerable occasions Roman Emperors and Generals made sacrifices to the God’s to ensure victory. Yet on so many occasions instead leading their armies to victory they led them to defeat.

The Gods for Augustine were the deceivers of men, leading them into error from their own sense of mischief. This concept of a group of deceivers leading mankind into error by making deceptive promises is a useful concept when it is shorn of its supernatural context. I would like to recast Augustine’s concept of a world of men mislead by a race of demons into a more human form. Rather than seeing original sin as the corrupting element in mankind, I see ambition as the corrupting element, something best expressed in the term vainglory. Leaders wish to be remembered in history as men and women who changed the world for the better. While this is a laudable ambition it can led them into following certain practices or beliefs which they believe will improve the lot of mankind, but which in fact does the reverse. Unlike the demons of Augustine these deceivers often deceive themselves as they really do believe that they have discovered the holy grail of human betterment. The current race of deceivers are not demons but Neo-Liberal economists and philosophers.

These philosophers and economists have been campaigning actively since the 1970’s for the adoption of Neo-Liberal economic policies and the creation of a free market society, one largely free of government intervention. The argument in the 1970’s by these economists was that by freeing markets to find their own equilibrium there would no longer be any foreign exchange crisis, as currencies would freely move up and down to their natural level. (This was a time of crisis when the IMF was constantly having to bail out countries such as the UK which were experiencing such crises.) Despite that the world has not seen an end of foreign currency cries. However Neo-Liberal economists would assert that these have been due to governments not wholeheartedly adopting the Neo-Liberal agenda.

The UK is one of the countries that have most wholeheartedly adopted Neo-Liberal economics, through the practice of supply side economics. Supply side economics stated that the cause of economic under performance were the various restrictions imposed the markets that supplied the factors of production, in particular labour. Following these policy prescriptions the government almost completely destroyed the powerful trade union movement and removed most of the employment protection measures that previous governments had imposed on the labour market. The UK now has one of the most flexible labour markets in the developed world, a market in which employers have few restrictions on how they use labour. Yet the UK is not an economic success story, 1 in 3 workers in the UK are receiving less than the living wage, having to rely on government handouts to held them pay for their accommodation, food and clothing for their families. The trade deficit also has spiralled out of control, in the 1960’s it averaged 0.2% of GDP, whereas today it is 30 times larger at 6% of GDP. Despite all the increased flexibility in the labour market, the productivity of the average British worker is significantly less than in our European partners such as Germany or France. However Neo-Liberal economists continue to assert that the economy is healthier than ever, usually citing some statistics to prove their point. They are self deceiving as many of the statistics that really matter show an economy that is performing badly.

However the self deception is largely that of the politicians, as economists have always known that changing to a Neo-Liberal economy would create a substantial group of losers. The deception has been in that they have always dismissed the losers as a small and insignificant minority. Those British economists asking for reform in the 1960’s argued for an unemployment level of 3% and for those economists this would be made up largely of those people temporarily unemployed and who were between jobs. However the more influential have been the public choice theorists and Neo-Liberal philosophers such as Ayn Rand, who have argued for a more social Darwinist approach to public policy making. Ayn Rand argued that the poor had little place in society as they contributed little to it and saw starvation as one means of reducing the number of useless mouths. (Atlas Unshrugged). She has been extremely influential in British political circles and her followers have been effective in creating a society wide contempt for the poor, which has led to a whole series of measures directed against them. These politicians have never gone so far as advocating the starvation of the poor, but they have implemented policies that have impoverished them. What these deceivers have been successful in doing is portraying the poor as the OTHER, a group to which the majority never belongs. They have successfully concealed from the public imagination that disabling illness is not confined to the poor, but it can affect anybody and only the richest can avoid being driven into poverty by disabling illness.

Perhaps the worst of the deceivers are the public choice theorists who pretend that privatising public services will only create winners as we all will benefit from cheaper public services. However these are labour intensive services and cheaper services can only be delivered through reducing the incomes of the people working in these services and through worsening their conditions of service. One very effective way of doing this is to abolish extra payments for working outside normal hours, or by using zero hour contracts, by rewriting the terms of employment or using temporary agency staff. All of which enables the employer to get more for less. Today my dustbin was collected by the refuge service on a day which for most is a public holiday. In past I had to wait until the day after the public holiday. While most people will probably appreciate the fact that there is no break in the service; I am concerned that the families of the three men on the lorry are deprived of their company on a holiday. Am I in a minority in preferring to have my bin collection delayed by one day so these men could have a day with their children?

These Neo-Liberal deceivers have succeeded in portraying those who lose as a consequence of their reforms as the losing OTHER. Yet there is a danger that this other might become the majority should society move backwards in recreating the widespread hardship and misery of previous eras. These economists, philosophers and politicians have successfully deceived the majority by portraying their changes as necessary if society and the economy are to prosper and that the only losers will only be the insignificant OTHER, not them. Yet the purpose of a Neo-Liberal agenda is to create a large impoverished serice or underclass to service the deserving better off minority(?). In fact in 2011 a group of politicians published a book which blamed the poor for their plight, they were poor because they lacked the work ethic. I don’t think it’s wrong to compare the Neo-Liberal deceivers of today with Augustine’s demons, as both promise a better tomorrow, while in fact intending the opposite.

A good lie told well, the secret of managing the economy

May 19, 2015Economics, Politics#MiltonFriedman, Financial crash 2008/9, Friedrch Hayek, milton friedman, Monetary economics, Neo-Liberal economics, Neo-Liberalism, supply side economicsangrytunbridgewells

Image courtesy of randalrauser.com

What every economics student used to learn at university was how difficult it was for leaders to make policy decisions on the economy. The effectiveness of policy measures were uncertain and the time lag in implementing these measures meant that when they came into effect they were often addressing yesterday’s issues. What we learnt was how difficult it was to understand and manage that highly complex human institution, which is the economy. In one of our seminars it was decided that there were no economics was not a science comparable with physics and that economic theory was at best a good guess as to how the economy worked. Consequently economics for the student in the 1960’s was very much a work in progress. It was Churchill who said that if you asked four economists for a solution to a particular pressing economic problem you would get five answers and two of these answers would be from Keynes. (Keynes was the outstanding British economist of his generation. This humility did no fit well with the demands from politicians for policy solutions, as exemplified in the words of Margaret Thatcher who said she wanted answers not problems. There was a group of economists responded eagerly to such requests and began to supply answers that were not hedged about with caveats about what might possibly make the policy ineffective.
Economists had to know and there was a school of economists that knew. These new economists where named variously as the Chicago School of Economists, Monetary Economists, Free Market Economists or Neo-Liberal Economists. They took inspiration from the economist Milton Friedman the doyen of the Chicago School, who in turn was inspired by the economist Friedrich Hayek. What this group offered was a solution to the one problem that dogged the Western economies of the 1970 and that was inflation. They offered two solutions to the problem of inflation, they said that inflation could be controlled by controlling the money supply and by supply side economics.
Monetary economists could supply answers to for example that of inflation, which reached 27% pa in 1976. Politicians could understands that if the money supply increased faster than the supply of goods, more money would be chasing relatively fewer goods and so prices would be pushed up. If money supply was cut inflation would fall and the economy would continue to grow on a smoother trajectory. What they did not want to know was as any non monetarist economist could tell them demonstrated a relationship between increased money supply and inflation is not the same as demonstrating a cause.
However once politicians began to follow the policies advocated by these new economists, it became obvious that these new economists did not know. Britain was one of the first countries to practice monetary economics as suggested by Milton Friedman. In doing so one huge problem was discovered no Treasury economist was able to define what made up the money in circulation and what was the total money supply. The government came up with five possible measures and from this they selected one as their preferred measure which they called M3. M3 was chosen which was the total of currency in circulation plus bank deposits. They chose this one because it was the easiest to measure, after all the banks regularly published accounts showing their total bank deposits. They then made one huge assumption that all other measures of money supply would change in the same way as their preferred measure. However there was no evidence that all the other possible measures of money supplies the bank identified, would change in the same way as M3. It was a hope that all the unmeasured changes in money supply would follow M3, but the evidence for this was lacking.
In desperation the Treasury and Bank of England gave up trying to account for changes in money supply and instead adopted a new practice. Admitting they could not count the money in circulation they opened for controlling the demand for money by changing interest rates. They believed that the supply of money was determined by the demand for money, therefore by controlling the latter they would control the first. Ever since the 1980’s changes in interest rates have been the main instrument for controlling the economy. Nobody today every mentions that the central plank of government economic policy is based on a theory for which evidence is lacking, simply because they cannot identify or correctly measure the key determinant, money supply.
Something very similar happened after the great financial crash of 2008/9. There were three deficits that could make recovery difficult the government or public sector debt, the private sector debt and the banking sector debt. The smallest was the government debt amounting in 2009 to about 60% of GDP and the largest was the banking sector deficit of 540% of GDP(as identified in a report by Paul Tucker, Deputy Governor of the Bank of England.) It is obvious that the debt that is in most urgent need of attention was that of the banking sector, yet the government of the day and succeeding ones chose to ignore it and focus instead on the government debt. The latter is the easiest to reduce as all the government had to do was cut its own spending, whereas the more serious bank debt was much harder to tackle. The government would have to take on the big banks and the City of London, very powerful opponents of whose power the government is in awe. Also if the government was serious about reducing bank debt it would negatively impact on the property market, as cutting the debt would be achieved by reducing the loans the banks could make in total. If there was less money available for house purchases, prices would fall. It is a truism of British politics that the easiest way to achieve electoral unpopularity is to preside over a fall in house prices. Consequently Britain remains with Japan one of the most indebted of the developed nations.
While these facts are known amongst the community of economists there is a conspiracy of silence in parliament about the true nature of Britain’s debt problems. There is no leading political figure that wants to be responsible for the painful economic adjustment that would result from putting the bankers house in order. Instead they focus on how they will reduce the least significant of the three debts and the noise of the debate on government debt crowds out any possible alternative debate on the real nature of the debt problem.
The economic debate as understood by politicians is what matters, as they determine economic policy. The fact that the economic debate is founded on on misinformation and lies is irrelevant. What matters is that the economic lie is the one that every one accepts. In consequence the economic debate is about the wrong debt and the government has pursued the unnecessary austerity programe that impoverishe an increasing number of people, while turning a blind eye to the excesses of the financial industry. Lies matter because they can be based on simple easily understandable untruths, whereas the truth about the problems of the economy is complex and hard to understand. To admit to truth would deny the politicians the opportunity to offer simple policy solutions that they could sell to the electorate. As the political debate of today is conducted in the simplistic language of the tabloid newspapers the truth about the real nature of Britain’s economic problems will remain concealed. Concealed that is until some major economic crisis forces the political and media classes to recognise the true nature of the problems facing the British economy.

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.