Tag Archives: privatisation

Alternative and/or Socialist Economics are overdue a revival

Economics, Neo-Liberal economics, Politics, , , , , , , , , , , ,

Politicians have constantly complaining about economists, usually for not giving them the they want. Only recently Michael Gove a leading Brexit campaigner complained that the people were fed up with experts. What he was complaining about was the fact that economists weren’t making the upbeat predictions about Brexit that he wanted. It was disappointing to him that all these economists who were backing the free market reforms of his government were no longer supporting him.

Michael Gove is typical of many politicians in their misunderstanding of economics. While throughout the course of his political career economists tended to speak with one voice, that of the Neo-Liberal free marketers, that resulted from the suppression of alternative economic voices. Free market economists of the Chicago school dominated the universities and the professions, maverick economists were marginalised or silenced. When he proposed that the UK leave the European Union, the largest and most prosperous free market in the world they could not support him. What he had misunderstood that while some economists were willing to ignore the evidence that a precipitate break from the EU would be bad for the EU economy, most economists subscribe to the view that there subject is evidence based and could not back a policy that was contrary to the facts. Free market economists could not support a policy that led to the U.K. breaking with the world’s largest and most prosperous free market.

However Michael Gove is not totally to blame for his misunderstanding of the nature of economics. Economists fail to recognise the divisions within society and the conflicting interests of the various groups that make up society. What they prefer is one ‘great theory of economics’, a theory that explains everything and benefits all. In the 1980s for a variety of reasons mainstream economists adopted the free market economics of the Chicago School. This is its essence stated that the free market brought about the most equitable of outcomes. The free bargaining of sellers and consumers would deliver the best outcomes for all. No longer would the state be ineffectively second guessing what the people or consumers wanted.

Contrary voices such as that of Michael Polanyi were ignored. Michael Polanyi argued that the unregulated free market was the worst possible of outcomes. He stated that the state was in effect could be better at second guessing what people wanted, than the market. In a free market the rich and powerful have undue influence over how the goods and services that the economy produces are distributed amongst the people. Not only could they claim the lions share of the wealth, but they could also deny the majority a fair share of the nations wealth. The health care system in the USA provides an example of his thinking. There the well off can have access to the best health care in the world, but also deny access to adequate health care for the majority. Health care in the USA is run by for profit health care providers. These health care businesses are usually companies owned by shareholders. Those share holders that hold a majority of the companies shares are the super rich and they are not going to permit their business to provide loss making services, as they want the best possible return on their investment. The provision of universal health care to the less well off is a loss making service, so it is not provided. The poor and less well off instead have to rely upon the health care provided by the hospitals run by charitable institutions. These institutions are poorly funded and cannot provide the best of care. Michael Polanyi would argue that health care is a universal good, as all have a right to good health care and only a state run health care service can provide health care for all.

When only one voice is heard the result is bad policy making. Michael Polanyi has long since been forgotten and the government only gets policy advice from free marketers of the school of Friedrich Hayek and Milton Friedman. Now al too often government policy has been that of trying to fit square pegs into round holes. Every government embarks on a new policy to make health care services more market efficient, each reform costs billions, yet is considered necessary by each new government. Never does any health minister ever stop to think that their policy might be wrong and that there are alternatives to remaking the NHS into a faux free market. What all ministers believe is that by dividing the NHS into competing buyers and sellers (hospitals are sellers, selling there service to the various local health trusts) they get the most efficient of health services. Never do they understand that each new bureaucratic structure they impose on the NHS is yet another costly diversion of resources away from front line services and that these expensive bureaucracies may prevent health care being provided in the most effective and efficient way.

What economists know but politicians do not. Is that a health service run by health care professionals might adopt some wasteful practices such as over ordered get of medicines, but the cure for this problem is far more costly. If the most efficient distribution of medicines is to be ensured a new bureaucracy of stock controllers, accountants and financial controllers of all kinds. The cost of these bureaucrats far exceeds the cost of any over ordering by medical professionals. In the well managed private hospitals of the USA administrative costs account for 40% of the costs of running the business. Unfortunately in the U.K. the government with its various reforms is trying to divert an increasing share of the health care budget to these financial controllers.

Although Michael Polanyi who once was a well known economist he is now virtually unknown amongst contemporary politicians. Contemporary economists are overwhelming free market economists and little is published that is contrary to the consensus view. What is now needed is a ‘Dead Economists’ society. A society that popularises all the policy prescriptions of these long dead economists. There are a number that I can recall such as Michael Polanyi, J.K.Galbraith, Piero Staffa and John Maynard Keynes. If politicians were familiar with Friedrich Hayes’s work other than his short populist text, ‘The Return to Serfdom’, they would realise that he would have been critical of much ill thought out policy making. There are numerous economists who have written about the problems that face contemporary U.K. and suggest policy solutions, but all are ignored. What politicians want are the simple easy to under policies offered by the free marketers, they have little patience with good economic practice, as it is time consuming and does not offer the simple answers that make good headlines in the popular press. Donald Trump rather than be seen as a maverick politician contrary to the mainstream of politicians, should seen as representative of current political process in which politicians have a limited time span and want solutions produced within five minutes.

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Our Dirty Streets are not so much a consequence of Neo-Liberalism as the Poor Policy Choices made by our Politicians

Economics, Neo-Liberal economics, Politics, , , , , , , ,

As a fan of Scandinavia noir I am always struck by the cleanliness of the streets, which is such a contrast with the streets of the city where I live. Italy is always said to be a country where local government does not work, yet my experience of Italy is very different. When I stayed in Pisa, I would always come across the street cleaners when returning to my hotel late at night. Apparently the council was concerned that leaving rubbish uncollected in the streets would encourage rats and mosquitos. (Obviously there are exceptions, as in Naples where the Camorra control refuge collection.) British towns and cities seem to demonstrate a certain air of neglect, it is obvious that refuge collection is not a priority. What is not realised is that this dirtiness of the British city is not so much a characteristic of the national character, but a consequence of policy decisions of government.

This is a neglect imposed on local communities by central government consequent on it adopting the policies of Neo-liberalism. One of the tenets of Neo-liberal practice is that private enterprise is superior to public enterprise in the provision of goods and services. If however the state or local authority preferred to keep a service within the private sector, it should be run as if it was a private business enterprise. In practical terms this meant respect for the bottom line. If the private sector ethos was adopted by the public sector the same level of service could be delivered at a lower cost of the tax payer. Also these efficiencies in service provision meant that more could be delivered for less.

When working as a manager in local authority social services, I encountered this new philosophy first hand. The funding to local government had been cut and I was at a meeting with fellow managers to discuss how best to implement these cuts. This particular meeting was about home care; the local authority employed care staff to look after the elderly and the house bound. Our senior managers were enthusiasts for this new philosophy of work and had decided that twenty minutes of care would be all that any housebound individual needed. What we agreed on was a certain minimum of care that could be achieved in twenty minutes. Light dusting only was permitted in the room in which the individual spent most of their time. Using a vacuum cleaner to clean the carpet was forbidden, as it would take up too much time. There were a whole of list of don’ts, that is time consuming care activities. To ensure that the staff were not tempted to do more than the minimum, they were given so many clients to visit, that if they did more than the directed minimum, they would end up working more hours than those for which they were paid. This new service delivery scheme was regarded as a success as it mean fewer care staff were needed for home care, which meant a big cost saving for the local authority. What the housebound elderly or sick wanted was irrelevant.

A similar approach is applied to refuge collection. Funding for such has been cut by the central government to encourage the adoption of cost cutting efficiency As a fan of Scandinavia noir I am always struck by the cleanliness of the streets, which is such a contrast with the streets of the city where I live. Italy is always said to be a country where local government does not work, yet my experience of Italy is very different. When I stayed in Pisa, I would always come across the street cleaners when returning to my hotel late at night. Apparently the council was concerned that leaving rubbish uncollected in the streets would encourage rats and mosquitos. (Obviously there are exceptions as in Naples, where the Camorra control refuge collection.) British towns and cities seem to demonstrate a certain air of neglect, it is obvious that refuge collection is not a priority. What is not realised is that this dirtiness of the British is not so much a characteristic of the national character, but a consequence of policy decisions of government.

This is a neglect imposed on local communities by central government consequent on it adopting the policies of Neo-liberalism. One of the tenets of Neo-liberal practice is that private enterprise is superior to public enterprise in the provision of goods and services. If however the state or local authority preferred to keep a service within the private sector, it should be run as if it was a private business enterprise. In practical terms this meant respect for the bottom line. If the private sector ethos was adopted by the public sector the same level of service could be delivered at a lower cost of the tax payer. Also these efficiencies in service provision meant that more could be delivered for less.

When working as a manager in local authority social services, I encountered this new philosophy first hand. The funding to local government had been cut and I was at a meeting with fellow managers to discuss how best to implement these cuts. This particular meeting was about home care, the local authority employed care staff to look after the elderly and the house bound. Our senior managers were enthusiasts for this new philosophy of work and had decide that twenty minutes of care would be all that any housebound individual needed. What we agreed on was a certain minimum of care that could be achieved in twenty minutes. Light dusting only was permitted in the room in which the individual spent most of their time. Using a vacuum cleaner to clean the carpet was forbidden, as it would take up too much time. There were a whole of list of don’t, that is time consuming care activities. To ensure that the staff were not tempted to more than the minimum, they were given so many clients to visit, that if they did more than the directed minimum, they would end up working more hours than those for which they were paid. This new service delivery scheme was regarded as a success as it mean fewer care staff were needed for home care, which meant a big cost saving for the local authority. What the housebound elderly or sick wanted was irrelevant.

A similar approach is applied to refuge collection. Funding for such has been cut by the central government to encourage the adoption of cost cutting saving measures and the ending of what were seen as over friendly employee policies. The local authority can only manage this service by giving a time limit to each individual household refuge collection. Speeding up refuge collection is achieved by making householders take there bins on the pavement for collection. These refugee collectors know that if they delay themselves by collecting the rubbish strewn in the street, they will be unable to complete there work in time forcing them to work for free in their own time to finish their round. In consequence any difficult or time consuming tasks are left undone. Problematic streets or houses will be left untouched, as to tackle them would be take up too much time. Given human nature, the refuge collectors will be tempted to avoid the more difficult tasks claiming that it would contravene their terms of employment, which demands the minimum of time spent on each task. When the work practice emphasises quantity not quality, it is easy to understand why our streets remain dirty.

What has been had the most impact on the provision of public service provision is the self denying ordinance adopted by the politicians. The one that tells them that they should never interfere in the free market and that free markets work best if all power is ceded to the entrepreneur. If all entrepreneurs were gifted and benevolent this would be fine. Instead they have used this freedom from regulation and oversight to enrich themselves at the expense of society and the state. They have been given a licence to make money, a licence that imposes no obligations on them. Only today I read an article explaining how a property developer could make £50,000 a year. All they had to do was convert a house into a series of micro flats and charge the tenants exorbitant rents. This £50,000 would in come in part or wholly from the state. Either the tenants received tax credits to help pay their rent or the tenants received housing benefit which would be used to pay the rent. Only recently two major rail companies walked away from a contract the run the East Coast railway. The government never questioned there reasoning, it was sufficient for them to claim that the continue to operate the railway would cause them to lose money.

Rather than blaming Neo-Liberalism for this situation, it is the politicians who are to blame. They failed to have an elemental grasp of human psychology. If you give a group of powerful and ruthless people the freedom to act as they please, they will do just that. If profit maximisation is the sole motivating factor for running a service, the business owners will do whatever they can to maximise their profits. If reducing the quality of the service improves profits, that will be done. One illustration of this is a proposal by one of the privatised rail company was to strip all the seats out of the carriages in its commuter trains and replace them will diagonal resting places. This would have enabled the company to squeeze even more people on to its trains, increasing both revenue and profits.

Our politicians are as hapless babes in the cut and thrust of the market place. When a business tenders for a large contract, it incurs substantial costs in drafting that tender. If it fails to win the tender it will have to bear the cost of failed bid. Our political babes have allowed those who submit losing tenders, to sue them for the money they lost in preparing the contract. These naive innocents are quite happy to acquiesce in this most uncommercial of practices. The business men and women who compete for contracts for the privatised services have been more or less able to draft the terms on which they compete for government business.

What renders our politicians so helpless is that they have so decimated the civil service and local government in there desire to create a small minimal cost government, that they lack the staff who are either qualified or experienced to manage out sourcing successfully. Not so long ago the staff devising a contract for the running of a railway service, were so incompetent in their drafting and in the subsequent negotiations, that the losing tenderer was able to successfully take the the Ministry to court and win back the contract it had lost. It is not unknown that for a government so lacking in-house expertise, that it will turn to one of the large accounting companies asking them to draft the out sourcing contract. This same accountancy company could also be advising one of the companies bidding for that contract. With the out sourcing of government services to the private sector, it is always win, win for the private sector and lose, lose for the government.

Returning to the start of my essay the dirty streets of British towns and cities is a consequence of the adoption of least cost minimal service practices, associated with out sourcing and competitive tendering. This could be said to be a consequence of the adoption of Neo-liberalism, but really it’s down to the naivety of the political classes. To put it another way the wrong people are in charge of the provision of public services, people with the wrong mindset. When for those in charge the priority is the bottom line, non profit making services will be delivered for the lowest cost, even if that means the service is minimal and delivered barely acceptable standards. What is needed is the services to be put in the hands of those whose priority is to maximise the common good. Obviously cost efficiency is important but it should not be the main criteria for service provision. The least cost health care option is to provide no health care, but it is not necessarily the best option. measures. The local authority can only manage this service by giving a time limit to each individual refuge collection. Speeding up refuge collection is achieved by making householders take there bins on the pavement for collection. These refugee collectors know that if they delay themselves by collecting the rubbish strewn in the street, they will be unable to complete there work in time and will be forced to work for free in their own time to finish their round. In consequence any difficult or time consuming tasks are left undone. Problematic streets or houses will be left untouched, as to tackle them would be take up too much time. Given human nature, the refuge collectors will be tempted to avoid the more difficult tasks claiming that it would contravene their terms of employment, which demands the minimum of time spent on each task. When the work practice emphasises quantity not quality, it is easy to understand why our streets remain dirty.

The Gig economy and the rediscovery of the bad employment practices of the 19th century

Economics, Neo-Liberal economics, , , , , , , , ,

There has been a lot of excitement in the media about the gig economy, which ‘whatis.com’ defines as ‘ an environment in which temporary positions are common and organisations and organisations  contract with independent workers for short-term engagements’. One study estimates that by 2020 40% of American workers will be free-lancers employed on a temporary basis. In the media there have been positive accounts are given of this development, in fact one journalist Deborah Orr explained how gig work was much superior to a boring job for life, as the individual worker was no longer stuck in the same job for all there working life, but they were now free to change from one job to another once the first became to “samey’. The gig economy for her was a liberation from the 9 to 5 five day a week job.

In fact there is nothing new to the gig economy, as its a reversion to a much older and more traditional form of employment. There is in Thomas Hardy’s book ‘The Mayor of Casterbridge” an account of how farm labourers attended the fair hoping to attract the attention of farmers who would offer them employment for the coming year. Employment on a temporary basis in that come the winter the farmer could dismiss the labourers for who he had no  use. Those left unemployed at the end of the fair had to ‘go on the parish’, that is with no means of support they had to look for to the parish for support. This meant going to the workhouse, an option so bad that families would rather go without and risk starvation than go to the workhouse. More recently such employment was known as the lump in the building trade. A practice whereby workers would be paid daily (if there was work) and work under an assumed name for an agency to avoid tax and national insurance payments. This work was so poorly regarded that most building workers strived to go on the lump. Given this history of the gig economy it is puzzling while it is greeted with such enthusiasm. 

Those who either were victims of the gig economy or knew its workings wanted it abolished. The 19th century and the early twentieth century witnessed action by trade unions and enlightened politicians to provide security of employment for all. In the 1970’s the last major example of gig economy was ended, with the Dock Labour Registration Scheme. Prior to that dockers turned up each day for work, hoping to be taken on for that day to work unloading a ship.

The only area of employment in which the gig economy remained was in the media world. one such example were actors who were employed only for the period in which a play lasted or which a film or television programme was made. This was considered acceptable as actors had the possibility, if successful, of earning substantial sums.

Today there are over 900,000 workers on zero hour contracts. It is claimed that this is made inevitable, because of technological change. New technology it is claimed is ushering in a world in which the nature of work will change, as most new jobs will be on of a temporary nature as the economy is subject to constant change. However while it is true that in some industries such as printing technological change has made many jobs redundant, many of these workers on zero hour contracts are in jobs which have been little affected by technological change. Care assistants in nursing homes or those attending the housebound have had little experience of technology affecting their work. Baristas, waiters, chefs, hotel cleaners are doing more or less the same job that they would have done 50 years ago. The cleaning of hotel rooms is still  largely a ‘hands on job’ that has to be done by a human being. The machinery they use has remained largely unaltered, that is the vacuum cleaner. Yet these thousands of people are all on zero hours contracts and part of the gig economy.

All new technology has achieved is to make the gig economy work for employers. The mobile phone means employers as employees are  constantly on call and can be called in at a moment’s notice. Making something possible does not make it inevitable.

There is another example I can give. Teaching is largely labour intensive and there does seem to be a limit on the numbers that teachers can teach effectively it is  about 30 students in a class. This has always seem a bugbear to right wing economists and politicians, as they see teaching as a prime example of a profession using wasteful labour practices. During the 1990’s there was great excitement in political circles about new technology making it possible for a teachaer to teach classes of a 100 or more. What they envisaged is remote teaching, whereby a teacher in a distant studio using computer technology would teach several classes at once in different schools.  This would have greatly increased the productivity of teachers and reduced the education budget, as many thousands of teachers could be let go. However anybody who knows children realises that they cannot be left to themselves, being remotely directed by a teacher hundreds of miles away. If such a system was introduced these  classes would require human assistants or guards to ensure that the misbehaviour of the few would not disrupt the class. However these children would have questions that could not be answered by the remote teacher, because there would be so many requests for help that this remote teacher would be unable to cope. A qualified teacher or teachers would have to be on hand to help the children with the work. This can be translated into economics by stating that the optimum economic unit of teaching is 1 teacher to 30, any substantial increase above that number will lead to diseconomies of scale.

Despite this it remains the holy grail of the ministry of education to develop that education technology that will reduce the need to employ expensive qualified teachers and so cutting the cost of education. Schools have been flooded with new technology aimed at achieving this end but so far none has succeeded.

There are areas of employment that have been revolutionised by the introduction of new technology. When I started work in an insurance office it included a typing pool, which contained 20  typists who produced typed copy from the hand written copy provided by the clerks. These typists have long since gone replaced by the word processor as have the messengers who have been replaced by email. The same applies for manufacturing industry where millions of production workers have been displaced by computers and computerised manufacturing. The argument is that this process is continuing and we all will have to be prepared to have several jobs in our lifetime, the old job for life has disappeared.

I am not convinced that this obsolesce of jobs will continue. Many of the jobs that can be done by the new technology have disappeared already and there does no seem likely that this technological change will continue at the same rate. The rate of innovation in the new technology is slowing, the RAM memory of my computer is that which was achieved a number of years ago. What my one year old computer has gained over its predecessors is portability, computers have shrunk in size.  This new miniaturised technology is set to revolutionise delivery services, greater control over delivery times is now possible making delivery services more efficient. Employers now can employ drivers for the time that they need them only. Delivery drivers are now self employed often owning their own van. Computer technology means that delivery companies need only employ drivers when they need them, getting them when needed from the pool of waiting drivers. This reduces costs and makes delivery services profitable.

However the possibilities of huge profits have caused many businesses to set up as delivery companies, so many that there are too many companies in the business. The opportunity for making profits is so reduced that for many businesses it can be achieved by reducing the costs of employing drivers. Incomes are driven down to the bare minimum and drivers conditions of employment are worsened so the companies can maximise the productivity of these drivers.

What makes the gig economy so necessary for the delivery trade is the low level of profits in the delivery trade. Without the benefit of casualised working practices and low driver incomes many of the delivery companies would be forced into bankruptcy. It is not so much new technology, as the weak financial position of many delivery companies that make the bad working practices necessary.

There is an alternative scenario if delivery drivers were paid higher wages and given better working conditions, the delivery business would not seem to be the goldmine that it appears to be at present. If that was the case fewer businesses would be attracted into the delivery business and these fewer businesses would gaina larger market share and the much greater certainty of being profitable.  In such circumstances the worst abuses of the gig economy would not  be needed to make the businesses profitable.

While it cannot be doubted that technological change will continue to change the employment market, it cannot be predicted how employment practices will change. Inevitably in some industries there will be the need for the working practices known as the ‘gig economy’ but a great deal of scepticism is required, as much of the changes that have brought about the adoption of the gig economy have little to do with technology but more to do with changes in business practice. All governments of the Western world have been in thrall to  the philosophy of Neo-Liberalism for the past three decades which teaches that the supply of goods and service is best done by the private sector and that the government is best kept out of the market for goods and services. One key element of Neo-Liberalism is what called ‘supply side economics’ and the key element is reform of the labour markets. What these economists teach is that the greatest threat to economic well being are the restrictions imposed on the labour market by trade unions and government. Employers are prevented by these restrictions from using labour in the most productive manner and so these restrictions need to be eradicated. Politicians have introduced laws to emasculate trade unions and removed much employment legislation, so much so that there are almost no restrictions on employers to prevent them from using the most abusive of the practices of the gig economy go maximise worker productivity and their profits.

Some of the very worst practices of the gig economy at be laid at the door of government, whether it be centre right or centre left, conservative or labour, Republican or Democrat, Christian Democrat or Social Democratic. As believers is Neo-Liberalism they believe that wherever possible government service provision should be transferred to the private sector, as private sector providers are more efficient that those of the state. The worst effect of this practice is shown in the care services in Britain. Care for the sick , the elderly, the house bound has been transferred to for profit service providers. Transferring care provision to the private sector has reduced the cost of care. However rather than it being due to efficiency it is due to hypocrisy. The government can squeeze the private sector care providers by paying less for their services. This squeeze on their incomes means that they have to cut costs and the biggest cost is that of labour. These companies adopt a variety of exploitative practices to keep costs down, such as the use of zero hour contracts and were ever possible reducing the income paid to care workers. Those workers that provide care for the housebound are not paid for the time travelling between housebound clients, only the time they spend with each client. This means that the bad publicity that goes with treating care workers so badly attaches to the private companies and not the government. The dirty secret of both the Labour and Conservative governments of the recent past is that they and not the private care providers are responsible for care workers being subjected to some of the most exploitative of working practices. Governments of both parties have refused to end the practice of zero hour contracts and the various abuses of care workers, because to do so would mean that they would have to increase by a substantial sum the money they spend on care services. Unfortunately these guilty politicians are unwilling to do anything to improve the conditions of care workers as any improvement in there working conditions would mean having to find more money for these workers out of taxation, which they believe would be unpopular with the electorate.

How to spot a bad economist

christianity, Economics, Economics, politics, short term ism,, Uncategorized, , , , , , , , , ,

What cannot be doubted is that if a mysterious plague had wiped out all living economists twenty years ago, the world would be a better place than it is now. Economists despite their supposed understanding of the economy have consistently failed to predict any of the major crises that have occurred. Just before the crash of 2008/9 economists were speaking of a new paradigm in which the old rules no longer applied. The huge debt or credit mountains that had developed in the financial sector were no a cause for concern but a welcome development. It was evidence of the efficiency of the banking sector in creating credit to meet the needs of industry and consumers. Banks were at the forefront of the technological advance, an example for the rest of the business to follow. The new paradigm was of course no such thing, old fashioned credit bubbles had built up within the financial sector and would inevitably burst as they did causing a near melt down of the banking sector. There were a few economists that spoke against the new paradigm but the majority  were in favour of it. Since the few perceptive economist were ignored by governments it only goes to demonstrate that we would have been much better off without the profession of economists. What is most worrying is that economists have become cheerleaders for the worst economic practices and behaviours instead of being its critics. Very few economists wanted to spoil the party, most choose to go along with the partying.

As one of the few economists (letters published in the national media), who predicted the bust of 2008, I think the role to which I am best suited is to identify those traits in an economist which clearly identify them as a bad economist. While I am not in a position to advise ministers on the choice of economist, what I can hope is that my advice will get wider dissemination and over time and will eventually reach the political classes, so enabling them to make a better choice of economist to advise them.

A bad economist can be identified quite simply, they claim to have the answers, they just know. They never express any doubts ,they are unique in that they always know what will happen in the future. Usually they are one trick ponies, they  have learnt and rehearsed the arguments for their particular brand of economics and see no need to ever change their views. What these economists lacked was what I experienced, student’s on my economics course were pointed in the direction of  J.S.Mill in the 19th century philosopher, who argued for  the impossibility of there being a science of society and in particular a science of economics. His argument was that it was impossible to make sound predictions about what would happen in the future, as there were too many variables (people) who behave unpredictably, unlike the natural sciences where the subjects studied do behave in predictable ways.

The British Treasury as one of the doyens of economic forecasting has spent a century or more proving J.S.Mill correct. The Treasury has never produced one correct forecast about the future of the British economy. They at the best make predictions in line with what has been the trend of the past few years. The only accurate forecasts they make are those that are revised after the event, when adjustments can be made to the forecast on the basis of what really happened. Despite its massive  investment in technology the British Treasury has always been caught by surprise whenever a crisis occurs. It failed to predict the financial crash of 2008/9, the bursting of the dot com bubble in 1999 and the property crash of 1990.

Despite their record of failure the British Treasury has no hesitation about advising the government on economic policy. They never feel any sense of doubt and they have been the driving force behind the adoption of free market economics. They were in the 1980s advocating an end to security of tenure (be it home ownership or lifetime tenancies), they argued that there was a problem of accommodation blocking in the areas of economic growth, as people hung on to their accommodation denying them to those workers needed by the growing businesses. The Treasury believed security of tenure was the enemy of economic growth. They were one of the leading advocates in government that led to those policies that effectively led to the end of security of tenure for the majority of people. It was not so long ago that the Treasury were congratulating themselves on the success of their policies, as they claimed that insecure tenancy system of private rentals system had freed up accommodation for the large influx of the migrants from the European Union. The victims of the housing chaos, that is the young professionals and families being priced out of London would disagree.

The next criteria for identifying the bad economist is a wilful forgetting of their past errors, they can never admit that they have been wrong in the past. There are never any failures in their curriculum vitae. Treasury economists despite their mixed record move to senior positions in the finance sector, where the businesses that hire them foolishly believing that they are buying into their unrivalled expertise in economics.

Another of the criteria for judging whether an economist is bad or not, is do they over rely on economic modelling? Do they have an inability to speak in understandable English or do they rely on incomprehensible economic terminology to convince their listeners of  their expertise? When trying to sell a policy that the purchaser (the politician) themselves could have thought of themselves these economists use baffling economic terminology to dress up what is a very simplistic policy proposal.  I can never forgive the tutor who recommended a book on market economics written by an eminent Chicago professor of economics. A book that for all its use of difficult economic terminology taught me nothing that I did not already know. Not only that it was in hardback and cost far too much; however it was a lesson well learnt. I saw my role as an economics teacher to translate the economic texts I gave my students into comprehensible English. Close reading of the texts showed how authors would use economic terminology to cover up gaps in their knowledge and understanding. Now that I am retired I wonder if this use of unnecessarily complex language was not a deliberate ploy to hide their failings as economists.

One other criteria is does the economist sound like so many others in the profession? All to often rather than analyse a problem and make reasoned suggestions, economists will take short cuts and rely upon repeating what is the common stock of economic knowledge. If they repeat it in their reports they know that they are immune from criticism, as no other economist will criticise them for repeating the mantras from the economist’s creed. While the agreed understandings and beliefs of the profession are not quite the holy writ, no criticisms of it will be tolerated by members of the profession. In conclusion it can be stated that a bad economist is a lazy thinker, someone who relies on the knowledge of the herd, one who follows convention.

Einstein once said that to do the same thing over and over again and yet expect different results each time is the height of folly. This happens regularly at the British Treasury which  insists that public services should be put out to tender and run as private enterprises, each year the Treasury finds new sectors of the public service to be farmed out to the private sector. Most recently it was the prison service, individual prisons are now to function as private companies. These new prisons will be judged on there reoffending figures. Incomes for the enterprise will depend on reoffending rates, those with the best record for reducing reoffending will get the biggest bonus payments. Profitability will depend on their success at cutting reoffending.  The only problem is that human behaviour does not respond this profit and loss model in the way the politicians assume.  If an effective method of reducing reoffending had been discovered it would have been introduced to the system long ago, as it would have been the most effective of reducing crime and costs of criminality. What methods of reducing reoffending that have been discovered are expensive to implement and one of the criteria for the new Prisons Ltd is that they keep costs to a minimum. This cost minimisation criteria goes contrary to the demand to reduce reoffending. This demonstrates another criteria naive over optimism, it is seeing the solution to complex social problems as being the adoption of simplistic business models.

When I attended my first philosophy lectures I remember Professor Oakshot talking about the various philosophical models adopted in the past. One was that adopted in the medieval period  was to examine human behaviours from the perspective of a super human being, a God’s eye perspective on mankind. Obviously mankind was found wanting or to use Augustine’s phraseology human behaviour was all too often dominated by the lower appetitive instincts. If today such a super human judged mankind he would recommend the elimination of the tribe of economists. This action would bring immediate benefits to human society and if it did not bring heaven down to earth it would lead to human society becoming much nicer.

Words of advice from a sceptical economist to any aspiring politician

Economics, Philosophy, Politics, , , , , , ,

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

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

Ozymandias image taken from blogspot
Ozymandias image taken from blogspot

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

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

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

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

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

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

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

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

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

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

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

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

The Return of Serfdom to Britain

economic history, Economics, Philosophy, Politics, , , , , , , ,

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

Economics, Philosophy, society, , , , , , , ,

 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.

 

Osborne-oenomics explained

Economics, Politics, society, , , , , , , , ,

Nietzsche’s dictum is that philosophers are in error because while they write about man they never study real man, only their idealised construction of him. They construct ethical systems but never look at the source of those ethical systems, man. He demonstrates how the concepts free will and moral responsibility are of little use in explaining human behaviour. His psychology demonstrates that much of human behaviour is pre-determined, it is their physiological makeup that determines people’s actions not rational thought. Criminal behaviour is more likely to derive from an individual’s biological drives which they cannot control than from conscious decision making. Commentators would do well when commenting on George Osborne’s economic policy to observe Nietzsche’s dictum. Most would see his policy being derived from his reading of the Neo-Liberal commentators of whom they assume he is familiar with. This ignores two key facts, one is that he studied history and probably had but a nodding acquaintance with Hayek etc. and that he is a son of a baronet and it is this latter fact which provides a key to understanding George Osborne.

The baronet is at the lowest level in the aristocratic pecking order and being aware of their nearness to the masses, they have always been the most zealous in defending their privileges of social rank. They are all too aware of what a fall from social grace means. It is these people who have provided the backbone of the Conservative party. The defence of their position often led them to developing the most reactionary of principles. Any improvement in the lot of the servile classes is a threat. A guest at the dining tables of the baronetcy would be aware of the servant problem. The insolence of the lower orders making them such poor servants and the difficulty of recruiting servants as most of the lower orders rejected a life of servitude.

The greatest threat was progressive taxation, particularly taxes on capital. The latter threatened their holdings of wealth and they saw around them the break up and disappearance of many large estates. The social order of which they were part seemed to be disappearing. Since social democracy is dependent on progressive taxation to fund its activities; they hated social democracy as it was that progressive tax system that threatened their existence. They also hated the public services which made such taxation necessary. One service that attracted their ire was the National Health Service. Why should they make such a large and disproportionate contribution to a service that they use but only occasionally. As they would resort to private health care so as to avoid contact with the masses. Is it at wonder that coming from such a background the guiding principle of all George Osborne’s policy is the destruction of what remains of the social democracy of former years? The privatisation and destruction the NHS being the iconic government policy that by which it will be known in history.

Self interest lies behind the desire for a small state, rather than the desire to free enterprise from the the burdens and regulations of the nanny state. A small state does not require large tax revenues to fund its activities. Any policy which shrinks the tax burden on the better off will meet the approval of a baronet’s son. Is not likely a man from his cultural back ground would want to cut taxes? It is no coincidence that one of the first acts of this government was to let Vodaphone of it’s £6 billion tax bill and it is now letting the self same company avoid tax on the multi billion profit from the sale of its shares in Verizon. Tax avoidance is no longer an activity to be discouraged by government but one to be encouraged by the Chancellor. He has decided that multi-nationals that have off shore subsidiaries can channel any profits they make in the UK through these subsidiaries to avoid tax.

One cannot underestimate the impact of the culture of the baronetcy on George Osborne’s thinking. Some members of this social grouping in the heyday of the Social Democracy feared their extinction through a loss of their wealth and position because of what they saw as a penal tax system. Growing up in the sixties on a country estate with family friends in service; I could not but be aware of how this group saw the state as the author of their misfortunes. Any society will suffer periodic crises and the UK society suffered from an economic crisis in the 1970’s culminating in the extraordinary high annual inflation rate of 1974 which topped 27% . It was the OPEC inspired rise in petrol prices which largely caused this spike in commodity prices which caused the high level of inflation. Taking advantage of the weakness of the state in this crisis, the political right forced/persuaded the government to adopt Neo-Liberal policies that would ultimately lead to the demise of the social democratic state.

It is probably no coincidence that the doyen of Neo-Liberals Joseph Schumpeter was an aristocrat. Neo-Liberalism as espoused by George Osborne is the guise through which the baronetcy and others wreaked their vengeance on social democratic state.