Tag Archives: Soviet Union

How to survive in the age of Trump, May and Farage

How do I live in a society in whose leaders values are totally alien to me? In Britain we have a Poujadist leader who seems intent on dragging Britain back to a country of her childhood imaginings. A country from which people with foreign sounding names with funny foreign languages are absent.The Britain which I love is fast disappearing before my eyes. EU nationals are now threatened with deportation because of their ‘EUness’, an alien virus which is seen to threaten the integrity of the English nation. To answer my own question I look to those who have survived with their integrity intact in more violent and authoritarian societies than mine.

One figure that has always attracted me is the Russian poet Anna Akhmatova, a women who survived the horrors of Stalin’s persecution of the intellectuals in the 1930s. She was one of the early supporters of the revolution or rather the revolution in social mores that was sweeping through Russia in the early twentieth century. What this change meant was that women were no longer confined to the domestic scene as wives or mistresses. They could live their own lives rather than a life according to established custom. When Stalin achieved power this independent minded woman was seen as threat to new puritanical work obsessed  world of communism. In Stalin’s world individualism of the type that was practised by Anna Akhmatova was seen as a threat to the collective. People should work for the good of society and exhaust themselves in the fulfilment of communist society’s goals. The individualism of Akhmatova was seen as bourgeois and as contrary to communist life and practice. Also she scandalised the puritanical Stalin by living what in the sixties would be termed a sexually liberated life.Women could take on traditional masculine roles that being a doctor, architect in Soviet society, but they should not transgress the traditional sexual mores.

The first act of persecution on her was the sending of her husband sent to a labour camp, where he later died. Then when her son had achieved adulthood he was sent to the camps on a trumped up charge. Stalin and his secret police then played a cat and mouse game with her. She would go to the camp were she thought her son was imprisoned with food and queue for an opportunity to meet her son. All to often she would be turned away on some pretext and was denied a chance to talk to her son or deliver her food parcels. This was an experience common to many mothers and wives of camp inmates. Yet despite this treatment she continued she take whatever opportunity she could to help her son. Somehow her son survived the camps and returned to civil society.

I cannot know what anguish Anna Akhmatova suffered because of her cruel treatment by Stalin, but I do know is that she retained her personal integrity. She continued to write poetry. It is this quality of personal defiance that I most admire, an intent of being herself and not communism woman. There is one of her poems  ‘The Crucifix’  which expresses her personal agony, in the manner in which only be achieved by a poet.

The Crucifix

Do not cry about me mother seeing me in the grave

I

The greatest hour was hallowed and thundered

By angel’s choirs, fire melted sky

He asked his Father ‘Why am I abandoned?’

And told his Mother ‘Mother do not cry’

II

Magdalena struggled, cried and moaned

Piter sank into stone trance

Only there, where mother stood alone,

None has dared cast a single glance.

Translated from Russian by Tanya Karshtedt

Edited by Dmitry Karshtedt, August 1966

What I take from Anna Akhmatova’s story is that even in the most cruel and corrupt of societies, it is possible to retain that independence of mind and sense of individuality, which represents the best of human life. In the end she triumphed over Stalin. The many tomes of his writing remain largely unread today, the only readers being those historians who need to understand Stalinism; whereas Anna Akhmatova’s poems are read by many thousands if not millions for pleasure. Her spirit lives on through her poetry, Stalin’s died at his death.

There is another story from Soviet Russia that sticks in my mind. A person who has been recently freed from a labour camp is given a $10 dollar note by a friend, who realises that they will need help now that they are trying to reestablish their life. However this man knows of friend in similar circumstances who he thinks is in greater need of the money, so he sends him the $10 dollar bill. The recipient of the money knows of a person who is greater, so he sends on the money. In the end the $10 dollar bill never gets spent as its sent from one person to another. People can it seems retain the best of human qualities in the most appalling of circumstances.

What I am not suggesting is that contemporary Britain is the 21st century equivalent of the Soviet Union. Instead I live in an increasingly authoritarian society in the leaders have values alien to me. It is a country in which the nastier of the Poujadist or Little Englander strain of politics has become mainstream. While our leaders may claim they are neither, their actions and the wording of their speeches betrays there true intent. How will I live in this new Britain? I will continue my friendships with my Iranian and Peruvian neighbours. Continue to patronise the Italian cafe where I regularly go for coffee. What I am trying to say is that I will try to live my life according to those qualities of life that the philosopher Kwane Anthony Appiah calls cosmopolitanism. I enjoy a life which I see as characterised by friendship with people of other culture. A cultivated open mindedness a respecting others for there differentness. Perhaps a feeling first stimulated on my first visit to France in the 1970 when for the first time in my life I could enjoy a good cup of coffee. This to a person brought up on instant coffee was a life changing experience.

I grew up in what many would consider ideal circumstances. It was a childhood spent in small rural village of native born English people. There was a strong sense of community mindedness. I could wander through the village and its surrounds knowing that I was safe. If I encountered any problems I could go to a neighbour. Yet now I could not return to a community of native born English speakers, as I love learnt to love diversity and difference. In the village of my childhood there would not have been a Mohammed with whom I could discuss Middle Eastern politics. Now my ideal world is the one centred on the urban coffee house, where I can engage in conversation with people who are not like me. One in which a secular minded Englishman can have a friend  who is a good Muslim who both share a liking for indulging in good conversation.

History has it wrong the Soviet Union won the cold war (at least in Britain)

One of the commonplaces of history is that the communists and in particular the Soviet Union lost the Cold War. This victory was exemplified in the pulling down of the Berlin Wall in 1990. However this is a misreading of history. There are two ways of winning a war, one the most obvious is the conquest of the enemies territory, the other less obvious is when the loser takes on the ideas and practices of the winner. A more subtle form of conquest but just as real. Recent history demonstrates in Britain at least there is an enthusiasm for the ideas and practices of the former Soviet Union.  As a teacher I always spent at least one lesson teaching communist economic practice, as I found it fascinating and I thought that the students would benefit from the knowledge of an alternative economic system. Imagine my fascination when recent events recorded in the media demonstrated that he practices of the Soviet Union had been adopted wholeheartedly by the department of education.

The leaders of the communist state realised that they had taken over a country steeped in capitalist values and their major task would be to re-educate the people in the values of communism. In the early years of the Soviet regime trains carried artists and other propagandists from town to town to teach the people communist values and practice. Without this programme of re-education the communist state would fail as the capitalist enemy from within would undermine all the efforts of the communist state at reform.  There had to be  in tandem with this programme of re-education active policing to root and destroy those enemies of communism. Just last week the latest schools minister just like any good communist politician he was claiming that saboteurs were seeking to wreck his programme of educational reforms. In this case it was a small group of rogue examiners and teachers, all of whom he was determined to root out of education system.

The Soviet State believed that schools would play a key role in re-educating the population into the correct mores of the communist state. Not only school students but those at university were expected to study the thoughts of the communist leaders. In addition they to follow courses of the approved and correct ideological content. Marxist studies were a key element of both the school and university curriculum. There was a certain paranoia in the thinking of the Soviet leaders as they saw themselves as the enlightened minority constantly threatened by the actions of the mass of unbelievers; it was the same attitude that prevailed in the Conservative government elected in the 1980s. They saw a failing nation corrupted by the anti capitalist values of social democracy and socialism. Just as their communist predecessors had, they employed the law and aggressive policing to destroy the power of the enemy within, that is the trade union movement. They also realised that the success of their conservative counter revolution depended on the re-education of the populace into the right ways of thinking. Obviously the start was be made with the easiest to re-educate the young that is those at school. This would be achieved by changing the curriculum and by re-educating the teachers.

I was one of the first teachers to be put on the programme of re-education. It was obvious to the government that we were imbued with the wrong thinking and one of the best ways of eradicating this was to introduce teachers to the right way of thinking. When a communist state wanted to re-educate the population they were sent to the camps in their thousands for re-education. When the South Vietnamese State fell to the communists all the army officers and government functionaries were sent to the camps for re-education in the values and ways of communism. In Britain the government made a half hearted attempt at re-eduction, was rendered ineffective hampered by their commitment to spending to cutting government spending so their was only a minimal amount of money to be spent on re-education. I as one of the selected few for re-education attended on training session given by a manager from the private sector in the values of business and free enterprise. Then I had to follow in my own time a modular course of re-education and produce a portfolio to demonstrate my commitment and willingness to teach the new ideas. I guess like many in the old Soviet system I was very sceptical about its value of this programme but I completed the it because it was the only way of saving my job. This made me less than an ideal ideologue for the cause.

Rather than continue with this programme of ineffective  re-education the government resorted the negative tactic of weeding out unsuitable teachers. They created a new inspectorate who role was to ensure that school worked in conformity with the new rules and values. This body weeded out many staff who were resistant to the new ideas. Many creative and talented teachers left the profession, rather than be forced to teach the new orthodoxy with it series of box ticking exercises. A flight similar too but much smaller in numbers than the flight of intellectuals from Russia in 1920s. Now as in much of the old Soviet State promotion is gained by adherence to the values and practices espoused by a series of government ministers. Promotion now is largely dependent on a display of the toadying factor.

Teachers are still regarded as potentially the enemy within and are subject to a series of punishing controls, usually in the form of inordinate amounts of paper work. Just as a worker under the Soviet system was expected to attend regular party meetings to demonstrate their commitment to the system, so a teacher is expected to produce mountains of paper work to demonstrate their commitment to best new system.

What as an economist struck me was the similarity of the economic models they employed. In the old Soviet Union Gosplan Moscow decided on the targets for all Soviet Enterprises and there were a series of Gosplans at different levels of government that added more and more detail to the plan to ensure that the central directives were met. Not only that but there were Gosfinance and Gosresources, that decided the money and resources to be allocated to the education sector. Since there were at least three separate bodies in Moscow deciding upon targets, finance and resources it was inevitably that these directives issued by these three bodies were often in conflict. Also it must be added that these detailed central plans always specified quantitive targets to be met to demonstrate that the planned targets were being met. Managers of local public enterprises struggled to meet these targets set by these different bodies so they often resorted to all kinds of practices in an effort to appear to be meeting these targets. Since it was easier for a shoe factory to meet the target to make by making only shoes of one type, a factory would often turn out only right or left handed shoes.

The similarities with the education system in Britain today are striking. The department of education set targets for schools to achieve. These targets are always expressed in quantitive terms, as they are easier to measure and check. Quantitive targets such as a setting numbers to pass tests in English and Maths. However the Education Minister and his planner set the targets  independent of the Treasury which controls funding and resource allocation. The consequence is targets being set that are impossible to achieve with the funding and resources available. This has led to the development of a new profession the private consultants who teach how to achieve the impossible targets.

Just as in the old Soviet Union the performance of individual schools is measured against a set of targets set by the central government. This means the emphasis in schools must now be on achieving government targets and so teaching practice is changed to enable the school to score as high as possible in tests, as high scores earn score additional scarce funding and resources.  In the Soviet Union factories made only left handed shoes, so schools similarly  turn out students with only the left handed education. Right handed education that is creative thinking cannot be measured so it is increasingly left out of the curriculum. Creative subjects such as art and music are downgraded within the system so the most able are encouraged to do the book ticking knowledge based subjects. In the Soviet Union what mattered was the quantity not the quality, the same is true of British education. What matters is the attainment of government targets not the quality of the educational students receive. Many of the targets are of have little real educational value but what matters is appearance, these statistics that can produced to show how successful is the minister of education and his latest reform programme.

What demonstrates most clearly the success of the Communist model is that Britain is eager to emulate the methods of teaching used in the schools of Communist China. Britain invariably lags behind China in the PISA tests. These are supposed to be impartial means of assessment by which the performance of a nation’s school students are  judged. Everybody outside the Government and the Department of Education knows that Chinese score highly in such tests because only students at the best selective schools in Shanghai are entered for the Pisa them. What matters to the Chinese is prestige and they would never think of entering students from those schools whose relatively poor performance  who would drag down the nations scores. Given that in a Soviet type education system all that matters is the appearance of doing well, rather than the more difficult task of actually doing well, in Britain the government is now importing Chinese teachers to help remodel our schools to be more like those of the Chinese.

Note. Despite their claimed difference between the Communism of the former Soviet Union and the Neo-Liberalism of the West are vastly overstated. They both claim to be ideologies of freedom but are in fact authoritarian ideologies that intend impose their limited understanding of freedom on their host societies. Under Neo-Liberalism we should all have the freedom to buy and sell without hinderance. One hinderance is what are regarded as the bedrock of democratic society, the freedom of association.  Political movements that intend to enact a reform of society, will according to the Neo-Liberals hinder the workings of the free market. They wish to impose restrictions and costs on business that will increase costs and reduce the supply of goods available to consumers. Therefore such movements should be discouraged or prohibited as they interfere with the workings of the free market to the detriment of all. It is the increasingly authoritarian nature of the British Neo-Liberal model of society that means that British society increasingly resembles that of the Soviet Union.

Astrologers, soothsayers and pseudo economists

All political leaders share one common weakness and that is desire to know the future so as to be one step ahead of their rivals. This makes them susceptible to the practitioners of the various pseudo sciences that can give them both a knowledge of future events and how to use that knowledge to their advantage. These pseudo scientists that in the past practiced this spurious futurology were the astrologers and soothsayers, today these people are more likely to be economists and psephologists. It is the lust for power that makes politicians so susceptible to the machinations of soothsayers of various kinds. There is not one political leader today who does not have an in house psephologist on hand to read the political runes. This is a common practice that runs through the ages, as one contemporary leader Tony Blair had the psephologist Phillip Gould to hand while Elizabeth I had  the astrologer and alchemist John Dee.However I intend to focus this essay not on psephology but on the new pseudo economics.

Soothsaying and astrology as with pseudo economics claim to know the future and can offer policy prescriptions to obtain the best possible future outcomes. These economists claim to possess a unique knowledge of the world, a knowledge that only they understand. Soothsayers or astrologists could state from there understanding of the future when it would be a propitious time for action. There knowledge of the future and future events came from they understanding of the fundamental forces that determined the course of human history. Pseudo economists also claim a knowledge of those planetary forces of economics that will determine the future. In this case it is rather than the movements of the planets determining history it is the movement of market forces that determine history. They will claim that communist leaders wilful ignorance of these market forces will resulted in the collapse of the Soviet Union. Following the lead of these economists historians began to see the future as being one in which the capitalist liberal democratic model was dominant. Possibly the most notable was Francis Fukuyama was perhaps the most notable with his essay and book entitled ‘The End of History and the Last Man’. In both the essay and book he predicted that history would end in all countries becoming capitalist liberal democracies.

Nostradamus pales into insignificance in comparison with these pseudo economists, he could only predict the collapse of great empires in the most elliptical and obscure of terms, he was not granted the knowledge that enabled him to name those empires that would collapse. Economists had a more secure knowledge they knew exactly which empires would collapse, that is the Soviet Union and the China of Mao. If economists know the future and they have the means of introducing the future now, they will do so. They have persuaded politicians throughout the Western World that the future is the free market capitalism system and their role is introduce the reforms that will make the future happen now. This all political leaders have done through a series of measures known as supply side reforms. All regulations such as employment protection laws have been removed because they prevent the free operation of the labour market, similarly health and safety regulation has been emasculated because that also prevents businessman doing what is best. There is an underlying and naive assumption that businessman are well intentioned and will work for the good of all. However the various scandals in the food supply industry show that this is not true.

The apparent success of those societies economists that follow the new free market system as compared to the old communist command economies has led to an over claiming of the success of the new economics and their over confidence has resulted in the practise of the worst kind of pseudo economics. These new economists and the politicians are guilty of creating a new economics that is almost childlike in it’s understanding of the economy and the wider society.

Evidence of this child like science is the introduction of simple moral terms into economics analysis. In its most simplest this new economics states that all government actions are bad, while all action of the free market are good. Obviously it is usually disguised by more complex language, as is demonstrated by the economics of the British Treasury. All economists of my generation that is the ‘Old Keynesians’ understood that all spending by the government increased demand in the economy and the level economic activity. Therefore in a recession the obvious policy was to increase government spending to stimulate economy. Old economists called this process by which spending increased the multiplier as government spending would lead to an increase in spending which was a multiple of the original sum spent. Now the Treasury has decided this no longer happens as it cannot conceive of any situation in which government spending is beneficial, instead it has decided that all government spending reduces overall demand and the level of economic activity. The Treasury has given the multiplier a negative value of 0.6 so if the government spends an additional £100 million pounds it will instead of increasing spending reduce it by £40 million, the Organisation for Economic Development gave the multiplier a value of 1.5, so that the same spending would increase demand by an additional £50 million. When economic policy is determined by such a child like morality such as this it becomes bad economics.

Why I prefer to call bad economics pseudo economics is because it is science that is as fallacious as astrology.

There are some disturbing consequences of the practice of pseudo economics, perhaps the worse is the belief is that governments should give up on most areas of governance in society and transfer their role to the private sector and the market. A belief that the economy works best when left free of government controls and regulations had disastrous consequences the manifested themselves in the great crash of 2008/9. Banks by this time were no longer subject to controls that required them to hold large reserves to protect themselves against a possible bank run that could occur in a financial crisis. Consequently when the crisis happened the banks held such small reserves of cash that they struggled to pay their customers who wanted to withdraw their money. Northern Rock was the first to fail and only a massive injections of government money prevented the failure of two of the big four banks, that is NatWest and Lloyds. Now eight years after the crash the banks are still largely unregulated and hold cash reserves that are again likely to prove inadequate in the event of another financial crash, so that they are likely to again need government cash to fund bail out. Their reserves are now 3% of assets as opposed to 2% of assets at the time of the crash.

Banks have resisted increasing their reserves to what many would regard as a safe level, that is 5% of assets, because money held as cash earns nothing for the bank. Keeping their reserves as low as possible enables them to maximise their profitability but at the expense of security of the institution.

When the government withdraws its governance from the various sectors of the economy it allows bad behaviour to flourish. The banks are not alone in behaving badly, many other sectors of business show evidence of wrong doing.

Despite the evidence politicians remain believers in the new pseudo economics, whenever its suggested that the imperfect markets of the real world need regulation the politicians throw their collective hands up in horror and resist any attempt at regulating these markets. They seem to be in thrall to the contemporary economic Nostradamus’s that believe they have discovered the secret to the future well being of the country is in free market system. If we want a good tomorrow all we have to do is let the markets work unhindered and they will deliver the good tomorrow. However as housing provision is increasingly being transferred to the private sector, the market seems increasingly distant from delivering that good tomorrow. The economic soothsayers are the many consultancies that advise the government. Unfortunately our political leaders are unable to see that these soothsayers and astrologists of the economic world are as misguided and ill informed as their medieval predecessors.

There is a hint of bitterness in my essay as I am a believer in good economics, the practice of which brings benefit to society not the pseudo science of today for most creates insecurity, misery and impoverishment in the name of creating a better tomorrow.

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

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.

Greece and the Sceptical Economist

Three kinds of economics

http://www.neuerope.eu

From a glance at the media it would seem that there is only one economics, usually what is now termed free market or Neo-Liberal economics. People are familiar with the mantras of these economists whether it spoken by them or a politician. Mantras such as a country must live within its means and it must reduce its debts to a sustainable level as is constantly repeated in the debate on Greece. However economics can be divided into three separate schools, Neo-Liberal economics being but the most dominant strand in but one school of economics. What ever school economists belong to will determine their approach to the crisis such as that in the Eurozone and Greece?

Neo-Liberal economics derives from the school of economics that sees the economy as an integrated system that when working well maximises the welfare of all. Economists from this school will see their role as to explain how the system works and how to make it work better. Changes such as removing restrictions or impediments that prevent the free market from working at its optimum. This has lead to the emasculation of trade unions and worker protections,as each are seen as an impediment to the smooth working of the free labour market. A loss it is believed that will be offset by higher incomes the now more efficient workforce. Ideally there should be no restrictions on how and where individuals choose to work and how employers choose to use them.

There are other schools of economics within this school that sees the economy as an integrated social system that can be made to work for the benefit of all. Although disregarded by policy makers today, they are the Keynesian economists who believe that through intelligent government intervention the economy can be made to work for the benefit of all. Their concern is ameliorating the damaging effects of the trade cycle, that is the economy goes through a repeated series of bans and busts. In the upswing period they are determined to stop the worst effects of the boom,  which is inflation, by regulating credit; similarly they wish to avoid the worst effects of a recession which is unemployment by using various measures such as increasing public spending to stimulate economic recovery. This school is anathema to the Neo-Liberals who believe that any government intervention in the economy can only have a malign effect.

Next there are a group of economists who see the economy as working for only one privileged group and merely providing the majority with the means of survival. These are the Marxist economists of whom there are few today. At the core of Marxist economics is the labour theory of value. This theory at its simplest states that it is labour that in the production process that adds value to the product, but that added value is skimmed off by their employers the bourgeoise. This group take a disproportionate share of the added value (profit) leaving the worker with only the minimal means of income. Marxist economists advocate measures to reduce or eliminate the power of the bourgeoise to take a disproportionate share of national income to achieve a more equitable sharing of that income.

There is a third school of economics of which I am a member, we are probably the smallest of all the economic schools. These are the sceptical economists who believe that seeing the economy as an integrated social system that works as fallacious. (I use the term sceptic after the sceptical school of philosophy, whose most prominent recent exponent of whom was Nietzsche, from whom I take my understanding of scepticism.) This is not to deny that the economy does not produce goods and services that add to the sum of human welfare, but to see it as working mechanism or a well functioning social system is wrong. There was a film realised  in the 1965 about an air race from London to Paris that took place in 1910.  In it there was song about ‘Those Magnificent Men in their Flying Machines’ which included the words if my memory is correct, that these machines fly but I do not know how they stay up in the air. A sceptical economist has this view of the economy, we know that somehow the economy works but not exactly how. Parts of the system we do understand but not the whole, we even doubt if it correct to describe the economy as a system, we only use the term system to imply a something. What we deplore is seeing the economy as a mechanism that is capable of being perfected, that can be made the best of all possible economic systems, as is the claim of Neo-Liberal economists. Not that we don’t believe that changes cannot be made to improve the working of the economy but those changes will have only a limited impact. The revolutionary economics of the Marxists or Neo-Liberals who claim to have the ability to transform society and its human members we see as misguided. Economics is the science of small changes that have been proved to work not the messianic social science promising a better future for all.

Greece and the sceptical economist

Greece provides the perfect example of the fallacious nature of much of economics. When the financial crisis of 2008/9 came it exposed the frail nature of the Greek economy without its over dependence on foreign loans. The European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB) provided the loans Greece needed on the condition that it adopted a programme of austerity and embarked on a series of Neo-Liberal reforms. These reforms were to cut welfare spending, remove labour protections and embark on a large scale privatisation of state owned assets. After five years debts have increased to 177% of GDP, youth unemployment has reached 50% and many individuals especially pensioners have been forced into poverty. Despite the disaster that is now the Greek economy the EU insists that Greece most continue to follow the programme of austerity and Neo-Liberal reform. Even the election of a government opposed to austerity and the issuing of an IMF report saying that the continuation of the current policy will make it increasingly unlikely that Greece will ever repay its debts,has failed to make the EU change its policies. The Neo-Liberal politicians and economists that control policy making at the EU believe that in spite of the evidence to the contrary that the Neo-Liberal reforms imposed on Greece will eventually deliver. It is a matter of holy writ for these people that only the truly free market can deliver the best of all possible worlds.

A sceptical economist such as myself might point out to the failure of a similar radical Neo-Liberal programme in the former USSR. This programme of radical reform had such disastrous effects that some Russian nationalists believed that it was a programme implemented to deliberately weaken the Russian economy and nation. There was in the 1990s after the collapse of the communist system, the wholesale privatisation of state run businesses. The least efficient were closed for lack of buyers so creating large scale unemployment and poverty.  Those businesses that were bought were purchased at knock down prices from the state by the oligarchs (often former officers of the KGB), with the result that control of the economy was transferred from the state to the oligarchs to the detriment of the Russian people. Economic reform was introduced by a government that had no real understanding of Western society and economy and into a society that lacked the social institutions to make the reforms work. Instead of the free market reforms creating a new Russian liberal democracy, they created a new authoritarian state. All the old methods of repression are returning, political dissidents are confined to mental institutions or imprisoned. Poverty is still persists and it is no coincidence that Russian men have the lowest life expectancy in Europe.

Perhaps a phrase for describing the policy towards Greece would be Iraqi economics. When George Bush successfully conquered Iraq he ordered the destruction of the existing governmental system. He intended to create a liberal democracy out of the ruins of the old Baathist political system. Instead this overly optimistic programme created a political wasteland which has lead to a decade long period of internecine warfare, as the authoritarian government that existed was replace with nothing more than misplaced optimism that once freed the Iraqis would by themselves create a democratic state. The radical Neo-Liberal economic policies that have introduced to the former USSR and Greece have created an equivalent economic and social wasteland.

At some subconscious level of thought it does seem that the European politicians do seem realise that radical Neo-Liberalism can only be imposed by an authoritarian government. They have been trying to remove the democratically elected Syria government and replace it with one of technocrats that will do their bidding.

What the sceptical economist would have done is to work within the existing political system and with its leaders to adopt a gradual reform programme, consisting of those measures that would bring some amelioration to suffering of the Greek people.  The obvious one is some measure of debt relief, this would mean that the European banks that made irresponsible loans to the Greek government would suffer financial loss as their would the Greeks would be defaulting on their loans. However they would be paying their price for their irresponsible lending, which is what should happen in a free market economy. There would be no ‘big bang’ reform of the economy but a series of negotiated and sensible reforms. Reforms that would be made with the consent of the Greek political leadership and people. There would be sufficient incentive to reform as the downgrading of Greece’s credit status, would make raising international loans difficult and costly until the Greek economy showed signs of recovery. The reforms would be modest in scope, there would be attempt to destroy Greek ‘clientelism’ as it is one of the key elements of the existing society. Reform certainly of its worst features but recognition that it is part of the unique nature of Greek society. No attempt would be made to make it a southern European equivalent of Germany or free market Britain.

What I am trying to say is the politicians and economists of the EU should recognise the limits of their knowledge. They are the last people that should claim to have a knowledge of the ideal society and economy, as people in glass houses should not throw stones. One of the criticisms is that the Greek tax collection system was ineffective, as one writer stated it was as if the state was putting out a collection plate. Yet these European critics are in their own countries encouraging rich individuals and business corporations to avoid tax. Many business corporations locate their head quarters in Luxembourg, Ireland and the Netherlands to avoid tax. Soon the UK will be added to their number as our government is developing new tax avoidance schemes to encourage business to locate in the UK.

The sceptical economist has no one big answer to the problems of managing an economy, instead they have a series of small answers. These small answers are to be tried and if fail to be replaced by alternate measures that might work. What the sceptical economist recognises is the uniqueness of different societies, which come up with different solutions to solve common problems. Is the Greek system of ‘clientelism’ really much worse than the employment practices of the United Kingdom? If clientelism produces over employment, the Anglo Saxon free market produces under employment. Government departments in Greece may have been over staffed with political place men, but British business corporations such as supermarkets are staffed with the under employed, that is workers working on split shifts on low incomes, who desperate for extra hours of work  to boost their incomes. The Greek practice of clientism is far from perfect but so are the practices of the Anglo Saxon free market. What I want but don’t see is a recognition of the fallibility of social institutions and that what might work in one society does not necessarily work in another.