24 December 2007

Turning Towards Each Other

With the year just turning one's mind also inevitably turns to what we have learned and where we are going next year. For people in Gloucestershire this has been The Year of the Flood - a catastrophe which, fulfilling the hope of the management jargonists, has presented us with many opportunities for growth and learning.

Firstly, the foolishness of 'economic development' within a capitalist mindset was made manifest. Take the town of Tewkesbury. Lying at the confluence of the Avon and Severn Rivers it is always going to be at serious risk of flooding. The Abbey there has stood and remained dry for 700 years, but this year it flooded. The reason was unwise building further up the river, removing the possibility of the water moving onto its natural floodplain. Something those who lived in the Dark Ages were surprising enlightened about.

When new housing developments are put in the flood-plain the supermarkets that enable the profiteering are given a superior position on a concrete plinth. Like the cathedrals of old they are now the most revered constructions. Unfortunately, in Tewkesbury this meant that when the flood came people in Morrisons were stranded on an island and had to spend the night in the cafeteria.

Tewkesbury has another flood-plain development planned. This July it was called The Watermeadows but its name has miraculously changed to The Meadows during the summer.

Surviving the floods was a salutory experience, and a very uplifting one after the initial panic had subsided. We amazed ourselves with our resourcefulness, as we found Heath-Robinsonesque ways to channel rainwater into our toilets and wash five heads of hair with half a bucket of water. We found out who our neighbours were (and look after the vulnerable ones) and we found out where our electricity and water came from (amazed that we had never known!)

We were instructed not to flush our toilets with drinking water - some of us realised that this is in fact what we do everyday and thought about ways to make our water use and distribution system less wasteful in future. The most important thing we learned from the flood was that the greatest resource we have is each other, and that in a crisis we do look after each other.

Looking further afield, I was interested to see how attitudes to economic development have changed in Thailand, partly as a result of the tsunami. The country has turned its economy in the direction of sufficienty rather than export-led growth. They are building self-reliance and reinforcing their local communities, as well as finding inspiration from the workings of nature.

2007 has been the year when many people - sadly not many politicians - have started to think seriously about the economics of climate change: about how it will affect their ways of finding daily necessities and the way they interact with their environment and each other.

18 December 2007

Please Stop Talking about Climate Change

It's not just the carbon dioxide emssions associated with the thousands of flights to Bali from around the globe that could be saved if these farcical international negotiations were abandoned once and for all. There would be all the additional hot air produced by over-excited and sweaty men posturing at each other like shaved gorillas. And all that extra methane produced by all those excessive summit-of-extravagance dinners.

Of all the infuriations that arose in my troubled breast during the tortuous days of the Bali discussions the most poignant was the coincidence of the signing of the 'Lisbon' EU treaty, a day before all the HoGs had to be in Brussels, meaning that they had to fly specially to Lisbon only for the tacky signing ceremony, accompanied by lift music. A vast outpouring of C02 just to inflate some Portuguese egos.

I know there are some good people involved in these talks, and I truly wish them well, but the angrier and baser part of me just wishes they would all just fucking shut up. The sight of their hypocritical staged concern while they destroy my planet is more destructive to my soul than can be soothed by the minuscule progress that may have been achieved. How many of those participating are unaware that they can never get anywhere because the negotiators are in hock to the economic interests that cannot tackle climate change without voluntartily giving away their wealth and power?

The pictures show the signatories in Lisbon and the negotiators at Bretton Woods, where this whole crazy system started in 1944. We will never solve the one without addressing the other. A money system based on debt and enforcing geometric economic growth can enver be compatible with sustainability. (I couldn't find a photo of the actual negotiators in Bali - please help if you can). How much has power shifted in the past 60 years: one female out of 27 is an infinite improvement, mathematically, over the no women at all around the table in 1944.

Perhaps the most dangerous thing about negotiations such as those at Bali is the temptation to be sucked into all that displacement activity while what we should be doing is taking the power back into our own hands and sorting out our own economic and social realities. Planet-saving begins at home, not on some paradise island.

13 December 2007

Political, not banking, crisis

The world's central banks have made it easier for the world's commercial banks to increase the amount of debt circulating around the world economy. They began by concertedly reducing interest rates, making it cheaper for commercial banks to lend money. This had little effect, so yesterday they acted together to actively create new money.

It is not clear how this money was 'created' but it was probably by the selling of government bonds, in other words increasing the value of the public debt that we will have to pay off through taxation. Since there is no asset to balance this debt the central banks are guilty of just the sort of monetary inflation that the government says is impossible when policemen want a pay rise. Such action is defensible, it seems, when it is financial investors who want a pay rise.

Is it the fact that the word 'inject' is always used about the creation of debt-money by central banks in this way that leads journalists to use the metaphor of a drug pusher, encouraging debt-addicted banks to go back for another fix? To me the more appropriate metaphor is that of the weak parent.

The role of the central bank is to ensure what the jargon calls 'fiscal probity', which means not lending in an irresponsible way. But how could banks judge what is responsible or not when lending to people to gamble on the future value of unplanted cocoa crops is acceptable? No clear boundaries here. And when the unruly children see their playfully created 'financial instruments' blow up in their faces they are not punished or even reprimanded but simply payed off and allowed to continue. No tough love in the world of banking.

Since the reserve ratio (the proportion between bank lending and assets of real value held in the banks) was abandoned, central banks have only required that commercial banks act with prudence. The purchase of junk assets, such as mortgages held by people with no incomes to pay them back, is a clear example of imprudent behaviour. But do the central banks punish banks for this? Of course not, they just enable this sort of lending to continue.

Central banks, and the governments they answer to, are in an uneviable situation of their own making. Following the ending of credit and exchange controls, the deregulation of financial markets, and the ceding of control of monetary policy to banks by governments, political control over money has been abnegated. The role of politicians was to ensure a money system that served the real economy and our interests as citizens. The role of banks was to maximise profits for shareholders. If things are as bad as they currently seem, and the whole monetary system fails, this will be a disaster for us all.

To see what happened when Argentina experienced a 'credit crunch' see my article.

For more on the creation of money see Richard Douthwaite's excellent (and short!) book The Ecology of Money.

Or you could buy Market, Schmarket where this is covered in Chapter 6.

10 December 2007

Buy Now Pay Later for Public Services

The number of times Gordon Brown has invented funding schemes which would make goodies available now to be paid for by our poor cash-strapped children has made me wonder whether he shares my view of the inevitability of collapse of this riotous financial system we are struggling with - and that was before the near-collapse of Northern Rock.

First there was PFI, in order support which you would have to believe that corporations would cheerfully pay for us to have hospitals and schools now, on the cheap, out of the goodness of their hearts. Then there was the International Finance Facility, which funded 'development' in poorer countries along similar lines. The latest is the vaccination scam, that not only leaves debts for future generations but also lines the pockets of the big pharma corporations.

Unison Scotland have produced a report (http://www.unison.org.uk/acrobat/atwhatcostoct07.pdf) detailing the costs of some of these projects and making it clear how horrendously we have been ripped off by a policy that never amounted to more than jam today at the cost of horrendous debts tomorrow.

According to the report, Scottish PFI/PPP contracts could be costing around £2.1 billion more than conventional funding. The NHS in Scotland is now having to pay rent to the companies that built the hospitals of some £2.4bn. ‘UNISON Scotland’s analysis of official figures from 35 schemes found that estimated public sector comparators (PSCs) were 6.4% (median) cheaper than the contractors’ bids. For just these 35 schemes, that means almost £720m is being wasted - nearly enough to pay the whole of the PFI bill for Wishaw General Hospital.’

In 2006 a report by the Centre for International Public Health Policy at Edinburgh Unversity, found that the debt for the NHS will be far greater than the investment provided by PFI schemes: £2.4bn. compared with £602m. No prized for guessing where the difference has gone.

What is the cost of this to the private sector? They usually argue that the vast sums we pay are to underwrite their risks (there’s that word again), although the risk involved in building a hospital for an ageing population for which you have no shortage of demand and a single captive customer can never have been that great can it?

But in fact we are paying for the risk involved in these contracts – to the tune of £3.5bn. for an insurance policy in case anything goes wrong. And of course if anything does go wrong, as in the case of the tube and the nukes, we know who will really end up carrying the can.

The dubious scheme is being expanded countrywide. Mark Hellowell and Alyson Pollock, authors of the report, estimate that the annual cost to the NHS will rise from £107.1 million in 2005/06 to almost £500 million within the next five years. The mystery about how so much extra spending on health has achieved so little appears a mystery no more.

4 December 2007


I am extremely chuffed to be able to inform loyal readers that Gaian Economics has been chosen as Green Blog of the Year. I started blogging about a week after Jim produced the top 100 green blogs last year so missed out on that. I was a sceptical blogger at first and was persuaded to learn about this new literary genre by my brother-in-law Nick Batt, who grew tired of me moaning that my book was not selling as well as I wished, and that people didn't like reading more than a page at a time.

So, since the purpose of this blog was to draw attention to my book, I'll include a picture of the cover here, with some extracts from reviews at the end of this post. You can order if from a bookshop or from me (molly@gaianeconomics.org)--best to avoid Amazon! You may also be interested in the internet showcase I share with other green economists of like mind: http://gaianeconomics.org/

The blog is a new form of writing, somewhere between a haiku and an essay. I have really enjoyed learning to thrive in this new medium and nothing beats the thrill of finding comments, particularly those from regular readers. Many thanks to you. Another high point of the year was being targeted by Tory bluggers: a hurtful but confirmatory experience.

So, thanks for your votes. Please keep reading and consider giving me that little thrill! We all have a right to comment on the economic issues of the day.

'Just occasionally, you read a book that gives you an Archimedes-in-the-bath moment. Market, Schmarket is one of those.'--Mark Anslow in The Ecologist

'This is an ambitious vision building book which provides analysis, a historical review of other economic structures and directions for solutions all packed into a readable 180 page paperback. Overall, this is an energetic and stimulating addition to any co-operator’s resource box but Cato intends the book not only for reflection but also for action. So perhaps we should say: buy it, read it, get it in your library, form a book group, act on it!'--Mike Aiken in Journal of Co-operative Studies

'Her critique of capitalism extends to its intellectual lap dog neo-classical economics. She describes conventional economic theory as a ‘catechism’ and demolishes its fetishised concepts such as perfect competition and rational economic man. . . this book is a radical green analysis that provides hope and inspiration by linking a critique of capitalism with new analyses and possible alternatives'--Mary Mellor in Capitalism, Nature, Socialism

'Full of practical examples and suggestions, this is a courageous book which draws on history and the many current strands of critical economic thinking, and attempts to weave all into a coherent whole.'--Nadia Johanisova on the FEASTA website

'Cato’s book challenges us to look afresh at our economic system and to recognise that regulation and reform will not solve the problems it presents. Instead, the values upon which economic activity is based require fundamental re-evaluation. She provides abundant thought-provoking historical and contemporary material that demonstrates the principles upon which a post-capitalist society could be founded.'-- Brian Westbrooke in TeAwa, magazine of the New Zealand Green Party

2 December 2007

Flu, what a scorcher!

If the theme of the 21st century economy is 'Where there's risk there's brass' then health scares offer a fine opportunity for profiteering. Forgive my scepticism in failing to react with delight to the recent announcement from Alan Johnson that the government will be buying sufficient stocks of anti-viral Tamiflu to treat 50% of the population, in spite of the fact that last time we faced a similar crisis only 25% of the population were infected.

[really nice cartoon removed due to copyright conflict: hope to resolve this soon!]

What is the cost of such ardent prophylaxis? The 14.6m doses already purchased on our behalf have cost us £200m., so we will soon be sending another sum of the same size to Roche. Doubts have been raised about whether the drug is effective and the proposed solution is--to also buy another similar drug, Relenza, just in case. Back in 1999 then Health Secretary Frank Dobson respected the opinion of Nice that this drug was so ineffective as to be a waste of money. Threats of legal action from Glaxo soon reversed this decision.

I can't help wondering how much of Johnson's enthusiasm is related to his support for big pharma rather than a realistic assessment of how much Tamiflu we are likely to need. His scientific back-up is not of the most credible variety, coming from chief medical officer Liam Donaldson, he who told us all we were risking blindness by daring to watch the eclipse.

According to its manufacturer, Tamiflu lasts only four years, so this could represent a fairly constant stream of cash for Roche so long as our fears are kept topped up by stories of dead swans, a new marker that winter is finally here. There are big profits in our fears. Perhaps we should all get more of a grip on ourselves. This may be a more likely way to reduce our taxes than another round of civil service job cuts.