27 January 2009

Go Forth and Quantify!

Having worked at a modern, 'metropolitan' university for six years I have finally started teaching economics. The resistance was more my choice than theirs, since I felt reluctant to teach the holy writ I didn't believe in. This term I'm sharing the applied economics course with a true believer. He does the graphs; I do the real-world horror stories.

My content has focused on climate change, food security, localisation and trade. Yesterday, perhaps to convince them that I really am an economist, I drew one of the classic economics graphs myself for the first time in years. It was the usual two lines, one sloping up, the other sloping down. Something magical and meaningful and mysterious was supposed to happen at the point where the two lines cross: equilibrium.

Of course the flaw with this method of representing the world in a system of initially straight and then, in the more advanced courses, curved lines, is that there are no numbers! Axes are labelled capital P and Q while points on the axes are labelled with lower-case ps and qs. The point of equilibrium is represented by p and q with an asterisk.

On one level I can see the funny side of this. In a rather dry and Puritanical sense, the signs and symbols of economics speak to the ritualistic side of proponents of the most positivistic of the social sciences. When I write of 'holy writ' it is only partly a joke. The jargon of economospeak carries power just as the words of the Nicene creed do. We shall not resist the command to compete, to achieve economies of scale, to avoid moral hazard. The true economist is convinced that s/he has some sense of order and some grasp of meaning in the world of uncertainty and unpredictability. What else is a religion for?

But beyond the humour something very serious is going on. The lines I was drawing were taken from the Stern Review and represented the costs and benefits of taking action to tackle climate change. They were literally matters of life and death. In this case numbers did emerge; numbers which gave justification to the continuation of the economic system that is eliminating our species and harming our planet. My question is whether something of such depth and importance should be left in the hands of economists.

*Thanks to Rupert Read for the title for this post.

21 January 2009

Starting to Feel Queasey

There is considerable discussion in green circles these days about whether we should support the nationalisation of the banks. We need to be clear about what this means. First, we need to distinguish between ownership and control. At present, the government is taking on ownership of the banks but, because of its ideological revulsion from any sort of economic management, it is not controlling them.

This is an irresponsible and dangerous policy. Brown and Darling appear to have naively believed that, once substantially publicly owned, banks would automatically start acting in the public interest, abandoning a lifetime of self-interested profiteering. They still appear reluctant to appoint citizen directors, or other public-minded experts, to the banks' boards. A green proposal for control of the banks would surely also include their breaking into smaller, regional and local banks with requirements to serve businesses in their local communities with lending facilities.

The more serious question is whether we can afford to support the banks. Where is the money coming from to balance the bad assets of the bankrupt banks? Initially, we were borrowing it from our children. Now we are creating it in return for our financial credibility in the world - hence the precipitate decline in the pound. The end of this road comes when private-sector investors refuse to accept government 'paper', effectively ceasing to believe that the assets and workers of UK plc can make good on the IOUs.

It appears that we are reaching that situation. The value of long-term gilts (money borrowed from investors now that we promise to pay in 30 years' time) is falling. The quantitative easing we have heard so much about is being used only as a bootstrap technique to conceal this unpopularity of government debt. So the Bank of England is providing itself from nowhere with the ability to buy our own national debt.

No country can absorb the sorts of debts that have been produced by reckless bank lending. The policy of quantatitive easing to finance the unfinanceable lacks all credibility and begins to suggest a situation where, by taking on bankrupt businesses, we may be moving towards banktupting our own nation.

19 January 2009

Over-Shadow Chancellor

Ok, I admit it: I've been naive. I genuinely believed that (a) Gordon Brown understood the nature of the financial crisis and (b) the absurd policy of throwing billions of pounds into the black hole of bank debt was just a shoring up measure while something less outrageously unjust - and capable of rebalancing the economy - was stitched up behind the scenes.

I now realise I was completely wrong about this. The grey suits really don't have a better idea than just fiddling on with more of the same in the hope that, somehow, the greedy corporate gamblers who got us into this mess will find some way out. My evidence that this is the case? The re-emergence of Ken Clarke - the chief proponent of smoke and mirrors economics under the discredited Tory regime.

I've noted frequently on this blog the ubiquity of this 'man of the people' who also rubs shoulders with the leading corporate players. In a move whose significance could not be more symbolic he is now being brought in to the job of mirroring Mandelson, while over-shadowing the flimsy toff-wannabe George Osborne. There is no doubting where the real power now lurks in both front bench teams.

The presence of the Big Bilderberger Beasts on both sides of the dispatch box make it clear who is really running the political show. Voting for any of the 'main political parties' can only ever be to encourage them.

17 January 2009

No, no, no

Margaret Thatcher was not a politician whose reputation was built on her facility to produce a well-turned phrase. She was famous for employing armies of speech writers and taking elocution lessons. Recent politicial shenanigans have forced me to borrow one of her least eloquent quotations and, indeed, have filled me with the sort of rage that must have propelled the intransigent termagant through 20 years of destructive policy-making.

How can it be that we have seemingly taken on the chin decades of servitude to pay for the banking bailout? I have lost count of the dizzying sums involved (if anybody knows where these are handily calculated please drop me a line) but when I last looked it was already enough to keep my putative grandchildren on the capitalist treadmill long into their dotage.

The people we are dealing with here are wideboys and sharks. They are the kind of people who, when given and inch, will take a mile. So we should not be surprised that having pulled this scam so spectacularly in the autumn they are now coming back for another go in the new year.

When it comes to the executives and shareholders of Barclays and RBS, and those who trade in their shares, we are talking about people who are in the habit of living off the work of others. In a recession, of course, when the economy is shrinking and money is tight, they cannot extract value using the traditional methods. They need to bully and defraud the government and taxpayers.

The tactic appears to be for stock-traders to target particular financial institutions and drive down their share price. Those controlling large numbers of shares, working with short sellers, can provoke massive downward movements in company values. The media creates a shock-horror story headlining the 'inevitability' of more public money; the politicians dutifully oblige.

The phrase 'public money' feels safe, almost positive, and is a cover for the fact that money is now being extorted from us and our descendants to be sent directly to bank directors and shareholders. This was originally billed as an unpalatable emergency measure - it now appears to have become routine. The phrase 'impotent rage' seems to sum up how I feel. Any suggestions as to means for making this rage potent would be welcome.

All Aboard for Green Central

The launch of Green Economics in Oxford on Wednesday was hugely enjoyable - at least for me as the author - I hope others enjoyed it too. Rather than the snooty, stuffy events you see portrayed in films like Bridget Jones's diary it felt to me as if I had hired a room and bought wine so that my friends could sit around saying nice things about me. I can really recommend this as a self-esteem-building strategy!

The launch was at Ruskin College, who did us proud. This was symbolically important, linking old and new radicalism. The attendees were a mix of academics, green activists, and others concerned to create a new economics paradigm.

As John-Paul Flintoff reports in his excellent blog at Times Online, James Robertson spoke about the cognitive dissonance that results from messages about saving the planet and exhortations to save the economic growth fetish issuing from the forked tongues of New Labour politicians. The decision about Heathrow the following day only proved his point.

14 January 2009

Paradigm shift

I'm launching my book this afternoon at Ruskin College in Oxford. The commissioning editor has written a few words for the launch and it reminds me of how much the world has moved on in the 18 months or so since I started writing. He recollects the supreme self-confidence of global capitalism in 2006/7, its claims to be not only the greatest economic system in the history of mankind but the only possible way of organising economic affairs: as unchanging as the laws of physics.

How paltry those claims seem now. Green economists were always aware that the economy was failing in two fundamental respects: it generated huge inequalities which led to deaths and suffering in the poorer countries and the poorer parts of our own country; and its expansionst logic threatened the health of the planet. Now it is failing in its own terms as well.

Unlike the vultures who circulated around Woolworths and other familiar friends on the High Street who are now defunct, few will bemoan the special offer deals that should die with the death of capitalism. As this excellent cartoon by Imogen Shaw shows, we have far more to gain than to lose from the new paradigm we will build together.

6 January 2009

Real Wealth is Slow

It has been a delight hearing Clive James on the Point of View slot on Sunday mornings. Ok, I'm showing my age now, because rather than razzing it up on Saturday night and lying in on Sunday morning I often catch not only this essay at 8.50 but actually also Something Understood at whatever horrendous time that is on.

Clive James had certainly understood something this week, in his essay called Get Rich Quick - still available from the BBC podcasts page. I don't expect Clive James to be on my political wavelength, and usually he isn't. I listen to him because he is witty and clever and has a rather pleasing Australian accent which is quite soothing of a Sunday morning.

His theme this week was a suitably new year one - the change in consciousness that the financial catastrophe has brought in its wake. He predicted that getting rich quick will cease to look smart and begin to look silly: 'Excess wealth is gone, like the codpiece.' His confidence in making this 'prediction' lay in the fact that, in reality, the change has already happened.

For me, this change is deeply reassuring. Not because I feel vindicated or less uncomfortable about my inability to deal with constantly changing fashions (or is that just total lack of interest?). It is more that I have felt so uneasy about the rampant conspicuous consumption of others. This feeling doesn't arise from inherent frugality, or judgementalism or even a concern for the ecological impossibility of it all. It's more a sense of deep disappointment that so many people have no conception of what really matters in life.

We are going to need those things in a big way this coming year. We are going to need to value comradeship and the kindness of strangers. The human resources on which Britain traditionally prides itself - communitarianism, courage, humour and stoicism - are going to be the character traits most in demand in 2009. And underpinning them all we are going to need a faith to replace the fear that swirls around the shopping malls where empty shopfronts are rapidly replacing hyperactive consumers.