30 December 2009

GOD: Grand Old Dollar

Lloyd Blankfein is the FT's man of the year, with a citation that names him the 'Master of Risk' and quotes, apparently without irony, his own opinion that he did God's work for Goldman Sachs. This has set me to wondering which God this might be - certainly not the one I learned about in Sunday School.

The dollar is the God of the global market, but when I last looked this false idol was much closer to Mammon. This blog has already retold the tale of larceny that was the US bailout of AIG. Combined with the 'creation of money' through the purchase of corporate debt it was this 'socialised medicine' for the financial sector that guaranteed their huge profits last year. Blankfein's only skill was to have the friends in the right places, his only risk that he might make an inappropriate remark at a cocktail party or business breakfast.

When the gap between your position and the management of the nation's finances is only one promotion, it does not take a great deal of skill to embezzle public funds on a massive scale. If you must choose a US figure who has excelled economically this year it would have to be the American Everyman who has toiled to create the goods that can be sold for the money the government has allowed its private financiers to create. Or rather their as yet unborn offspring who have already been sold into slavery to fund the lifestyle of Lloyd and his ilk.

Having taken the value of our work they are now in the process of stealing the planet itself through the International Emissions Trading Association. The IETA is a coalition of private companies including AES, Barclays Capital, Chevron Texaco, Conoco Phillips, DuPont, Ecosecurities, Gaz de France, Goldman Sachs, Gujarat Flurochemicals, J-Power, KPMG, Lafarge, Lahmayer, RWE, Shell, Total, Toyota, TransAlta, and Vattenfall. This is an explicit list of the implicit conspiracy of energy, automotive and financial corporations who are controlling the debate about policy responses to climate change, and destroying our chance of a future life on this earth.

This choice by the FT establishes with certainty that newspaper's unashamed support for the worst excesses of corporate capitalism. As the only UK newspaper that can still pay its journalists enough to ensure quality research and writing, this is a disturbing note on which to begin the next decade.

26 December 2009

Thinking Entropically

As my Christmas gift this festive season I hand you an interesting concept, which has kept me entertained during several recent train journeys. It is the concept of entropy. To understand entropy you need to have a scientific mind, so I am at something of a disadvantage. Here is how a scientific friend of mine, Steve Harris, has helped me explain it:

'Thermodynamics is among the most important topics in science; it studies how energy is exchanged between physical systems as heat and work, resulting in changes in pressure, volume, temperature and entropy, the measure of disorder within a system. The laws of thermodynamics provide some of our most basic understandings of what is physically possible.'

He goes on to explain why the laws of thermodynamics - which explain how our physical universe functions - are of fundamental importance:

'The first law of thermodynamics, also known as the conservation law, states that energy can be neither created nor destroyed, only transformed. However, the second law of thermodynamics—
‘the entropy law’—tells us that in general, the total amount of useful, organized energy available to do work is always declining. For example, a lump of coal is a high-quality, highly organized form of energy; when burned it turns into smoke and heat, which are low-quality, dispersed and much more disordered forms of energy. This process is irreversible; we cannot recapture all the heat and smoke produced by burning and turn it back into a lump of coal. The second law tells us that all energy systems have a tendency to increase their entropy (or degree of disorder) rather than decrease it. This appears to apply to everything in the physical universe. So, although many natural and technological processes do increase order on a local scale—through the growth of plants, say, or the manufacture of goods from raw materials—the material waste and heat produced by these processes steadily, if imperceptibly, increases the general disorder of the physical universe.'

To my unscientific mind this concept is very appealing. My anarcahist inclinations are soothed by the thought that the inherent tendency in the universe is towards chaos, rather than order. The idea of entropy seems intuitively to help explain what is going wrong with our relationship with the planet, and how this relates to our economic activity. It was used in this way by the ecological economists, following up on the work of Nicolae Georgescu-Roegen.

The first law of thermodynamics is about quantity - there is only so much energy in the universe and it can only be changed from one form to another, never created or destroyed. The second law is about the quality of that energy, which changes as its form changes, and with an inherent tendency towards a higher level of entropy, or disorder.

The first economists to consider why our economy was growing out of control and why economists had no concern for the physical limits of the universe soon identified the cause: the pseudo-science of economics pre-dates the discovering of the laws of thermodynamics by some fifty years. Its Promethean optimism about what humans can achieve operates outside physical reality, and has never been brought into line.

There is something intriguing about the relationship between entropy and life itself. Natural processes are able to transcend the movement between disorder and order more creatively than our industrial systems can, an example being the way that nature transforms wastes into life-giving systems, potato peelings into soil, for example. I hope you will be able to do something similarly creative with the concept of entropy itself. It could change your life and could fill a dull moment between meals.

24 December 2009

New Labour; New Redistribution

In an era when investigative journalism is a nostalgic memory and even the best political parties worry more about how they can present a policy than whether it is right, how reassuring it is to find a report that is full of good hard numbers. Such is the recent report on assets and wealth from the Office for National Statistics.

This is a rare and welcome survey, since too much policy attention is focused on income - whether in terms of taxation or inequality - whereas assets are a much better indication of the social health of a society. The graph indicates how unequal the distribution of wealth is according to deciles of the population. So the first bar represents the poorest 10%, the next bar the next poorest 10% and so on, up to the 10% who hold the most assets. It includes physical wealth (like cars and washing machines) and property wealth, as well as potential wealth, like pension plans, and actual savings.

Asset inequality, as measured by the Gini coefficient (where 0 is perfect equality and 1 perfect inequality), varies between different kinds of property. The gap between the richest and poorest was least in terms of actual stuff (0.46) and greatest in terms of cash holdings (0.81), with pension savings (0.77) and property wealth (0.62) coming somewhere in between.

The greatest weakness of the report is that it is a snapshot and includes no trend data. So we cannot gain a sense of how asset wealth has been changing during the years of Thatcherite policy. This information is available for income inequality, and is illustrated in the second graph, again measured by the Gini coefficient.

The rise in inequality under the Tories can have come as no surprise, since part of the purpose of the Thatcherite ideology was to reintroduce the economic incentive that fearing for your well-being and fighting your way up the wealth ladder provides. There is not much point in competition if everybody comes out a loser. However, the recent rise in income inequality under Labour is much more depressing. Mandelson's crack that he was seriously relaxed about the super-rich has clearly found its way into policy.

These figures all pre-date the costs of the bank bailout, which, as I have blogged previously, represents a massive transfer of wealth from poor to rich. The debt that has been foisted on us will be repaid at the expense of those who earn, not those who own. Labour's particular new twist on redistribution will ensure that both income and asset inequality increases rapidly over the next decade

21 December 2009

Curiosity Killed the Trac

I am working hard not to go down the route of allowing my personal economic situation - as a university academic - to influence either my views or the content of this blog, but the system for tracking the value of the psychic and intellectual labour of the staff of the UK's universities can be used as an object lesson in the futility of accounting for work.

In the case of our universities, the strategy appears to be to turn creative intellectuals into contracted brains in the industrial vats. The level of animosity has reached such a pitch in the wake of Mandelson's Higher Ambitions report that a couple of weeks ago the country's professoriat - hardly the most radical sector of society - marched on Westminster en masse. Their march was to show opposition to the government objective of turning universities into training institutes for corporations.

According to the latest in a round of futile measurement exercises the Research Excellence Framework, the value of universities is to be measured partly in terms of their 'impact'. I am listing the list of impact measures in full at the end of this post since it gives a clear idea of how universities are being manipulated. I particularly enjoy the way that quality-of-life indicators are included as an afterthought - and we are expected to suggest ways to measure these for ourselves. The drafters of these proposals clearly lost confidence in their ability to translate quality into quantity when it came to life itself.

The order of priorities for universities is also made clear by these proposals. First comes subsidising corporate training budgets, then providing free inventions for industry, then helping out the public sector (activities which are defined in a pure managerialist way), then advancing sustainable development, increasing cultural richment, and finally helping society's losers and improving quality of life. This list encapsulates what is wrong with our whole social and political system, for which our universities are now intended to be an uncritical support system.

Part of the fun or working in a university is that you are permitted to spend some of your time devising typologies and taxonomies (I promise that other more useful things are done with the share of your taxes spent on HE as well). One such is the diagram illustrated below of Pasteur's Quadrant. It is intended to distinguish between the different sorts of research that 'scientists' carry out.

Obviously the two-by-two is a gross simplification and the graphic would work better if you thought of the two axes as continua, but there is probably some validity in considering how immediately useful in a practical sense research is intended to be, and to what extent the researcher was concerned to seek fundamental understanding as opposed to a more superficial explanation (or typology?).

The complaint of the Professors and other notables such as Sir Alec Jeffries, so-called inventor of DNA profiling is that it is impossible to know when research in the top left square, the blue-skies square, might generate practical outcomes. Jeffries claims that his own work was based on pure curiosity about the genetic make-up of seals. It was only as a by-product that his research team found that their insights could be used to map DNA found at crime scenes.

The purpose of the REF and other such impact-based measurement exercises is to force academics into the bottom right square. It seems to me that what they are actually doing is forcing academics to focus so hard on proving usefulness and avoiding deeper explanations that more and more are being forced into the bottom left square. This is the square of doom for any intellectual - the place where your work is not only shallow but useless as well. The sort of work that wins the annual Ignobel Prizes.

And in the latest assault on academic freedom researchers are to be 'tracked' according to a new process devised by accountants to require us to justify every minute of our time. In what Professor of Critical Accounting Rebecca Boden has called 'a deeply flawed and inoperable system', we are to keep note of how we spend the hours of our days, as though thinking could be subjected to a time-and-motion study. This will not only kill research driven by curiosity, as Jeffries feared, it will also undermine the place of thinking as a part of academic life.

19 December 2009

Good Cop or Bad Cop?

So what are we to make of the failure of the meeting that was billed as our last chance to save ourselves as a species? The conference was a demonstration of the gap between media spin and political substance in the modern world. Nothing demonstrated this better than the impotence of the man who many of the world's disempowered have viewed as somebody who could wield power to make a difference. From rhetorical bravura to rhetorical bravado, in one short speech Obama demonstrated that, like every other US President, he is utterly controlled by the economic actors who dominate his domestic politics.

The clue to what was going on was given by the separation, in the wake of Obama's arrival, of emissions reductions from the transfer of cash to larger but less diplomatically savvy countries that were once part of the patronisingly titled 'third world'. 'We haven't managed to agree on emissions', went the spin, 'but the other main issue has been resolved'. The creation of US dollars from thin air is not, and never was the purpose of Copenhagen. As followers of this blog will know, creating money in this way is actually driving economic growth and environmental destruction. Worse still, this deal does not offer the bulk of the money until after 2020, by which time it will be much too late to make the cuts necessary to ensure a habitable environment for humankind on planet earth.

The most galling aspect of the conference was to have to accept lectures from the US about leadership in climate change. As the table makes clear, Obama would do well to adopt a position of humility rather than the arrogance he showed at Copenhagen. The numbers make clear who the main culprits are in terms of CO2 per capita, the only just way of measuring emissions. These figures should be the real focus of our attention, and until every number in the second column of that table stands at 1 or less then we are in very deep trouble.
Note: Data are for total greenhouse gas emissions, reported as equivalent to the impact of CO2. Gases included are: CO2, CH4, N2O, PFCs, HFCs, SF6.
Source: World Resources Institute, Washington DC: http://cait.wri.org.

This gives a sense of the scale of reductions in carbon emissions we are talking about. Not giving more money to Brazil or South Africa, not cutting by 9% or 17% or 23%, but completely changing our lifestyle so that we end the 200 years of oil-fuelled over-consumption and return to a balanced relationship with the earth that is the source of all our wealth.

Obama's purpose in travelling to Copenhagen was to sidestep the main issue of actually reducing emissions and shift the debate to an area he could control, i.e. the production of worthless pieces of paper by the US mint, and an issue where he could take the moral high ground, i.e. the regime of inspection. He has also provided himself with a media opportunity that will give him some leverage in taking a bill of sorts through the Senate.

The EU and Japan, who have been acting with a moderate degree of commitment on this issue, have been left sidelined by a degenerate superpower and a group of wannabee nations who ought to know better. Leadership is still possible, although a negotiated settlement may not be. The way ahead is clear: an agreement between the developed nations who are prepared to make cuts and the poorer countries of the world. The contraction and convergence model can be made to work first in a club of nations, with transfers of technology to be exchanged for our excess emissions during our period of transition to a low-carbon economy.

14 December 2009

When it comes to finance, pigs won't fly

Since the bursting of the asset bubble financiers are on a desperate quest to seek other fiddles to generate the vast incomes they have grown accustomed to. Speculating in national economies appears to be the scam of choice. The power-players are the credit-rating agencies. In a world beyond democratic politics, these self-appointed judges of the worth of whole countries have become market makers.

A downgrade in the rating of the economy of Spain from 'stable' to 'negative' as happened to Spain last week, will cause an abrupt decline in the desirability of Spanish public debt, meaning that the Spanish government will have to pay more to extend its IOUs, and have less available for public spending. This has devastating consequences of the people of Spain. The role of economic policeman once undertaken by researchers from the IMF now appears to have been privatised and passed to the men from the credit rating agencies.

These are the new harbiners of doom whose journeys to the developed economies that were beyond the reach of the IMF lead to savage cuts in public spending and the loss of the services that the vulnerable rely on. The suggestion of such a visit is itself enough to send the credibility of a country spiralling downwards, making it a self-fulfilling prophecy, since this will automatically make it more expensive for that country to borrow. These visits are not neutral fact-finding missions but examples of hostile sabotage attacks on national economies.

But for a financier it represents an opportunity to acquire arbitrage profit from the movement in the value of government stock, especially if the financier were to know which way the movement was likely to move in advance. Spain's membership of the euro means that it cannot suffer the sort of speculation against its currency that made George Soros rich on the UK's Black Wednesday, but placing bets on the movement of Spain's national bonds must be just as lucrative.

Most offensive terms of our Mediterranean neighbours have passed into the graveyard of political uncorrectness, but referring to Portuagal, Ireland, Greece and Spain as PIGS is apparently still an amusing pasttime to those in the City. Given the recent political history of these countries, their citizens have little to laugh about. Their historic battle over value between capital and labour is already showing signs of returning, and the spectre of military dictatorship may not be far behind.

12 December 2009

Cuts and the City

It must be because we are living right through the middle of one of capitalism’s periodic adaptations that it is so difficult for people to observe and interpret what is going on. The previous avatar of this oppressive economic beast was the greedy asset monster. The inflation of house prices and stock prices made us all feel like winners, but only some of us could ever afford a yacht and a trip to Dubai. For most the book price of the house we live in was always an irrelevance: what mattered was the fact that we had to work so many more hours to pay for the same house.

This financial bubble has burst and the market alchemists, having lost their power of turning debts into assets, are casting around for the next trick that enables them to extract an unfair share of the nation’s wealth. The massive transfer of value to the banks must be repaid by the sweat of the brows of the country’s workers, apparently. The pain will not be shared equally; those who control capital will still avoid work but have access to cheap finance.

In a democratic system we might expect to be able to vote about whether we consider this the best way forward. But no political party has the courage to suggest that a different financial settlement might be preferable – one that removes the mediating power of finance that comes between work and well-being. Lest we dare think of a fairer outcome, the voices from the City are quick to let us know that they will be downgrading our stock unless we rapidly increase the rates of tax we pay. Just as the IMF punishes the countries of the South that dare to put the interests of their people before those of global finance, so the banksters and their spin-doctors terrify politicians with talk of Moody's and Fitch's and the dreadful prospect of ending up like Argentina or Greece.

The media supported the asset phase, with its TV shows encouraging us all to morph into tatty interior designers or pocket-sized Rachmans—and our rag-rolled homes and steam-rollered private tenants bear the scars to this day. Now they have followed the financial creatives into the next phase, persuading us all of the need to live within our means (by which they mean take a smaller share of the pie, not take account of the environment) and willingly accept higher taxes and cuts to public services.

3 December 2009

Shooting the Messenger

As the political and economic implications of climate change become clearer, the response from the politicians and the corporate elite who dominate politics will be to pressurise scientists not to blow the whistle. On Monday I was at a public policy seminar in London where Professor Kevin Anderson from the Tyndall Centre publicly admitted that he and his colleagues had spent years sweetening the pill on climate change so as not to cause political offence and damage his chances of receiving research funding. 'Nobody would be funded to find that globalised capitalism is the cause of the problem', he said, a view which I was able to support based on my personal experience.

And now another leading climate academic has had to leave his job for telling the truth about the sorts of changes that are needed to protect the human species from the corporate machine that is destroying our planet. Dr Clive Spash resigned yesterday from his job at Australia's CSIRO so that he would be free to seek the truth about the economics of climate change.

His excellent report 'The Brave New World of Carbon Trading' is due to be published in a peer-review journal early next year and so has already been subject to academic scrutiny. But because he finds that carbon trading will not be effective in addressing the problem of CO2 emission - and in fact doesn't really make sense in terms of economic theory – his employers demanded that he change his findings.

Spash was told that he was in breach of CSIRO policy, which restricts its scientists from making statements about public policy. Put together with the limitations on research funding for academics identified by Kevin Anderson this removes livelihood options from environmentally focused academic researchers unless they are prepared to toe the corporate line.

The climate change debate is hotting up in Australia, having nearly caused an emergency election last week, so Spash's claims that he was being censored forced his boss, Megan Clark, to publish the report on November 26th, but only on the condition that the scientist would be punished for refusing to change his findings. Under intense pressure, Dr Clark publicly released the report on November 26 but warned Dr Spash that he would be punished for his behaviour and his refusal to amend it. Spash, who has been suffering from stress as a result of his mistreatment, consequently decided to resign.

To find out what all the fuss is about read Clive's paper.