23 June 2010

Lord High Executioner Targets People and Planet

It's 18 years since Peter Lilley performed his widely ridiculed parody of the 'little list' song from The Mikado at the Tory party conference. It has taken that long for the heirs to the Thatcher legacy to make good on his promises to cut down the disabled, the vulnerable and those suffering various shades of misfortune. Yesterday's budget, whose measures such as limiting housing benefit and cutting welfare payments will make those who are the poorest in our society pay for the banking excesses, made it a shameful day to be British.

The targets have been chosen with care: while Osborne was less explicit than Lilley, it is the same groups of people that are routinely excoriated by the gutter press who will take the pain, including (in Lilley's words)'benefit offenders' 'those who make up bogus claims in half a dozen names', 'Young ladies who get pregnant just to jump the housing list'. The hate politics of the 1980s has returned with a smiling face and smoother presentation.

This is bad politics and it is also bad economics. Withdrawing money from those who were most likely to spend it can only increase the likelihood of recession becoming depression. By contrast, the money poured into the banks since 2008 has disappeared into various black-holes and offshore investments. The reductions in corporation tax and limited increase in rates of capital gains tax are being packaged as a stimulus to the business sector, which is supposed to lead us out of the recession. But given that all countries alike are cutting spending and seeing reduced incomes amongst their consumers, who will be buying?

Beyond this narrow debate, for those of us with an interest in life on earth beyond this parliament, the misguided suggestions that divisive budget-cutting now will lead to future economic growth also misses the point. Living within our means requires an acceptance of the limits of what the planet can provide, and then a principled decision to share that bounty fairly. Without the chimera of growth we are left with a more balanced lesson about the need for compassion and community.

The inclination of these heirs to Thatcher to beat up on the vulnerable is unsurprising, but our response must not be a return to the last-century struggle over value between earners and owners while the planet suffers. The economics of degrowth can offer the chance of a future of equality as well as sustainability. This is the politics of the new century and of a shared future.

21 June 2010

Equitable Life

In so many of the areas that are now the source of public debate, the money system is being used to conceal a sleight of hand that transfers the value created by working people into the bank accounts of the wealthy. This is true of the pensions system, so before we listen to the pronouncements and proposals of the politicians charged with persuading us to suffer poverty in our old age, we should remember how we reached this situation we are in.

In The Future of Money, Mary Mellor anatomises the switch from public and company pensions to private pensions as part of the financialisation of life in the UK during the 1990s. Bribed with their own money on the up-swing of the capitalist business cycle, many were persuaded to leave company schemes, forsake the contributions made by their employers, and join the short-term orgy that was people's capitalism. Working people who had historically prepared for their old age through mutual savings and friendly societies became competitive individualists.

In reality, becoming involved in the money game as a punter was always going to be a mistake, dependent on the mistaken assumption that money has some independent value. The whole debate is couched in terms of putting away money now to spend later. But what is important in our old age is the existence of good public services and people to care for us. Accruing extra cash may put you ahead in the competition for these as they dwindle under right-wing governments, but being part of a society that takes responsibility for social welfare for ethical reasons is always going to be a better protection.

So how might we think about pensions in a balanced and grounded way? In the figure I have illustrated a person's productivity curve over their life-course. When the curve is below the line the person is in commitment to the community, receiving more than they contribute; above the line the reverse in the case. Give or take a few years for earlier retirement or more time spent in education, each person is in the workforce for 40 years, or around half their expected lifespan. The curve might look different for people with physical vs. intellectual employment, and for those with a special call on society, because of illness or disability, for example.

The conclusion is a simple one: we spend half our lives being productive and the other half relying on other members of our family, group or society. Since we are all in the same position we can abide by the Golden Rule and contribute more in the time we spend above the line for the benefit of those below the line, knowing that one day we will ourselves be below the line and that members of our own family group are in that position right now.

Bearing this image in mind we can now try to compare the security offered by two contrasting schemes: a private pension scheme and the teacher’s pension scheme. In a company scheme your money is used to buy stocks and shares. You security is based on the schemes of Darth Trader and his colleagues in the Square Mile, whose activities are routinely discussed in academic economic papers as examples of irrational behaviour. You are relying on your ability to gamble effectively now, to make yourself secure in 20 or 30 years’ time.

The Teachers’ Pension, by contrast, is a real-time scheme. The contributions I make every month pay for the pension of teachers who are now retired, my mum for example. So I only have to bet on the fact that, when I come to retirement, people will still be having children and teachers will still be being paid to educate them. This seems a much safer bet than the stock-market. At a larger scale, of course, this is exactly how a properly funded state pension system would work.

We may see in our fear about pensions a projection of the selfishness that is encouraged in a capitalist society. We know that all our miserable lives we have only been storing up material value. We have not been establishing the relationships of trust and love with our friends or our children that will enable us to live comfortably in dependence on them. We have fallen into the economist’s trap of turning all relationships into financial relationships, increasing our children’s allowance to make up for the fact that we have no time to spend with them, for example. Unlike the older people of more traditional societies, we know that when the emotional balance-sheet is tallied we will be in serious debt. We will have no hope except our money.

17 June 2010

Celebrating Zero Growth

I spent yesterday evening at the launch of the second Zero Carbon Britain report, a second edition of the report again produced by the Centre for Alternative Technology, this one intended to frame our transition to a climate-friendly society by 2030. There is lots of good stuff here, with detailed plans for the obvious areas like built environment, transport and energy, and more on the less obvious areas such as agriculture, motivation and policy than the last time the report was put together.

I was invited to contribute to the economics chapter, which was an additional area, but I am sorry to say that none of my contributions seem to have made it into the report. One reason for this is that the cultural home of Zero Carbon Britain as a study - and even as a concept - is the rather tecchie world of modelling and gadgets, a world where my approach must seem rather girlie. The deeper reason is that the report was intended to influence government, and it was therefore self-consciously set within the existing paradigm.

My question to the report's writers is: can we have a Zero-Carbon Britain unless we have a Zero-Growth Britain. In spite of the fact that the job of writing the economics chapter was delegated to nef, and they have clearly stated elsewhere that a steady-state economy is a prerequisite of sustainability, this question caused some confusion at the launch and is not adequately addressed in the report. A decision had been made to frame the report in terms that parliamentarians would feel comfortable with, so the growth paradigm was left unchallenged.

Economics is an expert field, perhaps even a field whose jargon and mathematical symbols operate like a 'Trespassers will be prosecuted' sign, but it is desperately important that those who would propose sustainability policies in any area have a basic level of economic literacy. There is little point in talking about changes to housing, energy or transport without stating simultaneously that all these changes will be irrelevant if we continue to live in an economic system that requires growth in order to survive.

The report was launched at the first meeting in this parliament of the All-Party Parliamentary Climate Change Group, a group who include E.On and Royal Bank of Scotland amongst their membership. I am sure that both will find opportunities for making profits from the sort of move towards a zero-carbon Britain that the report proposes, whether as installers of massive new energy grids or the providers of the capital for the same. For my money, the Steady-State economy conference in Leeds on Saturday has more relevance to our species' survival on this planet.

16 June 2010

Join the Love Feast

I was recently invited to a Diggers Agape in Gloucester, which, as well as (or perhaps because of?) being the place where Harry Potter was filmed, appears to be the world centre of radical vicars. This sounded like such an esoteric event that I had to find out more about the idea. Here is what Simon Topping, who I believe to be a man of green cloth, although I have never seen him in a dog-collar, had to say about how the idea came about:

'There were three main influences behind the idea. Firstly, as you might imagine, I was influenced by the writings of Gerrard Winstanley and his central idea that “the earth was made by Almighty God to be a common treasury of livelihood for whole mankind in all his branches, without respect of persons.” From this starting point Winstanley goes on to reject the practice of “buying and selling” because no-one can buy or sell what is (or should be) held in common. Hence our idea for the Diggers agape that people should only bring things that have not been bought or sold.

'The second influence is the Christian idea of “koinonia” which is often translated as “fellowship” but, in many of its usages within the New Testament, actually implies material, economic sharing. This “koinonia” was put into practice through the early church’s community of goods in Acts 2:43-7 and 4:32-5 and through the collection of funds by Paul for the impoverished church in Judea (2 Corinthians 8:3-4 ff).

'Finally, the tradition of the “agape” or Love Feast (a non Eucharistic shared meal) has its roots in early church practice (Jude 12) but was revived by the Moravians and by John Wesley, the founder of the Methodist Church to which I belong. Agapes, though now infrequent, do still feature as an element of Methodist church life.

We had the first Diggers Agape in January this year and a second in April with about twelve people attending each one. Amongst the many and varied things which people have brought we have had spring water, nettle soup, elderflower cordial, a road kill pheasant(!), hawthorn and dandelion salad, hazelnuts, parsnip and apple soup, poems, stories, shells, a rendition of the Diggers’ song, a rewriting of Woody Guthries’ “This land is my land” to make it relevant to Gloucestershire.'

This all sounds too good to be true and I shall have to scour my garden, or gutter, for suitable produce for the next eucharistic love feast. Perhaps you could start something similar where you live?

14 June 2010

Time to Create the Renten-Euro?

Why do currencies fail? If you did not know any better you would assume it was because the people in the countries supporting them became lazy and demanded free plastic surgery at a moment's notice while spending all their days reclining in the sun enjoying a view over the Agean. Or some other scenario we can enviously imagine while stuck at our computers in the summer rain - us and the Germans we share our northern Atlantic climate with.

It was not so long ago that we were looking at this same scenario from the other end of the telescope. The narrow focus on the Second World War in UK history teaching means that many of us have a strong mental image of the collapse of a European currency, with the useful visual mnemonic of hungry shoppers trundling a wheelbarrow full of notes to the local bakery. The whispered suggestion that the Euro may have lost credibility to the extent that it be replaced by a new currency (as the Mark was replaced by the Rentenmark in 1923) makes clear the parallel with that period of German's history.

The most unhelpful talk of punishment should bring this image to mind, because nobody suggests that the German hyper-inflation between the wars was the result of the burghers setting up their deck-chairs along the Rhine in the hope of catching a bit of sun. We all learned, and we should remember now, that the German economy was destroyed by the demand for an unrealistic level of reparations. Punishing Germany for its economic woes, as many are suggesting we should punich Greece now, destroyed its currency and allowed space for fascism to flourish.

The CIA have helpfully compiled a list of the countries of the world ranked according to the size of their debts as a proportion of the GDP. I have no idea how reliable this data is, but surely the more important point is that so many countries have these debts. This suggests that there is something structurally wrong with the system of national and global financing, rather than the demand of people the world over for a decent life, or their willingness to work a reasonable amount of hours to achieve that.

The system of creating money as debt should be our target: for creating instability, and for permitting the extraction of the value of work by those who do none. If we are seeking targets in deck-chairs, those who live from rental earnings of their financial investments would be a good place to start.

7 June 2010

A Brief Word, Mr Cameron

The class war has been launched, and not by the Labour Party. Cameron's speech today sets the scene for a principled stand in favour of the interests of his owners rather than earners. This should be greeted with no surprise - why else was he elected in the bungled events of last month? Certainly not on the basis of his charisma or incisive intelligence. This speech will be followed up by attacks in the media on the plans for strike actionsby working people defending their living standards before these have even be discussed much less voted through.

The political implication is that the public sector has enjoyed massive investment during the Labour years and that it will now pay the price while the private sector and the interests of capital see their just returns. The problem is that this is an outrageous untruth. My argument rests on the two pictures that are included with this post. Between them they demonstrate how the need for the shocking levels of public borrowing arose and where that money was spent.

The first graph demonstrates perfectly how we got into this mess by tracing public-sector borrowing from February 2007 to December 2008. It shows the steep rise that followed the banking crisis when our money was extracted in various ways to prevent the collapse of global finance. We didn't cause this, we didn't benefit from it, and yet the graph shows clearly that we paid for it.

The second graph shows the same variable - public sector net borrowing - between February 2009 and April 2010. If you compare the graphs you can see that we are on a totally different axis here. Annual borrowing of £35bn. in Feburary 2007 had, by April 2010, been massively increased to £160bn. This is not the result of pointless spending on government bureaucracy, or the overpayment of nurses and teachers, its precise location in time makes clear its origin in the bank bailout.

Perhaps as some sort of weak demonstration of honesty to justify his claim to have introduced a new type of politics Cameron does, in a subtle way, identify where the money went:

'The global financial markets are no longer focussing simply on the financial position of the banks. They want to know that the governments that have supported the banks over the last eighteen months are taking the actions to bring their own finances under control.'

This implicit admission of the massive transfer of value from public to private, from us to them, and the corresponding transfer of their debts to our public balance-sheet is the real political issue here. It is vital that working people defend their interests, and most importantly do not follow the divide-and-rule strategy that the attacks on public-sector pay suggest will accompany the inevitable summer of discontent.

4 June 2010

The Ideology of the Cancer Cell

It is hard to question the prevailing view that we are on the brink of an even more serious economic collapse than the one we squeaked through some two years ago. What first emerged as a private-sector debt crisis has not been solved, it has merely been shifted into the public sector. The first round of default was solved by the publics of Western democracies taking on private debts on a previously unimaginable scale. Now that we have reached our collective overdraft limit, what are we supposed to do next?

The conventional wisdom, which is being used to determine the economic policy of our new government, is that we need to 'tighten belts'. The 'we', as usual, is loosely defined. As somebody who works for the public sector I am already having to drill new metaphorical notches into the over-strained leather. Small private-sector businesses have already fasted beyond salvation while the fat cats of the finance sector appear to still be lapping up cream.

Other economists, who are rather bizarrely are being referred to as 'radical' are resisting the cuts. Their rationale for this is entirely reasonable: cutting the public sector will choke off the recovery and force us back into a recession which is likely to be deeper and longer than the last. How will they pay for this? Their solution, which undermines the use of the 'radical' label, is to fiddle with the figures in the short term and wait for economic growth to sort the problem.

A green economist can be the only real radical, and a green economist must reject any policy that relies on economic growth to get us out of this mess. We have the advantage of a really radical proposal: restructure the global financial system so that the debt is really removed - and for good. This would ensure future stability and equity.

As green economists we can also raise two other policy options which would seem too market interventionist for orthodox economists. First, we can take charge of the banks that 'we' own and direct their lending towards domestic, small-scale and sustainable businesses. Second, we can recommend that such government money as is spent is intentionally directed towards the sectors where it will have the maximum multiplier effect. On the one hand this means increasing the wages of lower-paid public-sector workers, who are much more likely to spend the money than save it. On the other, it could mean asking serious questions about changing our approach to trade so that we control the flow of money from our failing economy to the flourishing Chinese economy. Too radical for you, Professor Blanchflower?