27 July 2010

Answers in the Trees

I do hope that there is wisdom in the woods, since I have chosen to spend my summer holiday this year at Clissett Wood in Herefordshire, where I will be learning green woodworking. I'm not so ambitious as to think I will actually make a chair, but I should become better acquainted with a shave-horse, and spending that much time outdoors is enough of a thrill for me.

The rap poet Paradox is offering wisdom from the trees in his poem about the scandal of money, banking and interest. You will have heard this message many times before since the Crash of 2008, and read plenty of similar stuff on this blog, but none of it as stylish, I think, as this six minutes of poetry.

21 July 2010

Sustainability Watchdog to be Put Down

Producing a report, as a government body, that recommended ending economic growth was always a risk. It seems that the Sustainable Development Commission just went to far, when its economics commissioner Tim Jackson did this last year. Reports suggest that the closure of the SDC is to save money, but with such an absurdly small budget this is surely just political cover.

For more than ten years now, the Sustainable Development Commission has been trying to do what I, and many other green commentators, think is impossible: persuading those who hold power in business and politics within this paradigm that they should take a path that does not threaten the planet. They did this politely, and in a measured way, backing their arguments up with clear and irrefutable evidence.

This result is that the SDC has been closed. This is surely evidence in itself, if such evidence were needed, that the existing power structures cannot be changed incrementally, from within. We need to recognise that the political system we struggle with will not allow us make the changes that the planet needs - the Westminster system of power and its corporate lobbyists are corrupt from top to bottom.

Tim Jackson's report was the latest and clearest statement of the total incompatibility of capitalism with sustainability. He may not have phrased it in those terms, but since capitalism cannot survive without growth, to challenge growth is to challenge capitalism itself. So I am not surprised that the SDC has met its doom; I only hope that those who thought that the art of persuasion could be successful will learn this lesson and have the courage to join us in building the new paradigm outside the mainstream.

20 July 2010

One Law for the Rich . . .

One of the greatest benefits of an academic life is that it forces you to keep in contact with academics from across the world so that you keep an international perspective. For a localist like me, who might otherwise lurk in my burrow with only the occasional foray to the 'big city' (Cardiff) this is a salutory obligation. In Bordeaux I recently had the pleasure of listening to two presentations about radical economics in Latin America. This is not the wishful thinking of pressure groups or smaller parties but the work of governments on behalf of their citizens.

Ana Rosa de Mendonca from Brazil presented a paper about the role of public banks in the Brazilian economy. In Brazil these banks, which are politically managed, control 43% of the credit in the economy. For many people they are their retail bank of choice, in place of the high-street banks we rely on, which exist to maximise profits for their shareholders.

Economic theory suggests that such public banks can play a useful role in underdeveloped economies until the market is sufficiently developed so that the private banks can take over, offering their manifestly superior services. Ana Rosa quite reasonably questioned whether such public banks might in reality play an important role in developed economies too, especially since they can act in an anti-cylical way, i.e. investing more when the economic is in recession and drawing money out to prevent over-heating.

Public banks, operating in the public interest, can also support important economic transitions as they did in Latin America's building of its industrial infrastructure in the 1950s and 1960s. In the UK, if the banks which we already own large portions of were simply turned into public banks, with political governance structures we could see them playing a similar role in our transition to a low-carbon economy.

Meanwhile, Eugenia Correa from the National University of Mexico outlined arguments for politicians to retake political power over the financial structures of the Latin American countries. Venezuela and Bolivia are already controlling their currencies on the foreign exchange markets. All the LA countries, she argued, have been net exporters of foreign capital for decades, as their wealthy citizens have deposite funds abroad, Switzerland being the destination of choice. This has left them short of capital for domestic investment and expansion.

She also proposed a Banco del Sur and a regional exchange currency. The latter already exists in the form of the SUCRE, which already exists to enable countries to settle foreign-exchange balances without needing to hold foreign exchange reserves. This could allow the Latin American economies to create a thriving regional economy that is insulated from the depredations of the rest of the world.

Like Africa, Latin America has for long seen its resources sucked out to benefit corporations sited elsewhere. Its people are no longer engaged in violent revolution in response to economic injustice but are rather electing politicians who are smart enough and courageous enough to defend their interests. Viva la revolucion economica!

17 July 2010

Gunning for the Money Men

I'm recently back from the Association for Heterodox Economists annual shindig, held this year in a sunny and astonishingly beautiful Bordeaux. It was the usual hot-bed of vibrant conversation amongst economists who, having long ago eschewed the neoclassical orthdoxy and therefore any hope of an exalted career path, see no risk in embracing and enjoying a plurality of opposing views about economic life.

I had the usual temptation to engage in some impromptu ethnographic research, especially when sharing a meal with a bunch of fellow economists, who use game theory to work out who should tip and by how much, and watching the World Cup semi-final in what the French considered an English pub with a people of mixed nationalities and prejudices was also highly entertaining.

One of the greatest pleasures was meeting Gunnar Sigurdsson, who claimed to have personally overthrown one Icelandic government and be well on the way to destroying a second. This gives you a clue to the sort of person he is, and I imagine that the negotiating skills needed by a politician are well beyond his skill-set. He himself admitted that his greatest mistake was standing for election.

But then, what else are you supposed to do when your country and everybody in its has been put onto the baize cloth by a small number of irresponsible young men? In Gunnar's case what he decided to do was to make a short and entertaining film of his personal take on the Iceland banking crisis and subsequent bankruptcy.

You will not be surprised to learn that the City of London was highly implicated in the fraud, by supporting the Viking Raiders as they bought up a range of high-street names which they could not realistically support. (Surely the purchase of supermarket Iceland was just a little joke on their part?) Gunnar also noted the support by 'respected' economists Mishkin and Portes, who he claims were paid to say that there was no problem with Iceland's stability. In effect, 'the were hired because they were willing to get it wrong'.

I have previously suggested the Icelandic case as an object lesson in what goes wrong when an economy becomes detached from its real, physical base. It seems that the reality was murkier, with a tiny elite corruptly supporting each other in an anti-democratic network that stretches back to the founding of a US military base on the rocky island in 1951. Too many Icelanders enjoyed the good times without asking questions: they have wised up since and Gunnar says that all Icelandic people are now economists, as are many of his best friends!

Gunnar's own journey since his decision to follow the money has involved considerable air miles as he trekked from Guernsey to Tortola in the British Virgin Islands to track down the movement on the non-existent money on which the Iceland miracle was based. There he discovered 600,000 financial companies were registered, with no regulation whatsoever, including 120,000 in just one small office block. His deeper journey of disillusion and loss of trust is one we are all embarking on, whether we choose to or not.

15 July 2010

Chick and Pettifor Call to Reverse UK Spending Cuts

This fairly standard Keynsian call for counter-cyclical public spending to avoid a self-reinforcing depressionary spiral is interesting more in where it is found (on the Bloomberg website) than for any new thinking.

Land: The Final Tax Frontier

Here are some further interesting reflections from Martin Wolf, who seems to be breaking the economists' rule of a lifetime and actually engaging in some open-minded thinking. This time he is on the issue of land, and even goes so far as to consider the writing of Henry George on the subject. (I have already posted about my recent encounter with his devoted followers.)

Why should this issue be receiving attention, all of a sudden? Could it be that, with all other sources of revenue drying up, the politicians are at last realising the benefits of taxing land, which cannot be sent offshore or hidden in a foreign bank account? The Tax Justice Network considered this possibility in a recent special issue devoted to land tax, where I rehearsed many of the arguments Martin Wolf addresses in his piece.

Theoretically, Wolf must be right that the removal of land from economic theory was absurd, and contributed to the disconnection of the economy from the environment that has been a major contributor to ecological crisis. But as Greens we always have to be cautious about taxing land, since putting pressure on its value could merely lead to over-exploitation. Proposals for such land taxes always need to be linked to strategic objectives, put into practice via a newly democratised and community led planning process.

14 July 2010

Culture of the Shameless: Part II

Click here to vote in the Total Politics Best Blogs Poll 2010

It's only once a year that I ask this favour. If you're enjoying all the priceless education and thought I share with you for nothing, in flagrant and shameless denial of all the precepts of economic theory, you might consider voting for me in the annual poll of political blogs.

The rules are simple.

1. You must vote for your ten favourite blogs and ranks them from 1 (your favourite) to 10 (your tenth favourite).
2. Your votes must be ranked from 1 to 10. Any votes which do not have rankings will not be counted.
3. You MUST include at least FIVE blogs in your list, but please list ten if you can. If you include fewer than five, your vote will not count.
4. Email your vote to toptenblogs@totalpolitics.com
5. Only vote once.
6. Only blogs based in the UK, run by UK residents or based on UK politics are eligible. No blog will be excluded from voting.
7. Anonymous votes left in the comments will not count. You must give a name
8. All votes must be received by midnight on 31 July 2010. Any votes received after that date will not count.

For ideas about other political blogs you can include to reach the total you can check the links to the right.

12 July 2010

Culture of the Shameless

I really am not a vindictive person. In fact, I am rather fearful that if any of my Quaker friends read this post I will drummed out of the meeting. Or perhaps breathed out with sad and consoling looks, or something appropriately friendly. Or maybe I will be just accepted in spite of my cruel thoughts and my inability to get a grip on my rage about bankers.

I am angry about the way that the clear link between banking bailout and bankrupt Britain is neatly overlooked in almost all media discussions. I am angry about the fact that nobody questions the capitalist system which cannot operate without these periodic and hugely destructive collapses. But most of all I am angry about the inability of what we might tritely call 'the banking community' to take any responsibility for what has happened.

My anger may be summed up in one simple question: where is the jumping man? The last time we had a crash on anything approaching this scale, the 1929 stock-market crash, the Wall Street traders who had been sucking in the savings of small investors and investing them in widly risky schemes were clearly identified as the guilty parties. When the bubble burst they felt ashamed of destroying the savings of the working poor, who had been lured into a game they didn't understand. This as much as their own personal losses, we were led to understood, was the cause of the high rate of suicides in October 1929.

Except there was actually a low rate of suicides in that month, according to Galbraith's account of the Crash. The story of the jumpers was largely an urban myth. And even those who did jump did so because of being unable to face a future without their own personal wealth, not because of concern for the little people their risky dealing had destroyed.

A decade ago, when the Japanese economy began to fall apart because of of the failure of capitalist finance, an executive at the Bridgestone tyre company in Tokyo, committed hara-kiri as his company's profits plummetted and thousands lost their jobs. I am not exactly recommending this to the higher echelons of Goldman Sachs or RBS, but the shameless way in which they ignore the suffering around them and carry on rewarding themselves cannot help but make one look towards other times and other places with a sense of nostalgia.

8 July 2010

Don't Mention the Trade War

Have you ever noticed how your German friends can't pronounce the name of their own country correctly? No doubt grown tired of us correcting their pronunciation, according to Martin Wolf in the FT they have no made an alliance with China and actually become Chermany . I wish this were a joke, or some sort of economic chimera, because the reality of Germany and China turning inwards and offering only stern words to the rest of the world about our budget deficits is a very worrying development.

It is extraordinary how many politicians fail to understand that, in a globalised and interconnected world, running a surplus is just as destructive as running a deficit. It is only when national economies are in balance that all can thrive; large-scale imbalances lead to tension between countries and suffering and strife within them. This is not news: it was Keynes's understanding at the Bretton Woods conference, which is why he proposed a global trading system within which those with a surplus, as well as those with a deficit, were fined by a global regulatory body. At that time it was the US, flourishing as the purveyor of arms to the world, that resisted; now it is Chermany, which is vaunting its economic strength and ignoring the political consequences.

Martin Wolf draws attention to the problem of 'chronically weak aggregate demand'. This is the most frightening code-word that an economist can find: it means people aren't buying enough stuff. From the point of view of a capitalist economy that spells disaster. The shark has stopped moving through the water and will soon expire. The other code-word of note in his piece is 'protectionism', contrary to expectations one of the most threatening words in the economist's lexicon because it means less trade. In capitalist economics, without growth the economy will fail and the best way to achieve growth is to sell stuff to other countries.

The facile posture adopted by Dave and the Boy George at the G20 is almost as laughable as their suggestion of 40% cuts. We are, apparently, to grow our way out of the recession by exporting more. Leaving aside the understanding of readers of this blog that the planetary limit makes any further growth impossible I have two simple questions for the dining-club boys: what are we supposed to export (the demand for financial services having declined rather rapidly over the past two years), and who on earth is supposed to be buying?

5 July 2010

Shock till you Drop

How many of your friends have told you recently that they feel lucky to still be in work? This is the sign of somebody who has already given up the fight for decent standards of employment and a fair rate of pay. People who make comments like this should be politely but firmly put right. Their supine acceptance of the public-spending lies must not be allowed to take hold of the national psyche.

This sort of feeble-minded compliance is, of course, particularly prevalent in the public sector, which is the primary target of Slasher Osborne. The news that the Treasury is requiring plans for 40% cuts from the majority of departments makes clear that this is all about ideology and nothing to do with economics. One would expect the instinctive reaction of a Tory government to be to favour the private sector and punish the public sector. But in the case of Cameron and Osborne it is difficult to understand whether they really are stupid enough to sacrifice the whole national economy just to pick on public-sector workers, or whether it is a more subtle attempt to undermine the self-confidence of working people.

This is not a new strategy. Back in 1981 Thatcher's absurd policy of monetary tightening pushed the economy over the edge and resulted in the worst recession in a generation. The weakened situation of employees allowed the Tory government to force through a range of anti-union legislation that will make resistance much tougher this time around. I wonder how many people then were wandering round telling colleagues how lucky they were to still be in work. I was lucky enough to be too young to be in the labour-market.

Between them Mark Serwotka and Naomi Klein seem to have the right explanation: political shock and awe to make us vulnerable to whatever radical changes they seek to impose on our society. Together we can resist, but the shock tactics are designed to divide and conquer: pitting public sector against private sector, employed against unemployed. These are times for keeping your head, whether all about are losing theirs or not.

1 July 2010

Kevin Rudd: My Part in His Downfall

This is my title but, as you will see from this guest post by Clive Spash, a not entirely inappropriate one. Kevin Rudd may come to be seen as the first premier to become a political victim of climate change.

Rudd's Demise and Corporate Power
Clive L. Spash

The demise of Kevin Rudd leaves some stark questions as to how Australia will ever tackle the power of the resource extraction sector. Rudd is cited as having become unpopular for having dropped a carbon emission trading scheme and for having advocated a tax on the mining sector.

Was Rudd wrong to ditch carbon trading? Clearly not in my opinion. Amongst many issues, the scheme (originally developed under the Howard government) was set to transfer billions of dollars to the coal and aluminium industries in 'compensation' and was designed to achieve no domestic reductions, pushing action onto the poor in other countries. Yet Rudd and his party refused to recognise such issues and only abandoned the scheme under political duress. Indeed explaining the general problems with such schemes, in academic terms, led to my own work being banned, subject to censorship and led to my resignation as a senior Australian civil servant. Is this something for which Rudd or his government could be blamed or is there a deeper malaise in Australian politics?

In November last year, the Australian Senate had a special one hour debate on whether the Rudd government was undertaking censorship. Rudd's party colleague, Minister Kim Carr, responsible for the CSIRO where I worked, later tabled a letter by the head of the organisation, Megan Clark, making a series of false allegations against me. Megan Clark is herself a former mining corporation (BHP Billiton) executive. In February this year, in a Senate Estimates Committee, the two attempted to deride my work on emissions trading and question its quality (despite its acceptance in a journal The Australian Research Council ranks as ‘A’ listed under its programme for Excellence in Research for Australia). Minister Carr readout a few selected phrases from a four page confidential journal referees report which can only have been placed in his hands by the CSIRO. These individuals have failed to suppress the work or damage its credibility, but what they did do was to expose the links between a Minister and the supposedly independent results coming from a government research agency. Carr also exposed the readiness of a Minister to place his own opinion above the scientific peer review process.

Rather than the Rudd government attacking alternative voices on climate change policy they should have been listening. They might then have developed a more sensible approach to tackling human induced climate change than the second hand policies of their opponents. Environmentalist should remember that Rudd's action of signing Kyoto meant not cuts in emissions but actually a commitment to an increase of 8 percent over 1990 levels. Rudd offered no alternatives to the rejected emissions trading scheme and seemed at a total loss as to what to do next. This failure to explore alternatives appears to be a long running Australian government problem, not just restricted to Rudd. For example, if research had been ongoing in a fair and open manner Australia might by now be leading the world in the renewable energy sector. Instead it is leading the world in resource extraction and sales of coal, especially to China.

Recent attempts to fund renewables also appear to have gone astray. Energy Minister, Martin Ferguson's solar energy flagship has been criticised as excluding those with the most advanced technology and best experience. Instead the short listed companies included some highly questionable fossil fuel corporations with little or no experience of large scale solar. The flagship was floated short on funds and with little regard to the requirements for creating and sustaining a solar sector. Ferguson has also appeared on television defending large greenhouse gas emitting energy technologies. He has stated the government does not select winners and these things should be left to the market (http://www.abc.net.au/lateline/content/2010/s2842402.htm). That markets are structured institutions set-up by social rules of governance and public policy seems to have slipped his notice, or perhaps not!

Rudd's own failure seems to have been one of too slowly becoming aware of where power lies in Australia. The final substantive act of Rudd's government was to try taxing super profits in the mining sector. This led to BHP, Rio Tinto, Fortescue Metal, Santos and the Minerals Council of Australia spinning propaganda about the tax destroying value for the miner and the nation. Opposition from Western Australia and Queensland inevitably followed. The fact that Rudd was overthrown from within his own party highlights the sensitivity of Australian politicians to mining interests.

The downfall of Rudd indicates on-going problems within Australia of how to control big coal, big mining and international corporations. Things could have been different. A politician brave enough to face down the climate sceptics while admitting emissions trading is a flawed approach should have offered real alternatives. A politician ready to take-on the mining sector and bring-in a serious resource tax should have been ready to first fight the same vested interests to put in place a tax on greenhouse gases. Revenue could then have supported a transition of the economy. A politician ready to seriously support a renewable energy sector could have taken Australia into a new era and weaned it off coal. Instead half hearted attempts at ill-conceived policies have left Australia as the biggest per capita carbon emitter in the world with a political economy heavily invested in exploitation of the environment.