Economic lie number 4; inequality is good for the system…

The whole Capitalist system is dependent on aspiration, or so we are told. Our Chancellor of the Exchequer has just heralded his 2013 budget as something for an ‘aspiration nation’- seeking to help those who want to help themselves- those who want to own their own houses.

Without the wealth creators (business entrepreneurs) there can be no long term prosperity. All that you will have is stagnation- look what happened in the old soviet bloc countries.

Without greed we have bad cars, cabbage soup and bureaucrats in stone washed denim.

Except that the rich are getting richer, even WITHIN our western economies. This from The Telegraph;

The world’s rich are getting richer. The Forbes billionaire list was published this morning (there are now 1,426 of them globally in dollar terms, with 210 new entrants in the last year), and collectively they are $800bn richer than they were a year ago. Each billionaire is, on average, $100m richer than in 2011, with an average wealth of $3.7bn.

And the poor poorer; The Institute of Fiscal Studies forecasts that, as a result of UK tax and benefit policies, there will be significant increases in child poverty in the coming years. In Scotland alone forecast trends would suggest between 50,000 and 100,000 more children being pushed into poverty by 2020. (See here.)

And what is more, the argument can be questioned even by people on the inside;

There is the opposite argument too- that the more equal societies are in terms of income, the better its citizens seem to do. This from here;

In The Spirit Level Wilkinson and Pickett base their analysis on data from 23 rich countries as well as data from the 50 American states. They say that in the main this shows that the following problems are much more pronounced in countries with higher levels of income inequality.

Health inequalities: At the end of the 1990s there was an average gap of 7.3 years in mortality between rich and poor people in unequal societies. This can rise to as much as 28 years in some American states. They argue that research shows these differences cannot simply be explained by differences in health behaviours.
Mental illness: They argue that ‘inequality is  causally related to mental illness’; that rates of mental illness are five times higher in the most unequal societies compared to the least unequal.  Illegal drug taking is also higher.
Obesity: Unequal societies are more likely to have higher levels of obesity, with poor people most at risk, partly because of the attractions of ‘comfort eating’.  Indeed the rate of obesity is six times higher in the most unequal, compared to the least unequal, societies.
Divorce rates: There have been larger rises in more unequal societies. This then creates more stress for children.
Teenage pregnancy: This is more prevalent in unequal societies. Indeed in the USA the rate of teenage pregnancy is four times the EU average.
Violence: Wilkinson and Pickett argue that the strongest evidence or the negative effects of inequality is violence figures. The reasons for this are explored below.
Imprisonment: Unequal societies are more punitive. People are five times more likely to be imprisoned in the most unequal societies than the least unequal.
Social mobility: Inequality leads to less social mobility. Inequality ‘solidifies the social structure’ and also depresses educational attainment for the poor.
Women’s position: In general women are less likely to be in higher status jobs in unequal societies and they also have worse health than women in more equal societies.

Wilkinson and Pickett argue that the problem of inequality is not just for poor people: everyone suffers. The life expectancy figures even for rich people is lower in unequal societies than more equal ones. The reason they advance for this is that unequal societies have lower levels of trust than more equal societies. This lack of trust leads to more hostility, fear and lower levels of community participation. In this way everyone suffers.

In the data they present the societies which are most unequal, and have the biggest health inequalities and social problems, are the USA, the UK, Portugal, Australia and New Zealand. The least unequal are the Scandinavian countries and Japan.

 

Ecomonomic lie number 3- austerity affects us all…

Austerity

Back to my little mini series about economics. Don’t expect deep learned insights- I did study economics as part of a social science degree 25 years ago, but I was a very poor student. However, there are many approaches to economics- here are a few;

Technical/systematic- clever people who claim to understand the ebb and flow of the complex currents that move in the deep oceans of international finance. They know the difference between M1, M2, and M3. They advise the powerful and hold the fate of millions within their sterile computer generated models. Here, the economy is a desperately complex, ever changing thing, that is not just human in origin, it is supra-human. We are all subject to it, in the same way as the Ancient Greeks lived in the shadow of Mount Olympus. The gods are capricious, mysterious, vengeful and unmoved by ephemera. Our high priest-economists are expected to placate the gods, but they are after all gods and so there is the constant threat of earthquake wind or brimstone…

Political- I contend that most politicians know very little about point 1. They have to pretend they do, like the emperor and his new clothes. They have to pretend to be in control of the gods. They have to present deep ocean complexity in the form of simplistic decisions. All the better if the issue can be polarised, and if their are people/groups to be blamed. So we see two narrative techniques being employed at present-

  1.  The economy is constantly compared to a household spending plan. It has to be about prudence, good management, respectability- the image is a solid middle class family who budget carefully for their two holidays, their new sofa and retirement plan. Except that the economy bears no resemblance to a middle class household budget. Houses can not print their own money for a start. They can not set their own tax rates, they can not invest huge sums in education or health or in nuclear arsenals. And of course not all households are the same. Some are broken, bankrupt.
  2. The other narrative I have already hinted at- it is the narrative of blame. Our lifestyles are under threat from the fecklessness of the poor or the tidal wave of immigrants- the strivers are carrying all these skivers on their backs. We no longer talk about social class because stratification in our society has fragmented- but in case you are in any doubt, check out any mumber of tabloid newspapers- the Express, the Mail, the Sun. They are full of stories of benefits dodgers, single mothers getting posh social housing, dark skinned swarthy outsiders who are clogging up our hospital wards. For a while, the bankers got some mud thrown at them- but mud does not stick to shiny power for long.

The economics of justice- There is another approach to economics of course- one which both politicians and technical economists are aware of, some even motivated by- it is the analysis of the flow of capital from the poor to the rich, and the operation of the machine that makes this happen. It points us to the conquest of poor countries, whose raw materials are used to make the toys of the rich. It also points us to the remarkably persistent and stable gulf between the rich, healthy, educated minority and the rest- both globally and locally.  I make no excuse for this statement; these are the economics of the Kingdom of God.

Two stories sum up this gulf within the UK at the moment. Firstly, this one;

Lamborghini Veneno

The eurozone may still be in recession, but there is little gloom at the Geneva motor show, where Lamborghini, Ferrari, McLaren and Rolls-Royce have launched luxury supercars costing up to £3m each.

While European car sales dropped by 3.3m last year – the equivalent of a car company the size of Fiat failing to sell any cars at all – super-luxury cars are rolling out of the showrooms in ever increasing numbers.

“Most the world is suffering from recession, yet there are clearly people who can buy a Lamborghini at €3m (£2.6m) a pop,” said Paul Newton, auto analyst at IHS Global Insight. “Bentley, McLaren, Rolls are all doing well. There is clearly a market for the most expensive of cars, whereas the mass market manufacturers are nearly all suffering, especially in Europe. It’s the definition of a two-speed economy.”

Philip Harnett, product manager of Rolls-Royce’s latest €245,000 Wraith model, launched at the Geneva show on Tuesday, said that while the global economy was in the doldrums “some people are doing very well and they want to reward themselves”.

He said it was important for staff morale that high-flying company executives continue to buy the most luxurious cars. Executives told him that “the day I turn up for work in a Morris Minor is the day the staff will start to worry”.

(From the Guardian Tuesday 5 March 2013.)

Then, by way of contrast, this story;

Houses in Middlesbrough

One of the most acute concerns about the government’s so-called “bedroom tax” – which from April will force anyone “underoccupying” social housing to either downsize to a smaller property or face a cut in their housing benefit – is the severe shortage of smaller properties available to move to.

The National Housing Federation suggests there are 180,000 social housing tenants underoccupying two-bedroom homes in England, yet fewer than 70,000 one-bedroom properties are available.

From 1 April, anyone living in social housing who has one unoccupied bedroom will have their housing benefit cut by 14%, rising to 25% for households with two spare bedrooms.

Maureen Hagan, 58, lives in a three-bedroom property in Grangetown, Middlesbrough, with her 18-year-old granddaughter, whom she took in five years ago. She will now see her housing benefit cut by 14%, even though she says she requires the extra bedroom in order to meet standards set by social workers, as she is fighting to bring another young relative out of foster care and into the family home.

She feels that the welfare reform is out of sync with the rate of inflation, and calls for the government to prolong the introduction of the cuts. She spoke of her recent struggles to meet utility payments: “That was before that bedroom tax on top of everything else. What am I going to do then?”

Hagan expects to face a £14 cut to her housing benefit each week – more than half her weekly shopping budget.

“I can’t afford to buy makeup. I’d like to buy it but I can’t. I’d like to buy my own clothes; the charity shop’s my clothes shop, and it has been for a number of years.”

(The Guardian, Friday 8 March 2013)

Both of these extremes are a direct result of the current economic circumstances affecting us all. One part of our society profits- gets richer, amuses themselves with more toys.

The other folk (whilst watching Top Gear on Sunday night) have decisions to make about whether they move house because they are mere grit in the cogs of the system. Their fate is irrelevant to the ultimate prize. If they can not consume, they have no value.

We are not all ‘tightening our belts’, or ‘feeling the pain’. We are not all making the same sacrifice.

There are of course other possibilities. Some are about managing the economy better- taking a Keynesian approach to stimulating our economy again. But this does little to change the game- it just clarifies a few of the rules.

Poverty is not a choice, it is an economic necessity to ensure growth. The alternative is revolution- if not of the Marxist kind, then perhaps the Jesus kind, which takes the emphasis off power, and puts it on love. Against this there is no law.

The false-god of economic growth…

Interesting article in the Guardian today about this book;

GetImage

 

Interesting title- considering discussions about apocalyptic end times obsessiveness in some parts of the Christian world. A timely reminder of how we can get snarled up in religion at the expense of hope for the future this beautiful planet.

The book opens up again the question about what we can do as a nation to break economic mono culture that we have spent ourselves into. Here is a quote from the article;

Consume less, he says. Be sceptical about new technology. Slow down. And do not fall for the modern political class’s post-Blair belief that history is bunk, and to draw on the past is to be a hopeless throwback: it is only a comparative blink since the second world war found millions of people reshaping their lives in the cause of a common endeavour, and the same thing could yet happen again.

And then there is the fetish of growth, or rather growth-ism. As Simms points out, the idea that economies necessarily have their limits was being voiced when capitalism was still young: in 1848, John Stuart Mill argued that “a stationary condition of capital and population implies no stationary state of human improvement”. A century and a half later, Adair Turner, a former director of the CBI, told Simms that if anyone thinks “the most important objective of public policy is to get growth from 1.9 per cent to 2 per cent and even better 2.1 per cent”, they’re worshipping a “false god”, and “extra growth does not automatically translate into extra human welfare and happiness”.

These are pretty ordinary thoughts, but ones that the dull noise coming from Westminster renders almost exotic – and essential.

 

Trickle down economics; economic lie number one…

The first of a little mini series about Capitalism that has been nagging at me for a while…

trickle down economics

There was an article in out local paper last week- Argyll and Bute council, like most of our councils, has to make significant cuts to the budget. Despite our large geographical area, Argyll has a low density of population and services are already stretched tight. The article listed the sordid detail of the cuts- older peoples care, youth rehab, road schemes, outsourcing services to the private sector who will do the support of our most vulnerable more cheaply etc etc.

And what is all this about? Why is money suddenly so tight? Why do we all buy into the collective idea that ‘times are hard’ and so ‘we all have to tighten our belts?’

The fact is that not all of us do tighten our belts. Many people are doing very well out of the crisis. This from the Guardian;

The super-rich – the top 1% of earners – now pocket 10p in every pound of income paid in Britain, while the poorest half of the population take home only 18p of every pound between them, according to a report published this week by the Resolution Foundation thinktank, which reveals the widening gap between those at the very top and the rest of society.

Inequality has grown sharply over the past 15 years, according to Resolution’s analysis: the top 1% of earners have seen their slice of the pie increase from 7% in the mid-1990s to 10% today, while the bottom half have seen their share drop from 19% to 18%.

And then there are those right at the bottom- the Strivers who are forced to become Scyvers, or the Skyvers who have lost hope, or those who never had a fair crack of the whip in the first place. Have you noticed that when the economy takes a dip, they always take a hit? They become the problem– the scapegoats.

So we see all these regressive punative policy decisions being pursued by our current government- lower benefits to fewer people, changes to housing benefit to force people to leave their homes if they have an extra bedroom. All this in the context of reductions in care provision, and less funding for voluntary bodies and charities. Our current government is doing things that even Thatcher at her most strident would have baulked at.

But again- why? Where does all this come from?

What the neo-liberal economists will tell us is that the problem is caused by natural adjustments made by a self regulating economic system. That the job of us all is to get out of the way and let it all sort itself out like some kind of higher intelligent life form. The problem, they would say, is an over inflated public sector, whose interference in the natural order of things by public spending, taxation and welfare provision means that the economy fails to self regulate.

This kind of economic thinking has become so pervasive, so wrapped up in the political system, so much in service of powerful self interests, that we all wriggle on its hook. We are compliant because we have bought in to some of the lies that the system has sold to us- perhaps the biggest one is this one- Trickle down theory.

In a nu­tshell, trickle-down theory is based on the premise that within an economy, giving tax cutsto the top earners makes them more likely to earn more. Top earners invest that extra money in productive economic activities or spend more of their time at the high-paying trade they do best (whether that be creating inventions or performing heart surgeries). Either way, these activities will be productive, reinvigorate economic growth and, in the end, generate more tax revenue from these earners and the people they’ve helped. According to the theory, this boost in growth will ultimately help those in lower income brackets as well.

So, the argument is, if we have lots of rich people, and they are encouraged to become super rich, then our country, and our economy, will benefit- right down to the roots.

This analysis does not regard the wealth of the few as contingent upon the poverty of many- in this country and even more crucially in the poor countries around the world whose raw materials and cheap labour we are entirely dependent upon.

It also does not conform with the facts, as the rich get richer, and the poor get poorer.

As the worlds resources are over consumed by the few and our environment continues to be damaged, perhaps beyond repair.

As austerity plans are still touted as ‘good housekeeping’, as if the UK economy could be compared to a household budget.

So, what is the alternative? Fairer, more progressive tax systems? This might be a start- but I think the problem is the system- and we are all part of the system aren’t we? It is really hard to get out of it- the mortgages, the gadgets, the foreign holidays and the dependency on technology to deliver distraction, entertainment and connection.

Where is the Kingdom of God in all of this? What are we, the agents of this Kingdom , to put our energy towards? I am convinced that we need to be engaged critics of injustice wherever we see it- particularly towards the poor and the marginalised.

And the beginning of how we can do this is to take a look at the system through a different set of lenses…

RIP Eric Hobsbawm…

Historian, marixist commentator and intellectual Eric Hobsbawm has died aged 95.

His is a name that has has stayed with me from being a student 25 years ago- someone who was prepared to look at history through the eyes of poor people. Who was prepared to analyse what have become by understanding the inequalities of power and wealth.

Emily has left school and is taking her higher/advanced higher qualifications at a Cardonald College- where she has chosen to study (much to her old dads pleasure) Sociology and Psychology. She is being exposed to all those old questions that excited me in the past (and the present.) How did we get here? Who is calling the shots? How could we be better- how could we organise ourselves so as to protect the poor and weak, and reign in the excesses of the strong and powerful?

Hobsbawm was a large part of this for me in the past. A left field calm voice who was able to speak with a quiet authority.

In praise of him, here are a few quotes (courtesy of the Guardian.)

On socialism and capitalism: “Impotence therefore faces both those who believe in what amounts to a pure, stateless, market capitalism, a sort of international bourgeois anarchism, and those who believe in a planned socialism uncontaminated by private profit-seeking. Both are bankrupt. The future, like the present and the past, belongs to mixed economies in which public and private are braided together in one way or another. But how? That is the problem for everybody today, but especially for people on the left.” 2009 Guardian article

On Tony Blair: “Labour prime ministers who glory in trying to be warlords – subordinate warlords particularly – certainly stick in my gullet.” 2002 interview

And from this essay;

…This was the way of thinking about modern industrial economies, or for that matter any economies, in terms of two mutually exclusive opposites: capitalism or socialism.

We have lived through two practical attempts to realise these in their pure form: the centrally state-planned economies of the Soviet type and the totally unrestricted and uncontrolled free-market capitalist economy. The first broke down in the 1980s, and the European communist political systems with it. The second is breaking down before our eyes in the greatest crisis of global capitalism since the 1930s. In some ways it is a greater crisis than in the 1930s, because the globalisation of the economy was not then as far advanced as it is today, and the crisis did not affect the planned economy of the Soviet Union. We don’t yet know how grave and lasting the consequences of the present world crisis will be, but they certainly mark the end of the sort of free-market capitalism that captured the world and its governments in the years since Margaret Thatcher and President Reagan…

…The test of a progressive policy is not private but public, not just rising income and consumption for individuals, but widening the opportunities and what Amartya Sen calls the “capabilities” of all through collective action. But that means, it must mean, public non-profit initiative, even if only in redistributing private accumulation. Public decisions aimed at collective social improvement from which all human lives should gain. That is the basis of progressive policy – not maximising economic growth and personal incomes. Nowhere will this be more important than in tackling the greatest problem facing us this century, the environmental crisis. Whatever ideological logo we choose for it, it will mean a major shift away from the free market and towards public action, a bigger shift than the British government has yet envisaged. And, given the acuteness of the economic crisis, probably a fairly rapid shift. Time is not on our side.

Where is the new ideology?

It is an old academic political discussion- the end of Ideology– by which I mean the end of the time of battling grand political/economic theories that inspired and fuelled our attempts to understand and shape our society. Thatcher put an end to all that in the UK- not because she had no ideology, but because she cleared the field of all opposition. Capitalism and ‘The Market’ triumphed and gifted us with the so called free movement of capital, trickle down, neoliberalism and globalisation.

Over the next 20 years, nation after nation fell in line, cajoled by the promise of great wealth or manipulated by powerful organisations who needed scarce resources or a new market.

None of this is a surprise, but what is more noticeable is the lack of viable alternative. Sure there are voices of protest- not least the Occupy Movement- but to demand change is not necessarily the same thing as proposing an alternative (I know that the OM are in discussion about all sorts of issues, but I would suggest that no real coherent alternative ideology has yet emerged.)

There was an interesting article in the Guardian today by Aditya Chakrabortty. Here are a couple of quotes;

When the history of how a good crisis went to waste gets written up, it will surely contain a big chapter on the failure of our academic elites. Because just like the politicians, the taxpayer-funded intellectuals at our universities have missed the historic opportunities gifted to them by the financial collapse. And it will be the rest of us who pay the price…

…So have the non-economists grasped their moment? Have they hell. Look at the academic conferences held over the past few weeks, at which the latest and most promising research in each discipline is presented, and it’s as if Lehman Brothers never fell over…

Chakrabortty did a search of recent sociological and social science conferences and academic papers and concluded that pretty much the disciplines were not interested in challenging the core assumptions of the dominant ideology.

So where is the challenge to come from, if not from the academic elite? And more importantly, where are the alternative ideologies going to emerge from?

I watched the two Che Guevara films recently- a time when ideology believed that revolution was possible and even worth killing for. Revolution meant overcoming the ruling elite, empowering the poor and dispossessed and bringing egalitarian justice to society. Whilst I abhor the violence, most of us will instinctively feel the pull of these ideas.

Most of us too will have heard the spoilers- the voices that suggest that such ideas are unrealistic, unobtainable, work against human instincts and have been proved to serially fail because of the repeated failures of communist regimes throughout the world. Therefore the only option left is to continue as we are- with a few tweaks to satisfy the left field.

I want to raise my own voice in protest at this hopelessness. I want to invite my friends into a journey to find a new kind of ideology. We are not there yet, but I think we have some clues;

Start small. Start local.

Buy less, want less, make more.

Reduce waste, increase sharing and holding things in common.

Increase joint social enterprise.

In all things be aware of the impact on those who have little.

In all things be aware of the impact on the environment.

For me, the other academic/social/political group that has been near silent in the offering of a viable alternative is this one- the Church. Because as I look at the economic list above, it seems to me to be also a SPIRITUAL list. Without the life of the Spirit within us, we are mere animals, scratching and scraping at one another for the meatiest parts of the carcass.

So perhaps it all comes down to the word Love. If Economics are subordinate to love, then what might the theories look like? If political science was shaped by love, how might we organise ourselves differently? Even as I write this I feel the rise of cynicism, but- love remains.

I think this is the ideology of the Kingdom of God, and the viral vitality that we can and should bring to all these debates. And we do not have to wait until the universities write papers and hold conferences- because we can make our own small economy now- here.

Kaynes and Hayek, why their ideas still matter…

In order to look for new ideas of how to organise our economy, we have to understand the old ones. Never was this more important.

In the 1920’s and 30’s, two protagonists argued polarised opposite views in the midst of their own economic crisis. One (Friedrich Hayek) insisted that the free market would right itself, and that the job of government was to get out of the way, to reduce its spending and the proportion of the public purse that interfered with the self correcting forces of free market economics.

John Maynard Keynes fundamentally disagreed. He said it was the job of government to govern, and the primary way that they should do this was by managing the economy. He was concerned with the human consequences of boom and bust economics – mass unemployment, poverty.

These two polar opposite positions have been fought over ever since. One libertarian, one interventionist. One arguing for centralised control, the other wanting no control at all. Evidence for the failure of both positions exists.

The free market brought us vulture capitalism, Thatcherism and the current crisis. It became the mantra of the International Monetary Fund, and the basis on which it manipulated whole nations. Centalised managed economies did not do well in the former communist countries. And we in the UK remember the strikes and power cuts of the 1970’s.

However it is also possible to point to the stable, eventually prosperous and well managed period after the second world war when Keynes ruled the world, or the eventual triumph of the Free Market, until this current crisis of course.

The question remains as to how this argument will play out in our current context. It seems that the current political instinct is towards Hayek, whilst having to acknowledge that when the free market is really free, then the unbridled greed it releases is potentially destructive to us all.

There is a really good clip on the Guardian website, here.