Tuesday, 16 December 2014

THE E.U. NEEDS TO LEARN THE TRUE MEANING OF "WEALTH"

Reports emerging from the European Commission last Thursday suggest that two key environmental proposals may be dropped from its programme. The object is to reduce the number of regulations with which businesses must comply.

If true, the associated losses could be considerable. The Clean Air package could deliver “monetised air quality benefits” of up to €151 billion per year by 2025, according to the E.U.s impact assessment. The Circular Economy package, which is focused on recycling, offers net savings to businesses of a staggering €604 billion through “resource efficiency”. To put that in context, the controversial Transatlantic Trade and Investment Partnership (TTIP) promises a boost to E.U. GDP of €120 billion by 2027 in the best case scenario.

Why would the Commission want to drop widely-supported proposals for clean air and recycling worth a potential €755 billion between them, while pursuing a controversial trade deal worth €120 billion at best? The answer lies in the provenance of those numbers, all of which are measuring different things.

For a start, those “monetised air quality benefits” are not real money. Their value derives from something much more important than that, which is the quality and length of people’s lives. The impact statement for the clean air package anticipates a reduction of 50% in premature deaths from particulate emissions by 2025 in the recommended scenario, and of 33% from low level ozone. This equates to 60,000 fewer premature deaths than would occur under existing policies.

Emission abatement measures are estimated to cost about €5 billion a year by 2025, against which can be offset various savings such as fewer working days lost and reduced healthcare needs, which together are worth about €3 billion. The cost to polluters of installing abatement equipment is also offset by the benefit accruing to the manufacturers of that equipment.

In terms of real money, therefore, the net result of air quality improvement is broadly neutral. GDP does not measure the quality and length of people’s lives, so the size of the economy does not change as a result of the clean air package. In terms of economic growth, that €151 billion of “monetised air quality benefits” simply disappears into the ever-cleaner air.

Something similar happens with recycling. That €604 billion saving is some way into the future and is preceded by costly investment. The impact assessment for this package identifies a net €29 billion annual social benefit, but makes no specific claims in relation to economic growth. As with  cleaner air, reductions in landfill, marine litter, atmospheric CO2, etc. do not translate directly into economic growth, since social benefits are not measurable in GDP terms.

The fact that human health and the state of the environment have no value for GDP provides a hefty clue to the European Commission’s list of priorities, of which growth is number one. Since GDP is the internationally recognised measure for economic progress, policies that do not focus upon it - or do not do so in the short term - are being marginalised. Although climate change is at number three, environmental protection as such does not feature in the top ten. TTIP, on the other hand, is at number six.

If the Commission decides to scrap the clean air and recycling proposals, it will highlight once again the uselessness of GDP as a measure of human progress. I’ve discussed elsewhere how it encourages governments to value the different forms of economic activity in the reverse order to that which people would naturally adopt. By focusing exclusively on money transactions, it ignores many things that have a direct focus on human wellbeing, including the huge amount of useful and productive activity that people undertake in their lives for no pay at all.

The limitations of GDP as a measure of wealth production are increasingly well known. Less widely recognised, however, is how a policy focus on GDP is likely to promote inequality by favouring the already-wealthy. Because it measures the economy as a whole, GDP is not concerned with how wealth is distributed, so its usefulness depends upon the assumption that a growing economy is good for everybody. This is the logic of trickle-down” - the idea that the wealth of the rich finds its way down to the benefit of all.

People with spare capital are well placed to increase the money wealth that GDP measures, whereas the less well off may create wealth much more efficiently outside the money economy by doing things for themselves, as this example graphically illustrates. The way to maximise GDP, therefore, is to favour capital investors and encourage everybody else to prioritise paid work over self-motivated, unpaid activity.

The trickle-down theory, however, is increasingly discredited. A report published last week by the OECD concluded that GDP would be higher if societies were more equal, and that relying upon trickle-down is likely to undermine growth in the longer term. If policies that target GDP are favourable to the rich, however, this analysis poses a significant problem. More equal societies have higher GDP, but policies focused on GDP growth tend towards inequality and may, therefore, prove self-defeating. 

Ultimately this is a question of long term and short term outcomes. Business-friendly, light regulation and low taxes designed to help company profits may give GDP a short term boost but will end up leading to lower growth. Governments looking for sustainable growth of the sort of wealth that really matters need to plan people-friendly, socially inclusive measures that will increase individual wellbeing over the long term.

Planning does not become “long term” just because it has a distant date attached to it. Projections for TTIP are based on 2027, by which time, it is claimed, “every year an average European household would gain €545, as our economy would be boosted by 0.5% of GDP, or €120 billion annually.” The word average, however, conceals any amount of inequality, and the main cheerleaders for TTIP are the corporate interests for whom new avenues to short term profit will be opened up.

In practice, households that are invested in corporate profits will do much better than average out of TTIP, and the rest will do far worse. The reason is simple: TTIP seeks to increase the movement of goods in the interests of lower prices, but since moving goods around has a significant cost (both financial and environmental) it follows that those lower prices will be paid for by the lower wages that an even more competitive economy demands.

A clean environment, on the other hand, provides direct social benefits for everybody. The additional costs incurred by business will be repaid in spades by improvements in quality of life and human wellbeing. In this scenario, corporate profits may grow less quickly, but the totality of human wealth has greater potential for sustained increase in the longer term.

If the E.U. is keen to assert leadership on these issues, it could do worse than reflect upon what “wealth” really means for its 500 million citizens. Higher corporate profits extracted from an increasingly “flexible” labour market is probably not the answer to this question. Among possible alternatives: clean air to breathe; an affordable place to live; a fair share in the wealth that society produces and the time to enjoy it. All things that GDP can’t measure and which form no part of what  "economic growth" currently means.

Monday, 1 December 2014

DISRUPTIVE TECHNOLOGY? HOW THE AUTONOMOUS CAR REVOLUTION UNDERMINES THE CASE FOR TTIP

The case for the Transatlantic trade and Investment Partnership is all about cars. The E.U.’s impact assessment document on the proposed deal leaves no doubt about that. According to the assessment, motor vehicles and parts account for 47% of the anticipated increase in exports and 41% of the increase in imports in the most ambitious scenario. The details are in Tables 31 and 32 of the report.

Those figures project forward to 2027, but what the impact assessment fails to mention is that nobody knows what the motor industry will look like by then. One thing, however, seems increasingly certain: it won’t look anything like the industry today. As the authors of a report featured on an EU website put it “if self-driving vehicles become a reality, the implications would be profoundly disruptive for almost every stakeholder in the automotive ecosystem.”

That “if” was written in 2012. In the two years that have passed, it has become a decided “when”, with a consensus beginning to form in the 10 to 15 year range that runs neatly up to the E.U.’s 2027 benchmark. The technology is converging rapidly, from two directions. While European manufacturers are applying more and more semi-autonomous features to their top-end models - intelligent cruise control, automatic braking, parking, lane control, collision avoidance, etc. - automotive newcomers such as Google have gone back to the drawing board with proposals for a basic vehicle that does A to B without any driver intervention at all.

In view of that convergence, Daimler CEO Dieter Zetsche’s insistence last year that "we will never automate the cool part of driving” may have more to do with hope than expectation. As the story has moved from the blogosphere to the mainstream press, all the talk is of eliminating the human. The disruptive consequences for car insurers, bus, taxi, van and lorry drivers, vehicle repair workshops and breakdown services, traffic police, traffic light and road sign installers, road builders and even high speed railways and hoteliers, have been widely aired.

If that is the case, Daimler should indeed be worried. Because no less profound - if less exciting to talk about - are the implications for the motor industry itself. For sure, cars will be safer, lighter, more efficient and loaded with in-car entertainment options, but they will also - and this is the critical point - be much the same under the skin. The performance issues that sell cars - acceleration, top speed, handling, the whole “cool part” that Zetsche referred to - will be largely irrelevant. In this autonomous near future, the mechanical parts of cars are well on their way to becoming commodity items, like memory chips and hard disk drives.

Manufacturers already share engines, and this trend is sure to accelerate as people lose interest in what is under the hood. Because cars will be collaborating, linked by wireless connectivity, all the focus will be on consistent performance and interoperability rather than competitive edge. As with mobile phones, the underlying hardware will move forward across the industry in generational steps. The competitive emphasis will shift to “software” considerations - comfort, entertainment and practical applications such as mobile offices and sleeping compartments.

That’s not the only challenge. At present, cars typically are in use for only 5% of the time. The rest of it they spend clogging roadsides or parked up on expensive real estate. Here, again, disruptive change is anticipated. Self-driving cars will simply drop their occupants where they want to go and lose themselves until next wanted. In many cases they will move on to a new job. If that occupancy rate were to rise from 5 to 10%, boosted not just by multiple users but a rise in intelligent journey-sharing, the market for new cars could be cut in half.

The autonomous driving revolution provides a clear case for the standards-sharing aspirations of TTIP, but those standards will be less about rollbars and lighting and more about the underlying autonomous systems to be applied. In this case, care is needed. Nobody wants incompatible technologies, but competition is needed to ensure that the best standards are arrived at in the first place. Setting standards too soon could be a regressive step.

Once those standards are established, however, cars will end up like dishwashers, video players and desktop computers - different colours, different brands and even different features, but fundamentally similar in the bits that matter. Because of this sameness, and with fewer in total required, the case for shipping an additional 13 million tonnes of vehicles (generating 910,000 tonnes of additional CO2 in the process) to and fro across the Atlantic may evaporate into thin air. If that happens, nearly half the E.U.’s stated case for TTIP goes with it.

This article first appeared on Huffington Post

Thursday, 20 November 2014

HOW TO EARN £90,000 A YEAR MAKING SANDWICHES WHILE SAVING THE NHS



Plans by multinational food processing company Greencore to recruit overseas for the workers to staff a new sandwich making factory in Northampton provoked more questions than answers last week, not least the Daily Mail headline “Is there no one left in Britain who can make a sandwich?” Of the 8,000 people unemployed in the city, it seemed safe to assume that enough of them probably could.

One question not asked, however, is whether that would be a good use of their energy and time. After all, commercial sandwich making displaces, rather than creates, economic activity. People have to eat, and the maximum value comes from eating the right combination and quantity of food to stay satisfied and healthy. It is to be hoped that people eating Greencore’s sandwiches have chosen them in preference to something else, rather than merely eating more. For the economy as a whole, therefore, its a zero sum game.

Of £3 is spent on a sandwich in a supermarket, typically about £1 goes to the shop, with something for the lorry and driver to get it there, something for the factory workers, something for Greencore’s management and overheads, something for its shareholders, something (hopefully) for the taxman and something for the sandwiches that go out of date and get thrown away. Whatever’s left pays for the ingredients (included in which is the price of getting the ingredients to the factory in the first place). If it’s is as much as a quarter of the shop price, on average, it would be a surprise.

Constructing a homemade sandwich, therefore, saves £2.25 for five minute’s work. That’s £27 per hour out of taxed income, or over £90,000 a year gross for a higher rate taxpayer. At that rate it’s safe to assume that most people aren’t buying shop sandwiches because their time is too valuable. 99% of us would be much better off taking five minutes unpaid leave from our work.

People buy sandwiches because it is convenient. When amounts are small they may not notice the price of that convenience, which suggests that this spending comes out of cash they don’t otherwise need. Cumulatively, however, the sums are considerable: £2.25 each working day is about £750 a year of gross income for a basic rate taxpayer - enough to pay for a week and a half of extra time off at the median hourly wage.

In macroeconomic terms the function of a sandwich factory is to keep people working to pay for their sandwiches, thus recycling their surplus cash towards people who need it. In political parlance it “creates jobs”, which allow people to participate in the economy who otherwise would not. That model is vulnerable, however, when the labour market can so easily expand. If the factory pulls in new workers, rather than using the ones who are already in the country, the problem gets worse, not better. Low paid workers receive state benefits as well as the unemployed, so the immediate cost to society goes up, not down.

Whether a sandwich factory is ultimately a cost or a benefit to society depends on how you measure it. GDP rises when more sandwiches, or more expensive sandwiches, are sold. Company profitability should also improve, creating the impression that “UKplc” has done well out of this investment. But something is still missing. Work that people would gain £27 an hour for if they did it themselves is generating a string of jobs that pay far too little to sustain life. Could that money be put to better use?

According to the British Sandwich Association, the U.K. market for bought sandwiches is worth £7.25 billion. If a quarter of that is ingredients, that leaves £5.5 billion, a sum that would go a long way towards meeting the additional funding that the NHS is said to require over the next five years. People buy, on average, about one sandwich each every week. If everyone made that extra sandwich, might that save the NHS?

Arguably, it could, but not in the obvious way of channeling more cash into its coffers. The time people spend making their own sandwiches is the best-paid five minutes of their day because it is totally productive, unburdened by overheads such as premises, shareholder profit, manufacturing plant, professional advisors, corporate management, transport, packaging, advertising and marketing costs.

This principle applies to many things, including healthcare. The biggest challenge facing the NHS is not a shortage of doctors or expensive kit, but long term conditions arising from old age and lifestyle factors such as poor diet, stress and smoking related illness. Many of these are related to poverty and/or over-work. It would be far more cost effective to buy people time to look after themselves better and take care of each other than for them to stress themselves out earning money to pay taxes to pay the NHS to do it for them.

Instead of struggling to find new jobs for all those redundant sandwich makers, therefore, the most beneficial solution is to spread the extra free time around the working population to improve the quality of their health and lives. To achieve this, two things are needed. The first is to move on from the idea of benefits as charity to the economically inactive. In their place should come a form of universal, basic wage that acknowledges everybody’s capacity to contribute, whether paid or not. The second is to measure the value of the unpaid work that promotes human wellbeing - to condemn GDP to the museum of mid-20th century curiosities and replace it with something that prioritises the human value of all work and activity. For this, the Genuine Progress Indicator is a good place to start.

This article first appeared on Huffington Post

Wednesday, 5 November 2014

THE LIVING WAGE: NOT QUITE ALL THAT IT SEEMS?

The Living Wage Foundation has made remarkable progress over 15 years, and in Living Wage Week, when new rates for 2014-15 are announced, it might seem churlish to carp at the detail. At £7.85 outside London the new rate is 20% higher that the statutory minimum, while the London rate of £9.15 is a substantial 41% higher. At a time when average real wages in the economy (adjusted for inflation) continue to fall, the living wage movement is a lone bright light in the generally gloomy outlook for low-wage employees.

Those headline figures, however, are not quite all they seem. The report setting the level outside London says that a wage reflecting “actual minimum living costs” would be £9.20, (up from £9.08 in 2013). The calculation, however, requires a cap of 2% above average pay rises, the rationale for which is worth quoting. “If the income needed to sustain a minimum acceptable standard of living rises much faster than average earnings, there will be limits to how far it is acceptable for employers to increase wages for the lowest earners to meet their increased needs.”

It turns out, therefore, that the Living Wage is not a living wage - not outside London, at least - and has not been so for several years. In order to become so it would need to rise by another 17%. It has been kept down because it might not be acceptable for employers to increase the wages of the lowest paid disproportionately. To put that another way, people who do not have what the report calls “an income needed to sustain a minimum acceptable standard of living” should not receive one in case people who already do have such an income feel hard done by in not getting an equivalent rise.

The Living Wage for London is calculated quite separately to that for the rest of the country, and is not subject to a formal cap. In combining, however, basic living costs with existing average incomes, its calculation, too, contains a stabilising factor that ensures that the Living Wage does not rise too fast.

It is only because the national minimum wage is so grotesquely low that the Living Wage can be seen as generous. That “minimum acceptable standard of living” - the one that requires £9.20 per hour outside London, not the actual rate of £7.85 nor the minimum wage of £6.50 - is still rock bottom, and even so it depends upon some critical assumptions. Not least of these is that everyone works full time, which, in an age of zero hours contracts, is optimistic. It also assumes that people with children have access to social housing (at social rents), which many do not. Because real circumstances vary so greatly, the report says the figure is “a benchmark which nobody should have to be below, rather, than necessarily something that will meet every household’s needs.”

Explore the underlying data and other issues arise. The Minimum Income Standard upon which the Living Wage outside London is based relies upon prices at large chain stores and supermarkets, few - if any - of whom pay the Living Wage to all of their staff. Life on the Living Wage, therefore, is dependent upon retail, transport and processing activity, much of which may well be paid below that rate. And this, of course, is before the pay and conditions of workers in low wage producer countries is considered. People on the Living Wage are not expected to pay a premium to ensure that the goods that they buy are made by workers who are not exploited.

As a director of a company that pays the Living Wage, I find the detail sobering, to say the least. I foresee some difficult conversations ahead with my management colleagues. The idea that an employer should take credit for paying the minimum that people need to live on is itself questionable. Any minimum should be a starting point, rather than a target, but employers have been encouraged to treat the Living Wage as something to aim for, and to congratulate themselves when they achieve it. To discover that this “ethical” pay rate is actually much less than people need to live on calls into question the living wage approach.

That approach is encapsulated on the Living Wage Foundation website, which headlines the statement: “We believe that that work should be the surest way out of poverty”. The intention is wholly positive. Work creates wealth, and people should indeed retain enough of the value of their work to avoid poverty. In a modern economy, however, manufacturing and process work is increasingly mechanised, requiring fewer workers for the quantity of wealth produced. When more is produced by fewer people, wealth creation of this sort becomes a function of capital rather than of labour.

Society has not caught up with this development. It needs to find wholehearted, deliberate rather than grudging, ways of distributing that wealth to the people who need it. One solution is to acknowledge that a great deal of the most important work that people do is unpaid. This is the work that people do when they look after one another - work such as homemaking, catering, childcare, care of the sick and elderly - the sort of work that nurtures human relationships and knits the fundamental social fabric in which people flourish.

The idea that an entitlement to participate in society’s wealth can only arise through paid work has caused these caring activities to be monetised on a vast scale. Examples include industrial food processing (instead of home cooking), fast food, paid childcare and social care, all of which operate on low wages. Paying people to go to work so that they can pay other people to do their caring for them is a good way of generating GDP (which takes no account of unpaid work) but is highly inefficient in terms of human wellbeing. This is because the value of care increases with the time given to it, whereas monetised care has to be done as quickly and cheaply as possible.

While the economy provides a trade off between decent wages and the rate of employment, working people will continue to be the losers. Higher wages in the economy may lead to lower levels of paid employment, but if they encourage investment in manufacturing and process work, so that more can be produced by fewer, this is not, of itself, a bad thing. The challenge then is to distribute that wealth in a way that encourages the production of as much as possible of social and caring wealth, including that which is unpaid.

If, as increasingly seems possible, average wages continue to stagnate, the Living Wage with its 2% cap may struggle to catch up with its true level. In this case the Living Wage Foundation may need to rethink its strategy. Everybody requires the means to live, but paid work for all might not be the best way of achieving this. Is it time, perhaps, to think seriously about the Basic Income, and the autonomy it gives people over the use of their time to produce wealth in the most socially productive way?

An edited version of this article first appeared in The Independent

Friday, 31 October 2014

THE £117 PER HOUR CHILDCARE SUBSIDY

George Osborne was out and about, last week, talking up the government's plans to get more women into work, mostly by providing childcare incentives. He wants to get another 500,000 "stay-at-home" mothers into the workplace by the beginning of 2016, reportedly in order to match the female employment rate in Germany.

His timing was unfortunate, coinciding, as it did, with the publication of a report by the Institute for Fiscal Studies, which estimates that free childcare places for three year-olds in England are costing more than £65,000 a year for each additional mother who enters paid work.

That figure is so staggering that it is worth looking at the methodology from which it is derived. Free childcare places for three year-olds were rolled out nationally between 1999 and 2007. At the start of the period 37% already had a free place funded by their local authority. Under the national scheme that proportion increased to 88%, suggesting that half of all three year-olds benefited.

That suggestion, however, is not quite what it seems. For, in addition to the 37% of three year-olds in free, local authority-funded places, a further 40% were in childcare for which their parents were paying. Only 11% of three year-olds moved newly into childcare as a result of the national free places scheme. Most of the money went as a substantial cash benefit to parents who had previously funded their childcare on their own.

Of that 11%, roughly a quarter of the mothers entered the workforce - an additional 12,000 women in total. IFS estimate the annual cost of all the additional free places under the national scheme at £0.8 billion per year, which, divided by 12,000, provides that headline figure. Since the childcare is for 15 hours per week, 38 weeks a year, the hourly subsidy comes out at £117.

So much for the sums. At that rate, if Osborne really wants another half a million mothers in the workplace, he will need to find a spare £30 billion a year. He doesn't have that sort of money - or anything like it. If he did, it's unlikely he would choose to spend it on subsidising women in low paid work.

Maybe he should, however. Last week the World Economic Forum published their latest gender equality rankings, which saw Britain continue its steady fall from ninth in 2006 to 26th today. In terms of economic participation, women are greatly under-represented in the "legislators, senior officials and managers" category and continue to score poorly in terms of equal pay for equal work. But the biggest difference relates to earning capacity, with women on 62% of the average earnings of their male colleagues. Many more women than men are found among the ranks of the lowest paid.

Low pay in Britain may be disproportionately a women's issue, but to turn this into a debate about women in the workplace is to miss the real question. That is, why is the government so keen to get people into paid work in the first place? By pushing more and more people onto the labour market it is forcing down wages and discouraging investment in productive technology. The result is that productivity has been falling, which means that the economy is becoming less efficient. Work, in effect, is being wasted because it is so cheap.

It is not as if that work is not needed in other spheres. The phrase "stay-at-home mothers" disparages parents of both genders who work by looking after their own children. It also devalues the work of caring more generally, whether children, the elderly, the sick or infirm - much of which is unpaid. But that work is important, and if government would only value it properly, offering financial incentives to enable people to give it all the time that it deserves, wages would rise in the labour market and productive investment would resume.

The purpose of caring is to seek an improvement in the social, emotional and physical wellbeing of the person being cared for. A visit to bath an elderly person does not become more productive because it is done more quickly; indeed a short, hurried visit may cause stress that cancels out any functional benefit. Similarly, time spent by parents with their young children is never wasted, and its benefit is likely to increase greatly when the pressure of other time commitments and obligations does not intrude.

To make sense of this the government needs to understand that caring does not function like the money economy. Time spent on it is not a cost to society, but a vital benefit, and the more of it a society can do, the richer it becomes. This means more money wealth being channelled toward carers to allow them to care - rather than forcing them into low paid jobs so that other low paid people can care "efficiently" on their behalf.

This article first appeared on Huffington Post

Tuesday, 28 October 2014

RUSSELL BRAND IS ON TO SOMETHING: THE POLITICAL AND ECONOMIC SYSTEM IS ADDICTED AND NEEDS CONTACT WITH A “GREATER POWER”

Russell Brand thinks the world can change because he has. His well-aired views on the futility of voting connect with this theme. Change comes from inside, he argues. To cast a vote is to engage with an external, artificial construct that operates within its own set of rules. If you don't accept the rules, than voting really cannot get you where you want to be.

Recently, provoked by criticism from John Lyden, Brand adjusted that view, but only slightly. Although piqued into observing that “if there was something worth voting for, I'd vote for it”, he introduced a crucial caveat, noting how global trade agreements increasingly prevent change happening at a national level. Voting for a national government, he is suggesting, is pointless if all the important decisions are taken elsewhere.

There is something in that: global agreements have progressively raised the bar that must be leapt over if change is to happen. TTIP is set to take it several notches higher still. A people-centred economy is a fine idea, but anyone trying to create one is confronted with a body of E.U. and international law that is hooked on corporate interests. In the current paradigm, big business holds the keys to wealth creation, and governments should know their place and simply help them get on with it.

Brand knows all about being hooked. He is an advocate of The Twelve Steps of Alcoholics Anonymous, a path to sobriety that involves taking responsibility for the consequences of one's actions. Drinking is an individual act, even when it is out of control. An addict may feel trapped, but they know that escape from the trap is a personal journey. However much support or fellowship is available, it is essentially something that people must do for themselves.

When it comes to rampant consumerism, however, or an economy dependent upon easy credit and rising house prices, people may feel equally trapped, but they are less likely to acknowledge responsibility for a situation that they did not make, and is not of their choosing. The addiction in this case is not individual but institutional: both the political system and the economy that it depends upon are trapped into patterns of uncontrollable self-harm, perpetuating a structural model that reinforces behaviours of waste, greed, inequality, deprivation and exploitation.

The addictive traits are unmistakeable: if you feel bad, keep taking the poison. in Britain, the government feeds the housing crisis not by seeking to reduce land values but by pouring money into the system to allow prices to rise. Across the world, corporate taxes are slashed and cheap money fed to banks, which encourages the speculation, profiteering and bulging asset prices that caused the economic meltdown in the first place. The system is blind to its weaknesses, incapable of the first and necessary step on the hard road to recovery, which is acknowledging that it is out of control. From this we can deduce that it has yet to hit rock bottom – that in the short term things can only get much worse.

Brand is right, therefore, in his central analogy, and his exhortation not to vote must be seen in this light. The main parties are stuck in an economic paradigm that drives GDP growth at the expense of human wellbeing. It favours financial transactions over productive activity and accords no value to the things that people care about most – the things they do for themselves, their families and each other because they wish to and choose to. It says that only an economy that transfers money systematically from the poor to the rich can create enough wealth to solve the problems of poverty. Voting for a party within that paradigm is like telling an unreformed addict to drink up and stop worrying. Rather than empowering people, it explicitly denies them opportunities to take control and solve problems for themselves.

The analogy with addiction, however, also points to a way forward. Addictions are tackled with small, manageable and measurable steps, the first of which involves acknowledging the scale of the problem. The second step in the 12 step programme requires belief in the restorative capacity of a “power greater than ourselves”. Originally associated, in the A.A. movement, with the Christian God, this power is now interpreted more broadly and may be found to live within the support of the group.

In economic terms, this “greater power” is the innate capacity of human beings to support one another through their relationships, irrespective of any money that changes hands. The way to invoke this power is to substitute human wellbeing for money value in the national accounts. By measuring GDP differently, incorporating the value of unpaid, voluntary, domestic and caring work and discounting the value of activity that merely circulates wealth, the power of the human will is harnessed to the task of redirecting the political and economic system away from its destructive path.

This article first appeared in The Independent

Thursday, 16 October 2014

CAR WARS: THE ENVIRONMENTAL COST OF TTIP

E.U. officials are keen to let us know that most of the benefits of the Transatlantic Trade and Investment Partnership - the vast and controversial trade deal currently in negotiation - will come from reducing "non-tariff trade barriers", known as NTBs. At present, many European and American factories produce different versions of their products for the two different markets, because each has its own set of manufacturing standards. Harmonising these standards will make them more efficient, the argument goes, allowing them to produce more with less.

It is not difficult to see how this works. It must take less time, effort and material to produce 100 identical widgets, that 50 each of two different sorts. If that's where the matter stopped there would be little objection.

Who pockets the saving would still be a question. Workers would be more productive, so should, theoretically, be paid more. But fewer of them would be required, which depresses wages in the labour market. In a recent post, I explain how unlikely it is that productive workers will be the gainers from the TTIP proposals.

With free trade agreements, however, making factories more efficient is not really the point. The point is to make the market more efficient, enabling it to seek out the cheapest, most profitable places for producing things. So Europe will import more of the things that are cheaper to produce in America, and vice versa.

With that in mind, it is instructive to look at the sorts of goods that the E.U. expects to be importing more of, and those of which it expects its exports to rise. Table 31 of itseconomic assessment gives those increased exports as follows: cars: €87 billion; chemicals: €30 billion; processed foods: €13 billion; metals and metal products: €13 billion. Between them these amount to 77% of the total projected increase. Motor vehicles alone account for 47%.

If these are the things that Europe can produce more efficiently than America, what about the other way? In what goods can the U.S. do better?

It turns out that top of the list is... cars, at €66 billion. Then come chemicals at €27 billion; metals and metal products at €19 billion; and a category called "other transport equipment" at €10 billion. These four also account for 77% of the total. Motor vehicles alone account for 41%.

So it turns out that Europe and America both have the edge over each other at producing cars and car parts, and that nearly half of the projected benefits of TTIP in the best case scenario arise from them selling more of these to each other. An extra €153 billion's worth, to be precise, based on figures projected for 2027, taking the value of motor vehicles criss-crossing the Atlantic every year to a colossal €231 billion in total.

To put that number in context, the E.U.'s Eurostat service reports exports to the U.S. of €37 billion in the comparable "road vehicles" category in 2013. Imports were €7 billion, giving a combined total of €44 billion. Inflation at 1.8% would take that figure to €56 billion by 2027; nonetheless, the scale of the ambition remains staggering. From €56 billion to €231 billion in 14 years.

Eurostat is nothing if not thorough. As well as reporting the value of trade in Euros, it also provides its total weight, in multiples of 100 kilogrammes. Those €37 billion of exports in 2013 weighed in at 2.5 million tonnes, or €15 per kilogramme. The €7 billion of imports weighed in at 700,000 tonnes, or €10 per kilogramme. This makes sense: American cars are bigger, but not necessarily more valuable for that reason.

Extrapolating from these figures, the €87 billion of additional car exports the E.U. is hoping for as a result of TTIP will weigh nearly 6 million tonnes; the €66 billion of additional car imports will weigh nearer 7 million tonnes. In total that's an extra 13 million tonnes of vehicles making the 5,000 kilometre journey in one direction or the other across the Atlantic, or 65 billion tonne/kilometres of sea transport.

As Glyn Moody pointed out in his TTIP Update XXXIX, "TTIP's net effect will be to cause vast quantities of fuel to have been burnt carrying out this [transatlantic] vehicle swap". But how much fuel? More importantly, how much CO2 will be released into the atmosphere as a result of all this combustion?

Once again, the numbers, approximately, are to hand. The European Environment Agency has data up to 2011 for CO2 emissions per tonne/kilometre for various means of transport. For maritime shipping the figure has hardly changed since 1995, at about 14 grammes. 65 billion tonne/kilometres at 14 grammes each gives a total of 910,000 tonnes of additional CO2. And that's not accounting for the road and rail transport to get the vehicles to the ports.

Now here's the interesting bit. The E.U.'s TTIP assessment says that increases in CO2 emissions in its best case will be a "negligible" 11,000 tonnes. If the two-way trade in cars is going to add another 900,000 tonnes to that figure, it follows that other provisions in the proposed arrangements must bring about reductions in CO2 emissions on a similar scale.

What these are is not revealed, but some possibilities suggest themselves. If European and American car standards are to be harmonised, perhaps fuel efficiency will increase? Perhaps the greater availability of smaller, more frugal European models will squeeze traditional American gas-guzzlers out of the market? Well - maybe: but are we really saying that the only way to communicate a self-evident piece of knowledge (that smaller cars use less fuel) is to ship millions of them over in order to prove it? And that the price of shipping those cars is that millions of (presumably less efficient) cars are shipped in the other direction?

Let's hope not. Let's hope that this transfer of knowledge can be achieved without the accompanying 13 million tonnes of metal. For that to happen, however, the case for TTIP must stop focusing on the volume of trade and seek to make it smarter in environmental terms. "No worse", is not a great outcome, but a net saving of a million tonnes of CO2 would be worth celebrating.

This article first appeared on Huffington Post

Wednesday, 8 October 2014

HUMAN RIGHTS CAN BE HARD TO GRASP, BUT THE CLUE IS IN THE NAME

If everybody had agreed with him, the great Conservative William Wilberforce would not have had to dedicate so much of his life to the abolition of slavery in British realms. As it was, it took decades to convince parliament to outlaw the trade in human beings, and decades more before the Slavery Abolition Act itself could be passed.

Human rights are like that. People have to be reminded of them, and then prompted a bit more. Neither the Universal Declaration nor the European Convention would be necessary if everybody treated everybody else as they would wish to be treated themselves, but necessary they are.

The purpose of human rights legislation, therefore, is not to reassure us of what we already know, or allow us to bask in the comfort of our best intentions. It is there to challenge us in our comfort zone. When David Cameron felt “physically ill” at the idea of giving prisoners the vote his stomach was trying to tell him something more sophisticated than he realised. Doing the right thing can be uncomfortable at the best of times.

It is worth bearing this in mind when considering Conservative plans, trailed during the party conference and announced on Friday, to scrap the Human Rights Act. Commentators noted that the trail did not specifically mention pulling out of the European Court, but Friday's announcement amounts to not much less. Under Conservative proposals, “The European Court of Human Rights is no longer able to order a change in UK law and becomes an advisory body only.”

The essence of human rights is that they take people as they find them. The clue is in the name: human rights. Whatever you do, whatever, your circumstances, whatever your condition, you remain human, with inalienable rights. Those rights cannot be traded, tit for tat, you harmed me so I can harm you. That's a natural human response when feeling angry or aggrieved, and the rule of law is there to steer us onto a nobler path.

When the ECHR determined that prisoners should be allowed to vote, it was drawing attention to their part as stakeholders in a functioning democracy. In taking upon itself the right to lock them up, the state is as accountable to them as to any other citizen. They must believe, for example, that if new evidence is forthcoming they will have a right of appeal. They must know that they will be humanely treated. They must know that their families back home are being fairly treated. A prisoner has no less a stake in the education of his son or the healthcare of his mother than any other father or son. Allowing him to vote is a powerful way of making that clear.

A more appropriate response to the judgement, therefore, would not have been to trash it, as so many so vigorously did, but to take the time to work out why, against all instinct and intuition, the court's long-considered verdict might actually be true. We have these drawn-out and expensive processes precisely to prompt us in a direction that we hadn't thought of, not to confirm us in our preconceived views.

Among examples that have been highlighted in the Tory proposals is that of travellers claiming the right to family life when in breach of planning laws. This may be annoying to some, but travellers have a way of life to which the planning regime makes all too few concessions, and the purpose of human rights law is not to make them conform, but to point that out.

If it weren't uncomfortable, frustrating and altogether thoroughly inconvenient to a local authority with a lot of angry voters on its back, human rights law would not be necessary. It exists above all to disrupt the path of least resistance, which routinely subjects the interests of a minority to those of an insistent and vociferous majority.

Under the proposals, travellers' rights in such a case are likely to fall foul of provisions limiting the use of human rights laws to the most serious cases. “The use of the new law will be limited to cases that involve criminal law and the liberty of an individual, the right to property and similar serious matters,” the document says.

The right to live somewhere is a serious matter, if you don't have it. But by treating it as a detail of planning law, the Tory proposals will airbrush it out of the human rights frame. This, ultimately, is why they are so worrying. Human rights in Britain are not inalienable, after all, but survive only with the grace of a parliamentary majority that has the sovereign power to take them away.

Majorities, however, can look after themselves and their own, so human rights are not primarily a majority issue. It is minorities that need protection, many of whom, whether criminals, immigrants or jihadist sympathisers, are unattractive from the majority point of view. If the majority is able to decide what rights to accord them, it is scarcely surprising that they find themselves vulnerable to abuses of power.

Locating the ultimate arbiter of human protections beyond the control of the majority was the right thing to do, for this reason. The European Court may be irritating on occasion, or even invariably so, but that is how we know it is doing its job of disrupting the expedient majority view.

Disruption, in business, is the acknowledged route to progress. Old models such as video rental stores give way to downloads and online services such as Netflix. At first it's strange and uncomfortable, and then, before long, customers are taking it for granted. Human rights are much the same; they take getting used to. Britain, which abolished the Atlantic slave trade and whose lawyers drafted the European Convention, ought to understand this better than most. Sadly, some in Britain no longer seem to do so.

This article first appeared on Huffington Post

Thursday, 2 October 2014

TTIP - FOUR LETTERS THAT SPELL RISING POVERTY

Bilateral trade agreements have been around for a long time, but thanks to TTIP - the big daddy of them all - and its controversial ISDS provisions, both the general public and the world of politics are finally sitting up and taking notice. For those who haven't yet done so, TTIP is the Trans-Atlantic Trade and Investment Partnership between the U.S and the E.U., currently in the final stages of negotiation behind doors that remain firmly closed.

ISDS stands for Investor State Dispute Settlement and is controversial because it subjects state sovereignty to commercial interests. It means that an overseas investor may claim compensation from a host country which changes the rules in a way that prejudices their interests. In Britain, concerns have been raised that the ISDS provisions in TTIP could prevent a future government from returning to the public sector any parts of the NHS that have been outsourced to U.S. healthcare companies. Environmental regulation is another sensitive area. If an investor builds a plant to produce a chemical that is subsequently banned, should the host country pick up the bill?

ISDS provisions in bilateral trade agreements are nothing new. The North American Free Trade Agreement, which contains a chapter on ISDS, is over twenty years old, and the principles of investor protection are much older than that. What is new, however, is the strength and profile of public opposition. In the aftermath of the banking crisis, corporate investors are viewed with suspicion and critics have latched on to the potential consequences of ISDS in the event that the interests of investors and those of the host country turn out not to coincide.

Public opposition has brought unaccustomed scrutiny to bear on negotiators and bureaucrats, for whom the benefits of free trade have for generations been unquestionable. The E.U.'s economic assessment of TTIP continues in that vein, asserting that, if a "high ambition" comprehensive agreement can be reached, GDP will increase by 0.48%. This is equivalent, they say, to an increase in disposable income of €545 for a family of four. The catalyst for this will be an increase of 28% in exports from the E.U. to the U.S. and 37% in the other direction.

Tariffs between the E.U. and the U.S. are already low, so the big gains are supposed to come from removing non-tariff barriers, such as different safety standards for cars. Indeed, cars form a big part of the E.U.'s case for TTIP. They account for 47% of the increase in exports and 41% of the increase in imports in the best case scenario, with well over three times as many vehicles braving the Atlantic storms in one direction or the other than at present.

How would that make anybody richer? After all, both European and American car purchasers are already spoiled for choice. The logic of free trade is that it increases the opportunities for specialisation and economies of scale. Things get made in whatever way - or whatever place - is most cost-effective. Cost-effective should mean better value, and buying things at better value makes people richer, since they have more to spend on other things.

The question is - better value for whom? Cheap labour may be good for investors and shareholders, but at the societal level at which governments operate, it creates a whole new set of problems. Much the biggest task of government is redistributing wealth, via pensions, benefits and the free provision of education and health services. Cost-effectiveness in this context would lie in ensuring that productive wealth is effectively distributed without such costly government intervention. The free market economy is particularly bad at this, which is why companies pay taxes which are then redistributed to their employees in the form of benefits to make up for wages that are too low to sustain life.

If TTIP does, indeed, increase wealth as the E.U. is suggesting, it is a dead certainty that this gain will not be evenly distributed. The primary beneficiaries of long-distance trade are the middlemen who seek to buy cheaply and sell at the highest price that they can. Shipping lines, freight operators, advertisers, traders and other transactional intermediaries will do disproportionately well, as will motor manufacturers, who should benefit from a streamlining of production.

Productive workers, however, can expect to find their wages increasingly under pressure. If the extra cost of transporting cars back and forth across the Atlantic is to be absorbed, and the vehicles are to offer better value to the consumer, it follows that the productive work contained in them will have to be acquired more cheaply. That could mean greater automation, or lower wages, or both. Either way, a smaller slice of the value of cars will go to the people who actually make them.

Neither the E.U. nor the U.S. is poor, on average, but those averages conceal huge differences. The U.S. census found a poverty rate of 14.5% for 2013; using a different methodology, the E.U. found that 24.3% of its population were at risk of poverty or social exclusion in 2012. When real wages are falling, productive work is scarce and the systems for distributing wealth are woefully inadequate to the challenge, workers in both regions are ripe for exploitation.

Trade which outsources production to low wage countries has the effect of importing poverty from the poor country to the rich one, since the loss of productive work in the rich country causes wages to fall. The danger of TTIP is that Europe and America will start exporting their significant levels of poverty to each other at a much faster rate than at present - a potentially disastrous chase to the bottom in which poverty increases inexorably as real wages continue to fall. Meanwhile, the capacity of governments to address the problem will be further eroded by the investor protections of ISDS and the tax breaks inevitably demanded by investor capital that can go wherever the return is greatest.

ISDS is a serious issue, to be sure, but a far bigger issue with TTIP is the inadequacy of the outcomes that the negotiators are targeting. For so long as these relate to narrow measures of largely transactional wealth which is poorly distributed, no good will come of it. There is still time (just) to insist that those outcomes are refocused on the economic health of society as a whole.

This article first appeared on Huffington Post

Thursday, 25 September 2014

WHY "INVESTMENT IN JOBS" IS A ROUTE TO LOW WAGES


Mr Miliband wants to raise the minimum wage to £8 by 2020. This could be worth £3,000 a year, he tells the Labour Party Conference, deftly multiplying the £1.50 increase by 40 hours and 52 weeks. Factor in inflation, however, and the result is less impressive: if RPI (which includes housing costs) continues at its 2014 average of 2.55%, this year's £6.50 will need to be £7.56 in 2020 just to keep up. Given how far average real wages have fallen in the past five years, even a real increase of nine pence a year over a five-year period might seem welcome. But it is hardly the stuff to bring conference to its feet.

The reasons for such a modest proposal are not difficult to trace. The Labour Party has a visceral fear of appearing "anti-business", and the knee-jerk response of business leaders to this policy when it was trailed last weekend suggests that their caution is, at the very least, understandable. Dark mutterings about the impact on jobs find a ready echo in many quarters: in a society in which paid employment remains the way in which most people access a share in society's wealth, the idea that "investment in jobs" is the key to growing the economy is not difficult to grasp.

Not difficult, but wrong, nonetheless; indeed "investment in jobs" is close to being an oxymoron. An economy that is advancing should not generate more paid work, but less. Producers invest in plant and equipment in order to do a given amount of productive work with fewer people. By increasing output per worker they become more productive, and it is only by increasing productivity in this way that the economy can truly grow. This is why, in 1930, the economist J M Keynes predicted that, a century on, people would only have to work 15 hours a week to lead comfortable lives.

Keynes's deadline is rapidly approaching, but the signs are that he could not have been more wrong. Productivity has risen enormously since 1930, it is true, but with no effective mechanism beyond paid work to distribute that wealth, the effect has stalled. An economy that is creating jobs is either growing so rapidly that technology cannot keep up, or it is going backwards, replacing technology with people because they are cheaper. The latter condition is now well established in Britain, where, although the technological possibilities are almost unlimited, productivity has fallen back, real wages are also falling and working hours are increasing. Many people work excessive hours, while others take multiple jobs. Most households now have two wage-earners (or would like to) which would be a big surprise to people of Keynes's time.

Government bragging about recent record levels of employment, therefore, completely misses the point. What matters is not the number of workers, but the amount of real wealth that each of them is producing, and since much employment is largely transactional in nature (i.e. it circulates existing wealth around the system, rather than producing real, new wealth) many people in work are probably producing less than they would do if left to their own devices. After all, much of what people do in their personal lives (housework, exercise, education, caring for children, the sick and elderly) is economically productive, even if the people who measure GDP do not recognise it as such.

Mr Miliband is right, therefore, to concentrate on raising wages. Low wage employment destroys, rather than creates, value, by devaluing the work that is being paid for at such lowly rates. High wages increase productivity by encouraging investment in productive technology. Such investment increases the total wealth in the economy, which means that there is more to go round. For this to happen however, wages need to rise a great deal faster than Labour is planning, and a parallel policy is needed to ensure that the wealth does, indeed, "go round" without recourse to millions of low paid jobs that send the process into reverse.

The terminology of redistribution may long have been banished from the party lexicon, but the challenge for Labour is to resurrect the "distribution question" in terms that reflect the success of a modern, productive economy rather than merely "soaking the rich". Political economics is the art of manipulating the levers of power in ways that produce social benefit, and if the manipulation is deliberately timid in order not to risk frightening the horses it is bound to fail.

The distribution of real wealth is the single greatest challenge to social policy in the 21st century, and a few frightened horses may be exactly what are needed to challenge the prevailing assumptions. More paid work is not the answer: about a third of Britain's GDP is already spent by government in redistributive ways (pensions, benefits, healthcare and education are the big ticket items) because the pay people receive for their work is not sufficient for them to purchase the goods and services that they need, and still it is nowhere near enough to meet the basics of a civilised society such as good housing and care services.

Mr Miliband's speech was strong on recognising the problems that society faces: his enthusiasm for meeting "real people" on his walkabouts can leave him in little doubt that the crisis many face is a real one. But a nine pence an hour real increase in low wages over the five year term of a Labour government is no substitute for the far more radical solutions that will be necessary to achieve the social justice for which he clearly yearns.

This article first appeared on Huffington Post

Wednesday, 3 September 2014

COMPASSIONATE POLITICS - WAS THIS A EUREKA MOMENT?

Even the Daily Mail was shocked. Perhaps that "even" is unwarranted. The Mail speaks for instinctive human responses, whether they are compassionate or cruel. In this case the parents of cancer patient Ashya King, who had withdrawn him from treatment in a hospital in Southampton, were imprisoned in Spain at the behest of British prosecutors, leaving the five-year old to fend for himself in a Malaga hospital. A petition to have them released rapidly garnered nearly a quarter of a million signatures, a campaign which deputy prime minister Nick Clegg was quick to support. The prime minister himself was reported to have weighed in, and police and the Crown Prosecution Service soon back-pedalled. By Tuesday night, the parents had been released and were travelling from Madrid to be reunited with their son.

Despite the bland formulation of the CPS spokesman, that "there is insufficient evidence for a realistic prospect of conviction for any criminal offence", it is hard to avoid the conclusion that human feeling has triumphed over insentient officialdom in this case. Irrespective of the rights and wrongs of the legal arguments, nobody, from the prime minister down, thought it was a good idea for a sick five-year old to be left in a foreign hospital without access to his parents.

Nobody thought so, and yet a bunch of officials in the Home Office appear to consider that it is a good idea for a 44 year old Wadih Chourey, who suffers from Down's Syndrome and is reported to be dependent upon the care of his brothers, to be deported to Lebanon, despite his family having lived peaceably in Britain for the past 17 years. It will be interesting to see whether local MP Vince Cable, who has intervened in the case, proves as influential on this occasion as did his senior government colleagues in the case of little Ashya.

Similarly, an individual identified only by the poetic moniker "Entry Clearance Officer 5" was the decision-maker who refused admission to the UK to the Jamaican sister of Oliver Cameron, the purpose of whose proposed visit was to donate a kidney to her brother after his own had failed. The report in The Independent noted that consideration had been given to the “compassionate aspects” of her case, which, if nothing else, provides a helpful yardstick to what is meant by "compassion" in official circles. This case also aroused significant popular protest, and the refusal was eventually overturned.

In all three of these cases, local residents have campaigned for a compassionate response, reminding us that whatever generalised negativity people may feel towards immigrants, asylum-seekers or people who appear to act against the interests of their children, the specific reaction of people who know the human beings in a case is almost invariably supportive. Most people, faced with a real situation involving real people, know what to do for the best. They do not need to be told.

All the more surprising, therefore, that government officials, who are supposed to know the real circumstances in every case, repeatedly make inhumane decisions. It is as if officialdom has become so obsessed with objectivity that it has determined that all considerations of human feeling are to be rigorously excluded from decision-making. In so reasoning it is forgetting that the human circumstances of each case are a central part of objective reality. Human beings are, objectively, emotional, sentient and vulnerable to distress, and to arbitrate upon their destinies without placing these characteristics at the centre of the decision-making process is inhumane by definition.

If a family has been settled in Britain for a number of years, if the children have grown up here and go the school here and have no real concept of a home elsewhere, the question of how they got here, is objectively, completely irrelevant. It might have been relevant once, but it is not any more. The objective circumstances are those that prevail at present; objectively, it would be inhumane to force such a family to break all their connections and return to another country, which they no longer call home.

That conclusion may be awkward for politicians beating the immigration drum, but they had better get used to it. Social media has made every local story a national concern, and unlike generalised prejudice such stories have a lasting impact. It is reasonable to expect that public policy be guided by the needs that arise from real human circumstances, and even politicians seem surprised, as the events of the last few days seem to indicate, when this does not happen.

That the two most senior politicians in the land have been so quick to condemn an unfeeling officialdom in Ashya's case could be an eureka moment, when the light dawns. But if you're a Down's Syndrome sufferer fighting deportation from your home of 17 years, don't count on it.







Tuesday, 26 August 2014

OFSTED AND THE "FALSE DICHOTOMY"

From this September, 40% of two year olds will be eligible for free childcare - a total of 260,000 children, according to government calculations. Places are said to be in short supply, with The Observer reporting on Sunday that 63,000 two-year-olds are on waiting lists and that "it appears many private and voluntary nurseries, which provide the vast majority of places, are reluctant to embrace" the government's free place initiative.

Although the source of this information is unclear, the inferences drawn are that the amount the government is willing to pay may not be attractive to private providers, and that existing paying parents might object to an influx of children from the more deprived families eligible for the free childcare.

In this context the article refers back to a speech given by Ofsted chief Sir Michael Wilshaw on 3 April 2014, in which he pointed to a false dichotomy between play and learning for pre-school age children. "It is", he said, "a middle-class prejudice for which some of the most disadvantaged pay the price. The chattering classes will never have many problems in bringing up their children and finding the best ways to educate them from the earliest age."

Sir Michael is correct about the false dichotomy. As he says:
"Play in many families is inherently educational. When a child interacts with an adult it is an opportunity to learn. Children naturally absorb new skills, words and ideas. The parents, rich or poor, who teach their child every time they hold a one-way conversation with a baby, convey lifelong advantages.
"They teach when they count the stairs as they carry the child to bed. They teach when they read a toddler stories and sing nursery rhymes. They teach good behaviour by loving their children, showing their affection at every available moment, but also by setting clear boundaries and acting as good role models. They guide them so that they can play with other children."
He should not forget, however, that this process is only partly a "doing" by the parent; children learn experientially, whether a parent intends it or not, from whatever is going on around them at any moment in their waking hours. Play in all families is inherently educational, because everything a child does or experiences teaches them something. It inevitably follows, however, that many young children learn things that, ideally, they would not learn at so tender an age. Sir Michael is incorrect, therefore, to say that some children are not "taught" in their families. The problem is simply that they may be "taught" the wrong things.

The dichotomy that really matters, therefore, is between "good" learning and "bad" learning where, in extreme cases, the latter is learning what it is like to be neglected or abused. The capacity of pre-school settings (as well as schools themselves) to supply any deficiency and correct, in so far as possible, any misdirection, is clearly an important issue. The problem arises with the list of things that Ofsted thinks that children need to be taught. Sir Michael quotes a list of "ten ticks", as follows: "to sit still and listen; to be aware of other children; to understand the word ‘no’ and the boundaries it sets for behaviour; to understand the word ‘stop’ and that such a phrase might be used to prevent danger; to be toilet-trained and be able to go to the loo; to recognise their own name; to speak to an adult to ask for help; to be able to take off their coat and put on shoes; to talk in sentences; to open and enjoy a book."

If preparedness for "academic" school learning is the only objective, the list makes sense. It supplies children who are problem-free, co-operative and receptive - i.e. manageable, even passive. In reality, however, young children are more receptive to the word "yes" than "no"; prefer opportunities to "go" rather than constantly be told to "stop"; are not, at the age of five, well disposed to sit still and listen for more than a short period of time, unless truly engrossed; are only dimly becoming aware of their own individuality, let alone that of those around them; may not willingly open and actively enjoy a book until well into their teens; etc., etc. If these criteria form the basis for all pre-school activities it is highly likely that "challenging" children will become more challenging still as each day wears on, while those who are more compliant will miss out on stimulating opportunities for exploration and self-development.

Children who "fail" in conventional educational terms often start off with difficulties that get worse. For that reason, a child's early learning experiences are, indeed, of great importance, but the trajectory suggests that the education they are receiving does not respond to their needs at a given age. For young children those needs are, above all, exploratory; they need to find out about the world for themselves, and a good pre-school setting will ensure that these explorations form the basis for a social and emotional development that is positive, engaging and constructive.

The most deprived children are not the ones who are not yet toilet-trained, or who can't sit still, undo their coat buttons, talk coherently, do what they are told or take an interest in a book. The truly deprived are those who have too infrequently heard a kind word; whose experience of relationships is acrimonious rather than compassionate; whose freedom to explore their environment has been constrained; who are more used to criticism than encouragement. Long before any "academic" shortcomings can directly affect their life chances, these children are at risk of crashing out of a system that is more interested in their progress with letters and numbers than their emotional and social well-being.

Forget, therefore, “playing” versus “teaching”, or "middle class" versus "economically deprived". Think, instead, of the importance to all children of “developing” as distinct from “achieving”. What a child can or can't do in practical or intellectual terms at the age of three, or five, or even eleven, is broadly irrelevant when compared with the quality of the individual adult that emerges post-18. There is plenty of time to play catch-up, provided the fundamentals are in place. What those fundamentals consist of, however, is far removed from that Ofsted tick-list.

Wednesday, 13 August 2014

THE LUDDITES HAVE THEIR DAY

Economists are puzzled by jobs and wages data that continue to show rising employment accompanied by falling real wages. The puzzlement arises because classical supply and demand theory dictates that when the need for workers grows (as rising employment suggests that it is) the price of employing workers grows with it. It makes no sense that wages would fall when the jobs market is so buoyant.

Classical theory is all very well, but when the facts don't fit it's time to move on. What's new in the British economy in the last 40 years or so is that most people in paid work don't produce anything new - i.e. anything that looks like real wealth of the sort that people really want and need. Most work is simply cycling existing wealth round and round the system, which is great for GDP but absolutely useless in terms of how wealthy Britain really is. Some of this work in the transactional economy is well paid (think currency trader or commercial lawyer) but a lot of it is not (think call centre worker or delivery driver).

If labour is cheap, it may make sense to employ more telephone sales agents, for example, flogging insurance or electricity or PPI claims-processing, because the employer can get a marginal gain by attracting more business. Since the business comes from another supplier, however, there is no net gain to the economy. Except GDP says that there is, because the wages paid to the sales agent count in the total of economic activity.

Similarly, someone with a bit of money to invest might think it worth while to start a courier company, to try to grab a bit of the burgeoning market for delivery of online purchases. Wages are so low that it doesn't matter if the vans are half empty. If the extra competition puts pressure on rival companies they respond by forcing down the wages of their own workforce. Ultimately no more work gets done, but because more vans get driven more miles, GDP registers a boost in activity.

The point is that the market is responding to the opportunities provided in a low wage economy by becoming less efficient. Productivity is on the slide because labour is now cheaper that investment in technology. Finally the Luddites are having their day, as work is being created that either doesn't need doing at all or could be done much more efficiently with appropriate technology and even - whisper it quietly - productive collaboration.

The government has created these circumstances with policies such as benefits cuts and sanctions, employment deregulation and service outsourcing to the cheapest provider, all of which force people into the jobs market at low rates of pay. In so doing they're forcing the economy to go backwards in terms of real production. If wages were much higher, investors would find more efficient, more productive ways of wealth-generation, so ultimately there would be more wealth to go round.

Getting the wealth to "go round" is the heart of the problem. Forcing people into paid work is the only way anyone can imagine of distributing wealth, even though "more work" is less efficient and produces less wealth in total that would be produced by a highly technologised economy. Until governments face up to the need for a more effective way of distributing wealth, this problem can only get worse. A citizen's wage may be part of the answer, but although it sounds radical even that would be only a start.

Wednesday, 11 June 2014

JOINED UP GOVERNMENT?

When is work productive and useful, and when is it just a drag on the productive and useful things that people want to do? The importance of this macro-economic question is best illustrated by specific cases, which is why the story of the former magistrates court in Totnes, in south Devon, has such resonance. 

The 1970s court building, which was closed in 2011, is next to KEVICC, the town's secondary school, which wants the additional space for its cramped sixth form. The drive leading up to the main sixth form building runs right right past it, and has a direct access.

Unfortunately for H.M. Courts Service, who own the building, that is pretty much the only access, at present. It was formerly approached across land owned by Devon and Cornwall Police, who presumably had an interest in allowing the people they had arrested to have access to their day in court. Now that the building is for sale, however, the rights of access appear not so straightforward.

 What does seem straightforward is the solution to the matter. KEVICC, a public body, wants and needs the space, and is even willing to pay a respectable sum for it. H.M. Courts Service, another public body, wants to get rid of it. Common sense and the interests of the public purse would suggest that the simplest and swiftest means of transferring ownership from one branch of the state to the other would also be the best one, particularly since the complications of access do not arise.

Not at all! A better solution, apparently, and the one adopted, is for the police, the courts service and Devon County Council, which also owns some neighbouring land, to employ lawyers to thrash out the details of an alternative access to the premises, which might lead to a higher price than the KEVICC offer. According to an article in the local Totnes Times, they have been at it for year and have still not resolved it. The issue, presumably, is that the owner of the access to a site considered landlocked can expect to garner 50% of its value. In the Balkanised state that is modern Britain, four different branches of government are now fighting over the value of a building that only one of them wants.

No prize for guessing the winners in all of this, although whether the lawyers or the estate agents will do better only time (and a freedom of information request) will tell. Meanwhile, however, the value of this deteriorating public asset is diminishing as the professional fees rack up. If KEVICC ends up paying more for the building, the police and the courts service may gain, along with the lawyers and agents, but there will be a net loss to the public purse, since the school will have fewer resources with which to educate its children. And if it cannot buy the building at all, the public purse will still bear a loss since the cost of expanding in other ways is sure to be greater than the price achieved for the courthouse on the open market.

By allowing the arrangements between different branches of the public estate to be commercialised in this way, the government has caught a serious infection from the private sector, which is the cost of doing business in an increasingly transactional economy. More and more people now make their living shifting money round the economy, taking a handsome slice of it along the way but not actually producing anything new that people want or need.

In the past 25 years the number of practising solicitors has increased by 154%, according to figures collected by the Law Society, while the number of people working in real estate has increased by 134%. The latter is an ONS industry category that includes a lot of people who are not estate agents as such, but it gives an indication. Over the same period the population increased by a mere 12%: whereas one solicitor per thousand people in England and Wales was sufficient in 1988, two and a quarter are now required, which suggests not that life has got better, but more complicated, and people are having to buy a lot more legal services than they did. Nor can this increase be accounted for by the fact that people are doing more business: GDP increased by 62% in the same period, so GDP per solicitor is now two thirds of what it was 25 years ago.

When it comes to the things that people want and need, the economy divides approximately into the actual production of those things, which is a clear gain for society, and the  administering, managing and regulating of that production, which is a cost upon society that has to be paid for out of productive capacity. The test is relatively simple: would you rather have more of it or less of it. In general a society would rather have more of the things that people want and need (including the ones that are “free” such as a good night's sleep or a walk in the countryside) and less of the administrative burden.

Of nineteen industry categories collated by ONS, six employ fewer people now than in 1988, and most of these are the “doing and making” activities that produce the things that people want and need. Mining, manufacturing, energy production, farming and fishing all get by with fewer people; the number engaged in construction has changed little over the period, and numbers are up in water supply, hotels and restaurants, education, the arts, communications and health. These doing and making activities as a whole engage about 850,000 more people than 25 years ago  – about a fifth of the four million new jobs that have been created over the period.

Much bigger gainers, meanwhile, have been administrative and support services, and professional, scientific and technical activities, which together have nearly doubled in size, putting on 2.3m new jobs over the period. This latter group is where the lawyers, accountants, advertisers, etc., are to be found. Other transactional activities that have increased their numbers are wholesale and retail (up 10%), and transport (up13%). Finance and insurance are down slightly, because the huge growth of the City over the period has been offset by the loss of many clerical posts and the closure of local bank branches.

Each ONS category contains a range of work activities, and it does not follow that all the work in the professional, administrative and financial categories is of a sort that society would ideally do less of, or that all the work in the other categories is providing real human value. But the categories do paint a picture. Just as those government departments are paying professionals to share out among them the value of a dilapidated building in Totnes, so society at large is spending more and more of its time and energy administering, managing and regulating itself, and less and less of it producing the things of real value that people want and need.

Friday, 25 April 2014

THE WRONG CONVERSATION

Image Credit - http://www.flickr.com/photos/dannyman/4672474943/
Licensed under the Creative Commons Attribution 2.0 Generic license.
The campaign to prevent UK asylum seeker Afusat Saliu being returned to Nigeria, where she fears her two daughters will be victims of female genital mutilation, looks unlikely to succeed, despite 100,000 people signing up in 4 days to the petition on change.org.

Particularly interesting are the reasons people have given for supporting this campaign: they are thoughtful, informed, compassionate, empathetic – all the things you would want people to be who have the power to make decisions that so profoundly affect people’s lives.

This case, like that of Yashika Bageerathi, the A level student deported to Mauritius before she had the chance to complete her studies, illustrates how far political decision-making has fallen out of touch with the human qualities that people value in their daily lives. It is easy to argue that the law is the law, except that the implications of that argument are that compassion, empathy and thoughtfulness ought not to be applied where the law is concerned. That sounds like the language used to justify all manner of barbaric acts: “I was only following orders”, i.e. not thinking for myself and acting in a spirit of shared humanity.

The issue here is not, as often portrayed, between rules and no rules; it is between smart rules and blunt rules. Smart rules say that people who have been in the UK for a few years, are integrated into their communities and are living useful lives should be encouraged to stay, whatever the circumstances. We need people like that, and we have no business to be increasing the sum of human misery in the world by destroying the new lives they have built. That they may suffer additional abuse if they return to their country of origin should strengthen their case, but people who have built new and useful lives should not be thrown out whatever the circumstances.

Blunt rules say that Yashika was 19 when she was deported, so the regulations that say that children should be allowed to stay to finish their exams do not apply to her. They say that the present circumstances of an applicant for asylum are not relevant, that it doesn’t matter how long ago or how recently they arrived, or where the rest of their family is, or where they have made their lives. They say, in effect, that the human reality of a case is not a legitimate area for consideration.

You have to wonder, What planet are these people on? As so often, they are having the wrong conversation, in this case about hard, arbitrary, artificial, generalised regulations rather than soft, specific, real, individual people. Politicians don’t get it that anti-immigration sentiment is not anti-immigrant; it is a generalised sentiment fuelled by the choice (when available) between unemployment and long hours on poverty wages, that many now face. In these circumstances, any government action intended to make people’s lives even more difficult than they already are will continue to attract outrage, whether it is the UK Border Agency destroying a family or the Department of Work and Pensions applying sanctions to its meagre benefits.

Monday, 14 April 2014

ARE THEY READING THE SMALL PRINT?

Do they know what they're doing?
Did Nigel Evans vote for the Legal Aid, Sentencing and Punishment of Offenders Act 2012? Presumably not, because as a deputy speaker of the House of Commons he had forsworn political partisanship in that chamber. Would he have voted for it had that not been the case? Did he know what was in it? If he did, would he have voted for it if he had known that two years later he would be on he wrong end of a £130,000 bill for legal costs incurred in his defence against a string of sexual assault charges,of all of which he was found not guilty?

The question arises because Mr Evans has been making the rounds of the media demanding, among other things, that the Crown Prosecution Service should pay his legal bills. On Five Live Breakfast at about ten to nine this morning (14th April) the incisive Nicky Campbell was quick to note that it was not only the wrongly accused who were potential victims of legislative injustices, whether inflicted for ideological or fiscal reasons. Benefits claimants, in particular, had a right to complain, as Mr Evans was doing, that nobody who had not experienced the consequences of the legislation that targeted them could appreciate the extent of the harms that it caused.

What is surprising, however, is that Mr Evans says he did not know, until his solicitor recently told him, that his costs were irrecoverable under the 2012 Act. Nicky Campbell missed a trick here in not asking him why he did not know, bearing in mind that he was a member of the legislature that passed the act. Is it acceptable that lawmakers should not know the contents and implications of the laws that they are passing?

Part of the answer is to be found in the act's long title, which, at risk of losing my readers, is worth quoting in full:
An Act to make provision about legal aid; to make further provision about funding legal services; to make provision about costs and other amounts awarded in civil and criminal proceedings; to make provision about referral fees in connection with the provision of legal services; to make provision about sentencing offenders, including provision about release on licence or otherwise; to make provision about the collection of fines and other sums; to make provision about bail and about remand otherwise than on bail; to make provision about the employment, payment and transfer of persons detained in prisons and other institutions; to make provision about penalty notices for disorderly behaviour and cautions; to make provision about the rehabilitation of offenders; to create new offences of threatening with a weapon in public or on school premises and of causing serious injury by dangerous driving; to create a new offence relating to squatting; to increase penalties for offences relating to scrap metal dealing and to create a new offence relating to payment for scrap metal; and to amend section 76 of the Criminal Justice and Immigration Act 2008.
This act contains a string of high profile and controversial provisions, including a reduction in legal aid (which is different from recovery of legal costs), the criminalisation of squatting in residential property and new, minimum sentences for knife crime. There is so much tied up in here that Mr Evans may, perhaps, be forgiven for missing the full import of the particular gem that has left him out of pocket:

After section 16 insert—“16A Legal costs (1) A defendant’s costs order may not require the payment out of central funds of an amount that includes an amount in respect of the accused’s legal costs, subject to the following provisions of this section. (2) Subsection (1) does not apply where condition A, B or C is met. (3) Condition A is that the accused is an individual and the order is made under—(a) section 16(1),(b) section 16(3), or(c) section 16(4)(a)(ii) or (iii) or (d)...."

There is always a frisson of schadenfreude when a MP falls victim to a law that their own party has enacted, and Mr Evan's case does not come close to that of Lady Scotland, who was fined £5,000 for a "technical breach" of a law that she had, as the relevant minister, been responsible for shepherding through parliament. Nonetheless, here is yet more evidence of a parliamentary system that is out of touch with reality and unable to keep tabs on a government that is far too quick to legislate on matters that it does not fully understand.

Mr Evans's more important point, that the process for prosecuting historic sex-related offences needs thorough reform, is well made. But this is a sensitive issue requiring careful thought and consultation. There are no quick wins and certainly no vote-grabbing sound-bites to be had, so don't expect Westminster to get onto it any time soon.