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