Tuesday, 8 December 2015


Here is the text of a letter I've sent to my local MP:

Open the Door to Transparency- -StopTTIP - 15542416215.jpg

Dear Dr Wollaston

I understand that the House of Commons will be debating TTIP on Thursday. I hope you are planning to be there!

I'm sure you are aware of the widespread strength of feeling against TTIP. I share the concerns of many that the secretive deal is primarily designed to serve large, corporate interests. The ISDS provisions are particularly objectionable in this respect. The UK has a tried and tested system of civil litigation, and does not need a rival system to which only large corporations have access.

I want in particular, however, to draw your attention to two aspects of this debate with which you may not be so familiar.

The first has to do with the nature of economic growth. It is generally assumed that all growth is the same - i.e. that so long as GDP rises it doesn't really matter what is causing it to rise, and that since more trade increases GDP it is by definition a good thing.

This, however, is not the case. Although much trade is useful, there is plenty that takes place for no social purpose other than to make a profit for the traders. This profit comes not from "value added" but from the losses or exploitation of others.

For example, the EU case for TTIP makes clear that nearly half the increase in trade that will occur is in cars, with three times as many vehicles being shipped across the Atlantic than at present. The environmental cost of this shipping goes without saying (I hope) but the real question is who will benefit from this increase in trade? If, as the EU claims, the cars are to be cheaper, despite the additional costs of all that shipping, then it follows that workers wages will be lower, probably because more work is outsourced to low wage parts of the world. Cheap American cars are of little use to us if we have lower earnings with which to pay for them. As with so much trade, the main beneficiaries will be the car companies and their shareholders - i.e. the already rich.

The second point has to do with the relative merits of small and big business, which the EU and TTIP treat quite differently. To give you an example - changes last year to the VAT system required all sellers of digital media to pay VAT in the country of sale, rather than the home rate (or no vat at at all if they are below the threshold). This has caused many small UK businesses to stop trading directly into Europe, because the costs of compliance are so high.

These rules were designed entirely with big businesses in mind, and we are now seeing small businesses being obliged to trade via big platforms such as Amazon, as a result of which they surrender a large chunk of their margin. For example, if I sell one of my books via Amazon I get about £4. If I sell direct I get about £8. I do most of my shopping in Totnes, so that is £4 more that could go directly into the Totnes economy rather than into a mega-corporation's profits.

TTIP will continue this trend, since it makes the assumption that GDP going into the pockets of already-wealthy international business and their shareholders is as valuable as GDP going into a local economy, employing local people at reasonable wages. I strongly urge you to look at all these aspects very carefully, and not just focus on the big, partisan debating headlines that surround this subject.

Many thanks, and all best wishes

Martin Whitlock

Photo credit: „Open the Door to Transparency- -StopTTIP - 15542416215“ von greensefa http://www.flickr.com/photos/21733269@N06/15542416215/. Lizenziert unter CC BY 2.0 über Wikimedia Commons.

Sunday, 6 December 2015


I recently recorded a short interview with the Network of Wellbeing on why GDP is such a poor measure of economic wellbeing. The occasion was "Buy Nothing Day", the point being that many of the most valuable things in our lives don't come from a shop and don't involve the payment of money. But because GDP only measures money transactions the many unpaid activities that bring value into our lives are excluded from the measure of national prosperity.

It's with slight trepidation, therefore, that I propose a "shopping opportunity" for Christmas, in the form of Human Politics : Human Value at a special Christmas price of £9.99. By buying direct, however, the supply chain, the carbon footprint and the transactional waste is kept to a minimum. And since the book was thought about, researched, written, typeset and printed in the UK, all in all it is a relatively "eco" choice as Christmas presents go!

If you've read it yourself you'll know (I hope!) that it's offers an accessible insight into how the system that we've come to accept as "normal" in the economy is in fact disastrous for human and environmental wellbeing. When it comes to land ownership, trade and big business there are much better ways of organising the economy for our individual and collective good, as the book shows.

But that's not all: the book offers answers to some intriguing questions (How rich really was Mr Darcy?); includes a brief history of architecture (and the money that funds it) from the Sumerians to the Shard; has a chapter that has been described by a reader as "the best short analysis of the geo-politics of the post-war era" that they have ever read; and concludes with a powerful critique of a system of education severely compromised  by inappropriate and overly-narrow testing. In summary: there really is something for everybody not entirely contented with the way in which the human race arranges its affairs at present.

Order the book now at the Mindhenge Books website, for £9.99, with free UK p&p. Alternatively, a Kindle version is available here.

All best wishes for a peaceful and restful holiday season, when the moment comes...

Tuesday, 1 December 2015


As shadow foreign secretary, Hilary Benn is at the sharp end of the debate fissuring the Labour Party about whether or not to join the bombing campaign in Syria. The case he makes epitomises the grown-up, post-Iraq desire in relation to military action that many MPs of both left and right now espouse, to do the right - i.e. moral - thing. And since there is a moral case both for and against, there is a certain elegance in the proposition that Jeremy Corbyn should open the Labour case on one side of the argument, while Benn closes it on the other.

When going to war, however, with the resolve of killing people for a moral purpose, the default position should be against, so morality insists that the case for is resoundingly made. Mr Benn set out that case on BBC 5 Live this morning (here, about 2 hours 28 minutes in) in the following terms.
  1. There is a civil war in Syria in which millions are displaced. Isil is thriving in the resulting vacuum; 
  2. There is a clear threat from Isil to our citizens, those of other countries and those living in the regions it occupies; 
  3. There has been a unanimous UN resolution urging member state to do something about this; 
  4. Attacks on the beach in Tunisia, in Ankara and Beirut, on the Russian plane in Egypt and most recently in Paris show the nature of this threat; 
  5. The Paris attack could as easily have happened in Britain; 
  6. Britain is already involved in a bombing campaign in Iraq; 
  7. The Kurds say that support from the air makes a difference; 
  8. France has asked Britain to join in; 
  9. Backing off in fear is not the right thing to do; 
  10. Innocents are already dying, and there is no option that does not involve this continuing; 
  11. Isil are responsible for beheadings and crucifixions, throwing gay men off buildings and the sexual enslavement of women. 
Items 1 to 6 are statements of fact. Nobody doubts that the people who bombed Paris will also bomb London if they get the chance. Like Al Qaida, who succeeded spectacularly by dragging the western powers into an unwinnable regional war, Isil is out to cause as much mayhem as it can. The question is, will further bombing in Syria really hinder it in that? Or might it actually help its cause?

In response to that latter point, Benn falls back on points 9 and 10. Bombing Syria may increase the threat level on Britain's streets, but people are dying whatever happens, and backing off in fear is not the right approach.

That is not an argument one way or the other. The fact that people are already dying could support the case for intervention if it was more than likely that the number of deaths would reduce over time. The evidence for this is flimsy at best, and the precedents are not encouraging. Backing off, on the other hand, is generally a good idea if you think you are going to experience more harm than good. Whether you call it fear or pragmatism is a question of language.

The position of the Kurds in all this is unclear. Commentators have pointed out that they are much more interested in securing their own area that in taking on Isil outside it. That the French government should encourage Britain to join the bombing in Syria is understandable but does not strengthen the case. People who have just experienced an appalling tragedy do not always offer the most clear-headed advice.

Which leaves us with point 11. Isil represents a direct, ideological challenge to the humanitarian principles that underpin the western democracies - principles that run through the institutions of global governance that the western democracies were instrumental in creating.

This is also a statement of fact. But as an argument for war it falls into the “something must be done” category that allowed Tony Blair to lead Britain into the war in Iraq. Blair still points to Saddam's many cruelties as the reason why he finds it “hard to apologise for removing” him. Isil's cruelties are far more explicit, deliberately calculated to shock and posted on the internet.

Illiberal social attitudes and cruel punishments, however, do not qualify as a casus belli. Homosexuality may be punishable by death in 10 countries, mostly in the middle east, which Britain is not considering bombing. Nor is it bombing countries (some in Europe) in which women are trafficked into sexual slavery. Beheading and crucifixion exist as forms of capital punishment in a handful of states; indeed, a teenager remains under sentence of crucifixion in Saudi Arabia for participating in a pro-democracy demonstration.

Meanwhile, Assad's barrel bombs are killing far more people indiscriminately than Isil's more focused spectacles will ever do. As for the disparate, western-backed Syrian groups, their objectives beyond getting rid of Assad are unclear but it seems unlikely that secular western issues such as rights of gender and sexual orientation, of even the establishment of democratic rights leading to elections they can lose, are high on the agenda.

Another place, another time-frame. In 25 years Britain moved from Section 28 to gay marriage. Only 200 years ago it still used the pillory - a punishment similar to stoning. History is an erratic process. Attitudes change as societies open up, and as economic, social and educational prosperity spread, but this happens differently in different places. It is legitimate to be appalled by barbaric practices from which ones own society has moved on, but it does not follow that one can bomb others into change.

Saturday, 1 August 2015


I could not have been more wrong in my assessment, prior to the conclusion of the marathon negotiations that averted, for the time being, at least, Greece's departure from the Euro, that her prime minister Mr Tsipras would not sign up to a deal that would heap further damage on his country's economy.

Like other observers, I had over-estimated the contingency planning of Greece's left-wing Syriza government, which turned out not to have a plan B - not one, at least, that it was willing to execute. It was obliged, therefore, to fall in with whatever accommodation the other Eurozone members were prepared to extend to them.

In thus finally succumbing to the ineluctable pressure of his Eurozone colleagues, Mr Tsipras tacitly acknowledged on behalf of his party the overwhelming power of money to frame political decision-making. The Eurozone is structured to prevent governments from unnerving the markets by borrowing more than they can easily afford.

Since attracting capital investment has become an internationally competitive business in its own right, forcing down corporation and capital taxes, it is becoming clear that the tools no longer exist in Europe that would enable traditional left-wing policies to be enacted.

The Labour leadership contest reflects, in microcosm, Syriza's dilemma. Britain is more dependent upon the world’s money than most countries. It spends far more on imports than it can pay for with its exports, so the willingness of investors to buy sterling-denominated assets is critical to keeping the UK currency afloat.

The three mainstream candidates accept that. Along with social-democratic movements across Europe they know that socially progressive spending - and the taxation that permits it - is only possible to the extent that the markets allow. Against them, Jeremy Corbyn is standing on a “Syriza” ticket, determined that the corporate interests that have captured the market can be put in their place.

If Mr Corbyn wins, it follows that he will then be confronted with a “Syriza” reality - that low wage, insecure employment is the price that Britons must pay for the continued indulgence of the international financial markets. The choice between exploitative work and no work at all presents the entire labour movement with an existential dilemma that, at present, it is ill-equipped to solve.

The solution may be out there, however. In a basement room at Central Hall, Westminster, on Monday, a hundred people gathered to discuss wellbeing. The theme of the event, organised by the government-funded What Works Centre for Wellbeing, was wellbeing and public health.

It may not sound revolutionary, and yet, whenever wellbeing enters the public discourse, the subtext is profoundly political. In offering an alternative to money as the ultimate repository of what humans value, the wellbeing movement is questioning the fundamental economic assumptions that inform government policy.

In the wellbeing narrative, value lies in whatever improves the experience of people's lives. Money is a useful tool, but not an end in itself, so, by measuring human progress in terms of the money transactions that fuel GDP growth, policy-makers exclude important personal, societal and environmental factors that profoundly affect the quality of people's lives.

Wellbeing policy has been pioneered in the Himalayan state of Bhutan, where an index of Gross National Happiness has been been a key driver of decision-making since the 1970s. According to Dr Tho Ha Vinh, Programme Director of Bhutan's Gross National Happiness Centre, the term “happiness” is not used in the western, hedonistic sense, but describes the conditions of autonomy, fulfilling work, effective relationships and good mental and physical health that allow people to participate freely and productively in the life and work of their communities.

Happiness, therefore, is not so much the brief oblivion of “happy hour” as the sustainable equilibrium of a secure, productive and fulfilling life. Economic activity is central to this, but in a wellbeing economy this includes not just money-making but everything people do that gives meaning and value to their lives. Herein lies a big opportunity for those in search of a new toolkit with which to re-establish democratic control over social and economic policy.

Under the prevailing neoliberal orthodoxy, financial capital knows no boundaries or national allegiance. Governments have all the responsibility for ensuring that their citizens can access the wealth that they need, but little of the power they need to capture that wealth and put it to social use. Expensive, safe assets and a flexible, inexpensive workforce are the conditions to which capital is most attracted, so there is a corresponding social cost to be paid in unaffordable housing, low wages and insecure employment.

Wellbeing offers a route out of this systemic crisis. For so long as political, social and economic progress are measured in money terms, the forces of financial capital will continue to wield the upper hand. One way to overcome them is to follow the lead of Bhutan and start measuring something else - something that is closer to the real aspirations that humans feel.

Sunday, 12 July 2015


What's not to understand?
As the marathon Sunday evening Eurozone summit stretches out into the early hours of Monday morning, it is a rash moment to write a post that may be proved wrong by breakfast. But, amid all the headlines about Greece caving in to a deal that is worse than the one that the referendum rejected, there is something so big being missed that it feels as if people are holding the telescope the wrong way round.

It's this: the Greek government has consistently made it abundantly clear that it will not accept a deal that makes things worse. The only basis upon which it might accept further austerity would be with meaningful debt forgiveness, which could bring a sense that all the suffering was somehow worthwhile.

Since debt forgiveness is very much not on the table, and since the other Eurozone members have been piling on additional measures - way beyond those passed in the Greek parliament last week - why does anyone imagine for a moment that Mr Tsipras will sign up to a new agreement? After all, when a deal looked close a fortnight ago, he backed off and called a referendum in order to avoid appending his signature. In terms of Greek public opinion he is now in a much better place as a result of that decision.

One possible answer lies in that Greek opinion, so opposed to the Eurozone's onerous terms, yet so attached to Euro membership. The only acceptable way for the government to achieve an exit from the Euro in these circumstances is to be forced out. If Mr Tsipras and his colleagues can return to Athens with a convincing story that they agreed to almost everything and were still rejected, they can still hope to command the post-Grexit political landscape.

If this is true, they've played it almost to perfection. Mr Varoufakis upset everybody with his cogent reasoning; Mr Tsipras was urbane and engaging; Mr Tsakalotos sits calmly in the Eurogroup while all around are seething, an inscrutable smile playing on his lips as if he is the only person in the room with a clear plan. When Varoufakis left Athens for a family retreat on the evening of the parliamentary vote on Friday, it looked very much as if he was drawing fire, to give both his prime minister and his successor a clearer run.

Everybody fears Grexit, but the media consensus that it must necessarily be worse than a complete surrender of autonomy to the European institutions is surely wrong. People are extraordinarily resourceful, and will find ways to make their economic relationships work in the face of institutional breakdown. Although the paper losses will be great, the real, productive wealth of the country - the land, the climate, the sea, the hotels, restaurants and beaches, the factories, shops and warehouses, the ports and railways - are not going away.

The image of a post-Grexit Greece somehow losing fifty years of economic progress makes no sense in this context. After a chaotic period it will recover; those great assets will start to perform, and more effectively if they are not carrying insupportable indebtedness. All the signs are that Messrs Tsipras, Varoufakis and Tsakalotos know this full well. They are just waiting for Mr Schauable and Mrs Merkel to smooth their way.

Thursday, 2 July 2015


Need people be lonely in the sunset of their lives?
Britain's Health Secretary Jeremy Hunt has called upon people to take more responsibility for their own health. He has also called for a new approach to the way that elderly people are cared for.

The economic arguments are persuasive. Hunt states that smoking-related illnesses costs the NHS an estimated £2.7 billion a year. Type 2 diabetes - closely associated with being overweight - affects one in 16 of the adult population and costs the NHS £8 billion a year. Meanwhile, one in five children are leaving primary school clinically obese.

In the case of the elderly, Hunt rightly notes that the task of caring is not getting any smaller. “By the end of this parliament,” he says, “we will have a million more over 70s, one third of them living alone.” He points to the “heroic army” of family carers and volunteers, before observing that caring for elderly family members will have to become as central to people's lives as looking after their children.

The irony of this latter point is that government policy is reducing the amount of time people spend looking after their children. Political parties outbid each other for the amount of free and subsidised childcare that they offer, to allow parents to work longer hours.

Governments measure their economic success by the amount of paid work that people do, because only paid work contributes to Gross National Product. Encouraging (or even forcing) people into paid work, then paying other people to look after their children, creates a double dose of GDP, to which can be added the petrol or bus fares that get people to where they need to be.

Mr Hunt's ideas run counter to this policy, but that doesn't mean that he isn't right. Care in the family is often the best thing for elderly people, provided it doesn't just add to the stress of the carers' lives. To avoid this, the work must be properly valued and accounted for, rather that being piled on top of everything else that people have to do.

In searching for policies to make this possible, the government need look no further that a simple statistical adjustment, to incorporate the valuable work of unpaid caring in the national measure of GDP. This change would redirect political and social energy towards creating increased opportunities for this important and productive activity.

And on the same principle, if GDP could be adjusted further to incorporate a measure of human health, then enabling people to take the time off that they need to reduce the stress in the lives, which is a major cause of both smoking and obesity, would also start to pay its way in economic terms.

If we want to live healthier, happier, less lonely lives, then it makes sense to measure the economic value of the things that contribute to that - not just the transactions in which money changes hands. If you agree, why not join the campaign.

Wednesday, 1 July 2015


Alternative hierarchies of wealth-creation
What does it mean when the economy of a country shrinks, as Greece's has done, by a quarter? It means that the money flowing through the economy is reduced in quantity, that the total of people's money incomes (both earned and unearned) is reduced and that the total money value of what they buy is reduced accordingly. This also means that the country is less productive in money terms.

That use of the word “money” as a qualifier in each phrase of the previous sentence is significant. “Money incomes”, “money value” and “money terms” are not the only ways of quantifying wealth, and the fact that assets or goods become more expensive does not make them inherently more worth having. Cheap money flooded into Greece in the decade before the crash, funding investments based on rising asset values. The size of the money economy, measured as GDP, soared as a consequence. But much of that wealth was not real.

The crash, when it came, illustrated this clearly. As asset values such as house prices rise, they eventually reach the point at which they can only be justified by the fact that they are rising. The logic of this - that nothing is too expensive that somebody will subsequently pay more for - inflates a bubble that eventually is bound to burst. When the banking crisis hit, all that unreal wealth rapidly disappeared.

Now here's the crunch: if the wealth was not real, why would it matter if it vanished? When the mousse subsides in the champagne flute, the real stuff is still there to enjoy, so if the effect of the contraction in GDP was simply to eliminate the bubbly froth from the Greek economy (as this helpful graph suggests), why couldn't things simply pick up again on a lower growth trajectory?

It's a fair question. When asset prices fall, it does not reduce their real or useful value (provided they were useful in the first place). Buildings still provide shelter and a place to work.

The same applies to food. The land, the climate and the people make Greece a major food producer. No bursting bubble can take away any of those three. So there is no reason in principle why, in a post-crisis Greece, people should starve.

The actuality is rather different. Homelessness and food poverty have risen dramatically in Greece, while buildings and land lie empty because the people who need them have no access. So the resources of wealth production have not gone away, but the thing that people most closely associate with wealth - which is money - is preventing them from making use of them.

The hierarchy of advantage in money-based economic activity places the supplier of money - the bank or investor - at the top of the pile, receiving rent or interest on money as a way of making more money. Next comes the business owner, who uses the money to acquire commercial assets which they hope will prosper. If they do, they accumulate money; if they fail they lose their business assets to the lender. At the bottom comes everybody else - people with no commercial assets who are dependent upon business owners for employment and wages.

Since, within this hierarchy, all wealth-creating opportunities begin with money, the loss of money from the system closes those options down. If the business owners get into trouble the employees are the first to pay: they either lose their jobs or are forced to accept lower wages. As that money flows back to investors and lenders, the resources of land, buildings and equipment lie about unused, because the only access to them is through money.

That is the tragedy of the Greece at present: abandoned factories, shuttered shops and people without productive opportunity, because they lack the money to put themselves to work. Worse still, the solution the international financial community has arrived at to address this problem is entirely logical within the framework of money-wealth. Since wealth-creation starts at the top, it is necessary to re-establish financial security at this level in order to get activity moving again.

Unfortunately for the people at the bottom, this means funnelling more money upwards. Taking it away from the worst-off in society may be bad, the theory goes, but the only way to get that money making more money is to get it back to where it came from and start lending it again. This is why the institutions negotiating with Greece have resisted proposals for tax on businesses, preferring instead to see lower wages and pensions. The growth of money-wealth can only originate at the top of the hierarchy.

This also explains why the Eurozone is hailing as successful its intervention in Spain, where unemployment is at 22.5% and youth unemployment, at 52%, is even higher than in Greece. For, despite these figures, Spain's GDP is growing at a respectable rate. If the theory of money-wealth applies, that will eventually circulate back down to the unemployed.

Meanwhile, however, the anti-austerity Podemos is hoovering up electoral support from those unemployed Spanish masses. With a general election due in December, things need to pick up quickly if the Eurozone establishment is not to risk a bloody nose. It is also quite possible that another financial downturn will hit before the circumstances of the unemployed have time to improve.

There is another way. It involves turning the hierarchy on its head, making productive work the driver of the economic system and putting money in its appropriate place. In this alternative hierarchy, productive work starts in the home, family and community, where people prepare meals, look after the young, sick and elderly, maintain (or even build) their homes, grow food, make clothes and other hand-crafted goods, educate themselves and each other and keep themselves healthy.

Little - if any - of this work is paid for. It has little to do with the money economy and does not register in the measurement of GDP. It remains, however, among the most useful and productive work that people do, and it is highly resilient to shocks and changed circumstances. The Greeks have not lost any of their capacity to do this work, and to do even more of it than usual as the circumstances require. It is only a lack of access to basic resources such as land and buildings that is preventing them.

In this alternative hierarchy, money facilitates the work that people do for themselves, rather than obstructing them by putting resources out of their reach. The money a hotel receives from its guests goes to the people who built and run it, rather than to financiers who have pushed up the value of the underlying land. In measuring value, productive work, both paid and unpaid, is included, but the transactional work of exploiting asset values is not.

Ultimately, that is all it takes - changing the political perception of what is merely cost, and what has real value in people's lives. Paying to gain access to the resources of real wealth-creation is a cost in human terms; the work that people choose to do because it brings undeniable benefit to their lives has value, even if no money changes hands.

These are the inviolable basics of an economy measured in human terms. Seeking profit from commercial activity, and taking rents from accumulated assets, have their places in the hierarchy, but they are lower down and can safely fail while the basics continue to operate. In Greece, the obligation to pay debts has been placed before the need for food and shelter because society has chosen to place money above real human value. For all of our sakes, it's time for that choice to change.

Thursday, 25 June 2015


The idea of a basic income - a fixed cash payment to all individuals, in lieu of state benefits and tax allowances, but sufficient to cater for their basic needs - is increasingly emerging from the shadowy world of obscure think tanks and idealists into the starker light of mainstream politics.

This light is much more exposing, as the UK Green Party discovered to its cost in the run up to the general election earlier this year. Although a citizens' income has been part of their policy platform for some time, it was set at such a low level that many current recipients of state benefits would have been worse off under their proposals.

The basic income model is only viable if the sum allocated is large enough for people to live on. "Large enough" is a relative concept, so the level of the basic income needs to be relative, too. One way to achieve that is to make it a fixed percentage of per capita national wealth. This means that the market can do its damnedest without the risk of anyone getting too badly hurt.

It is true that the “balance of power” between employers and employees would be altered, but in a beneficial way. The money value of worthwhile, enjoyable, rewarding and productive work would tend to fall, because people would recognise its human value and would compete to undertake it at a lower rate. Conversely, the money demanded for undesirable work would rise. There would be a powerful incentive to reduce such work by investing in robotics and other productive technology, both to increase efficiency and improve worker wellbeing and satisfaction.

To consolidate these benefits in terms of government policy, however, requires a rethinking of the way in which wealth production is defined and measured. At present, wealth is almost universally measured in money, so the human quality of work has no value unless it happens also to produce an increase in cash terms.

The most effective way to grow money wealth is to increase asset values. Inequality is the natural consequence, since between the owners of assets and the people who pay “rent” to make use of them the flow of wealth is one way, from the asset-poor to the asset wealthy. The economic activity that supports this flow is largely transactional, flowing money through the system and allowing asset-owning investors to take a cut as it passes through their hands.

Money supports a system in which wealth is infinitely storable and transferable but in limited supply. Economic activity in this system has more to do with a competition to accumulate stored wealth than the creation of new, real wealth that people can use. The payment of a basic income is not consistent with this picture. As fast as people could accumulate money-wealth, much of it would be recycled back to the people from whom they had acquired it. Asset values - and the money value of the economy - would increase more slowly.

The human value that is contained in worthwhile, enjoyable, rewarding and productive work has no such limiting factors, but builds upon itself. Happy, fulfilled people tend to support one another in their happiness. Wellbeing increases through a virtuous, self-reinforcing cycle; unlike money, it is not a zero-sum game. Nor is the potential for growth in wellbeing constrained by environmental or resource considerations. Only time is a limiting factor - the time available for people to provide for themselves and others the forms of wealth that they truly value.

From this perspective, the basic income is a facilitator of wellbeing, providing the liquidity that allows people to participate in real wealth-creation on their own terms. Real wealth differs in three ways from that which gross domestic product (GDP) measures.
  • First, real wealth excludes work of which the purpose is transactional; that is, merely to transfer wealth from one person to another;
  • Second, real wealth includes productive work that is unpaid. Work that, when willingly undertaken, has sustainable human wellbeing as its purpose;
  • Third, real wealth includes non-material aspects of wellbeing, including the time and opportunity for people to develop their personal lives, deepen their human relationships and foster their physical and emotional health.
The basic income, if properly applied, will encourage the production of real wealth in all three ways. In human and environmental terms its effects will be entirely positive. But advocates for a basic income will struggle to be make progress while government policy is focused on GDP growth as currently measured. This is because receipt of a basic income will disincline people to undertake repetitive, demanding, unrewarding work upon which GDP growth has come to depend.

From this perspective, the basic income looks like a policy designed for an economic framework or paradigm that is not yet established. The current paradigm favours money accumulation; the paradigm that is needed to replace it will favour the creation of the real wealth that allows people to flourish.

The first step to making that change is to change the way in which the growth of economic activity is measured. This means either abandoning GDP altogether as an economic metric, or revising radically the way it is calculated to include only the components of work that contribute to the totality of human wellbeing.

Plenty of academic and technical work has been carried out on this “Beyond GDP” agenda, with contributions from the United Nations, the European Union and the OECD. Several new indices have been constructed, among the most comprehensive of which is the Genuine Progress Indicator, developed by the Center for Sustainable Economy in the U.S. So far, however, no popular political campaign has come together on the issue.

Such a campaign is long overdue. It is central to a broad coalition of reformist objectives, including environmental sustainability, affordable housing, social enterprise, banking reform and fair, useful trade that favours producer-consumers over corporate intermediaries. The case for the basic income is closely linked to all these objectives.

To answer this need, Human Politics is launching a project to bring together organisations, groups and individuals in the formation of an international campaign to change the way that wealth is measured and valued. The starting point is to gather expressions of interest and support. If you would like to be part of this, head over to the Human Politics website and join in...

Friday, 8 May 2015


If you're one of the 63% who voted other than Conservative, you may not yet have turned to wondering whether any good news can be sifted from this morning's surprise election result. The shock takes a while to wear off, but when it does a few glimmers of brighter light can be perceived.

The first is that the government's parliamentary authority is hugely reduced. Their working majority in the coalition was 73, but now it is 12. By-elections may eat into that, but even if they don't Mr Cameron, like John Major in 1992, is at the mercy of rebels on his own side and will be obliged to seek alliances across the chamber. The majority in England, however, is overwhelming, so we can expect to hear a lot about “English votes for English laws”. This simple slogan hides some complex constitutional issues, and the conversation that ensues could, potentially, have positive outcomes for regional and local government, as well as reopening debate about the broken electoral system.

The second point is that the outlook for the economy is nowhere near as rosy as the so-called “recovery” is supposed to suggest. Recent economic growth has been fuelled largely by consumer borrowing and spending, not real production. Interest rates may be low, but wages remain stagnant and productivity is going backwards while house prices continue to rise. Without inflation the cost of borrowing is not eroded over time, so something has to give. A slowdown within the next parliament is near-certain, a recession is likely and a further systemic shock, like the banking crisis of 2007, is on the cards. History suggests that whatever government is left holding the baby when the economy tanks will pay a heavy price at the subsequent election.

In my post on Tuesday I drew attention to the ethical dilemma this poses for people campaigning for fundamental change. If things must get far worse before the conditions are created in which they can get better, one may still hesitate to wish upon the homeless, the workless, the incapacitated and the underpaid another five more years of austerity.

Today's election results, however, do not suggest that the public has lost confidence in the free market economic model that gave rise to austerity, or that they are looking for a new system to replace it. Indeed, if voters remain invested in that model, it makes sense that they would prefer the party that “owns” the model, rather than the one that merely appropriated it as part of the “Blatcherist” consensus. Democratic political change can be a slow process, and while new, sharing, collaborative economic and political models are well established in the hothouse, they have yet to take root and spread within the wider public domain.

Fertile soil, however, certainly exists in that domain for these exotic plants, and on the evidence of yesterday's vote the extent of it is rapidly increasing. More than five million people voted Green and UKIP, over 16% of the votes cast and equivalent to 106 seats on a proportional basis. With a seat apiece to show for it, this group represents an unprecedented body of the disenfranchised.

The Liberal Democrats have been under-represented for decades on this basis, although rarely on this scale. By positioning themselves as a compromise between Conservatives and Labour, however, their politics have been embraced in aggregate by the two big parties whose free market consensus they share. Neither the Greens nor UKIP have this comfort, since these unlikely bedfellows share an ideological position distinctive to that of almost any other political group.

What the Greens and UKIP share is opposition to the workings of the free market. The way they express this could not be more different, but the similarity is real. For UKIP, the E.U. and its free movement of peoples is the bogey; for the Greens, the environmental and social effect of untrammelled greed and self-interest. But they are both talking about the same thing: a system in which individual people are rendered powerless by economic and political interests beyond their control.

Green opposition to the free market is rooted in the common good, while for UKIP supporters it may be that the free market has simply failed them. The latter are the “dispossessed” of contemporary politics - a growing group, both young and old, of people for whom a highly educated, flexible, increasingly mobile and disposable workforce has no use. Anti-market policies such as the basic income - a core Green policy that is gradually emerging into the mainstream - are directly relevant to their needs, opening opportunities of which at present they can only dream. It may be challenging to bridge high-minded Green idealism with the needs of this marginalised group, but the logic of doing so is impeccable. And the electoral rewards are there for any who can achieve it.

It is better to eat one's disappointment hot, and all at once, than to be obliged to chew it cold and slowly. President Obama's first term offered the latter dish, Britain's small-l liberals may one day be grateful that a minority Miliband government did not serve up a further helping of the same. At least, now, we know where we stand, and perhaps we should be grateful for that. The fight-back starts here.  

Tuesday, 5 May 2015


Polling station 6 may 2010 Writing about politics from the perspective of radical change is a dead loss during an election. Everybody heads for the centre ground for fear of frightening the horses, and even the Greens have been criticised for not pushing strongly enough their defining environmental agenda. The key to a successful campaign, as the parties know, is to keep things simple. Many of the basic assumptions about jobs, growth and the nature of wealth upon which the election debate is founded may be just plain wrong, but at times like this the truth is merely a complicating factor.

How, then, should people respond for whom that complication really matters? Through the prism of the election, what is the route to fundamental economic and political change? In a system in which so many votes will end up unrepresented, is there any point in voting at all? And should that vote be principled, committed, tactical, loyal or vengeful?

Before tackling that question it is worth scanning the horizon to see where the election is taking us. There is one piece of good news: if nothing else, the outcome is set to be disruptive, and disruption can be a useful precursor to fundamental change. No one-party outcome is anticipated: the Conservatives may end up with the most seats, but with too few friends to help them do their business, while a Labour programme will be dependent upon the support of the Scottish Nationalists. Meanwhile, so many red lines have been drawn in the sand concerning what the parties say they will and won't do that it already begins to look like a desert battlefield before the real negotiations have got going.

Also on the horizon is mounting evidence that the UK's so-called economic recovery is running out of steam. GDP growth is down, wages and job security remain depressed and household borrowing is on the rise. The outlook for manufacturing is poor. Recent growth has been derived not from useful production but from credit-fuelled consumption and a government-sponsored housing boom. The chickens are coming home to roost and a further recession in the next two years is entirely plausible.

The most likely outcome of the election is a minority government, so a further election in a year or so is quite possible. A headline decline in the economy is just the sort of event that could trigger it, as parties manoeuvre to shift the blame. The governing party could expect to suffer, in which case a marginal lead on 7 May could become a Pyrrhic victory. The danger is particularly acute for Labour, whose record on economic competence already provokes scepticism in the electorate.

For those of us who are interested in fundamental, systemic change, the question of how much worse things have to get before it is accepted that the system is broken is a real one. As a thought experiment, however, it poses an ethical dilemma: is it OK to wish things to get worse (with all the suffering that will bring) in order to create the conditions for transformational change? Or is there a better way?

One thing seems certain: the conditions for change are more likely to be created within a political system of greater diversity. In this election the first-past-the-post system (FPTP) will favour the two big parties less that usual. The anticipated Labour wipe-out in Scotland is a direct result of FPTP, which consequently will not deliver the “strong government” which is supposed to be so much in its favour. At the same time, a larger than ever number of UKIP and Green voters will find themselves almost completely disenfranchised, as many Liberal Democrats have found in the past.

Irrespective of whether Mr Cameron limps on, or Mr Miliband ends up seizing the prime ministerial crown, constitutional change will be high on the agenda. Scotland is the driver, of course, but the package of autonomy required to keep Scotland in the union is also relevant to the English regions. Post-recession Britain has already fragmented, and policies that may work in London are increasingly of little use elsewhere.

The decentralisation of government in Britain advances the cause of radical change because it connects political decision-making much more closely with social outcome. Government ministers in the Department for Work and Pensions probably have no experience of the human consequences of the Bedroom Tax, whereas political leaders in Birmingham and on Tyneside probably do. Localism only works when the entire chain of political responsibility is local, so that a decision and its consequences can truly interact.

Political diversity within a decentralised system has the further advantage of creating the conditions for experimentation. Ideas that would never get traction at a national level may be tried out locally or regionally where conditions are more suitable. In principle, the smaller the political unit, the greater the possibility of addressing specific issues in ways most likely to be effective. When a wide range of solutions are being tried, an effective politics may evolve more rapidly, and its methods be more rapidly shared.

It considering how to vote on Thursday, therefore, advocates for fundamental political and economic change should bear in mind the value of disruption to the status quo, as well as the relative merits of the two parties that the status quo is designed to support. At present, Labour offers a better bet than the Conservatives mostly because the Conservative grasp of social and economic reality is so poor, but anybody expecting a radical approach from a Labour government should remember how quickly the euphoria evaporated in 1997.

If the system is to change, however, it is important that the election result registers as strongly as possible how thoroughly it is broken. So the share of the vote matters more than usual in illustrating how much of the electorate is essentially disenfranchised, and supporters of the smaller parties should stick to their guns and not drift back towards the big two by way of tactical voting.

Voting Conservative against conviction merely to keep out UKIP flatters the Conservatives and increases the chances of business as usual. UKIP is not the BNP: however unattractive and incoherent their policies, there is no moral imperative to exclude them from a political process in which their mere presence advances the dynamic of change. Similarly, people attracted to Green Party policies should not consider this a wasted vote and plump for Labour in its place. Labour does not challenge the fundamentals of the market system, but the Greens do. If things are really to change, “the system” needs to hear from everybody who agrees with them.

Friday, 1 May 2015


European finance ministers reacted angrily, it was reported, to what they perceived to be Greek intransigence during their meeting in the Latvian capital of Riga last week. They don't like the refusal of the anti-austerity Greek government to play their game, and they have yet to work out what to do about it.

The Greeks know that they can't repay their debts, and that some sort of debt-forgiveness within the Euro framework is a better outcome for all concerned that forcing Greece to abandon the Euro altogether. In the latter case the credibility of the single currency is undermined, default is certain and the lenders will have to sing for their money. In the former, order is maintained and only a proportion of debt is written off.

Logic, therefore, is on the side of the Greeks, which makes anger a natural response from their interlocutors, who have boxed themselves into a corner from which they can only lose. Their frustration is palpable: the big boys always set the rules, and hate it when others choose not to play. It remains to be seen whether they will swallow their pride and accept the Greek logic, or kick over the table and allow the pieces to fall to the floor.

It is not only logic that supports the Greek position. It is also supported by human need. When the provision of basics such as housing, food, education and healthcare is vulnerable to the workings of financial markets (of which ordinary people have neither understanding nor control) it makes sense to reduce that vulnerability. But when the chosen method makes things worse - when the outcome of prioritising sovereign debt repayments is to leave the sick, homeless and hungry unsupported - it is time to question the rigid assumptions that frame the institutional mindset.

This point is illustrated by a telling passage in the press statement that followed the Eurogroup meeting. Eurogroup President Jeroen Dijsselbloem spoke of “good news” from Cyprus, namely that “the Cypriot parliament legislated to establish an insolvency framework and that will also make an end to the suspension of the foreclosure framework”. Unpicking that dense terminology we learn that Cyprus has caved into pressure to make it easier for banks to repossess the houses of people in difficulty with their mortgages.

Mr Dijsselbloem's comments on the equally “good news” from Spain were even more revealing, and are worth quoting in full:
We were debriefed by the Commission and the ECB on the main findings of their third post-programme surveillance mission to Spain that took place in mid-March...
We welcomed the significant progress made by Spain. All indicators are showing progress in both budgetary and economic terms.

We also realize that debt and unemployment remain high. So, clearly there are still important challenges ahead.

We are confident that Spain will maintain its good track record and adhere to its commitments under the surveillance framework.
The “good news” here is that all indicators are showing progress in both budgetary and economic terms. All indicators. Presumably that includes the debt and unemployment that, Mr Dijsselbloem concedes, remain high. "High" is understating it: unemployment in Spain remains stubbornly close to 25% and actually rose in the latest quarter. Among young people the rate is nearer 50%. If these levels applied in Britain - or the Netherlands, where Mr Dijsselbloem is Finance Minister - there would be revolution in the air. But never mind: the Eurogroup is confident that Spain will “adhere to its commitments under the surveillance framework”.

Such language tells a clear story. At an institutional level there is unwavering belief in the framework, and everything else is subservient to that. What individual countries choose to do within the framework is up to them, but they must live with the consequences. In other words, the suffering of destitute Greeks, unemployed Spaniards and homeless Cypriots are the fault of choices made by their own governments, and nothing to do with the policy frameworks set down by the European institutions, including the European Central Bank (ECB).

There are (at least) two problems with this. The first is that the policy frameworks are far less rigid than the institutions are willing to admit. The German authorities had to be dragged kicking and screaming to agree the ECB's programme of quantitative easing, but with countries such as Spain now able to borrow at negative interest rates there is good evidence to suggest that the only harm caused by this policy is that it was so long delayed. Managed default in a case of unpayable debt is a perfectly respectable policy approach and it will be no consolation to the Greeks if the institutions decide too late that it would have been appropriate.

The second problem flows from the first. Because the frameworks are not set in stone, there is a much stronger connection between the institutional policy framework and the outcome for ordinary people than the institutions are willing to admit. In reality, the framework represents no more that a prioritisation on the part of the institutions - a decision to favour one set of economic actors over another for reasons that are largely political.

This does not mean that those reasons are necessarily self-serving. The collective mind of the institutions certainly believes that keeping the financial markets happy is essential to the wellbeing of ordinary people. It is the same mindset that assumes that the Transatlantic Trade and Investment Partnership (TTIP), which strongly favours the interests of large corporations, is also good for ordinary people, even if many of them suffer falls in wages or lose their jobs as a consequence.

It is a mindset, in short, that sees individual people as essentially passive, powerless pawns in complex, multi-dimensional, multi-participant chess game. The powerful, back row pieces are represented by institutions, banks, large corporations, rich investors - anywhere that large concentrations of wealth are to be found. Governments, and government institutions such as the E.U. and it agencies, are like the king, dodging around, keeping his head down and trying not to get cornered while the queen, bishops, knights and rooks freely exert their destructive power.

Real life is not chess, however. In a game with fixed rules the big pieces may be more powerful, but in life they are only as powerful as we let them be. In the post-war era up until about 1980 western economies grew rapidly and societies became progressively more equal because the institutions that governed them were not willing to concede everything to the market. The capacity of the already-wealthy to acquire more wealth was deliberately, institutionally, constrained.

One of the advantages of the European institutions is that they really are big enough to take on the markets. The problem is that they don't want to, and for reasons that are entirely political. And that includes the left: as Paul Krugman puts it in his Guardian piece, The Austerity Delusion, “...the whole European centre-left seems stuck in a kind of reflexive cringe, unable to stand up for its own ideas.”

Coming from a prominent figure in that centre-left, the language used by Mr Dijsselbloem to describe the good news emanating from Cyprus and Spain (in contrast to the bad news coming from Greece) illustrates that cringe in action. Good news - the markets are functioning efficiently. The consequence, in unemployment, poverty and homelessness, are “important challenges”, but never mind - just keep taking the pills.

Monday, 6 April 2015


Ed Miliband at the CBI Climate Change Summit 2008 3 One third of probation officers employed by privatised service provider Sodexo could face redundancy in the next 12 months, The Guardian reported last week. They are to be replaced – in part, at least – by electronic kiosks that allow offenders to “report in” electronically.

Ed Miliband must have been delighted. The news came on the day that the Labour leader launched his party's manifesto for business with a speech in which he said that tackling the UK's productivity gap is the key to the nation's economic recovery. Productivity, in broad terms, is the ratio of output to hours worked, which is often increased by investment in technology. Managing offenders in the probation system using machines rather than people does exactly this.

What Mr Miliband actually said, employing the clipped delivery that speech-writers favour, is this:
Productivity is the key to the country we wish to be. Richer. Fairer. With opportunity for all.
Since the sacked probation officers may not see things in these terms, it is worth examining the connection between productivity and these supposed benefits. Society certainly gets richer when it can produce more, but which members of society get their hands on those riches depends upon how it is distributed. The “fairer” bit is quite important: increased output per hour may increase the value of labour, but if labour is plentiful (and therefore cheap) the increase in its value is likely to stay with the employer/investor.

There is nothing to say that rising productivity must make a country fairer, or give “opportunity to all”. The tendency of legislation through the industrial era - from the earliest Factory Acts in the 19th century to the Equal Pay Act of 1970 - was broadly progressive in economic terms, but income equality peaked in the mid-1970s and thereafter the trend has gone into reverse. The UK is a much less equal society that it was 40 years ago as most of the benefits of increasing output accrue to the already wealthy.

For those seeking a return on capital invested, productivity is less important than the cost of production. This explains why the present so-called recovery in the UK economy has seen a big rise in employment while real wages stagnate or decline. A productivity gap has indeed opened up, because employers now find it more profitable to take on low paid workers than to invest in the technology that would make them more efficient. Because of this, economic activity is now less about creating new wealth than about people trying to get a bigger share of the wealth that is already there.

The conditions that permit this are well established. The free movement of workers within the E.U.; the outsourcing of public services; low cost manufacturing in the Far East and elsewhere; benefit cuts and reduced social protections – all of these have increased the size of the U.K. labour force while reducing its value and security. While labour is cheap, flexible and disposable, productivity will remain weak because employers can do better through exploitation than productive investment.

Mr Miliband's will not say so, but there is political expediency at work in this. Any sort of employment is better than nothing, since if low-tech, poorly paid jobs are to be lost to technology it is not clear what will replace them. This is why Labour's plans to increase the minimum wage are so modest: conventional political thinking depends on business to create and distribute wealth, and has no coping strategy when this does not happen. Increased productivity brought about by higher wages could reduce employment and make society even more unequal than it already is.

Because of this, Mr Miliband's fine words about productivity are essentially empty. But they don't have to be, because he is quite right that productivity is the key to the country we wish to be. It will make society both richer and fairer, while increasing opportunities. It will only do so, however, if we correctly understand what productivity means. Such understanding requires profound changes to the economic system, changes in which the Labour Party at present shows no interest.

What is productivity? The traditional approach, of counting gross value added (GVA) per unit of work, is fine for measuring the efficiency in the production of widgets, but widget production is a small fraction of the UK economy these days. Most of the measured activity in the economy consists of services, where the concept of GVA is slippery at best.

Take those probation officers, whose work will now be done by machine. Statisticians may conclude that, since the same number of offenders is being processed, the output has remained the same, which gives a big increase in productivity.

If, however, as seems likely, that machines prove less effective at offender management than skilled and experienced officers, the statisticians will pick up the fall in quality and record it as a decline in output. This will reduce the improvement in productivity, or may eliminate it completely.

If machines can do as good a job as those skilled officers, then the talents of the latter were clearly being wasted on mechanistic box-ticking and form-filling tasks. It begs the question whether this form of offender management is worth doing at all, whether by person or machine. To answer it, consider what would happen if the probation service were to employ more officers, dispense with the box-ticking and allow them the time to engage properly with the offenders in their care. The increase in the quality of the service (in terms of reduced reoffending) might easily be greater than the increase in staff numbers. If so, employing more people could increase productivity as well as output.

Many services are like this. The benefit of a care visit may increase pro rata with its duration. A hurried “get in and out as quickly as possible” visit to give someone a bath is likely to create stress and anxiety for all concerned, but a leisurely “take your time” visit can do lasting good. Statisticians know this, and so one reason for poor productivity in the economy may well be that cuts in social services and outsourcing to the lowest bidder have caused a decline in quality (and therefore output) that is even greater than the decline in hours worked.

Statistical authorities have done a great deal of work on quantifying the qualitative aspects of the service sector. They rightly understand that the cost of a service is not necessarily the same as its value. To make sense of Mr Miliband's words, however, they need to go much further, quantifying the quality of output and productivity of services for which people are not paid. The majority of these services, including child care, food preparation, care of the elderly, social support, etc., take place in the home, where the quality of the output is the only consideration and the question of the “cost” of labour does not arise.

In general, people are at their most productive when looking after themselves and others. A truly productive society is one that allows them the self-directed time to do this effectively. That means shaping an economy in which work is valued for its human and social usefulness rather than its capacity to accumulate the wealth of others. If Mr Miliband is serious about productivity, his manifesto to business leaders needed to tell them that.

Wednesday, 18 February 2015


Officials both in Europe and America, The Guardian reports, are convinced “that the Russians have infiltrated, or are helping to fund, NGOs campaigning in Europe against fracking and the proposed free trade agreement between the EU and the US”. The talk, apparently, among policymakers is of “Putin’s useful idiots” inadvertently giving succour to “slick Kremlin operations aimed at dividing and enfeebling Europe”.

As somebody who has written, both here and elsewhere, about TTIP, I am left wondering how idiotic I have been. I am opposed to the general thrust of the Transatlantic trade agreement because its benefits appear far fewer than the harms it may cause. I am also opposed to fracking, and for a similar reason: the benefits of extracting fuel from the ground are clearly offset by some serious drawbacks. In taking both these positions I am on the side of people everywhere, both those who want to make an honest living from their work and those wishing to avoid the worst effects of anthropogenic climate change. If that puts me on the side of Mr Putin, then whose side are those “officials” on?

My objections to fracking can be summed up in four words - carbon capture and storage (CCS). This is the process of extracting carbon dioxide from industrial processes and depositing it in geological formations deep underground, from where (hopefully) it won’t enter the atmosphere. It is technologically challenging and expensive, as well as consuming a significant amount of additional energy.

Fracking is the opposite process. It consists of extracting carbon-rich liquids and gases from geological formations deep underground, which, when used in industrial processes, give off large quantities of carbon dioxide. This process, also, is technologically challenging and expensive, as well as consuming a significant amount of additional energy (and water).

It seems to me that if a society considers it worthwhile to go to the extraordinary trouble and expense of capturing carbon and storing it deep underground, the logical starting point is to release as little as possible of the carbon that is already captured and stored deep underground. Leaving oil and gas where they are is much, much cheaper, simpler and more effective than CCS - a sort of CCS on steroids.

This being the case, there are only two plausible justifications for fracking. The first is that we are so energy-poor that we have no alternative; the second is that someone can make a profit out of it, notwithstanding the costs to others that will subsequently occur.

The former argument is unsustainable. Alternative and renewable energy technologies have developed so rapidly in the past decade that the continued consumption of fossil fuels need only be a stop-gap, bridging to a time when almost all energy production will be renewable. How long that bridge turns out to be is a matter of political determination. Recent research suggests that a third of oil reserves, half of gas reserves and over 80 per cent of current coal reserves will have to remain underground if global warming is to be restricted to the “safe” level of 2 degrees C, so finding new, technologically challenging reserves ought to be a waste of time.

Unless, of course, there is a profit to be made, transferring a large proportion of the wealth of those untapped energy resources into the hands of financial investors who need not pay for the socially destructive consequences of their extractive activities. This is where the fracking issue coincides with TTIP, since both are driven by the neo-liberal assumption that the owners of capital have a legal and moral right to invest it in the most profitable way they can find - a right that states may not obstruct but should encourage to the greatest extent that they can.

Since the neo-liberal agenda emerged from the shadows in the 1980s the consequences of such policies have become increasingly clear. While societies are now much richer in paper terms, the distribution and availability of that wealth has caused rising inequality. In the U.S., real GDP has doubled since 1987 but real median earnings have not increased at all. Most of the benefit has gone to investors, encouraged by indirect subsidies from governments acutely aware that investor-driven corporate trading boosts GDP much faster than the real human work of making and doing.

There is plenty of evidence that the contagion of inequality is taking hold in Europe, too. Indeed, in a much reported post on his China Financial Markets blog, the economist Michael Pettis, wrote recently that:
“I am hesitant to introduce what may seem like class warfare, but if you separate those who benefitted the most from European policies before the crisis from those who befitted the least, and are now expected to pay the bulk of the adjustment costs, rather than posit a conflict between [different E.U. members] it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other.”
The hesitancy is understandable, but the conclusion makes perfect sense, and in the light of it we “idiots” might legitimately question how the policy-makers and officials who have governed the west through its post-Soviet ascendancy have so effectively thrown away the huge advantage that history dealt them.

We might observe how decades of government-encouraged rent-seeking, and the response of policy-makers to the deeply destructive financial crisis that it caused, have given rise to a society so internally conflicted as to permit a renascent Russia - so recently on its knees - to revert so rapidly and so effectively to its traditionally divisive role in Europe.

And we might expect that, in view of the catalogue of profound historical errors made by western policy-makers during those decades, they would, at the very least, discontinue digging - desist, that is, from the illusion that the interests of ordinary producer/consumers and those of rent-seeking investors, multinational businesses and banks are in some way aligned.

From one “idiot” to another - is that too much to ask?

Wednesday, 4 February 2015


Greek Finance Minister Yanis Varoufakis has a plan to link his country’s debt repayments to GDP growth. On the face of it, that makes sense. Everybody knows that debts can only be repaid when money is coming in. In debt-laden Britain, credit card companies go to some lengths to reschedule loans when people simply can’t pay. When the alternative is bankruptcy and permanent default, it makes sense to be patient.

Greece’s creditors know this. The German government knows this. German people, however, like many in mainland Europe, are not used to the casino-style property market that prevails in Britain, and the casual, “telephone number” personal borrowing that goes with it. They take debt seriously, so Angela Merkel has a domestic political problem in selling any deal to a financially conservative electorate.

Deal, however, there seems likely to be, and one reason for this is that Mr Varoufakis is framing his compromise plan in conventional economic terms. By linking debt repayment to GDP growth he is effectively committing Greece to an economic development strategy designed to maximise GDP - the standard measure of an economy’s success.

One of the most interesting things to come out of the crisis in Greece, however, as commentators have noted, is the way in which unconventional economic structures have arisen to replace the system that failed. Examples include food co-ops, which reduce prices by bringing producers and consumers closer together, and in some cases eliminate cash entirely from transactions.

GDP doesn't measure real wealth such as food, but only the amount of money that changes hands. Those co-ops that have cut out the middlemen are generating less GDP, even though the total real wealth (the amount of food) is the same, and both producers and consumers are better off. And if people are collaborating to grow food for themselves, then it could be that no cash changes hands and no GDP at all is registered.

The scale may still be relatively small, but Greece has just voted overwhelmingly to bin the old way of doing things, so the emergence of innovative economic relationships that work significantly better on a human level is not something that they will necessarily want to see halted. So the question arises, will Syriza seek to bring back the middlemen in order to get GDP moving and satisfy its creditor-partners? Or is it serious about the new, collaborative, economic models, in which case holders of GDP-linked bonds may have a long wait on their hands.

Tuesday, 27 January 2015


Whose side is the E.U. on? It is a question that would have arisen even without Syriza's election triumph in Greece, since the E.U. has become a divisive issue in the national politics of many member states. Attacks come from across the spectrum: both viscerally anti-E.U. nationalist parties such as UKIP and France's Front National, and radical movements such as Syriza and Spain's Podemos that are not anti-E.U. as such, but strongly oppose the economic policies that are embedded in its institutional structure.

The question may be out there, but Eurocrats would prefer not to think in those terms. The E.U. is supposed to be quite the opposite of political: an institutional counterweight to politicisation, seeking out consensus that is good for everybody. The word “harmonisation” is prominent in its vocabulary, reflecting the aspiration of its founding fathers to efface the historical rivalries that have subjected the continent to centuries of conflict. To take sides, getting “down and dirty” in the rivalries of national politics, would defeat this high-minded purpose.

This strategy has worked well in the broadest sense: jaw-jaw really is better that war-war. But the assumption that the E.U. knows what is good for people must now depend upon something more immediately substantial than the vision of “an ever closer union” of former belligerents. From its inception it has been an economic project, an appeal to self-interest as much as idealism. And since economic issues drive politics, the question is entirely valid: which sections of society does the E.U. best serve?

The debate raging around TTIP provides a powerful focus for this question. It has wrong-footed the E.U. negotiators, for whom the underlying premise of the proposed trans-Atlantic free trade treaty fits closely with the E.U.'s integrationist vision. From that perspective, TTIP is so clearly a “good thing” that opposition to it can only logically arise from people who have not understood it. This explains why the E.U.'s response to a consultation that is overwhelmingly negative is to undertake to go on consulting and explaining until people finally get the point.

In adopting this attitude, the E.U. is in danger of ignoring a sea-change in politics that is convulsing in various degrees the majority of its member states. The economic collapse precipitated by the banking crisis has proved to be far more than a mere cyclical correction. In exposing the workings of the free market system it has shattered the liberal illusion that the interests of corporate investors and worker-consumers are on the same track. This, in turn, creates an existential challenge to the terms of reference of the single market, the completion of which has been the E.U.'s defining economic project.

This point is well illustrated by the multi-nationals who set up shop in Luxembourg to avoid the higher rates of tax that would be payable in the much larger E.U. states where they conduct most of their business. Harmonisation only goes so far: the Luxembourg government does not have to pay the tax credits and housing benefits that are necessary to bring many of the employees of these multi-nationals up to an acceptable standard of living.

Similarly, food processing companies, suppliers of outsourced social care and other low-wage employers routinely exploit differential wage rates in Europe because locally available staff are too much trouble to employ. UK unemployment remains stuck around two million and there is relentless downward pressure on wages because the improved working conditions, wages and training required in a tight labour market can be avoided in this way.

This free market challenge to the conditions of labour is a key issue in the TTIP debate. E.U. negotiators believe that the proposed treaty will cut the price of goods to consumers by increasing competition between producers. Competition, however, forces down wages, which means that the main beneficiaries of unrestricted trade are not worker-consumers but investors.

The capacity of big business to exploit open markets explains why the main focus of opposition to TTIP has been on its provisions for ISDS – Investor-State Dispute Settlement – which allows international investors to sidestep normal legal processes, using secretive arbitration to challenge government decisions that could damage their commercial interests. The banking crisis and its aftermath have taught people to distrust footloose international capital; the 50,000 or so British people who signed up to oppose the ISDS provisions of TTIP did so because they have discovered the hard way that human social interests and those of corporate investors rarely coincide.

Therein lies the heart of the problem. Politicians have fallen into the habit of talking about “business” as if there is no distinction to be made between small and medium-sized enterprises that pump the life-blood of the real economy, and the vast banks, brokerages and multi-national companies that seek to drain that blood into the deposits of their clients and shareholders.

This distinction is between production and extraction. Production means creating new, useful wealth through skill, ingenuity and entrepreneurship. Extraction means deriving wealth from the ownership of assets. This may be literal extraction, such as oil or minerals, but it applies more broadly to the right to extract profit that the ownership of any asset confers.

With productive activity, human input is the ingredient that adds value. It could be as minimal as the exchange of pleasantries that turns a purchase into a rewarding social interaction, or as significant as the performance of life saving surgery. It could be the nurturing of a crop, or the making of a garment or household object. Investment may be necessary to liberate such human potential, but it is not sufficient. The essence of production lie in a person's work.

With extractive activity, the reverse is the case. Here, the wealth already exists, and the investment represents the ownership of it. Often the wealth can be extracted without meaningful human intervention, as digits flickering across a dealing room screen. Where human input is necessary, it is treated by investors as a cost to be minimised. The lower that cost, the greater the wealth that can be extracted from a given investment.

Since the market reforms of the 1980s, governments have sold extractive opportunities to the highest bidders. An investor buys a public service, and proceeds to trim the costs of its delivery (people's wages) to maximise its profit. The private sector is equally vulnerable: investments by a few large companies have monopolised the retail trade, squeezing the incomes of producers and the wages of their staff to maximise their profits. Manufacturing has been outsourced on the same principle – to extract the greatest possible margin from the supply chain that separates producer and consumer. Banks are wholly extractive. They create money by writing loans, then extract a percentage of the productive activity that the loan makes possible.

Is the E.U. on the side of the producers or the extractors? The fairest interim conclusion is that it has not yet woken up to the distinction. The longer it sleeps, the greater is the danger of the debate being captured by divisive forces that will shatter the E.U.'s harmonising dream. To put that another way: if 150,000 people opposed ISDS in its own consultation, and if 1.3 million people have signed a European Citizens' Initiative against TTIP that the E.U. has refused to recognise, then maybe – just maybe – it is worth taking the trouble to find out why.

This article is also published on Huffington Post