Wednesday, 9 November 2016

Trump's victory, like the Brexit vote, doesn't solve anything, but it puts the system in play and we must be ready for that

Memory soon adjusts to a new reality. A few months ago I woke up (in France, as it happens) to the news of Brexit; this morning's news of the US election is of the same shocking quality. As with Brexit, we have no idea what this really means, but the sense of shock will pass, probably sooner than it should.

It's far too early to start speculating on what Trump's presidency may hold. It's worth remembering, however, that, just as the left was rapidly disappointed by Obama, so may Trump in office prove less radical than his supporters hope. The Republicans will still control Congress, but that party is now so divided that "control" may not be quite the word. And Trump is not an experienced political operator, so the administrative machine is bound to slow him down.

On one thing, however, the pundits are likely to agree: the Democrats put up the wrong candidate. I flagged this up in a post last April: although the polling back them suggested that Clinton would beat Trump, it also showed that Bernie Sanders would beat him much more easily. The U.S. electorate was in the market for radical change. Trump and Sanders were both offering it, but Clinton was not.

Before the shock passes, therefore, it is worth reflecting again on what lessons can be learned for British politics. At the moment we're enduring the triumphalism of the nationalist right, buoyed up by the fact that predictions of post-Brexit economic fallout have not (yet) come to pass. This new right, however, has no plan to address the profound issues of inequality, poverty and social marginalisation that gave rise to the Brexit vote and have now brought Trump to power. Effective as a force of opposition, it will become increasingly vulnerable when things don't get better as a result of its policies.

To prepare for that moment, it is no good rehashing a sort of Blairite/Cameronian globalist centrism in the hope that a chastened electorate will in due course "come back to mummy".  The voters are correct in their instincts, that a system so massively stacked against them requires fundamental change. If the new right can't provide that, then history may view the votes for Brexit and Trump not as definitive in themselves but as the triggers that put the entire neo-liberal consensus in play. It's time to get ready.

Picture credit: Gage Skidmore [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Tuesday, 25 October 2016

Plucky Wallonia exposes the lie at the heart of EU trade policy

Welcome to Wallonia....
Policy strives to achieve the things that it measures, and nothing is more fervently measured in modern economies than GDP. If increasing GDP is the policy objective, then encouraging trade - any sort of trade - will generally help. GDP measures money transactions, so the more times a product and its components are traded on their journey from producer to consumer, the more GDP is recorded.

That, in summary, is the basis for TTIP, TPP, TISA and, currently, CETA, the Comprehensive Economic and Trade Agreement negotiated between the EU and Canada, which the regional parliament of Wallonia, in Belgium, is refusing to pass. Trade agreements increase activity in global markets, which increases GDP. The size of that increase is much debated, but even a tiny percentage of GDP is a big number in pounds or Euros, and makes for good headlines.

The extent to which trade agreements actually increase GDP is not, however, the real issue. The lie at the heart of trade policy is much bigger than that. The lie is that increasing GDP makes people wealthier, when it can easily have the opposite effect. As economies grow, what matters most is how that additional wealth is distributed. If most of it goes to the already-wealthy, then the rest of society becomes relatively poorer. Relative poverty is real poverty: when the rich people who hold assets such as shares and property get even richer, then housing, energy and basic services become more expensive and poorer people can buy fewer of them.

Both statistics and human experience bear out this point. Statistics show that median US incomes have not risen since the 1960s, although GDP has more than doubled. Experience in the UK is that while the UK economy is generating plenty of jobs, more and more of these do not pay enough to live on. Poorly paid, insecure jobs generate GDP and make employers richer, but they leave employees with insufficient wealth to live.

The connection between these outcomes and global free trade has to do with the way in which the nature of trade has changed over the years. Originally its purpose was to exchange things that one could produce for things that one couldn't. This could be driven by variable factors such as climate, environment, natural resources or the availability of expertise and technology. Thousands of years ago the people of Cornwall were exporting tin on this basis, and importing fine quality manufactured goods such as pottery and silverware.

These days, however, trade is increasingly driven not by need or availability, but by price. The technological capacity of Europe and Canada are similar, and their climates are comparable, too. There is not a great deal that either can produce that the other cannot. There is no reason to suppose, for example, that Europe cannot produce as much pork as it can eat; and yet the people of Wallonia are worried about their pig farmers, because CETA will allow unrestricted E.U. access for 80,000 tonnes of Canadian pork.

The only rationale for shipping 80,000 tonnes of pork thousands of miles across the Atlantic is that, even after the cost of that shipping is taken into account, it will still be cheaper. Which means that its cost of production in Canada is significantly lower, presumably because it is produced on an industrial scale. And cheaper pork is, apparently, good for European consumers, who are feeling the pinch because their own incomes are being squeezed.

And this is where the real problem with GDP-driven trade policy becomes apparent. Not only does GDP fail to take account of the distribution of wealth, but it also takes no account of the qualitative aspects of people's lives that cannot be measured in money terms. In 2013 the UK government released research findings showing that, although GDP had more than doubled in the previous forty years, people's life satisfaction had scarcely changed at all. Living in a country that was twice as rich did not make people happier, because the way in which that "twice as rich" was measured did not capture the things that really mattered to them.

Raising pigs on smaller farms in Wallonia may be more expensive in crude money terms, but it may also be conducive to a higher quality of life by preserving social and cultural networks in local communities and protecting the environment. These things have value. They can make or break the quality of people's lives, and its sustainability, and yet they have no place in the calculation of the benefits and losses that arise from unrestricted global trade.

People across Europe are waking up to the fact that economic "growth" as measured by GDP does not make them wealthier in terms that they recognise. Instead, it is disrupting their communities, causing people to trek thousands of miles in search of low-paid, insecure work; it is raising the cost of housing and energy; it is pouring money into the coffers of already-wealthy investors; it is giving multi-national companies more and more power over people's lives; it is depleting public services, as taxes on the wealthy are lowered to encourage investment; it is degrading the environment - not least with the CO2 emissions that will arise from shipping all that pork across the Atlantic.

Plucky Wallonians have finally said "non" to this madness. Instead of trying to strong-arm them into changing their minds, the Eurocracy would do well to learn from their good sense.

Picture by Stephane.dohet (Own work) [Public domain], via Wikimedia Commons

Tuesday, 27 September 2016

The Basic Income can fix Corbyn's nuclear problems

A Trident nuclear sub: replacement will create 13,000 jobs
Much of my childhood was spent in rural east Somerset, at the foot of the Mendips. For us children, Frome was "the smoke" - an industrial town that we only visited for its railway station, or for rare purchases that the local shops in Evercreech and Shepton Mallet could not provide.

Fast forward 40 years and Frome has morphed into a locus for alternative living. The Transition Movement may have been born in Totnes, but its Westcountry cousin has swiftly overtaken it in terms of political and economic innovation. Frome's "Flatpack Democracy" has produced a town council of independents focused on collaboration, devoid of members from any known political brand.

It was this reputation that brought Upstream, a radio documentary project from Economics for Transition, to the town this summer, to explore how new, wellbeing economics might work when applied in a live situation. (Full disclosure: I was interviewed for the project). The result is fascinating and unexpected. Over three one-hour programmes, Upstream's Della Duncan digs deep below the surface of Frome's burgeoning "sharing economy" to reveal the still livid scars of thirty years of de-industrialisation and social deprivation.

Frome's pioneering political and economic model may indeed bring hope and inspiration to a wide, even global audience. But at a local level the tensions are palpable. With the factories that I remember from my childhood long gone, and little of real productive substance to replace them, Frome now typifies the divergence of interests between a dispossessed working class that struggles to be heard and an increasingly vocal, socially liberal, aspirational, alternative movement. Nowhere is that divergence more clearly seen than in house prices, which incoming gentrifiers have sent rocketing far beyond the reach of most locals.

This tension - between liberal alternative values and those of the traditional labour movement - runs right through the anti-establishment forces ranged against the current Conservative government. In the middle stands the figure of Jeremy Corbyn - a stalwart of the Labour movement rapidly becoming an icon for many old-school liberals drawn to his principled positions.

Fifty miles to the west of Frome lies Hinkley Point, where a huge new nuclear power station is planned to be built on what are widely regarded as ruinous terms. Corbyn is opposed to this folly, along with everyone of an even slightly green, alternative disposition, but the labour movement, as represented by the trades unions and many in the Labour Party, is broadly in favour. They welcome the jobs the investment will bring, and see it as a boost to British industry rather than a rash mis-allocation of precious resources.

The recent row over Hinkley Point mirrors a far deeper one within the Labour Party over nuclear weapons, where the renewal of Trident also has strong trades union support. Corbyn, a long standing CND supporter, is opposed on principle, but the unions want the investment in jobs that the project will bring. Meanwhile the Conservative government has a free hand. Even Corbyn now accepts the futility of merely deepening Labour disunity over the issue.

It is clearly within the remit of trades unions to fight for good jobs at decent rates of pay, but from a new economy perspective their approach to these nuclear projects looks like outdated thinking. The combined cost of Hinkley C and Trident renewal is at least £50 billion just for construction, while the long-term cost of the power station is estimated at up to £37 billion and of Trident at £167 billion. To target such colossal resources at protecting a relatively small number of skilled jobs - 13,000 in the case of Trident, according to one union estimate; up to 25,000 construction jobs at Hinkley - will do nothing to improve the quality of life of the millions of insecure and poorly paid workers that the labour movement should also be representing.

What is more, most of the jobs at Hinkley, and many of those related to Trident, are relatively transient. At Hinkley the peak number is estimated at 5,600. Once the plant is built it will require only a few hundred to keep it going. So the unions' approach seems not only outdated but short termist, too. The more important question is not how a few tens of thousand jobs can be secured now, but how the financial security of ordinary people can be re-established in a world in which the only things preventing many human workers being replaced by machines is that human workers are cheaper and easier to get rid of.

If the economy were functioning as it should, progress would not mean more paid work, but fewer, better-paid working hours and more time for people to do the things that really matter to them. From this perspective the unprecedented number of jobs that the UK economy is generating is not good news. If the nation is to prosper, we need to work less, but smarter, getting rid of poorly paid, insecure and increasingly unproductive work and replacing it with the sort of creative, productive activities that allow people to flourish.

The basic income is central to this. Both John McDonnell and Jeremy Corbyn say that Labour is "looking at it", and the TUC at its recent conference passed a motion in favour of it, but there is little evidence to suggest that at present the labour movement sees it as much more than a rejigged benefits system. Its potential, however, is far greater than that: for many it will replace paid work altogether, allowing them to create wealth directly for themselves, their families and their communities without the intervention and profit-taking of investors and middlemen.

This new approach to distributing money-wealth is the missing piece of the puzzle that Upstream uncovered when they went to Frome. A sharing economy requires a sharing of the means of participation, which means ready access to the money needed to get anything done. In the same way, if all those highly skilled, motivated workers destined to work on Hinkley or Trident had the opportunity to decide for themselves how to participate in the economy, their combined output would undoubtedly be far more valuable than the two vast nuclear white elephants that are now in prospect.

Picture credit: By bodgerbrooks [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Tuesday, 30 August 2016

How Britain's Olympics success makes the case for the Basic Income

Mo success - Mo Farah shows his double gold at the Rio Olympics
One week later, the spectacle of Team GB's Olympics medals triumph seems a distant memory. It was great while it lasted, not least because it was so unexpected, but the British passion for sports has more to do with commitment that results. We like a loser who gives their all just as much as a winner who cruises to victory. So the UK's second position in the medals table is of passing interest rather than national significance. It's the sport itself that matters, and in the past seven days the sport has moved on.

That's my view, but Liz Nicholl, the chief executive of UK Sport, would beg to differ. "We invest in medal success to create a proud, ambitious, active, healthy nation", she said, hailing the UK as "a sporting superpower" and promising to build on the team's Rio success at the next games in Tokyo in 2020. Some £350 million will be invested over the next four years to make that happen.

Everybody knows that money counts in sport. We're told that each medal in Rio 'cost' over £4m, and almost every GB medal winner was on-message to praise the National Lottery funding that makes it all possible. Targeting continuous growth, however, will bring disappointment eventually. Just as the correlation between money and happiness runs out above a certain point, so the British public's love of sporting success soon turns sour once they learn to expect it. Winning predictably is not really the point. Performances that exceed expectation are what sport-lovers crave.

Nonetheless, the money used by UK Sport to support individual athletes, buying them the time and space in their lives to perfect their calling, has effectively demonstrated an important principle. It recognises that financial security allows people to develop the stuff that they're good at, which, in turn, can have all sorts of social and personal benefits that transcend traditional commercial ideas of value. In a sense, therefore, lottery funding has become a sort of Basic Income for the lucky, talented, committed few with serious medal prospects.

This object lesson in the principle of the Basic Income has its limits, however. For, if "a proud, ambitious, active, healthy nation" is really the purpose of sports funding, then focusing on individual medal prospects is probably not the best way to achieve it. Pride in its good sense means self-esteem and self-valuing; ambition means leading a fulfilled life; active means making decisions for oneself; healthy means having the time and opportunity to prioritise ones physical and mental wellbeing. None of these are achieved by passively watching others excel. All require active engagement, which means structuring society in a way that allows people to participate fully on their own terms.

Sport is one component of this. If every Briton had time and opportunity (including access to facilities) to participate in sport, the nation's tally of sporting success would be certain to rise. We don't know how many potential Mo Farahs and Jessica Ennis Hills have been lost through a failure of participation, but there must be more than a few. More importantly, many, many people have been prevented by social and financial circumstances from participating at their own level - not competing for a place on the podium, but for the far more vital objective of fulfilling or exceeding their own potential.

As in sport, so in every aspect of our lives. Whether as entrepreneurs, artists, carers, inventors, makers, designers or anything else, if we are to fulfil our potential and make our contribution to society we need the time and opportunity to develop every aspect of our talents, capacities and personalities. The Universal Basic Income isn't about picking winners, but acknowledging that everybody has the capacity to win - for themselves, for their families and communities, and for wider society. All they need is access to a fair share of the wealth that buys the time and opportunity to make this possible.

Picture credit: by U.S. Army [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Wednesday, 27 July 2016

Planning a 'New Economy' politics for the post-Brexit age

I've been off the air for a while, partly because I've been away, and partly because there seemed, initially, almost nothing to contribute about British politics in the post-referendum maelstrom. Everything was already being said, with most theories and speculations only lasting about five minutes before events overtook them.

Now, however, with the dust beginning to settle, it seems worth reiterating something I said in my post of 21 June, that "the outcome of the referendum does not hugely matter in economic terms".  The markets dived, and then they rose to the surface again; conventional demand is weakened and fiscal policy may be relaxed to reflect that, but the people who voted for Brexit - because their communities are depressed and marginalised, their jobs badly paid and insecure and their public services cut to the bone - are still exactly where they were, with no change in prospect despite a replacement prime minister's fine words.

Those words are worth noting, nonetheless. Here's a flavour:
"If you’re one of those families, if you’re just managing, I want to address you directly.
I know you’re working around the clock, I know you’re doing your best, and I know that sometimes life can be a struggle. The government I lead will be driven not by the interests of the privileged few, but by yours.
"We will do everything we can to give you more control over your lives. When we take the big calls, we’ll think not of the powerful, but you. When we pass new laws, we’ll listen not to the mighty but to you. When it comes to taxes, we’ll prioritise not the wealthy, but you. When it comes to opportunity, we won’t entrench the advantages of the fortunate few. We will do everything we can to help anybody, whatever your background, to go as far as your talents will take you."
When the new government fails to deliver on these promises, it will not be because it is a Conservative government rather than a Labour one. It will be because the economic system in which we operate - a system that existed in Britain before the referendum, will exist in Britain after Brexit and which pervades the institutions of the European Union - cannot deliver a fairer, more productive, more equal society. It is neither designed nor intended to do so.

The reason is this: neo-liberal economics are predicated on maximising money wealth, by allowing it to flow freely to wherever it can extract the best investment return. The social wealth of affordable, good quality housing, accessible public services, fair trade, well-paid, secure employment, etc., counts for nothing in this system or, worse still, counts as a cost against the money economy.

As money wealth inevitably flows upwards towards the already-wealthy, governments have to take extraordinary measures to get it back. If, however, they subscribe to the prevailing neo-liberal view that wealth has to be made by private businesses before anyone else can get a share of it, they cannot risk disincentivising the already-wealthy from becoming wealthier still.

The debate that is tearing Labour apart offers no escape from this dilemma. The mainstream parliamentary faction, like social democrats across Europe, has bought into a slightly more people-friendly version of the neo-liberal consensus; the Momentum faction is re-fighting the economic and class wars of the 1970s. Neither is offering a modern alternative to a system that is fundamentally broken.

Meanwhile, all talk of new political alliances and alignments seems pointless until a coherent new framework for economic renewal is put in place. Policy must come before parties and personalities. We need to agree, at least in broad terms, the changes that are needed to re-engineer the economy for the benefit of all.

The building blocks are well known - a form of basic income; new ways of providing affordable housing; a new way of measuring production, including social as well as money wealth; new, fairer trade rules and new forms of corporate governance. The question is how to put these together to create that coherent new framework we so urgently need.

The parameters are quite straightforward. They are (i) a New Economy model that (ii) brings significant benefits to the quality of the lives of ordinary people and (iii) is described in terms that ordinary people can make sense of in order to gain their support. By "ordinary people" I mean people living busy lives who have little time or patience for economic and political theorising.

I'm starting to collaborate on such a project, so it would be great to know what you think are the important issues for the New Economy, both in your own life and that of people around you. After all, unless this addresses people's real needs, it's a non-starter!

Tuesday, 21 June 2016

If we want a kinder, gentler politics, we must first shape a kinder, gentler, economic system

A member of parliament is murdered while doing her job. Flags fly at half mast, parliament is recalled for tributes, campaigning in the referendum is suspended, the prime minister and the leader of the opposition share a platform and the challenger parties decide not to contest the now vacant seat.

These are far from empty gestures. At the height of the most divisive, dishonest and ill-informed political confrontation that most of us can remember, it has taken a tragic act of violence to set free the instincts of our common humanity. It has reminded us that to empathise with and care for one another, to support each other and to share in our deepest feelings, whether of joy or of loss, is profoundly normal. As such, it throws into stark relief how entirely abnormal is the institutional behaviour that our political and economic frameworks impose.

In the House of Commons on Monday, the words of Jo Cox were repeatedly invoked, that we "have far more in common with each other than things that divide us”. Jeremy Corbyn said that her death should mark the start of a “kinder and gentler politics”, a tacit acknowledgement that, for the most part, politicians of all persuasions want good outcomes for ordinary people, but are trapped in a competitive, adversarial system that they believe cannot be changed.

Our institutions of governance are adversarial by design. They demand conflict for the explicit purpose of squeezing out human feeling. In politics they set government against opposition, party against party, each fighting to deprive the other of power and control. In the economy they set the owners of capital against paid workers, lenders against borrowers, home owners against renters, shareholders and directors against their employees, corporate interests against social justice, middlemen against both their suppliers and their customers. In the law, they set plaintiff against defendant, the wealthy against the disadvantaged, the state against the dispossessed.

I am willing to believe that, when David Cameron invoked the "big society" before the 2010 general election, he genuinely sought to favour collaboration, sharing and fairness over greed and acquisitiveness. Then, in government, he found himself driving a system so completely in hock to the owners of capital that prioritising their interests became essential. If the current government, neo-liberal to the core as it may be, could see a way towards universal prosperity, greater equality, a better-funded health service, etc., without spooking the markets, I don't doubt that it would take it. But they can't see a way because the system has blinded them with false certainties that they dare not challenge.

The bizarre consequence is that the government addresses the housing crisis not by increasing low-cost supply, but by offering cheap loans that force up house prices still further. It addresses poverty not by investing in opportunity, but by making the consequences of unemployment more painful. It addresses economic weakness not by seeking to unleash people's creative energy, but by allowing corporations to profit from low-paid, dead-end, insecure jobs, the growth in which it then describes as a success story.

The arch-marketeer George Soros explains why this is: Britain, he writes, "is more dependent than at any time in history on inflows of foreign capital". Brexit will reverse those flows, he predicts, causing a 20% drop in the value of sterling, offering rich pickings for speculators while making most voters considerably poorer.

Even without Brexit, the government is forced to sell or outsource every revenue stream it can come up with, from crazily expensive nuclear power contracts to national infrastructure to the provision of prisons, and many, many others, in order to keep that foreign capital flowing in. And the more revenue it sells, the more it has to find to sell, because the capital flowing in to buy those streams is more than matched, over time, by the revenue flowing out in the streams themselves. The debacle of the Private Finance Initiative (PFI) is proof of that.

The British economy is on a treadmill that is running away from it. Some time soon, its feet will not be able to keep up and it will fall over. That time could come on Friday of this week, or it could come in one, two or three year's time. That is why the outcome of the referendum does not hugely matter in economic terms. Soros is right, of course, but for the increasing army of Britons who feel that the economy has abandoned them, a crisis now may be more attractive that one merely postponed.

In this context, Britain's divisive political establishment looks like a pack of jackals fighting over a rotting corpse. There is nothing good left for anyone. Just as Syriza discovered in Greece, any party in power is faced with the same depressing certainties, the same obligation to conform to the expectations and requirements of the international financial markets.

Those markets have no morals. If we run our economy on their say-so we must reap what we sow. But if we want that kinder, gentler politics of which Corbyn spoke, we must first shape a kinder, gentler, economic system in which human effort, rather than market capital, is the guiding principle.

We are already learning what a people-focused economic system looks like. It treats housing as a social need, not a profitable speculation; it invests in people, allowing them to do productive work, whether paid or unpaid; it measures economic activity not as GDP does, in terms of money transactions, but in terms of the social and environmental benefits that it brings; it treats money as a tool to facilitate social interaction, not as a vehicle for creating debt owed to vast banking corporations.

The transition from an economy focused on the capital markets to one focused on people's aspirations, capacities and needs will take time, and careful management. But before all of that, it calls for political determination to work towards a better system. Irrespective of the outcome on Thursday, the lesson of the reaction to Jo Cox's death is that politicians like the idea of working together to build a better society for us all. Maybe on Friday they could get going on that.

Picture credit: Enver Rahmanov (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Friday, 10 June 2016

The basic income will make sense when people learn to value their unpaid work

Work in progress
(but investment is needed)
Which is more remarkable - that 77% of Swiss voters rejected proposals for a basic income in a referendum last weekend, or that 23% voted in favour? Admittedly the turnout was low, probably because there was little realistic chance of the proposal being passed, but the fact remains that nearly a quarter of the votes were in support of a radical, socially progressive idea of which nobody much was talking until very recently.

A well-executed basic income policy fixes so many socio-economic issues - both present and looming - that it's tempting to think not if, but when. The main barrier, however, may not be demonstrating effectiveness, or even affordability, but overcoming public perception. People are rightly wary of "something for nothing" offers, including the idea that people should be 'paid' without committing to 'work'.

Such perceptions matter, which is why 'paid' and 'work' are in inverted commas in the previous sentence. We assume that work comes first: once performed, it is valued and remunerated accordingly. In reality, however, money comes first: access to work is filtered through employers, who have the necessary money to invest in a workforce. This is why political rhetoric focuses so obsessively on businesses 'creating' jobs and people 'looking for' work.

This need to 'find work', however, creates an artificial bottleneck that limits people's productive capacity. Like a litter of piglets crawling over each other to get hold of a nipple, people are only enabled to contribute economically if they can find a point of access to the money system.

If access to money is what makes economic activity possible, why make it so hard? That's the premise of the basic income, which solves the problem by giving everybody an allowance of the money in the system. This frees up their autonomous capacity to work, without being dependent on the system to fit them in.

Implicit in this is a reassessment of the way in which we measure economic value. The unpaid economy in the UK is well over half the size of the money economy, and probably much bigger than that in terms of its usefulness, since unpaid work that people choose to do is more likely to result in something that is genuinely wanted.

The basic income acknowledges this by relegating money from the status of wealth to that of wealth-facilitator. After all, unpaid work also requires money: it needs tools, vehicles, materials, land, accommodation, etc., just as any work does. If the only route to that money is through payment, the amount of economic value that can be created through unpaid work is unnecessarily limited.

To put that in real terms: a person busy with paid work may be able to afford what is needed to cook wholesome meals, grow vegetables, look after their own children, write novels, learn a new skill, etc., but is unlikely to have the time. A person without work has the time, but may lack the financial resources unless somebody else is able to provide them.

If that busy worker is well paid, they will buy the meals, vegetables, childcare, etc. that they need. In the low wage, zero hours economy, however, paid work consumes valuable time without producing enough to buy the resources that are needed. Similarly, people required to search interminably for work in return for meagre state 'benefits' have neither time nor sufficient money to cater directly for their own needs.

Work, essentially, is exactly that - people catering for their own needs. Giving people access to money through the basic income will generate big increases in productive economic activity, but we won't know that unless we measure it. Currently we don't: GDP, which is our measure of economic success, is only interested in paid activity, so a large amount of useful work is systematically ignored.

Changing public perceptions about the basic income, therefore, depends upon changing our understanding of useful work and the way that we measure it. Since all of us do unpaid work, and none of us could survive without doing it, that ought not to be too hard.

The crucial point is this. The basic income is not paying people for their otherwise unpaid work: it is providing them with the financial investment that makes it possible for them to do it. Investment in people is not "something for nothing", but sound economic practice. It is also what people deserve.

Photo credit : Berit from Redhill/Surrey, UK (housework) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons


Monday, 6 June 2016

When the referendum's finally over, the important questions will still be with us


Not the real question...
With the referendum sitting on a knife-edge, it is increasingly pointless to speculate on an outcome that will be known in a little over a fortnight. In any case, that result will solve nothing. The only satisfaction likely to come from it is the schadenfreude (if that's your thing) of watching one or other group of self-serving Tories squirm. (Sounds like a win-win?)

Meanwhile, the big questions will still be with us. Those questions are: the economy, housing and education. If you're wondering why health (or immigration) aren't included it's because they're in the "economy" box. Health policy is essentially about paying for it; immigration is an issue because people blame it for their economic circumstances. Creating a fair, more equal, more productive economy will fix a lot of things.

Housing looks like an economic question, but there's a cultural issue that needs to be tackled first - something to do with our nimby-ist tendency to fetishise house ownership and house prices, while restricting access to building land.

Education might seem, like the health service, to be an economic question, but it's actually much more than that. Our education system dictates the sort of society we are, and whereas governments do not, in general, try to tell people what it means to be well or ill, they have an almost dictatorial approach to what in means to be educated. Even a single day of state-directed schooling missed, they tell you, can have a lasting effect on a child's life chances.

Real education is formed in a close relationship between pupil, parent and teacher. In any other such relationship we would not tolerate such government interference, and yet we take it for granted that politicians get to decide what children should learn and how they should learn it.

This is symptomatic of a deeper problem that pervades our politics, which the referendum campaign typifies. So focused have we become on personalities, soundbites and petty feuds that the question of values - social, ethical, economic - is largely ignored.

That's convenient for the powerful few, but ruinous for the rest of us. For, only by taking a hard look at the values that have been foisted on to us can the conditions be created for fundamental change.

Tuesday, 31 May 2016

We are still paying the price for New Labour's missed opportunity

Still doesn't get it...
Listening back to Tony Blair telling the BBC on Saturday that "it would be a very dangerous experiment for a major western country to get gripped by this type of populist policy-making, left or right" it's hard to make sense of his subsequent claim that he wasn't talking about Jeremy Corbyn.

The context suggests that he was, and in any case he has form on this subject. Back in February he expressed himself "baffled" by the success of both Corbyn and Bernie Sanders, while bemoaning a loss of faith in the centrist progressive position. He still thinks that New Labour was on the right track, and that the party has no prospects until that track is resumed.

So Blair really doesn't get it, and, by extension, nor do most members of the parliamentary Labour party, for whom reverting to some sort of mainstream centrism is the path to electoral success. So what is it that they don't get? Most importantly that the world has moved on: young people in particular (but many older people, too) are no longer invested in a status quo that cannot provide an affordable home and a secure, reasonably-paying job.

When the new normal is debt and economic insecurity, advocating for something different, as Sanders and Corbyn do, seems more like sensible than radical or left-field. So far from being dangerous, systemic change can now be viewed as essential for the future of both people and planet. The danger comes from the forces of reaction - the corporate lobbyists, the climate change deniers, the neoliberal economists and the mainstream politicians over whom they hold sway.

Maybe, therefore, the reason why the anger with Blair won't go away is less to do with Iraq than with a more generalised, generational sense of betrayal. Labour in 1997 had the political power and the economic clout to challenge the neoliberal agenda, but instead of challenging it, it went with it. Inequality increased, the marketisation of public services proceeded apace and the global financial markets went largely unchecked.

Labour's economic policies may not have been responsible for the 2008 crash, but its failure to challenge the neo-liberal framing that brought the crash to a head at least raises the question, "what is Labour for?" It is to Corbyn's credit that he is looking for an answer, and part of the tragedy of Blair that he can't see the point.

Picture credit: By Chatham House [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Thursday, 26 May 2016

A national policy framework for independent candidates?

Whigs and Tories - political merry-go-round
By Gilray (image via Wikipedia)
Wednesday's meeting in Totnes, organised by South Devon Watch to discuss strategies for political change, was inspiring and challenging in equal part. The inspiration came from so many committed people, all seeking to bring authentic democracy to a system widely seen as unaccountable, if not corrupt. The challenge is to find a way of beating the current system without repeating its manifest failings.

The meeting focused on independent candidates, both at local and national level. Among the speakers was Claire Wright, the independent Devon county councillor who came a good second in East Devon at the general election last year. Also present was Martyn Greene of the Free Parliament campaign, which is putting up serious money to support independent candidates at the next national election.

There can be little doubt that the tribal, adversarial party system typifies much that is wrong with our current politics. If independent candidates are to challenge the party stitch-up, however, they need to work together and show unity of purpose. The distinction between an organised group of independents, working together, and a new party, may not be easily observable to a electorate conditioned to the party system.

What comes first in politics, people or policies? If parliament were filled with independent members all operating under the Bell principles, it is likely that the quality of discourse and deliberation would be far higher than at present, but would effective policy, leadership and decision-making necessarily emerge?

One approach would be to elect government and parliament separately, the former on the basis of its policies, the latter on an independent, non-party basis. The current framework, however, doesn't work like that: when people go to the polls they suppose that they are voting for the government they want. Government means a combination of policy solutions and the people with the leadership qualities to put those policies into effect.

In response to this, independent-minded political reformers could work together to draw up a national policy framework in they key areas of the economy, health, education, etc., which independent candidates could use as part of their campaigning message. Instead of supporting a party, they would be advocating for a coherent set of policies, the essence of which they would undertake to support in parliament.

In the trade-off between independence and coherence, it makes no sense for every stand-alone candidate to have to reinvent the national policy wheel. A shared set of policies could give national traction, provide a clear story for the media and ensure that the electorate have a better idea of what they are getting.


Friday, 20 May 2016

EU referendum: a false dichotomy obscuring a far more vital struggle

Continuing the Referendum theme, a friend wishes they knew what the E.U. really does for us. This is not a Life of Brian moment but a measured desire to understand the pros and cons in order to make an informed decision.

The leaflet circulated to every household by the Electoral Commission offers little help. The page on the Yes side says "More jobs. Lower prices. NHS protected." while the one for No says "Our last chance to take back control". Yes is appealing to economic self-interest, No to a sense of nationhood. Such different value systems are difficult to compare.

This was reinforced in a research paper by Neil Smith that came my way this week. It makes the fascinating point that the UK is a member of the European Economic Area (EEA, which includes EU members and a few non-EU countries such as Switzerland, Norway and Iceland) independently of its membership of the EU, so leaving the EU does not, legally speaking, mean leaving the single market.

If so, the outcome of the vote will change Britain's economic relationship with Europe very little. The referendum question, as Neil points out, is essentially political. Once we understand it as such it becomes much easier to parse. Two visions are on offer, one nationalist, the other internationalist. What confuses the picture is that each vision separately embraces a wide range of political perspectives.

Internationalism is a central tenet of the socialist movement, for whom solidarity among working people transcends borders. But the capacity to operate internationally is also of key importance to corporate capitalism. This is why the traditional socialist Jeremy Corbyn is lined up with free marketeer David Cameron on the Remain side.

Nationalism also has its different facets. It embraces a spectrum from nasty racism to idealistic self-sufficiency. The leave side unites opponents of globalisation with neo-liberals who think that EU regulation is a drag on free market capitalism.

Given these odd associations of bed-fellows, anyone wanting to make a measured decision is entitled to be confused. The referendum has set up a false dichotomy which does not reflect a far more vital struggle  - one that pitches the values of global corporatism against those of human-scale relationships. Looked at like that the question for 23 June is simple: do we want to wage that struggle on our own, or in partnership with our European neighbours?

Tuesday, 17 May 2016

Brexit debate: a plague on both their houses

David Cameron wants people to be in no doubt about the disastrous consequences of leaving the E.U. Project Fear plumbed ever deeper depths last week as we were told that Brexit would weaken our security and increase the chance of a European war; that prices would rise, the economy would tank and that house prices would crash.

On that last point, many struggling renters and would-be homebuyers will say "bring it on". It well illustrates how corrupted is our economic system that higher prices for essentials such as food and clothing are deemed a bad thing, whereas higher priced housing (which is no less an essential) is good.

A bigger question, however, is why Cameron ever contemplated a referendum of which the consequences could, in his view, be so catastrophic; why he was was willing to take Britain to the brink for the sake of modest concessions from his European partners. But in those days he sang a different song: The E.U. was in desperate need of reform, he asserted, and Britain would be just fine without it.

So finally we come to the real question: does it matter that politicians say whatever suits them to achieve their ends? Is it OK, as many in the referendum campaign are doing, to make wild and often contradictory statements in order to appeal to people's visceral fears?

Politicians in a democracy have to take people with them, to be sure. But that should make politics a collaborative, social endeavour, not a gross shouting match between grotesque personalities. As it is, the entire realm of politics has lost the confidence of an electorate who increasingly call down a plague on all their houses, and may long resent the obligation to pick between two equally unattractive sides.

Friday, 13 May 2016

Let's not weep for the departing oligarchs - resilience begins at home

Posh London addresses...
Yesterday, billionaire hedge fund managers; today, the nameless super-rich buying into London's property market. All our instincts are screaming that these people do not operate in the best interests of society, and yet the refrain is the same: the rich are "wealth-creators" and we should be grateful to them rather than making them account for their wealth.

The rich are not wealth-creators, but wealth accumulators, and buying premium London property is part of that process. Having to reveal themselves under Cameron's much touted anti-corruption measures, will, it seems, frighten them off. Estate agents and lawyers - and doubtless interior decorators, security companies, limousine drivers and many others - fear for the crumbs that drop their way from these rich people's tables.

The UK is a dependent economy. It imports far more than it exports, and somehow it has to pay for it. Like those estate agents to the oligarchs it cannot operate without a steady flow of foreign money to balance the books.

Whether it's Chinese participation in HS2 and nuclear power stations, or secretive investors snapping up posh London addresses, or public services outsourced to multi-national corporations, or public institutions auctioned off to the highest bidder, almost everything in Britain that can generate an income stream has been sacrificed to keep the cash flowing in and make investors richer.

It's not sustainable and it's not resilient. Instead of Hinkley C we need local energy production; instead of selling off council housing to the highest bidder we need locally affordable homes. so let's not weep for the departing oligarchs - resilience begins in communities providing for themselves.



Picture: Amanda Slater (Flickr: Belgravia. London.) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Wednesday, 11 May 2016

Extreme wealth is not a "victimless crime"

Warning! Wealth-creators at work!
Twenty-five hedge fund managers took home $13 billion in earnings last year, according to a new report. Easy enough to be appalled, outraged, disgusted - or even impressed - but what does this really mean for the rest of us?

The assumption is that these people with the Midas touch are applying their hard work, ingenuity and good fortune to generating vast quantities of wealth, of which they then take a substantial cut. They are merely the most successful of the millions of people across the world who are trying to make money in investment markets.

But that phrase "generating vast quantities of wealth" is misleading. The wealth that comes through managing investments is not "created" or "generated" from new, but is reallocated away from other people. This might mean other professional investors losing out, but more often it means society at large. As employees, customers and tax-payers we all contribute to investor profits.

Politicians on all sides have for decades peddled the idea that encouraging people to get extremely rich is good for the rest of us. Whether it's Boris Johnston "humbly thanking the super-rich" or Peter Mandelson famously "intensely relaxed about people getting filthy rich as long as they pay their taxes", we've been led to believe that rich people have to "make" wealth before the rest of us can have a share in it.

The reality is quite the opposite. Wealth is created by people making and doing things that other people want and need. Things like growing food, making furniture, laying bricks, cooking meals, looking after each other, writing books, cleaning toilets, teaching young people, healing sick people, giving care to the elderly. Investors get rich by buying up this wealth-creating work as cheaply as possible, then creaming off as much of its value as they can.

Extreme wealth is not a "victimless crime". It's everybody else's wealth, concentrated into the hands of a small number of people, encouraged by the economic system. That system has had its day. It is time for change.

Photo: © CQC/Joe D Miles - ImageCapture via Flickr under this licence

Monday, 9 May 2016

Housing crisis: there's only one boat, and we're all in it.

Prices are rising, but who is winning?
Having spent the weekend debating the divisiveness of party politics, let's cut to the chase and talk about one of the big political issues of the day, which is housing. Conventional political thinking assumes that this is a generational matter, pitting the interests of older house owners against those of younger renters. Since older people are more likely to vote, that makes for a political no-brainer.

We could buy into that convention, which would make this an issue of inequality, or rich versus poor. This is what the political establishment would like us to do, because it suits the adversarial framing of party politics (in which the rich generally win). Or we could look at it another way, and try to work out what would be in everyone's best interests.

Research published last week shows that the "Bank of Mum and Dad" will help to finance 25% of all UK mortgage transactions in 2016, to the tune of £5 billion. To add to the picture, it is reported today that Nationwide is to offer mortgages that are funded through to age 85. So it's not only mum and dad, but also granny and granddad, who are using the value of their houses to raise finance for the younger generation.

It's pretty clear, therefore, that so far from having different financial interests, the generations in a family are all in the same boat together, each with a hand to an oar. For the oars to be effective, however, they need to be pulling in the same direction, and this is where the politics of fear come in. The older generations may think (or be persuaded to believe) that high house values are essential for them to be able to afford the help the children need.

The maths, however, says that the reverse is the case. Lower prices help everybody, reducing costs both for the first-time buyers themselves and the people who are helping them. Total borrowing, whether by older or younger, is less overall, so the only losers are the banks and lenders.

Lower house prices should bring hope, not fear, but that's not an easy message to convey to generations of established home-owners. I'll post some sums later, to illustrate the logic, but can anyone think of a more powerful way to make this convention-busting point?

Photo credit: copyright Terry Robinson and licensed for reuse under this Creative Commons Licence

Saturday, 7 May 2016

People don't vote, because the system offers no solutions

Limited attraction:
"Did not vote" the biggest winner by far
In our tribal, divisive electoral system it's no surprise that the biggest group of all is completely absent. In London on Thursday, 54% did not vote; in Scotland the figure was 44% and in Wales 56%. In English local elections the figures are similar or worse. And these figures are for registered voters. They do not include the hundreds of thousands of (generally young) people of voting age who do not make it onto the electoral roll.

Meanwhile, two election stories are dominating the news cycle. One is the failed Conservative "dog whistle" campaign against Sadiq Khan; the other is the "state of the parties" - who's up, who's down and can Labour win the next General Election under Jeremy Corbyn (or anyone else). Actually, they're the same story. Politics in the media is all about big-name politicians and the parties they belong to, rather than improving the quality of people's lives.

No wonder that a young person I met felt too uninformed about the issues and the candidates to cast a meaningful vote. They reasoned that they would unfairly dilute the votes of people who did know what they were talking about. Such faith in ones fellow citizens is admirable in one sense but almost certainly misplaced. Most people vote for party, not policy. Non-voters are left powerless and dispossessed, because they don't identify with any of the tribes.

In tribal politics, innovation is avoided for its risk of alienating core supporters. So the economy remains broken and unfair, the education system is dragged back to the nineteenth century and the NHS is starved of resources in the interests of tax cuts, because no party dares propose radical change. But radical political and economic change is precisely what we all (and especially young people) need.

Transformative policies, such as a viable basic income and truly affordable housing, will allow lives to be shaped by people's creativity rather than by debt and insecurity. The party system won't deliver them, but a new, values-based politics designed to engage those absent voters potentially could.

Picture: secretlondon123 (originally posted to Flickr as Polling station) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Thursday, 5 May 2016

Time to challenge the divisive values of party politics

Winners take all?
How the UK is divided by the party system.
Allegations that the Tories stole the last election by cheating on their spending are far more than a storm in an over-heated social media teacup. They point to an overweaning sense of entitlement in a system that disproportionately favours the big parties. The Conservatives, as the richest party, feel the most entitled, and their dismissal of the cheating claim as an "administrative oversight" suggests that they see rules as an irritation to be brushed off rather than an attempt to level an ever more uneven playing field.

Today is polling day. some people, in Scotland, Wales, London and elsewhere, have important decisions to make. Me - I get to vote for a Police and Crime Commissioner and my first instinct is not to bother, but then I'm reminded that alongside candidates from the main parties is an independent who looks like they know what they're doing. Here's a chance to challenge the system, and with turnout expected to be low my vote could make a difference.

Party politics is divisive and sectarian. Conservatives for those of us well served by the status quo. Labour for those of us in paid work, seeking a bigger share of the cake. Lib Dems? Hard to say any more (although hard-right "neo-liberals" have given the l-word a bad name). Greens for those of us worried about the environment. UKIP for those of us who feel dispossessed. However you look at it the entire system is designed to set people in opposition to one another, as if their interests as human beings are not essentially the same.

Trust in politics has rarely been lower, but to change things we have somehow to participate in the system, however rotten it may be. News that the proposed trans-Atlantic corporate takeover called TTIP may finally have been seen off shows that popular political action can be effective, as campaigns on tax credits, animal welfare and child refugees have also shown. But single issue campaigns, however much of a struggle, are always easier that systemic transformation.

The key to that transformation is to rethink our values. For so long as wealth and money are equated, the system will always seek to divide and rule. If we wish to challenge that assumption we need a new economic model - one dedicated to human wellbeing, in which value is measured not in money or numbers, but in the quality of our relationships, our collaboration and sharing, our sense of fulfillment, our health and, above all, our capacity to care for ourselves, each other and our natural environment.


Picture credit: By Brythones, recoloured by Cryptographic.2014 (This file was derived from:  2010UKElectionMap.svg) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons


Tuesday, 3 May 2016

Education is a relationship between pupils, parents and teachers. The government should keep out.

So that's what it means...
Photo: BenLaParole (Own work)
 [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)],
via Wikimedia Commons

If you missed the days at school when you would have learned to identify a determiner, a modal verb or a subordinating conjunction (which I fear I must have), you will drop a lot of marks in the new “harder” KS 2 SATs that are causing such controversy. Fortunately, these are useless pieces of knowledge, of significance only if one treats education as a form of mass-production in which the absence or misplacing of any one pre-determined component is a total fail.

This, presumably, is where schools minister Nick Gibb is coming from when he says “it simply isn’t fair on children to deprive them of a day of their education.” Shadow education secretary Lucy Powell also does not “condone children being taken out of school”. In this way they encapsulate the politician's view of education as a rigid framework of inputs selected and provided by the state, for which parents should be silently grateful.

This view reflects the patrician origins of public education. As each generation was better educated, parents were marginalised on the assumption that they had nothing to offer. If that were ever true, which I doubt, it clearly is no longer. Today's highly-educated parents are well able to assess their children's best interests, and to suggest that a day out of school is a “deprivation” is an outrageous slur on the value of the parent-child relationship.

Teachers, also, should be treated with respect. For pupils arbitrarily to miss a carefully crafted lesson is impolite, at best. Education is a partnership between parents and teachers, designed to help children to flourish in their own, unique ways. It's a vital engagement upon which government is systematically trampling, kicking both parties with equal vehemence with its oversized boots.

For this reason today's “Kids Strike” has a much wider significance than the grotesque new SATs that have provoked it. It heralds a battle to wrest control of education out of the hands of government and to embed it where it truly belongs - in a creative relationship between children and their parents and teachers.

Saturday, 30 April 2016

Rescuing child refugees is valuable work, but the system can't see it

Dutch children arriving at Tilbury in 1945.
Today's refugees may be less well organised,
but they are no less needy
Which is more valuable? The rescuing of vulnerable refugee children, or the management of a retail chain in the years prior to its collapse? By "more valuable" I mean which of these two activities brings more benefit to society?

This question may seem contrived, but in a week when the previous owners of BHS are reported to have received hundreds of millions of pounds from the now collapsed business, while the government declines to help child refugees adrift in Europe, it is, at least, topical and relevant. The activities of businessmen like Sir Philip Green are said to add value to the UK economy, whereas saving the lives of children is just a cost to be avoided if possible. Green received a knighthood for his pains; the children are left to fend for themselves on the streets or in unofficial camps.

It is natural to feel distressed at the miseries of refugees, and understandable to be disgusted by the excesses of corporate moguls, but is it such a stretch to connect the two directly? Apologists for the current system argue that it is only the taxes that rich people pay that allow us to help the needy. So they system massively favours the already-rich, cutting corporate and higher-rate taxes and oiling the wheels of big business at every turn.

If money were wealth, this deeply unfair system might at least have some internal logic. But it isn't and it doesn't: money is merely a tool for managing and distributing wealth. The wealth itself exists in the quality of people's lives, in their relationships, in their sense of achievement - in what advocates for a new economy increasingly refer to as "wellbeing".

Patching up the damaged lives of vulnerable children creates wellbeing that just keeps on growing - for the children and their families, for the people who work with them and for the rest of us who applaud that work and sleep easier because of it. Making huge profits in a low-pay industry, on the other hand, destroys wellbeing by directing wealth away from those most in need of it.

There is nothing in economics or politics to say that the system we have in inevitable. We are stuck with it only because we fail to challenge its basic assumptions.

Wednesday, 27 April 2016

Junior doctors are the standard bearers for a new economy

Photo: Garry Knight, Flikr (licence here)
This government's confrontation with junior doctors, which looked at one point like a traditional labour dispute about terms and conditions, has morphed into something much more important. What we are witnessing is an existential debate on the nature of value. How do we, as a society, value doctoring, or indeed teaching or any caring activity?

With figures showing that the fastest growing sector of the economy in the past 25 years is head office activity and management consultancy, the junior doctors' strike is a timely reminder that we can, as a society, choose what we value, and manage the economy accordingly.

At present we are stuck in a Thatcher era mindset, a perverse world of market economics in which caring is a cost that has to be paid for by creating wealth in some other way. We are told that financial services, management consultancy, estate agency, etc., create wealth, which we can then spend on the cost of keeping ourselves healthy.

In fact, the reverse is the case. Those transactional activities are the costs of running the economy. They create no new wealth, but merely channel existing wealth in certain directions (generally upwards). Doctoring, on the other hand, does create new wealth. It makes something (wellness) that was previously missing. As such it is not a cost, but a benefit.

Imposing a new contract is never going to fix this. We need a new economic model that directs energy and resources away from wasteful transactional activity towards the things that we care about. It won't come quickly, but when it does this doctors' strike may stand out as a significant marker on the way.

Tuesday, 26 April 2016

Productivity in crisis - armies of middlemen living on the backs of the productive few

More productive than it looks?
Photo: © Jorge Royan / http://www.royan.com.ar,
via Wikimedia Commons
To an otherwise comprehensive overview of the UK's productivity crisis by Duncan Weldon in The Guardian on Monday, one key factor could be added. Paid work is not necessarily productive, and not all productive work is paid.

Productivity is the measure of GDP per hour worked. Traditionally, it grows by introducing new methods and technologies, so that a given quantity of goods or services can be provided by a smaller number of people. This frees up other people to create more new wealth.

But the figures ignore all the work that people do freely for themselves, their families and communities - work that GDP does not measure. A paid child-minder is “productive”, but a parent minding their own child is not, according to official measures. This means that a lot of the most useful work is left out of the productivity data.

And just as unpaid work should be treated as productive, much paid work should be recognised as unproductive, and the amount of such work has grown rapidly in recent years. The record rise in UK employment means that more and more people are trying to extract a share of existing production, rather than creating anything new.

For example: many of Britain's consumer goods are imported. They don't start generating UK GDP until they arrive in the country, but then they generate a lot. A pair of training shoes made in a vast factory in Bangladesh might land at Felixstowe Docks with a value of £5. By the time the consumer gets out their credit card that value has risen to £80, even though the shoes are essentially the same.

Along that £75 supply chain are advertisers, retailers, wholesalers, lawyers, accountants, property agents, managers, bankers, financial traders, government inspectors and many others, all working to add transactional complexity, in order to extract their share.

One upon a time, a pair of shoes was made by a cobbler who dealt directly with a customer. It was slow, and in that sense inefficient, but at least there were no middlemen to ramp up prices for the customer and take a big chunk of the cobbler's earnings. Now, the supposed inefficiency of a crafts-person has been replaced by the real inefficiency of the supply chain. The number of middlemen is rising faster than the economy is growing and each truly productive worker carries a couple of unproductive transactional workers on their back.

Monday, 25 April 2016

Decades of sell-offs leave Britain unable to pay its way in the world

Port Talbot Steelworks: photo by Grubb at English Wikipedia
 (Transferred from en.wikipedia to Commons.)
 [Public domain], via Wikimedia Commons
The British government is chucking in some money to rescue UK steel production not as a coherent national investment but to avoid the embarrassment of losing the steel industry on its watch. The moment it gets the chance to sell its new shares it will do so. The labour movement is happy to see thousands of jobs saved by this part-nationalisation, so it won't rock the boat.

The episode illustrates the lack of a political strategy for rebuilding Britain's productive capacity. George Osborne won't tell you this, but the deficit that really matters is not in the government's finances, but those of the nation itself. Last year's balance of payments reveals that Britain spent £100 billion more than it earned. Unless we find a way to pay our way in the world, we're headed into yet more serious trouble.

Nearly forty years of selling off publicly-owned utilities, nationalised industries, national infrastructure and even basic government services means that Britain's capacity to retain its own wealth is severely depleted. Much lauded “foreign investors” come to Britain not out of goodwill but to enrich themselves, buying up customers and income streams that will pay out long into the future. Most UK households now buy their electricity from French, German and Spanish companies. As those profits leave the country they need to be replaced, so the government desperately looks for new things to sell.

Productive activities have, since the 'eighties, been steadily replaced in the UK economy by so-called business services - transactional activities such as  advertising, legal work, insurance, finance, accountancy, investment banking, management consultancy, most of which exist not to create new wealth but to move it around.

Britain is fortunate to be able to sell these services abroad, since they go some way to plugging what would otherwise be an astronomical trade gap, but relying upon them makes us vulnerable. Increasingly the large emerging economies will develop these skills for themselves. If they stop importing our food we can, at least, eat it our selves, while importing less. But financial services - I don't think so!

Thursday, 21 April 2016

To provide affordable housing, we need to defy the conventions of the market

Quality council housing form the 1960s, when land was for use,
not investment. Photo copyright John M and licensed for reuse
 under this Creative Commons Licence
Housing campaigners in Bristol are angry that the city council has sold off 14 council houses, even though the proceeds are to be used to build new homes.

In conventional market terms, the deal makes sense. The houses are old and in poor condition, but their location in expensive areas makes them valuable. So why not sell them and put the money into new, low maintenance replacements?

But conventional does not mean right, and the the anger is justifiable for two reasons. First, if these houses are desirable to people who want to buy them and do them up, then why could they not be desirable to council tenants, too?

The second reason is more fundamental. If you want to create affordable housing, the easiest way is to sell houses for less. But just as huge swathes of London's once-social housing have been sold into the private sector by cash-strapped local authorities because the land is so valuable, so Bristol is milking the stratospheric housing market to bring in as much money as it can from these properties.

High land values are the primary reason for the housing crisis. Land accounts for two thirds or so of the price of housing, which is what makes it unaffordable. Developers create artificial shortages in the supply of new houses to maximise the value of their landbanks.

If local authorities want affordable housing, they need to drive prices down, not feed the flames of a raging market. That means providing housing land at less than its market value and ensuring through legal covenants that it remains so for ever. A sufficient quantity of houses and flats provided on such terms would eventually bring prices down on the open market, too.

In this case, Bristol could have sold its houses at a substantial discount, to people willing to forego investment value in favour of a cheaper place to live. Under the terms of the sale, the discount would carry through to future owners, providing affordable houses for generations to come.

For sure it would have made less money, but there would still have been some to spend on new housing, while 14 newly affordable houses would have been instantly created at the stroke of a pen.