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 /,
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.

Wednesday, 20 April 2016

Sanders the outsider is far ahead of Clinton in the national race

Bernie Sanders (22546886990 f800475f7b n)
By Michael Vadon
[CC BY-SA 2.0 (]
via Wikimedia Commons
Following the New York Primaries last night The Guardian reports as follows:
"The increasing prospect of Trump and Clinton facing each other in the general election in November will trouble many Republicans. Current polling averages suggest that in a race between Clinton and Cruz, Clinton would win by two percentage points, but in a race against Trump, Clinton could win by nine percentage points."
The figures quoted are from polling averages, which make interesting reading for other reasons. Because what the writer doesn't say is that, in a race between Sanders and Cruz, Sanders would win by eleven percentage points, and in a race against Trump, Sanders would win by fifteen percentage points. And while the figures give third-placed Republican Kasich an eight point lead over Clinton, Sanders is ahead of him by four points.  In the national race, Sanders is polling much more strongly than Clinton against all comers.

These figures should get the Democrat super-delegates thinking. These party insiders own a big chunk of the electoral college and will probably wield the decisive votes at the convention. At the moment they're largely behind the establishment candidate, but this could change.

The numbers flesh out another story, too, a story about outsider status that could be important for UK politics. In this US election, outsider-ness is far more important than a candidate's place in the political spectrum. In an establishment Clinton/Kasich face-off, the Republicans have an handsome lead, suggesting an electorate leaning moderately right, which is what one might expect. But the favorite candidate is on the far left, the furthest removed from that "moderate right" position.

Where are the outsider candidates in British politics? Jeremy Corbyn has something of the Sanders aura but is too closely associated with the small "c" conservative (and deeply establishment) labour movement; Nigel Farage increasingly looks like a spent force; Boris Johnson is not an outsider, despite what he might wish us to think. Even the Green Party feels like it's become assimilated into mainstream politics.

Is there's something specific to British politics that encourages conformism? Many people blame the press, but the mainstream media in the US has shown little interest in Sanders, while non-establishment political movements have thrived in Greece, Italy and Spain, where much of the press is in private, right wing hands.

Maybe it's the electoral system, which gives new parties scarcely a look-in no matter how many votes they get.

Or maybe the British political class is just too orthodox and inward-looking to challenge a system that has endured for hundreds of years.

Or maybe things simply haven't got bad enough yet, which they undoubtedly will. In that case the system may still have the capacity to surprise us.

Tuesday, 19 April 2016

Brexit or Bremain - not much of a choice...

George Osborne's blood-chilling predictions of financial armageddon (a cost of £4,300 a year per household) in the event of Brexit make me want to run screaming into the “No” camp - there to make common cause with a bunch of people with whom I disagree on almost everything. Why? Because if the British economy is really so sensitive, then the system is all wrong in the first place. In that case Brexit could be the medicine we need to force us to sort it out.

Like many progressives, I'm an unenthusiastic Bremainer, reluctant to abandon the principle of “togetherness” that the E.U. represents. But while I cling to the idea that the Europe of people can make togetherness a reality, I am forced to acknowledge that the Europe of institutions is making the problem worse.

Take free trade, which is the cornerstone of E.U. policy. In theory it boosts competition and encourages more productive methods. In practice it means that companies exploit the lowest wages and tax rates they can find, to make their investors richer. Productivity has been replaced by profitability as the economic objective, on the basis that the total amount of wealth is less important than the amount of it that one can grab for oneself.

British governments have been encouraging this approach for over 30 years. The result: wages have stagnated while corporate profits and asset prices (including house prices) have soared on a great bubble of consumer debt. Meanwhile, the E.U. has shaken off the social idealism of its founders in pursuit of a single market in which corporations thrive while their workers are encouraged to embrace the spirit of “flexibility” - a market that will soon be wide open to U.S. and Canadian companies, too.

Whatever happened to people in all of this? They are either labour to be exploited or consumers made to pay as much as possible using money lent to them at extortionate interest rates. In Europe it's getting harder and harder to challenge this, as the Greeks discovered last summer. In a Britain outside Europe change would be both possible and necessary, but with political elites largely on the side of the investors it could well be change for the worse.

How did we end up with a choice between two bad outcomes? Because the system is rotten however you look at it. One thing's for sure, however: if Britain votes no, then a new political vision will be needed quickly, before Johnson, Gove and the rest of them have their free market way.