Archive for the ‘Economic matters.’ Category

25 years after the fal of the Berlin wall.

November 3, 2014

, economics editor of The Guardian writing in today’s edition of the paper, has a nice description of what happened in the West once the communist threat receded. 

 As it turned out, the end of the cold war was not unbridled good news for the citizens of the west. For a large part of the postwar era, the Soviet Union was seen as a real threat and even in the 1980s there was little inkling that it would disappear so quickly. A powerful country with a rival ideology and a strong military acted as a restraint on the west. The fear that workers could “go red” meant they had to be kept happy. The proceeds of growth were shared. Welfare benefits were generous. Investment in public infrastructure was high.

There was no need to be so generous once the Soviet Union was no more. What was known as neoliberal economics was born in the 1970s, but it was not until the 1990s that market forces reigned supreme. The free market spread to poorer parts of the world where it had previously been off limits, expanding the global workforce. That meant cheaper goods but it also put downward pressure on wages.

What’s more, there was no longer any need to be inhibited. Those running companies could take a bigger slice of profits because there was nowhere else for workers to go. If citizens did not like “reform” of welfare states, they just had to lump it.

 

According to Elliott after Soviet Union’s collapse;

What the world needed more was a vigorous opposition to neoliberalism and the misguided notion of the end of history. What it got was the collapse not just of communism but also of social democracy, which is why there has been so little fundamental change since the global financial crisis. An ideological vacuum was created when the Berlin Wall came down and it is slowly being filled. But it is being filled by nationalism, environmentalism and religion.

My only quibble with that is that I believe that the “ideological vaccum” was already there well before the Soviet Union fell. We must remember that the West welcomed the fall of the Soviet Union not because it thought its ideology was flawed because it thought all ideologies were flawed.  

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The Tories are lying quite openly – now there is a surprise. Part 2.

May 12, 2013

The Tories are lying quite openly – now there is a surprise.

 
For yet anotherexample their blatantly mendacious ways, see Nick Cohen’s piece Lies, damned lies and Iain Duncan Smith, in today’s edition of The Observer

Duncan Smith’s belief that the welfare state holds down the very people it is meant to serve is pleasing to Conservative ears. To maintain his supporters’ illusions, he has to lie. Last week, the UK Statistics Authority gave him a reprimand that broke from the genteel language of the civil service. The work and pensions secretary had claimed that his department’s cap on benefits was turning scroungers into strivers – even before it had come into force. “Already we have seen 8,000 people who would have been affected by the cap move into jobs.” How sweet those words must have sounded to Conservative ears. The government was forcing the feckless to stop sponging off hard-working taxpayers. (Taxpayers are always “hard working” in British politics, in case you haven’t noticed. We never try to get by doing the bare minimum.)

It seems that the Statistics Authority disagreed.

The figures did not show that, the statistics authority said. More to the point, they could not possibly have shown that. Duncan Smith’s claims were “unsupported” by the very statistics his department had collected.

It appears that  Andrew Dilnot, the chair of the statistics authority, is so concerned Duncan Smith’s habit of manipulating statistics to suit his own purposes that he thinking about sending his inspectors into the Department for Work and Pensions.

As journalists know, Duncan Smith’s modus operandi is well established. His “people” – all of them scroungers, not strivers, who sponge off the taxpayer from their Whitehall offices – brief reporters with unpublished figures. The Tory press uses them, and, as the Financial Times explained, when his spin doctors meet an honest journalist, who asks hard questions, they end the call and never ring back. By the time the true figures appear on the DWP website , and informed commentators can see the falsity, the spin, the old saying applies: “A lie is halfway round the world before the truth has got its boots on.

I’d like to think that there will come day when Duncan Smith – and his kind – will be exposed for what they are, but, as they say, I’m not holding my breath.

The Tories are lying quite openly – now there is a surprise.

April 25, 2013

Commenting on the underhanded way in which the Department of Work and Pensions has gone about scrapping to the £320 million a year funding it made available to so that 20,000 severely disabled could live as independently as possible, Zoe iliiiam notes notes that  the DWP lied about the purpose of closing the independent living fund. It didn’t admit that the money wouldn’t be there after 2015 until it was legally required to.

  Whenever this government comes out with an idea that sounds, for British politics, unusually unjust or barbaric or ill-conceived, it usually has its roots in the US (free schools, food stamps, dash for gas, shares for rights, privatisation of health services). What I mind the most is the readiness with which the government will now lie: the prime minister will lie about the national debt; the secretary of state will lie about immigration, the chancellor will lie about benefit claimants, they’ll be rapped over the knuckles by the Office for National Statistics or Office for Budgetary Responsibility, take their punishment and go straight out and lie again. So, in the words of Nicholas Tomalin, talking about politicians in a (real) war: “Never forget that they lie, they lie, they lie.”

Here are some examples of the lies that are cirdulated without apology.

Ask people where that  money that the governmet spends on welfare  goes and you’ll find  the assumptions is that it’s on unemployment or incapacity benefit. Apparently 41% of people think that the entire welfare budget goes to unemployed people paying out unemployment benefits.

In fact, half of UK benefit spending actually goes on state pensions. Jobseeker’s allowance is £4.91bn in 2011-12. That is a mere  3% of the  benefits bill that the government has to foot .

A vast of the  British public reckon benefit cheats are a massive problem.  A recent opinion poll showed Brits typically believed 27% of the welfare budget is lost to fraud.

The reality is less dramatic. The DWP publishes official estimates of fraud in the welfare system. The most recent publication estimated overall fraud at 0.7% (yes,0.7% ) of the benefits bill. Mind you, if you say £1.2bn,is lost on fraud, then you haved to allow that people are going to feel understandiblyunhappy. But then we should remember benefits can be underpaid as well as overpaid,  and that last year it is  estimared underpayments (arising from errors by either officials or claimants) added up to £1.3bn.  

 

Debt and what should be done about it.

April 23, 2013

For what i consider to be a few no very preposterous suggestions, read  Robert Kuttner‘s The Debt We Shouldn’t Pay which appears in the current issue of the New York Review of Books.

Public debt was not implicated in the collapse of 2008, nor is it retarding the recovery today. Enlarged government deficits were the consequence of the financial crash, not the cause.1 Indeed, there’s a strong case that government deficits are keeping a weak economy out of deeper recession. When Congress raised taxes in January at an annual rate of over $180 billion to avoid the so-called fiscal cliff, and then accepted a “sequester” of $85 billion in spending cuts in March, the combined fiscal contraction cut economic growth for 2013 about in half, according to the Congressional Budget Office. Moreover, some of the causes of public deficits, such as Medicare, reflect to a large extent inefficiency and inflation in health care rather than profligacy in public budgeting.

Here comes a point that’s now been lost sight of both in most countries tha are now been fed the austerity cure: 

It was private speculative debts—exotic mortgage bonds financed by short-term borrowing at very high costs—that produced the crisis of 2008. The burden of private debts continues to hobble the economy’s potential. In the decade prior to the collapse of 2008, private debts grew at more than triple the rate of increase of the public debt. In 22 percent of America’s homes with mortgages, the debt exceeds the value of the house. Young adults begin economic life saddled with student debt that recently reached a trillion dollars, limiting their purchasing power. Middle-class families use debt as a substitute for wages and salaries that have lagged behind the cost of living. This private debt overhang, far more than the obsessively debated question of public debt, retards the recovery.

We may think that debt – however incurred – has to be repaid: it a moral duty on us as individuals and as a society. Then again maybe there is a time when we have to think again.

In the case of a broad downturn,2 debt ceases to be purely a moral question, and becomes a pragmatic one: Will it help the overall economy for the law to demand that debts always be paid in full? Was it economically sensible to throw debtors into jail? Is it sensible now to force troubled corporations or banks to liquidate? To compel sales of millions of homes in a depressed market? To destroy the economic potential of entire nations so that they can service old debts that were incurred corruptly by previous governments or banks? Society properly discourages borrowers from taking on imprudent burdens, and the prospective loss of property or even liberty functions as a deterrent. But in a general collapse, debt forgiveness may become necessary if the economy is not to sink further.

He reminds the reader that debt relief and forgiveness has not been unknown, even in recent history. During the Great Depression and Roosevelt era

… the US government became serious about debt relief, with a series of policies that refinanced distressed home mortgages, reformed and recapitalized banks, extended relief to bankrupt consumers, financed a huge war debt at below-market interest rates, and wrote off some of the international debts of allies and enemies alike. (Britain, America’s closest ally, received near-total forgiveness of wartime Lend-Lease debt.)

Germany, today’s enforcer of Euro-austerity, was the beneficiary of one of history’s most magnanimous acts of debt amnesty in 1948. The Allies in the 1920s made the catastrophic error of helping to destroy Germany’s economy with reparations and debt collection policies. In the 1940s, after a brief flirtation with World War I–style reparations, the occupying powers agreed to behave differently: they wrote off 93 percent of the Nazi-era debt and postponed collection of other debts for nearly half a century. So Germany, whose debt-to-GDP ratio in 1939 was 675 percent, had a debt load of about 12 percent in the early 1950s—far less than that of the victorious Allies—helping to produce postwar Germany’s economic miracle. Almost every German can cite the Marshall Plan, but this larger act of macroeconomic mercy has disappeared from the political consciousness of Germany’s current austerity police.

Kuttner is wise enough to know the chances of countries such as Ireland having their debts relieved are remote.

The question of who gets debt relief reflects the distribution of political power—and power normally lies with large creditors such as banks.

 Just so.

Shaming the poor at will.

March 3, 2013

In a thought-provoking article published in today’s issue of The Observer, columnist Barbara Ellen, using the findings of  a multi-faith sponsored study called The Lies We Tell Ourselves. which highlights myths surrounding people and poverty, explains how shaming the poor has become the new blood sport

 The report argues that the government is “deliberately misrepresenting” the poor, blaming them for their circumstances while ignoring more complex reasons, including policy deficiencies. Moreover, they feel that this scapegoating is the result of collusion between politicians, the media and the public.

The reader does not have to wholly believe her assertion that it  does seem so long ago that most people would think twice about villifying fellow citizens for being down on their luck to see that she means that  thses days it appears “to have been sanctioned as a new national bloodsport, regularly slipping under the PC-radar as little else manages to.”

Is this our new default setting – that the needy are greedy? This chimes with a slew of government policies that appear to be founded on notions of bulletproof self-reliance, making no allowances for circumstances or sheer bad luck, and which many would require huge amounts of help to put into practice, never mind sustain. Meanwhile, the more fortunate are invited to pour scorn upon anyone who fails.

One could argue saying that it simply the “more fortunate” are the only ones invited to pour scorn on the failures ignores the fact that some of those pouring scorn are not always  especially fortunate themselves.  So what we have is the almost-poor being encouraged to  blame those below them for the situation they find themselves in.

Ellen has a neat explanation about how this came about.

 How does this kind of thing escalate? That’s easy. At the risk of stating the bleeding obvious, the poor are poor. They have no money, no voice, no representatives, and no means to establish their own public profile. Poverty is a big domino – once it falls, everything goes. In such circumstances, if a group of people are “deliberately misrepresented” then there’s precious little they can do about it. The churches got it right – if anything, the truth seems so much worse that it must surely be time to put the shame back into poor-shaming.

All I would add here is that the same could be said about those who who are almost poor.  They are encouraged to echo the those who are fortunate because while they may not have no money,  they almost certainly have “no voice, no representatives, and no means to establish their own public profile” Nor does it look like they will have in the very near future.

Hidden agendas.

February 19, 2013

In the pages of The Guardian  today, George Monbiot describes in some detail how  two secerative organisations – the Donors’ Trust and the Donors’ Capital Fund – funded by billionaires, and which provide a cover for various vested interests,  have financed 102 organisations which either dismiss much of the current thinking on climate change or downplay the need to take action.

These groups, working through the media, mobilising gullible voters and lobbying politicians, helped to derail Obama’s cap and trade bill and the climate talks at Copenhagen.

The large number of recipients, he suggests is deliberate because it “ creates the impression that there are many independent voices challenging climate science”.

By these means the ultra-rich come to dominate the political conversation, without declaring themselves  Those they employ are clever and well-trained. They have money their opponents can only dream of. They are skilled at rechannelling the public anger which might otherwise have been directed at their funders: the people who have tanked the economy, who use the living planet as their dustbin, who won’t pay their taxes and who demand that the poor must pay for the mistakes of the rich. Anger, thanks to the work of these hired hands, is instead aimed at the victims or opponents of the billionaires: people on benefits, the trade unions, Greenpeace, the American Civil Liberties Union.

Although most of what he describes is happening in America, there are it would appear organisations in the UK which are similarly funded and which serve a similar purpose.

The Institute of Economic Affairs is a British group that, like all the others, calls itself a free-market thinktank. Scarcely a day goes by when its staff aren’t interviewed in the broadcast media, promoting the dreary old billionaires’ agenda: less tax for the rich, less help for the poor, less spending by the state, less regulation for business. In the first 13 days of February, its people were on the BBC 10 times.
This Institute, it appears, gets some of its funding from an organisation called American Friends of the IEA.

Moribot’s persuasively argues that we need to know what these organisations are and who exactly it is that’s behind them.

 The answer, as ever, is transparency. As the so-called thinktanks come to play an ever more important role in politics, we need to know who they are working for. Any group – whether the IEA or Friends of the Earth – that attempts to influence public life should declare all donations greater than £1,000. We’ve had a glimpse of who’s paying. Now we need to see the rest of the story.

Look to Japan

February 10, 2013

In an excellent piece fot The Observer, in which he outlines lessons he learned from his week with Japan’s power-brokers, the columnist Will Hutton outlines the  “toll two decades of deflation had levied on Japanese society”

Hiromasa Yonekura, the president of the Keidanren, Japan’s all-powerful employers’ association, told me that this lack of confidence, in his view unjustified, had become hard-wired into Japan’s culture by falling prices. It affected even the birth rate and was the chief cause of Japan’s rapidly ageing society. Nor is the birth rate the only sign of a society in stress. Young women’s role in Japanese society is being knocked back by the fashion for coquettishness and cartoon-style prettiness, complete with singsong voices and contrived ways of walking. It is a return to suffocating traditionalism masked as fashionable faddishness. A society worried about its future becomes socially regressive.

However, he does observe that Japan’s capacity to pick itself up and go about the business of recovery is  “very much greater than our own.” And why is this?

Time after time, as I questioned company leaders about their capacity to do this, I was referred to Japan’s “public interest” or “stakeholder” capitalism – committed long-term ownership, partnership with the state to drive research forward and corporate leaderships keen to find commercial responses to the giant economic and social problems of our time. It is a world foreign to our own of shareholder value maximisation and gigantic personal bonuses, where interest in social problems is seen as “anti-business”.

It certainly is.

Student loans (USA style) in crisis?.

February 5, 2013

Bearing in mind that we are drifting  towards a crisis in the funding of education in the UK, I suggest that this Salon report is worth reading in full.

 Student loans: The next housing bubble

The American system of higher education is increasingly becoming a fiscal disaster for ever-larger numbers of students who move through it.  That disaster is being caused by a combination of terrible incentives, institutional greed — and the pervasive myth that more education is the cure for economic inequality.

The extent of this myth is highlighted by a new report from the Center for College Affordability and Productivity, which indicates that nearly half of all employed college graduates have jobs that require less than a four-year college education. Despite such sobering statistics, the higher-education complex remains remarkably successful at ensuring that American taxpayers fund the acquisition of educational credentials that, in many cases, leave the people who obtain them worse off than they were before they enrolled.

This  sugggests to me that the UK may not in the long run  be doing itself many fiscal favours by moving the student l0an sytem of funding further education.

It’s all Labour’s fault!!!!!

February 4, 2013

Its pretty much conventional wisdom to say that New Labour left the British economy in an appalling mess. The Conservative Party and its supporters in the right wing press never tire on saying so.. However, those of us with longer memories and with fewer reasons for rooting out bogeymen everytime we see a problem,  should not accept without question this very comfortable narrative.

  Firstly, we should recall the economic crash was principally a failure of the market.  Adair Turner, head of the FSA, described it as perhaps being the ‘biggest crisis of free market capitalism’ ever. Secondly, the crash was a global economic one and not unique to the UK.

 These two points are vital when trying to fully understand what happened. A properly balanced history of New Labour’s economic performance should recognise that there is little evidence to suggest that the Tory party would have either avoided the crash or would have done anything that make the UK better prepared to deal with its consequences.

 One of the main thrusts of  he arguments coming from the Consevatives is that there was insufficient regulation of financial institutions. Better regulation certainly would have  helped us to avoid some of the outcomes; of this there can be little doubt. However, the question we have to ask is whether or not the banking sector would have been adequately regulated under the Conservatives. I think not.

 Neither does the admirable Deborah Orr

In and opinion piece she wrote for The Guardian in December 2012, entitled “Why are the Tories laughing? Because they’ve got away with it yet again”, she says:

 The Conservatives have had awesome success in promulgating the nonsensical idea that the crash was caused by Labour incompetence and overspending, when it was really caused by Labour’s failure to tackle the neoliberalism introduced by the previous Tory administration. Genius. Not only do the Conservatives fail to take responsibility for the results of the banking deregulation that their party “masterminded”, they also manage to look as though they are the poor sods picking up the pieces after a socialist failure. That’s such good insurance, too. They can carry on saying, for a while yet, that the problem they inherited was huge. And they’re right. It was huge, because it had been being stoked up since the Big Bang 26 years ago.

  How do we explain the “awesome success” the Conservatives are having in continuing to lay the blame for everything at Labour’s door?

Cuts and the economy.

September 17, 2009

It is, though I don’t know why it should be, astonishing just how quickly we seem to have forgotten how and why the current economic crisis occurred and got back to the business of arguing about how public debt is a the source of all our economic woes.

 You don’t have to agree with everything Seumas Milne has to say in today’s edition of The Guardian to recognise that he is quite correct in saying that there has been a shift in emphasis about what needs to be done about solving the problems the economy is facing.  

 Instead of an argument about how to beat the slump triggered by the banking crash, all three main political parties are now competing over how to cut public spending and services. Cheered on by the bulk of the media, Cameron and Osborne have executed a startling sleight of hand, persuading a large section of the public that the real crisis facing the country isn’t the havoc wreaked on jobs and living standards by the breakdown of the free-market model — but the increase in government debt incurred to pay for it.

It may look as though this is a result of  Cameron and Osborne  having  ” executed a startling sleight of hand”,  but, in my opinion, it pretty much down to Brown’s make radical changes about how we thought about the “free market” on the back what he did to save the economy. He just simply cannot bring himself take on the bankers and the city, and that means that he has, from the outset,  allowed others to set agendas.