May 042014
 

This weekend I’ve been at Liverpool Sound City, a music festival based in the heart of the city centre, taking over disused spaces and opening-up events to audiences that might not otherwise use them. The Anglican Cathedral is a standout space, who would have though that hosting two thousand people for a rock concert could be achieved in one of Europe’s most iconoclastic religious buildings?

Liverpool's Anglican Cathederal

Liverpool’s Anglican Cathedral

The UK has some fine music festivals, and the appetite for them doesn’t seem to be diminishing. The approach of most festivals is to offer a wide diversity of performances on different stages, with different styles and genres of music. Headliners are given a big push and coincide with the marketing plans of the major labels, while smaller stages are a great place for new acts to learn their craft, refine their ideas and message, and meet-up with new audiences. For many it’s the nooks and crannies that make a festival memorable, tent-poled between seeing iconic performers and events.

It’s generally recognised that pushing new bands is tough everywhere, and that a festival entirely consisting of new, or at least unrecognised music, would be too challenging. This is where the heavyweights are brought in. A strong headlining legacy-artists can make or break a festival, despite the collective value and the worth of the supporting performances. Though too much reliance on the legends or the old guard, depending on how you see it, can have a stultifying effect and we end-up with performances that are too well trodden and predictable.

Eyedress at The Kazimier

Eyedress at The Kazimier

For the punters, some will only want to see the mainstream acts that all of their friends know and recognise, thus joining into a collective experience of shared references and memories. Recognition rather than obscurity is a powerful force. Others, though, are happy to discover alternative performers operating in the parallel margins and regard happenstance and serendipity as a key motivating driver of the experience.

Luckily it seems that music festivals, when done right can accommodate both. Without a good mix from the mainstream and the alternative acts acting in parallel the vibe isn’t right. Festivals depend on the opportunity for chance and the random encounter. That performer that you never would have thought of seeing in a million years turns out to be brilliant and the highlight of the weekend.

Festivals are chaotic, ad-hoc, temporary and founded on a common will to share an experience that confronts and reverses the standard dynamic of bureaucratic control that is exercised in daily life. Mikhail Bakhtin called it the ‘carnivalesque’, the point at which the tables are turned, however temporarily, giving power and authority over to the crowd.

Creativity – either industrially sourced on a large-scale, or thrown at the wall in seemingly random micro-acts -has a premium. Transgression is valued. Individual experience is central. As the festival-goer you get to choose. Either you can put the work in with a confrontational performance artist, or you can let the work come to you by watching a mega-scale performance from a ‘branded’ act. Both are valid.

Solids at the Kazimier

Solids at the Kazimier

What is clear, though, is that none of this is achieved without a clear sense of communalism. Unlike mainstream consumerism, the music festival only works when the experience that is being proffered is collectively engaged. A music festival isn’t a privatised affair. Instead it gives people the chance to share in a set of interests and ideas that they recognise as a self-determined part of their identity.

A rationalist economist might be able to reduce the experience of attending a festival to an equation, a dictum or a set of instrumental principles, but I think they remind us that human nature is pragmatic, contingent and ‘spiritual’. Who wants to go to a festival that is organised by committee and which doesn’t have any meaningful risk? As long as there is an alternative form of expression, we often find that we accommodate ourselves with the commercialism and the sponsorship. Even to the point of Kasabian…. Well, I won’t go that far…

We are very good at rationalising the capabilities we have acquired at different times into something that is supposedly eternal and immutable. Post hoc, ergo propter hoc is what the economists call it. Rationalising after the event. At a music festival our successes are achieved by going with our gut instincts and foregoing the rational or planned exchange. Keynes reckoned that the economy is shaped by the animal spirits. I wonder what he would have thought of Glastonbury? A music festival is both an analogy of those spirits and an opportunity to engage in an animalistic way with the world. I would recommend that some of our more reserved and rationalist economists give a music festival a go at some point. They might just come up with a more humanistic and realistic way of thinking about the world.

Apr 172014
 

If you have been keeping an eye on British Politics over the last couple of years, since the financial crash of 2008, you might be mistaken for thinking that the political parties, Conservative, Labour, Liberal, Green, and Nationalist, are all adhering to and promoting economic policies that are core to their ideological beliefs.

The coalition government is thought to be promoting a conservative form of austerity in order to move the economy back to laissez-faire liberal doctrine and remove the state as an inhibitor of free-market rationalism.

Labour, on the other hand, is generally perceived to be advocates of Keynesian demand management principles – i.e. the slump is the wrong point for austerity, it’s the boom when we will pay off our debts.

Nationalists want increased local control over the economic conditions of their local populations and see this happening either through independence or through border controls. With the Scottish Nationalists it would be an approximation of autonomy from Westminster, and for UKIP, it is through a combination of border controls and an abandonment of the rules-based transnational market of the EU that fuels their aspirations for economic independence.

The other group offering a distinctive economic ideology is the Greens, who want to shift consumerism from it’s present position as the engine of the driver of growth, to sustainability and environmental protection as the key drivers of economic action.

All this seems straightforward and predictable, but what if I said to you that it is a misplaced presumption and that what you are seeing in UK politics is not what you are getting? Indeed, the level of ideological cross-dressing and the double-speak of politicians has reduced our understanding of the options in front of us to a burnt-out husk that is profoundly anti-democratic and actually bad for the economy.

An excellent article in The Guardian by Simon Jenkins points out the absurdity of our present economic and political choices. Jenkins argues that:

“On coming to office, Osborne did indeed cut the “planned rate of increase” in public spending, as Darling had pledged to do. In 2009 total spending was £634bn. By next year it will be £732bn, higher even in real terms. The only big item truly butchered has been local government, and the coalition cares not a fig for that. Osborne has missed all his budget balancing targets and is way off course on borrowing, which still hovers around £100bn. He would be savaging Balls if the latter had been in office. Compared with Greeks or Spaniards, Britons do not know the meaning of austerity.”

Meanwhile, Ed Balls has agreed with Osborne that the state of the public finances is such that the amount the UK spends on welfare has to be capped, regardless of the evidence or the need of the country during the financial period the government deems this appropriate, which is after all entirely arbitrary. You might think that this policy would cause outrage on the Labour benches, but only thirteen MPs rebelled against the Labour leadership and voted against the cap.

If you follow mainstream political reporting in the UK it will tell you that the Conservative Party is riven with division over Europe, and while this might be true of it’s MPs and it’s members, there is another story emerging from the leadership of the party. This story is one in which Cameron, Osborne and Clegg, rather than being the children of Thatcher, are actually and secretly the children of the arch conservative interventionist Michael Heseltine, and that they want Britain’s economic model to be more closely aligned to the German model. Fraser Nelson, writing in The Spectator calls this Cameron’s ‘Northern Alliance’, in which the UK, or what is left of it after Scottish independence, is part of a reconfiguration of the EU along more integrated and state-structured lines. Osborne’s recent charm offensive for the UK to be more German is no accident. He wants to shift the UK economy from a consumption-based dynamic, to a producer and an expert-based dynamic, and the only way to do that is to form an alliance that is able to ‘guarantees fairness’ – or as Mark Blyth calls it German ‘ordoliberalism’.

I know this might sound bonkers, but if the Conservatives win the next general election they will take Britain into a closer alliance with the EU and will even adopt the Euro, despite the offers and talk of referendums and opt-outs. The conservative-nationalist rump will find a home in UKIP, the Europhile Liberal Democrats will form a permanent alliance with Cameron and Osborne, who will then be joined by the New Labour Tendency who will see the compromise offer of a market-driven welfare state along German lines as too irresistible to miss.

So, where does this leave the USA and Britain’s supposed historic ties with the entrepreneurial and dynamic liberal economy that it represents? Well President Obama is more to the left on the economic argument than the Germany dominated Europeans. Insisting on a Keynesian stimulus package while reforming and restructuring the private debt accrued in the crisis, through interventionist state action doesn’t seem very neoliberal or laissez fair, but then the US economy has been growing at a steady rate since 2009 and has recovered much of it’s reversals that it incurred from the crash of 2008. The fundamental alternative that the USA will offer will be the ability to inflate or deflate it’s economy in comparison to others through it’s exchange rate, and not as Europe is doing at present – through internal deflation.

If you are worried about the democratic implications of this, look at Greece and Italy who have seen their democracies overturned and replaced by technocratic committees in the name of competition and sound finances. How long can Spain, Portugal, Greece and Ireland sustain unemployment rates of twenty-five percent without significant social unrest or a shift to right-wing and fascist parties? This is the massive gamble that is being played out here.

This leaves us with an interesting dilemma, who should we listen to and what should we expect out of an economic growth model for the UK in the next five years and beyond as we try to come to terms with the collapse of the Thatcher/Regan coup? Should we listen to Cameron and Osborne, who are expert at saying one thing but doing another, or should we listen to Miliband and Balls who… well here’s the problem… they don’t seem to be saying very much at all, and this is what is worrying. Do Miliband and Balls want to follow Merkel and turn the UK into a duplicate of the German model, or will they follow the US and maintain a stance that looks to liberal entrepreneurialism and demand led markets that offer a limited social underpinning?

It’s not like these issues are being discussed openly, and I’d like to know more about the choices that are on offer. In a perverse way everything is up for grabs. The Conservatives have formed a permanent alliance with the Orange Book liberals and are rediscovering by stealth that Europe is a potential guarantor of economic growth, as long as it is governed by rules and structure. Will we see Labour rejecting the paternalism of ‘ordoliberalism’ and seeking an alliance with American liberals and social progressives along a liberal-Keynesian model of aggregate demand management in the context of global markets? Or, we could all resort to nationalism and fight with Russia as a way of distracting ourselves from thinking and analysing how these things might work out.

Apr 152014
 

Nov 282013
 

So Boris Johnson has caused a kerfuffle with his jibe “The harder you shake the pack the easier it will be for some cornflakes to get to the top.” According to The Guardian “Johnson mocked the 16% ‘of our species’ with an IQ below 85 as he called for more to be done to help the 2% of the population who have an IQ above 130.” Johnson’s intention, according to The Independent was a call to “a new generation of Brits to embrace greed and snobbery as a ‘valuable spur to economic activity’ during a speech where the London Mayor paid tribute to Thatcherism.”

In Johnson’s rambunctious manner, not only did he put his finger on the direction of future political schisms in terms of ideology, but he also set the battle-lines for a geographic tussle that could split the nation along a north-south divide, or more specifically a South East and the rest-of-us-divide. Big stuff, you might say, but then an antagonistic case has to be made as an alternative to Boris’ essentialisation of inequality and the moral and geographic determinism on which it is founded. The Telegraph quotes Johnson as saying “I don’t believe that economic equality is possible; indeed, some measure of inequality is essential for the spirit of envy and keeping up with the Joneses and so on that it is a valuable spur to economic activity.”

Let me point to a couple of features of this discussion that might lend them to the response that needs to be articulated in opposing this latest salvo of the ideology of muscular liberalism that Johnson represents. The Spirit Level argument is one notable starting point, based as it is on the proposition that the more unequal a society is, the worse it does in terms of economic performance. The recent OECD report into levels of literacy in the developed world, highlights the correlation between degraded levels of equality and the reduced levels of performance in basic skills. Put bluntly, the more unequal the resources of society are shared, the less likely that people will achieve the requisite levels of capability that will enable them to play a role in an economically dynamic economy, thus making us all poorer.

Johnson’s belief is founded on a moral fundamentalism that sits at the heart of muscular liberal thinking. It was expressed bluntly by Boris, and runs along the lines that it is each individual’s strength of aspiration and the extent to which they are willing to strive in the marketplace which justifies the rewards that they receive. This is an a priori worldview in which the moral virtue of the striver goes without challenge. The wealth creators get where they do, not because of luck, privilege, bias and the platform that was put in place from which they can operate, but instead because they are de facto morally superior and therefore deserve the rewards they get. The winners in our society get the wealth they have because they are due the reward for being better people than the rest, is the argument. They are, as Johnson describes, the ‘cornflakes’ who are capable of rising to the top of the box, and they deserve to be there.

What this argument ignores, though, is the fact that the cornflakes box is riddled with bias, hurdles and barriers that keep the lower cornflakes in their place, and enable the cornflakes that start off from a higher vantage point to maintain their differential place. The undeserving cornflakes, by contrast, can only expect to remain in the lower part of the box because they are accordingly held to be morally inferior. In Johnson view those at the bottom of the cornflakes box lack the ambition and the moral drive that the strivers possess, and so they must know their relatively subordinate place and keep within the segregated layers that suit their status in life. All the lower cornflakes can do is watch with envy as the morally superior cornflakes enjoy the rewards and opulence that comes with their inherent moral value.

Except, the conditions in which the cornflakes that rise to the top are not so clear-cut. As a philosophical mind-game I can see the sense in arguing that those who are capable of rising to the top are able to do so, but only if those who are at the top are equally capable of losing their foothold and falling to the bottom. This would be a virtuous cycle of replenishment based on merit, but I don’t think Boris is actually arguing for that to happen, is he? How radically Thatcherite it would be if Johnson argued for a dismantling of the mechanisms of wealth perpetuation? If Johnson was arguing that we should take apart the infrastructure of privilege and pre-selection that is inherent in the British social and economic system, then I might be willing to accept his argument as a worthy challenge to the prevailing social order. One that many other radicals could support.

Rather than calling for the expansion of the selection process in education and the widespread return of the grammar school system, Johnson would instead, if he was genuinely Thatcherite, argue for the removal of all forms of selection based on social bias. He would introduce lotteries and the redistribution of resources so that those with the innate IQ (if such a thing is possible), wherever they are found, could realise their potential based on an equal ability to compete based on merit. This is not a world in which who your parents are would make any difference. Nor would the connections your family have in the professions make any difference. Nor would your ability to pay for additional tutoring, or to go to private schools, or to receive any financial and status benefits that the state offers in terms of tax breaks above those of the average. Without sounding like a communist, Johnson’s moral economic radicalism would call into question the structural protection of property rights and the reinforcement of inheritance regimes.

But Johnson is calling for none of these things. Instead he is pandering to the South East mind-set in which those people who live in one part of the country that have benefited from the post-war, mid-twentieth century, geo-political realignment. Johnson is their champion and wants them to continue to benefit. Before World War Two the wealth of the UK was created in its Northern and Western industrial regions. Coal mining, steel, textiles, wool, manufacturing and shipping, was focussed on Manchester, Newcastle, Glasgow, Cardiff, Liverpool. The South East was essentially an agrarian bread-basket. London was a port and a centre of banking. The latter half of the Twentieth Century saw a reversal of these fortunes, with London primed as a service industry hotspot by Thatcher and Blair. The shift in geo-political power was due to the closer integration of Europe and the development of information based technology services. The rest of the United Kingdom was left to fend for itself. Industrial policies were restricted. Regional policies were emasculated. The independence of our once mighty northern cities was curtailed. No wonder the Scots are voting for independence!

If you owned land or property in the South East of England its value increased in the post-war period purely by a coincidence of geography and economic realignment. This increase in value had nothing to do with the individual appetite of people to strive, or the moral virtues held by the people who had ownership of these lucky assets. It was a lottery win. Purely a chance win in the lottery of life. Being in the right place at the right time. But Boris Johnson doesn’t want you to think about this. In Boris’ world the wealth was created by people who wanted it more, and who would do anything to maintain their relative differential with fellow citizens. This political and economic difference could be magically wished away, because they could more readily be reduced to a moral justification that maintained the relative structural differentials whatever the cost.

This greed is good mentality is based on ensuring that other people can’t compete,being cut off from a fair distribution (pre- and post-) of resources. Usually taking the form of admonishment, people are berated for not pulling their socks-up, getting on their bikes or being skivers, despite the fact that relative effort does not receive a proportional outcome. Employment displaced people aside, many people under this system are able to work less and still receive more, regardless of the the relative moral status of their claim.

The legions of Borisbots who invest in the South East of England do so because the tax breaks are generous. The Council Tax remains unreformed, despite the gross unfairness of the ratings system and the fact that there hasn’t been a market re-evaluation since it was introduced in 1992. As a property tax this scandalously takes money and demand away from the diminished north and further pump-primes the south-east. Likewise inheritance tax remains unchallenged and is shot-full with so many loopholes that money cascades from one generation to another with barely a murmur. Our judiciary and senior positions in the civil service remain full of people drawn from private schools. The elite universities continue to be stuffed with people from privileged backgrounds. You can see where I am going.

Yet if you are bright and from a modest background, your chances are squeezed. Paying for tuition fees, the removal of Educational Maintenance Allowances, the Bed Room Tax, hikes in public transport costs, the increase in under-employment, temporary contracts, a hire-and-fire attitude with no protection and little access to law and redress. Credit has fuelled the feel-good factor. Property speculation is being driven up to further boost economic activity in the South East. The Bank of England is slamming on the breaks in the hope of stopping the bubble bursting. Michael White of The Guardian warns Watch out, Boris. You are playing with fire – fire that may be tempted to burn down Eton just to prove it’s on the people’s side.”

So less of the lectures about the moral virtue of greed please Boris. If you really want to be a radical you will have to challenge the sacred-cows of conservative England, and the perpetuation and retention of wealth and opportunity by a diminishing super-elite. The level of inequality that we have in the United Kingdom is unsustainable and will lead to the social bonds being stretched to the point of no return. This is not a way to build a sustainable economy and it is not the way to justify what are otherwise morally reprehensible, deterministic and borderline fascistic comments about the individual capabilities of our fellow citizens. No doubt Boris can relate this to ancient Greece or Rome better than I can, all I would say is that we must be beware polybian demagogues!

[Update] Andrew Rawnsley has followed this story in his column in The Observer, in which he points out that Boris is repeating a well established trope – one played out in Aldous Huxley’s A Brave New World. Rawnsley points out that  “the real problem here is with the implied conclusion that the poor are poor because they are born stupid, the rich are rich because they spring from the womb destined to be that way, and there’s nothing much anyone can do about it except to urge the wealthy not to be too “heartless” and let a few of the talented poor into the elite.”

Aug 122013
 

Only in the topsy-turvy world of Neo-Liberal economics can the further decline in Greek Gross Domestic Output (GDP) be called a triumph. And yet, that is what economically conservative newspapers like the Daily Telegraph are saying about the latest batch of figures that show that Greece is in recession for the twentieth consecutive quarter.

According to the Daily Telegraph “Excluding the borrowing costs on its massive debt burden, the Greek government is now raising more money than it spends.” What the Telegraph isn’t reporting is that this has been achieved by massive lay-offs of civil servants, a relaxation of the minimum wage and a punitive property tax that will only be exempt for those living below 6000 euros a year.

Obviously, the most simple economics lesson from history has not been heeded. When in a slump, the only way out is to stimulate demand in the economy. As Simon Jenkins in The Guardian has rightly pointed out for some years now, the best way to do this is to give the money directly to people to spend, rather than to bankers in the form of Quantitate Easing and the purchase of bonds. How much QE money has been salted away in tax havens and used to keep share prices high?

Instead of the stimulus money going into the Greek economy to ensure that it can grow it’s way out of debt, the austerity nutters are continuing to bleed the Greek economy dry while expecting a miracle. No wonder the politics of fear and uncertainty are taking hold in Greece.

The Greek unemployment rate is now at a staggering twenty-seven per cent, with no sign that it is coming down. All those people out of work, dependent on squeezed state benefits and charity hand-outs. Before long we have to start asking what will be left of the Greek economy, because at this rate there is going to be very little to work with afterwards to restore growth.

As Zygmunt Bauman points out “The fraudulence of the promised ‘trickle-down’ effect of opulence at the top has now been laid bare – for everybody to watch helplessly and bewail – but the ‘collateral casualties’ of the grand deception are here to stay for a long time to come. The foundations of social solidarity and communal responsibility have been sapped, the idea of social justice compromised, the shame and social condemnation attached to greed, rapacity and ostentatious consumption have been wiped away and they have been recycled into objects of public admiration and celebrity cult”.

It is not the ordinary people of Greece who brought this about, but the international financiers in London and around the world who have inflicted this burden on the Greek people. I can only utter my indignation – twenty quarters of recession! Surely someone might have got the idea by now that this isn’t working? Imagine how much it is going to cost to repair the damage and sort out the cost to Greek society once this wicked experiment is over?

Aug 072012
 
wpid-wpid-UK-deficit-graphic-008-2012-08-7-13-52-2012-08-7-13-52.jpg

Demand Management?

Given the current crisis of capitalism there are many commentators who are arguing that the left, or progressive side of politics, need to return to an over-arching counter-theory to capitalism. Indeed, the shock of the present crisis is leading to a fundamental re-evaluation of the very form of capitalism itself. Not only is the crisis allowing for a reappraisal of the long-standing economic views, it is also generating considerable rethinking on all sides of the political/idealogical spectrum as well. In some cases this reappraisal is allowing us to look again at writers and thinkers who have previously been shunned and written-off. The irony of this crisis is that a re-reading Marx throws-up insightful historical challenges and allows us to find pertinent resonances with today’s political economy. This must be giving many on the left a tingling sense schadenfreude.

As with Karl Marx, so it is with John Meynard-Keynes. I’ve just finished reading Robert Skidelsky’s Return of the Master, a brief account of the relevance of Keynesian economics as a response to the present economic crisis. Originally published in 2009, at the point when the shock of the crisis was being tentatively dealt with, Skidelsky outlines the key ideas of Keynes and how they might be applied in order to ensure that there was no return to recession. Obviously, economic events have continued to zig-zag since Skidelsky put pen to paper, and the early opportunity he describes to embed recovery now seems to have been squandered with the self-defeating drive for austerity. Given the circumstances, then, these are timely ideas that are rightly enhanced rather than diminished, and need to be more fully explored.

Robert Skidelsky argues that Keynes would have said that this ongoing crisis is based on three flaws. The first flaw has been institutional, with the governing and regulatory authorities being unprepared to deal with the high level of uncertainty that the global economy is now struggling with. Secondly, Skidelsky points out, has been a significant flaw in intellectual thinking that has been embedded around economic theory since the mid-1970s. This thinking says that we are all independent, rational economic agents that are capable of always making an optimum decision about our well-being, as long as government doesn’t interfere. Finally, there has been a collapse of moral thinking, where bankers have gambled shareholders and taxpayers money without incurring any personal loss or accountability themselves.

While many have argued that the present crisis is a problem of debt, Skidelsky argues that if we employ Keynesian insights into the origin and management of the crisis we might see the cause and the solution in a different light. Rather than thinking of this financial crisis as a problem of debt, Keynes’ insight is to see this as a problem of excessive saving. Rather than looking at the individual countries that are facing crisis we should, according to Keynes, take a step back and look at the level of aggregate demand in the global economy. If we did step back we would see that there are considerable amounts of capital looking for investment opportunities. The problem is that there is so much uncertainty that investors are not investing and instead are looking for safe-havens in which to hoard their liquid assets, either as cash or bonds. Everyone is battling-down-the-hatches for an imagined on-going storm, and as Keynes points out, the herd mentality takes over leaving the financial system to run dry of lubricating credit and finance.

This is not a crisis of debt, argues Skidelsky, it is a crisis of thrift and hoarding. Overall there is more than enough capital in the international financial system, it’s just that much of it is being locked away. The levels of capital investment by both private companies and by individuals has dropped considerably, and continues to be depressed. In this scenario it is left to the investor of last resort to step-in and provide support for investment until private investment returns to sustainable levels. That’s government acting on our behalf. It will only be when private investment is functioning in a more balanced way that governments can begin to deal with their accumulated budget deficits and start to manage their debt overhangs. This, of course, will take time and effort to achieve, but as Keynes points out, we have to make an assessment about the future anyway, the question is do we have sufficient confidence in that future? Governments role, therefore, is to enhance certainty in the financial system so that investors can make their plans for the future, knowing that they are likely to get a reasonable return. It is this confidence in the future that only government can provide in these circumstances, and which has been so clearly blown away in the present responses of governments around the world, some who have followed the heard and set unrealistic short-term targets and made irresponsible analogies with national credit-cards and household debts.

Ironically personal debt is being paid off at record levels, but as Paul Krugman points out, ‘Your spending is my income, and my spending is your income’, so demand is being further depressed because of the ongoing lack of confidence. Promoting and directing demand, therefore, is the number one priority for governments in these circumstances. Since the 1980s demand in the UK economy has been stoked by privatising debt. The rise in home ownership, personal loans, credit cards, tuition fees, and so on, have given many the sense that their relative economic position has improved. However, there is good evidence, suggests Skidelsky, that overall growth rates have been lower following the Reagan-Thatcher period than in the previous Keynesian, demand-management period. It is going to be difficult, therefore, for the UK and US economies to be rebalanced on the basis of the expansion of conspicuous consumer activity. Instead, the expansion of the economy is going to have to be directed through investment in collective and shared resources, manufacturing, transport and energy services. The time to worry about debt, argues Keynes, is not in the slump but in the boom.

In the meantime we have an opportunity to renew much of our crumbling infrastructure on the basis of the long-term loans that Britain has access to on the markets at record low rates. How we prevent the hoarding of resources that could otherwise be invested is going to be the greatest political challenge of our recovery. How do we ensure that the resources we direct into the economy are going to have any effect? Well, the £350 billion that has gone into the banks as part of the quantitative easing programme run by the Bank of England doesn’t seem to have had any impact in the real economy. The banks are hoarding this cash as insurance against uncertainty. It’s not being invested directly. The job of government in these circumstances is to focus this investment directly and urgently into the economy. Many argue that there is nothing worse than leaving our children with our debts. There is something far more pernicious though, and that is keeping them in poverty now and depriving them of the resources to make a difference in the future. As Keynes is often quoted saying, in the long run we are all dead anyway, so why deprive yourself something that you need now?

So what can be done? Are we past the point in which the standard approach to stimulus packages can be effective? Tinkering at the edges is not going to solve this problem. Instead, government is going to have to take charge of developing a full, extensive and considerable investment plan for the economy. It is essential that a national investment bank is established that has the capital to lend directly to businesses at favourable rates, and can support local government and other state institutions to renew our social infrastructure. We have to avoid a return to consumer credit bubbles, but cash needs to be flowing in the economy. Wages have to rises, benefits have to rises and charges for daily activity – such as transport and media – have to be slashed. Our transport network is patchy at best, so a long-term boost will be welcome by millions. Our rail services need major investment. Our cities are in desperate need of integrated, modern transport infrastructure; our town and city centres need to be refocussed to priorities urban life. Families have to be able to live in city centres, free from excessive and oppressive traffic, anti-social behaviour and crime. Our communication and IT networks need boosting significantly just to keep pace with investment in emerging economies. Sustainable development and green technology needs to be rolled-out and embedded everywhere. Support for knowledge creation and learning is a lynch-pin priority. Our healthcare and social care services need continuing improvement.

There is so much to do to even out the collective share of our national wealth. This is just a start, there are many more services and resources that need to be developed, but rather than thinking that this has to be done privately, the emphasis has to be on high-quality collective provision. We need to be bold about our working lives as well. The French have got some things right. The cap on hours worked each week, the ‘Tobin’ tax on finical transactions, increases in the top rates of tax, increases in inheritance tax and death duties. To balance the rises in inheritance duties we can cut national insurance taxes and income taxes. End the tax subsidies on second homes. Tax rental income for landlords of residential and business properties, but balance these with tax-breaks on investment in these properties that renew the physical infrastructure.

These are radical actions that are aimed to shifting investment out of the vaults and the savings accounts and into peoples pockets. There is no point locking-up savings while living in poverty now. What virtue does that serve? Anywhere that wealth pools, collects and is hoarded should be taxed to avoid usury, exploitation and gate-keeping. This alternative approach should have one primary purpose, to get wealth flowing and circulating around the economy. One of the great lessons from capitalism, which underlines the importance of getting this process right, is that it is not necessarily the amount of wealth that people have per-se, but the extent to which this wealth is creatively deployed, recycled and recirculated – invested in other words – in things that matter. This is the time to invest in our public services for the good of all. In doing so we will enrich us all. In doing so we will moderate the vast extremes of income and wealth accumulation that has done so much damage to our country. And in doing so our towns and cities will become, as Keynes wanted, more harmonious places to live.

Aug 012012
 

Melton Needs an Economic Boost Now

Melton Council has today launched a consultation on economic strategy for the borough. According to the Melton Times “A DRAFT blueprint aiming to boost economic development and prosperity” is going out to the public for consultation. The consultation comes at the same time that the UK economy is struggling to get out of recession. Figures reported today tell a grim picture in which factory output has dropped significantly. The Telegraph reported “Manufacturing PMI fell from 48.4 in June to 45.4, where anything below 50 indicates contraction. The result was far weaker than analysts’ expectations of 48.6.”

As reported in the Melton Times “The strategy, which will eventually be adopted by Melton Council, highlights numerous key goals including building on Melton’s standing as the ‘rural capital of food’, increasing the number of knowledge-based/hi-tech businesses in the borough, improving links between businesses and education providers to ensure young people have the qualifications and skills the future economy needs, and supporting the Melton BID Company in its efforts to revitalise the town’s economy.”

Rutland & Melton Labour’s online organiser, Rob Watson, said in response to the consultation “It’s really important that Melton Borough Council adopts a sense of urgency and starts to use all the powers of the Borough Council to stimulate economic growth now. The focus on austerity and cuts is failing, with businesses really struggling. Melton has a lot to be proud of and there is much more that the Borough Council can do now to ensure that business are given a boost and jobs are created.”

The report can be download from the Melton Borough Council website.

Jul 272012
 

wpid-wpid-graph.php-2012-07-27-01-09-2012-07-27-01-09.pngHere’s a really handy website from the Institute of Fiscal Studies, that can work out for you where you sit on the income distribution scale. Are you a high-earner, or are you low-paid? Just how rich are you? According to the IFS

“When asked this question, most people think they are in the middle. From people in the poorest third of the income distribution, up to people in the richest five or ten per cent, many will happily report that they think they’re in the middle. Obviously, not everyone can be in the middle and IFS has used the latest data on household incomes to give you an accurate picture of where you actually are in the distribution.“Where do you fit in?” is a simple tool that lets you know your position in the income distribution and can be accessed online here or downloaded as an iPhone App.”

Jul 192012
 
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Clueless Cameron?

David Cameron is reported in The Telegraph saying that he believes that austerity in Britain is going to last until 2020. According to the report “Asked whether the austerity programme would now last a decade until 2020, the Prime Minister replies: ‘I think it’s going to be…this is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts. I can’t see any time soon when…the pressure will be off.'”

If the Prime Minister can’t imagine a way of getting the British and European economy working again sooner, then he really should think about standing aside and let those people who do have some ideas have a go at jump-starting the economy. Paul Krugman in his book End This Depression Now offers some simple solutions. Krugman describes the economies problems as like a car with faulty electrics. There is nothing wrong with the structure of the car, it just needs a jump-start.

Cameron, Osborne and Clegg are so blinded by their ideological convictions that they are incapable of seeing any other practical alternatives. Along with Mervyn King it’s time that they moved aside and let other people, who have got some ideas have a go.

Jul 162012
 
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Midland Main Line Electrification To Go Ahead

It’s good to see the Coalition getting behind a major investment in Britain’s Railways, particularly at a time when the economy needs a significant boost. These proposals have, however, been around for some time. In 2009 Network Rail consulted on the proposal to electrify the East Midland Mainline. In October 2009 Network Rail announced plans to electrify the route. The Leicester Mercury quoted Network Rail saying the “work would pay for itself over 60 years in cheaper running costs and maintenance”.

But the plans where put back in favour of the West Coast Mainline improvements.

As a regular traveler on the East Midlands network the improvements will be welcome, however, after spending a few days in the North West last week, and traveling between Wigan and Liverpool, I sometimes feel that things can be much worse. Yes trains between Birmingham and Stanstead Airport are not frequent enough, and they finish far too early in the evening. They are not the ramshackle and rickety trains that pile in to Liverpool Lime Street.

This investment is welcome, but much more is needed, and it’s about time that passengers started to feel the benefit in reduced costs, more flexible ticketing, and more interconnected services.