26 February 2007

Habitat and yoghurt culture

In the ethereal realms of academic discussion the buzzphrase of the moment is ‘ecological modernisation’. This phrase relates to the idea that, now that we have won the argument that the ecological crisis is real, there is a struggle going on about how to respond to it. This struggle boils down to a choice between business-as-usual with a few green tweaks, or a wholesale reorganization of society and economy. The question being asked is whether it is possible to have a sustainable world without fundamental social and economic change.

In the field of habitat the ecological modernizers would like to expropriate and commodify the learning that has been developed in low-impact communities, wipe it clean of its radical overtones, and make it profitable business. They are seeking to divorce the technological wisdom from the social wisdom that gave it birth. They are ignoring the lessons of holism that are the most important lessons of the sustainable vision. Knowledge based on practical experience cannot be reduced to information to be written into technical manuals.

Much of the knowledge about how sustainable communities might look has been garnered within the Ecovillages network, co-ordinated by Jonathan Dawson of the Findhorn Foundation. He recently published a book sharing some of this experience. The communities he studied are found in rich and poor societies and offer an experience of creative living. He likes to think of them as ‘yoghurt culture . . . small, dense and rich concentrations of activity whose aim is to transform the nature of that which surrounds them’.

Most of the ecovillages are success stories, but many ‘collapse’ because of the difficulty of building new relationships and social structures. It is vital that we do not see these shorter-lived projects as ‘failures’. The learning and positive experiences generated by experimental living are not lost when the people move on and the structures decay. Learning to live experimentally requires learning to accept that the natural life-span of some of these ventures may be short.

Is it possible to build sustainable communities without asking questions about ownership, equality and hierarchy? In my view, not only can we not ‘solve problems by using the same kind of thinking we used when we created them’; we also cannot save the planet without asking questions about who owns it. The message of ecovillages the world over is that these issues are intrinsically linked to the building, physically and metaphorically, of a sustainable future.

22 February 2007

Robbing hoods

The fact that, as a national economy, we operate with a large and growing level of debt is now accepted as being unproblematic. Yet, as well as being a way of mortgaging our future, the national debt is another mechanism for transferring money from poor to rich. The government borrows money by selling bonds in itself, i.e. a promise to pay the purchaser the sum they invested plus an interest payment at some specified future date. The interest on the bond is paid from taxation income. Since the creation of the Bank of England in 1694 it has operated as a manager of the government’s debt, which it has managed to the advantage of its rich investors. The Bank’s website quaintly states that ‘the public’ were invited to subscribe, although we can imagine how many butchers and seamstresses contributed to the £1.2 million initial capital stock. To the poor debt represents fear and loss of control; to the rich it is an opportunity to use their money to make more. Government debt is the ideal form, since there is no risk involved and if all else fails you can claim you own the country!

Criticism of the national debt is a common thread in radical economics. For poor countries national debts force them to engage with an unfair trading system to generate enough foreign currency earnings to pay the interest. They are tied into a system of debt-bondage with which the rich countries replaced their more unsightly imperialist policies. The national debts of rich countries are less immediately troubling, since if you have a reserve currency at your disposal you can accrue as much debt as you need. In this setting the debts are rather a pump that operates to transfer money from the poor to the rich, since the earnings on government bonds are paid for through taxation of those who have to work because they do not have enough money to live by making investments, including in bonds. Hence the national debt of the UK is making the rich richer and the poor poorer just as the national debt of Tanzania or Peru is.

Shelley identified this fraud nearly 200 years ago when he wrote, in 1820, that ‘the public debt is a system for transferring income from the labouring segment of the population to those who’ had money to lend to government and would thus accrue interest, and who profited from government expenditure in wars. He related this process to the debasement of currency through the printing of paper money, noting that once a real link with gold is broken: the system of money creation thus enables those with power to use money to extract labour from others: ‘to increase the labours of the poor and those luxuries of the rich which they supply . . . to augment indefinitely the proportion of those who enjoy the profit of the labour of others as compared with those who exercise this labour.’ His radical conclusion is that the consequences of this new system, which we would now have the benefit of calling ‘capitalism’, ‘have been the establishment of a new aristocracy, which has its basis in fraud as the old one has its basis in force’.

19 February 2007

Diets for fat cats

Peter Hain's humble request that city firms give their bonuses to charity is too laughable for words. The elaborate pose of powerlessness of the modern politican makes him an embarrassment to his profession, which is, after all, about power. If he and his party dislike the obscene inequality the economy is generating, they should legislate to prevent it. Simple really. That is why we live in a democracy.

With £8.8bn. heading the way of the super-rich in bonuses alone, the messages from Hain's colleagues about pay restraint ring rather hollow. According to the Guardian, average pay deals have risen to 3.5% in recent months. Research by pay specialists Industrial Relations Services (IRS) shows a 0.5% rise in the three months to January compared to the previous quarter while a study of more than one hundred wage settlements reveals that half were worth between 3% and 3.9%.

If you feel inclined to condemn these pay rises, remember that, since the retail price index is currently at 4.2%, these people are actually taking a pay cut. And also remember the deceptive nature of averages. While some people may be getting a little bit more, although not enough to keep pace with price rises, some fat cats are making a very great deal more. The sharing out of the value of the work of people in this country is becoming more inequitable year after year. No wonder we all feel poorer: it is because more of the value of our work is being extracted by the super-rich.

But what about inflation? The familiar wail of the mainstream economics commentator. The reality is that inflation is a fear for the rich since it erodes the value of assets. So long as you have index-linked pay a gently rising rate of inflation can be very comforting if you don't own a lot. The reason we are all struggling to pay off mortgages compared with our parents' generation is that the rampant inflation of those times simply eroded their debts for them.

In his New Year message, TUC General Secretary Brendan Barber called for a national debate about top pay after revealing that for every £100 earned by a top company director in 2000 they now earn £205, while ordinary employees have only seen a £6 increase in every £100 they earned six years ago (after allowing for inflation). Top pay is increasing 17 times faster than average pay. And if City bonuses had been shared among everyone at work in the UK, we could all have enjoyed a Christmas bonus of more than £350.

The situation is mirrored in the USA, where the average hourly wage for the top 10 percent of jobs has increased by 45 percent since 1990, far outpacing jobs in the middle and lower end (see the graph). The median hourly wage has increased 16 percent over that same period of time. (Data from: http://www.workforceexplorer.com/ )

In 1980 the average CEO of a large firm in the United States was estimated to have made 42 times as much as non-supervisory workers. By 1995, the ratio of inequality between the shop floor and the executive suite had increased to a multiple of 160. In 2000, they were estimated to have been paid 458 times as much as ordinary workers. And the gap continues to widen aftrer a downward trend during the recent bear market. (Data from AFL-CIO)

These vast differentials in pay awards cannot possible be justified on the basis of productivity. And as recent research shows that those with the most money are also the most polluting (an obvious finding, really) allowing the rich to become even more rich is a threat to the planet. Since such inequality is also socially divisive why not just prevent it? We could enforce a differential between the best and worst paid person in any organisation or firm of, say, three or five times. Any additional money earned could be taxed at a rate of 100%. Making these sorts of decision for the benefit of society is what politicians do to earn their comfortable salaries, after all.

16 February 2007

Schemes and Dreams on the Mosquito Coast

Over the past couple of months I have been posting intermittently about money and have had some interesting comments. I understand that reordering your understanding of this issue is hard to take. As Galbraith so eloquently put it: ‘The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent.’ But as is so often the case in economics, as well as home economics, the proof of the pudding is in the eating. So for those who are not yet convinced by this account of the nature and instability of the money-banking system some examples from history can be used to illustrate the theory in practice.

Such periodic disasters are inevitable, indeed symptomatic of capitalism as an economic system. They are the boom-and-bust cycles that are generated because the capital that lies at the heart of the system is created in such an illogical and unstable way. In the words of Galbraith again: ‘As banking developed from the seventeenth century on, so, with the support of other circumstance, did the cycles of euphoria and panic. Their length came to accord roughly with the time it took people to forget the last disaster’. One cautionary tale follows. I'll post more over the next month or so.

The establishment of the Bank of England was the other side of the coin of the creation of the national debt called a ‘fund for perpetual interest’, rather like a perpetual motion machine. Initially the Bank was established privately by Scottish entrepreneur William Paterson who persuaded the government to raise £1,200,000 by selling the national debt to citizens who would redeem their share with interest in a fixed number of years. The scheme was accepted in 1694 and from then until the following year Paterson served as a director, when he fell out with the other members of the Court (or board) and was sacked. Paterson was an entrepreneur and the Bank of England was merely one of his many schemes to create money from thin air. He is probably most famous for the subsequent disastrous Darien project.

In 1693 he set up the Company of Scotland Trading to Africa and the Indies, which sold shares of a proposed colony on Darien on the Panama isthmus. The Scots were keen to see their own advantage from expanding international trade and so there was no shortage of investors: about half a million, half Scotland’s national capital, was invested. Darien was in fact the original Mosquito Coast and most of the settlers died within the year. The scheme was also sabotaged by English traders and the English governor of Jamaica who did not want any competition. Thanks to Paterson the Scottish economy was nearly bankrupted preventing Scottish entrepreneurs from competing with the ‘British’ empire, and we have lived with the national debt for the past 300 years and more. In its weakened state Scotland agreed to be subservient to the English Crown under the so-called Act of Union just a few years later in 1707.

Galbraith’s conclusion on banking seems most apt: much discussion of money involves a heavy overlay of priestly incantation. Some of this is deliberate. Those who talk of money and teach about it and make their living by it gain prestige, esteem and pecuniary return, as does a doctor of witch doctor, from cultivating the belief that they are in a privileged association with the occult. (Galbraith’s Money: Whence it Came, Where it Went, p. 5).

14 February 2007

Who will love the children?

Today is St. Valentine's Day. Like so many other festivals it has been reduced by our commercial culture to a shopping opportunity. The message of love is easily lost in the pink ribbon and overpriced cards. I prefer to celebrate Dydd Gwyl Dewi, the festival of St. David, the national saint of Wales, which happens two weeks later. One of David's messages was to appreciate the little things in life, including our children. It is surely a signficant coincidence that this year's celebration of St. Valentine coincides with a report showing that British children are in a very unhappy state and that while they have plenty of money they are sadly short of love.

A few weeks ago separate academic research was produced that indicated that adolescents' Circadian rhythms are different from those of adults. Hence the reason they stay in bed until lunchtime and then roam the streets until the early hours is because this is what their bodies need to do. There has been no response in terms of adjusting teaching hours to suit when children are most able to learn. Instead children must force their bodies to fit in with artificial, unsuitable timetables. My daughter's school hours run from 8.45 to 3.05, so she is just waking up as school ends. Worse still, lunctime is before the last lesson, so at nearly 2pm, meaning she has no intake of calories for most of the day.

Given these pressures on growing, developing bodies it is no wonder that we see record levels of poor nutrition and mental ill health amongst children. Unfortunately the drug companies see in this a marketing opportunity, selling Ritalin, a stimulant, to children whose signs of depression resulting from emotional neglect are masked. They are made manageable and their exam results improve while drug company profits are increased . Department of Health figures reproduced in the graph, plot the rise in Ritalin prescriptions from 92,000 in 1997 to 254,000 in 2002, a 326 per cent increase in just six years. The long-term emotional consequences of this abhorrent treatment are now becoming clear.

Feistier children respond to social oppression with resistance and aggression. They resort to vandalism, violence towards others, and self-harm. Record numbers of our children are now being labelled as mad, bad or sad, and chemically adjusted or incarcerated. So rather than loving our children as they need and deserve we are forced by market economics to go out to work and ignore them, while they are bombarded with advertising, drugged and criminalised.

The bottom place in the league table of children's welfare must be particularly galling for a government that has made such play of caring for children, from Blair posing with his exploited brood on the steps of number 10 to the poignant difficulties faced by Gordon Brown and his wife. Brown's commitment to raising children out of financial poverty may be genuine but he seems sadly misguided in his understanding of what children need. Perhaps his Calvinist past makes it impossible for him to grasp that more work, whether by their parents in the workplace or themselves in school, is destructive rather than positive for the general state of children's health.

13 February 2007

Market, Schmarket!

When was the last time you felt really happy? If you think back to that time, did the feeling arise from anything you bought in a market using money? I can fairly confidently predict that in most cases the answer is no. As a species we are brought delight by the birth of our children, by a curious juxtaposition of ideas, by the misty beginnings of a glorious spring day. The tragedy of the modern economy is that, although the well-springs of our joy are found in our shared humanity and our beautiful planet, we have allowed ourselves to become enslaved to a market and its hegemonic ideology.

It has become a cliché of the political debate that if something fails it should be ‘marketised’ and this will solve the problems. This is now a general solution to political problems that is proposed for areas as diverse as depressed local economies and over-crowded hospitals. In spite of the images of beast-infested jungles that abound in the marketeers’ discourse, this solution is not seen as throwing a group of vulnerable people to the lions; rather it is offered as a panacea for all the ills of a late capitalist society and economy.

If, as is often the case, this solution fails, it is not reversed. We are told not that the market as a system has failed but rather that this particular market has failed, and it is generally concluded that the failure results from the fact that the market was not ‘free’ enough. Although Joanna Bloggs can clearly see that a train system does not work well within a culture of competition she is silenced by the ideologues who will offer the free marketeers an infinite number of opportunities to kill consumers, whether from BSE or the string of rail crashes. So convinced are they of the supremacy of their market mechanism that they will accept these sacrifices to the market fetish in their own societies, and numerous more overseas.

So the dissection of the market as a concept is essential before we begin to rebuild our economy. The first step is to question what we really mean by the market. For managers and politicians it is simply shorthand for an economic structure that advances their ideological position; but economists actually mean something by it. They are the keepers of the holy grail of the market mechanism, whose beautiful qualities are passed on to all students of economics within a year of reaching university. The problem is that the central assumptions on which the claimed supremacy of the market system is based are universally flawed and anachronistic. I will unpick these individually in a few forthcoming posts.

This task is not intellectually demanding. Testing the market against reality invariably results in its demonstration as a hollow icon. However, if you try publishing a swingeing attack on this ideal view of the market as the best system for the distribution of goods, not to mention money and people, you will find your arguments dismissed on the basis of naivety. The attack is unfair, the economists will claim, because nobody really believes the world works that way. But if not, where is the justification that the market is the best system? And, perhaps more importantly, why is this non-existent ideal system taught to all first-year students of economics? Here is the answer given by one standard introductory economics text:

These assumptions are very strict. Few, if any industries in the real world meet these conditions. Certain agricultural markets are perhaps closest to perfect competition. The market for fresh vegetables is an example. Nevertheless, despite the lack of real-world cases, the model of perfect competition plays a very important role in economic analysis and policy. Its major relevance is as an ‘ideal type’. Many on the political right argue that perfect competition brings a number of important advantages. The model can thus be used as a standard against which to judge the shortcomings of real-world industries. It can help governments formulate policies towards industry.

Here is the response to this question provided by the ‘hints to teachers’ book that accompanies the undergraduate text, Parkin and Kin[i] Its authors being by conceding that ‘perfectly competitive markets are quite rare in the real world’ (no examples are given), but continues that there are three important reasons to continue to propagate this false view of the economic world:

1.Markets ‘quite closely approximate perfectly competitive markets’;
2.The theory allows us to discuss these ‘competitive forces which are at work in all markets’;
3.The ‘model’ can be used as a ‘benchmark’ against which to ‘evaluate relative allocative efficiency’.

This paragraph constitutes a fascinating admission of intellectual manipulation. It explicitly states the theory of perfect competition as an ideological tool rather than a scientific theory. Without it governments would not be able to justify their policies so, although it is a completely inaccurate portrayal of the world we live in, it is of vital political importance. This first makes it clear that, before the market can be brought up as an ideal, the arena it is being introduced to needs to be justified as being at least approximately capable of supporting the ‘ideal’ and non-existent market in which the efficiency of this system was justified. In fact, as will be demonstrated later, this cannot be done in the market for tea-bags, never mind in that for health care or labour.

The second point generalises the relevance of the discussion to all markets. But point 1 has already accepted that, rather than all markets demonstrating these competitive forces, in fact very few, or perhaps none, do. What are these ‘competitive forces’ that really exist in all markets? They have not begun to be identified. Unperturbed by this contribution the authors forge on to point 3, forcing the world to conform to an unattainable model.
Perhaps most telling is the claim that this ‘model’, meaning something that is not real, which does not exist in the real world, can now be used as an ideal against which we can compare other system of allocation which do exist in the real world. In other words we can assess how efficiently tea-bags are being distributed and if this does not match up to our model we can legitimately criticise it, even though we are aware that our model is an impossibility. It is at least admitted in black and white that, like the Camelot of the Monty Python film (the Holy Grail one), the market is ‘only a model’, it is a chimera against which a real system can be compared, against whose perfection we who exist in the grubby world of monetary exchange can match our imperfections. This is a far cry from the laws of physics claimed by those who use market theory to justify strict competition laws.

[i] Parkin, M., Cohen, A. J., King, H. B. and Spencer, D. E., Economics: A Study Guide (Wokingham: Addison Wesley, 1995).

9 February 2007

Globalisation comes home to roost

Poor old Bernard Matthews. Not so bootiful as he used to be. First Jamie Oliver decimates his profits by exposing his turkey twizzlers as deep-fried guts and gizzards and now his loathsome farming practices are coming home to roost--oh go on! Forgive me a few bad puns. We gave up eating all so-called food proceeding from the Bernard Matthews empire a few years ago when, as I opened a packet claiming to be filled with Bernard Matthews wafer-thin turkey ham slices, my son asked 'who farted?'

I had difficulty following events this morning as the news bulletins jumped about between Hungary and Turkey. I was feeling hungry myself and blame the shortage of blood sugar in the brain for my lack of lucidity, but I really did begin to wonder whether Bernard also has a production facility in Turkey. Well in this era of globalisation where nobody knows where anything is and companies count for more than countries you can hardly blame me for the confusion.

This is only one of my many struggles with the food distribution system globalisation has bequeathed us. Following the appalling episode of foot-and-mouth it was clear that transporting animals around the world just to kill and eat them is not only cruel but also dangerous to public health. It has always amazed me that friends and family find it more shocking that I know the source of my meat by name than that they cannot even tell me which country theirs was produced in. Dulcie has been slaughtered recently and should be turning up in sausages soon.

The shame around the factory production and slaughter of sentient creatures is made evident by the use of the euphemism 'cull' when what is meant is kill. Not to mention the curious public outcry about the deaths of the innocents from the latest factory-farming disease and the pseudo-ritualistic pyres, when these animals were created in factories only because they were going to be killed to be eaten. Where is the moral difference between killing and cremating them en masse, and killing and roasting them in our individual ovens?

This is to say nothing of the wasteful production of unnecessary carbon dioxide our food distribution system brings with it. For an excellent critique of that you can read Caroline Lucas and Colin Hines's most recent report. Caroline's adage on the transport of biscuits from Germany to the UK and back again is the best indictment of the global food system. Watching the lorries moving past each other on a European motorway she asked 'Why don't they just swap recipes'?

Like the guy who enjoyed shaving so much he bought the company, such strong identification between an individual and a brand, the corporate cult of personality, brings its own dangers. Bernard was never as bootiful as he thought, and now his face and the festering turkeys he is still selling as safe to eat are forever melded, leaving a most unpleasant taste.

6 February 2007

Warning the Frog

We are living in interesting times. Far from the fall of the Berlin Wall marking the end of history it has opened up all sorts of possibilities and freed our minds from the hegemony of capitalist ideology. The arena of debate has been released from the straightjacket of the false dichotomy between capitalism and communism. This is a timely turn of events, because we will need all our powers of creative thinking to solve the significant and urgent problems that we face as human beings sharing this beautiful planet.

Although problems such as climate change and global poverty are now figuring large in the public debate the penny has yet to drop that these are but two consequences of a wider problem, caused by the way our economy is organised, caused by capitalism. Many concerned citizens make commendable efforts with individual problems, when their time would be more efficiently spent addressing the source of those problems. This was my conclusion when I published a book during 2006. Much of the content of this blog is extracted from that book. If you would like to have it all in one handy volume you can buy it from me (details here) or my publisher (details here).

The book is called Market, Schmarket! But my opposition to the market is not total. I argue for a change in the rules governing what is a social institution like any other. And my opposition to capitalism does not make me a communist. There is no longer any need to characterise those who question the efficiency and ubiquity of markets as communist fellow-travellers. We have the liberty to explore an infinite range of different ways of deciding how our resources should be shared, how goods and services should be manufactured and distributed. Rather than ensuring the final victory of capitalism, in fact the ending of communist domination of Eastern Europe and its retreat in most other parts of the world has opened up the space for debating these different approaches to economics.

This is an urgent task for, let us be frank, the system we have is not a very good one. Any system that allows deaths from over-consumption in some countries and from under-consumption in others can hardly claim that it achieves efficient distribution. An economic system whose twin objectives are profits and expansion can no more claim to meet our most fundamental human needs for security and well-being.I have frequently been told that if I oppose capitalism I must be a communist. This sort of comment betrays a sad lack of imagination on the part of my interlocutor. My response is that I refuse to believe that a species that has produced the likes of Shakespeare and Gandhi can really not achieve something more exalted in terms of an economic system than capitalism. This is the challenge for us all, not least because if we fail to rise to it the planet on which we all depend will begin to fail to support us. It is a challenge which I make some effort to contribute towards in this book.

An article in the Economist used the metaphor of the frog in the experimental vat in a discussion of the problem of debt. The point about the metaphor is that, because the heat is turned up so slowly, the frog does not realize it is being slowly boiled alive. This sounds to me like the folk myth of the dog in the microwave, since I cannot believe anybody would be allowed to conduct the experiment required to test the idea, but as a metaphor for how our economic system is cooking us all without our really noticing it cannot be bettered. So the message of this blog is: ‘Wake up! Jump out of the vat!’.

3 February 2007

You are what you make, not what you buy

A famous critique of the nature of work within a market system is to be found in the writings of Karl Marx. One of his central concerns was the social and psychological effect on the individual of life within the market. As expressed by Terry Eagleton, Marx’s view was that ‘Under market conditions, individuals confront each other as abstract, interchangeable entities; working people become commodities, selling their labour power to the highest bidder; and the capitalist does not care what he produces as long as he makes a profit.’ So there is nothing original in the critique of the anti-globalisation protestors, although they may not recognise the source of their complaint.

Marx reserved a special place for work in his analysis: he considered it to be the central expression of what he referred to as our ‘species-being’. It is because what we do as a species is to work that the mutation of work into its capitalist form is so socially and psychologically damaging. It is this process which Marx refers to as ‘alienation’, meaning that the items which people produce with their work are appropriated by the minority of people who own the means of production, i.e. the employers or in today’s terms the global corporations. Marx related this sense of alienation to our estrangement from nature. His conclusion was that the process of work and the creation of products that are bought and sold by others, destroys the individual sense of self and radically undermines her or his identity.

This loss of identity has been massively extended by the globalisation of the international economy. Think of the work of Adam Bede, the eponymous carpenter-hero of a novel by George Eliot. His work links him directly to the other members of his community. He makes an intricate kitchen cabinet for the employer of the woman he loves, in the hope that this will catch his beloved’s eye and win her heart. How distant this portrayal of identity and relationship in work is from the life of the person who tends the machine that turns the thing, that makes the pin, that joins the leg to the bed, that they sell on the industrial estate. S/he has no idea where the item will be sold or used, never mind by whom. And similarly, when we shop we have little idea where or by whom the items we buy were made. We lose our sense of connection and the producer loses her sense of identity.

In response to this loss of identity, and particularly for those who are too poor to adopt brand-based consumer identities, we see a rise in identity groups based on gender and ethnic identities. This unfortunate response to globalisation has long been predicted and yet appears to surprise and horrify the Establishment when it expresses itself in terms of large numbers of votes for politicians who base their appeal on the offer of an identity. In spite of radicals and environmentalists warnings of the imminent depletion of natural resources or the collapse of the financial system, it seems that the most dire threat to globalised capitalism is actually posed by the loss of identity created by the meaningless and exploitative systems of both production and consumption that it feeds off.