This new pamphlet by all the twits on the left. A few choice lines and arguments.
We must reverse the decades-long transfer of wealth and power from labour to capital.
Hmm, now this would require that labour\’s share of national income must have been falling. (Yes, I know they say wealth not income but income is what they mean). And sad to say for their argument it hasn\’t been. Still somewhere between 65 and 70%, as it was in 1960.
…reasserting the interests of the common good over the market (education, health and welfare are not commodities)
Quite, they\’re services.
In the longer term work needs to be uncoupled from paid employment with the introduction of a Citizen’s Income – a basic unconditional income for all.
Agree with that of course, as with this:
enlarging and defending individual civil liberties
Although quite how that is to be done by the socialist method of restricting economic liberties remains to be seen.
Banks were destroyed by their pursuit of shareholder value, and the regulators became the agents of this business model. The result was a systemic failure to maintain a proper capital base and a reckless concentration of risk.
I think you\’ll find that the problem wasn\’t concentration of risk but its dispersal. German banks falling over because US house prices fall sounds very much like dispersal, not concentration, to me.
Capital controls and a tax on global financial transactions are needed to aid economic development and protect vulnerable economies.
Ah, this is where those individual civil liberties seem to get mashed. They\’ll tell you what you can do with your own money.
Living standards have been maintained by cheap credit and by Chinese workers on subsistence level wages producing more and cheaper goods.
Those subsistence level wages….they\’re the ones that have been rising 14% a year, year on year, for more than a decade? So that they\’re 4 times or so what they were only those few years ago? And cheaper goods are a bad idea are they?
On climate change:
And to ensure affordable warmth, energy markets and prices must be regulated, and the energy companies brought to account.
Mmm, hmm. Reduce energy usage by lowering the price of energy. Good one that.
Work and quality of life could also be improved by introducing a living wage (rather than simply a minimum wage).
Oooooh! As we\’re worried that millions will be thrown out of work we\’re going to make it more attractive to hire labour by increasing the price of labour. Excellent!
This could be matched by introducing a maximum income, for example at a ratio of 1:20 of the living wage.
That would be around £300,000 a year as the maximum wage then (the living wage is said to be £7.50 an hour or £15k a year). Hmm, going to be interesting to see how many of the top 1% to 0.1% (£150k to £700k are the bands there approx) are going to either stick around or continue to work as they do under such a restriction.
Umm, don\’t the top 1% pay something like 23% of all income tax collected? That\’ll be an interesting hole in the government accounts then won\’t it?
Before the 1970s, government regulation of the finance sector required banks and financial institutions to provide collateral, to retain reserves or capital requirements for the debt they created – as guarantee or cover in the event of non-repayment. But with the loosening of regulation, capital requirements were lifted and the finance sector was given powers to issue debt without collateral – ‘unfunded’ or ‘margin debt’. Instead of holding ‘reserves’, banks could simply issue credit and guarantee this against the value of an asset.
Really? My word. And there I was thinking that Basel I and Basel II had been all about the amount of capital or reserves that a bank had to hold against its liabilities and assets.
About $60 trillion of corporate debt is insured as ‘Credit Default Swaps’ (CDSs). But Credit Default Swaps are not swaps at all, but a form of unregulated insurance that is taken out with unregulated insurance companies by lenders to companies, including banks. These insurers have naturally demanded, and been paid, high premiums for taking on the risk. However, while the insurers have charged high fees, they have not provided the ‘collateral’ needed to compensate banks should companies default on their debts. This is because, unlike household insurers, CDS insurers are not regulated, and therefore not obliged to set aside ‘reserves’ or collateral, in case insurance claims are made. Thus about $60 trillion of corporate debt is unsafely insured.
Erm, no. There are $60 trillion of CDSs outstanding, this is true, but it ismost certainly not insuring $60 trillion of corporate debt. This is a fundamental misunderstanding of how the CDS market works. You\’ll recall that when Lehman went bust that $400 billion of outstanding CDS contracts actually netted out to something like $8 billion (sorry, memory a bit hazy on the actual amounts).
And as to collateral? Everyone who is not the proud possessor of an AAA credit rating (and there are precious few of those now, what with AIG bust, even GE and Berkshire Hathaway no longer are AAA) posts collateral on the changing value of a CDS each and every day.
Ms Pettifor knows not of what she speaks methinks.
As the Credit Crunch took hold after the events of August 2007, central bank governors succumbed to demands from the banking sector to immediately lower official interest rates. However, privately-fixed interest rates – fixed in London by the British Bankers Association and known as LIBOR (the London Inter-Bank Offered Rate) – continued to rise, in defiance of the official rates set by central banks. This was the clearest evidence yet seen of the loss of control by central banks and governments over a key lever of the economy – the power to set the rate of interest over all loans, whether short, long, safe or risky.
Ah, confirmation. LIBOR is not "set" by the British Bankers Association. It is reported by them. They survey the rates at which banks are willing to lend to each other and then report that. Her statement is like saying that because The Guardian reports that shares in Barclay\’s traded yesterday at 90p that The Guardian has thus set the price of Barclay\’s\’ shares at 90p.
A nonsense in other words.
And can anyone remind me when government has had the power to control all interest rates, long and short, risk or no risk? I dimly remember that Building Society rates were so controlled but I\’m pretty sure that commercial bank rates never have been.
The rate of interest is a social construct, not a product of market forces.
Eh? The base rate perhaps, but seriously, all interest rates?
The Green New Deal also proposes the reregulation of the finance sector, in particular careful regulation of the finance sector’s powers to create credit. This will require the introduction of controls over the movement of capital; and the restoration of the power to set interest rates to publicly accountable central banks and governments. Above all, the Green New Deal calls for a framework of sustained low rates of interest to enable investment in its proposals for a £50 billion a year programme aimed at massively improving energy efficiency and the use of renewables.
Ah yes, that idea that a country which imports capital (as we have done for decades) can increase the amount of capital available by stopping Johnny Foreigner from sending his capital here….and by lowering interest rates so as to make saving by hte indigenous population less likely.
These people are mad aren\’t they?
Somewhat counter-intuitively, high home-ownership is also a direct cause of unemployment, which rises by 2 per cent for every
10 per cent rise in home-ownership, due mainly to labour immobility.
Now this is true. Well, over a certain range of house ownership at least. However, I fear that there\’s going to be a hole in this argument in a moment.
If we are to resolve the long-term crisis in social housing and rediscover the positive story of renting, we have to address the
problem of subsidised home-ownership, which renders social housing a permanently residualised and under-funded service.
Ah, there it is. Firstly, there are two alternatives to owner occupation. One is the private rental market (those appalling buy to let people). The second is indeed social housing. Now if we are to take on board the point that the immobility of owner occupation raises unemployment, which of these two alternatives would we prefer? Private rentals or social housing? Some time ago I asked a Labour Councillor (no names, no pack drill) by email what mobility in social housing was like.
Something that\’s been puzzling me that you will know the answer to.
So, someone is in social housing (council, housing association, whatever the current set up it).
1) If they want to move to another unit within the same catchment area (maybe for work reasons) how long does it take to get such a move sorted out.
2) If they want to move to another catchement area, again for work (say, a different council or housing association) how long does that take to sort out?
The short answer – forever. The slightly longer answer – if they go through the council and go on the transfer list, probably a long time (bear in mind they are up against people who are overcrowded etc, and people in council houses tend not to be very mobile, even when they have a bigger house than their current needs). Usually they would try to arrange a private swop – you often see the cards in the newsagent windows – but it may take a long time. Not much meaningful difference between RSLs and councils in how it works.
So again, if we take the unemployment argument seriously (which I do) then we should be preferring private rentals to social housing. Encouraging buy to let, not councils.
Sadly, our report\’s author seems to skate over this.
There there\’s Richard Murphy which is simply too tedious to comment upon.
Adam Leaver thinks that private equity is naughty. Ho hum.
John Grahl says that the euro is shit and we shouldn\’t join it. But if we could make the euro less shite by having a proper economic and fiscal government for all of Europe then we should.
Erm, but what if we don\’t want to have an economic and fiscal government for all of Europe?
Oh, and the Green New Deal and a Post Bank. The latter\’s fine by me, the former has been savaged so many times already.
On food security, Margaret Beckett says something very sensible indeed:
We do not take the view that food security is synonymous with self-sufficiency … It is freer trade in agriculture which is key to ensuring security of supply in an integrating world. It allows producers to respond to global supply and demand signals, and enables countries to source food from the global market in the event of climatic disaster or animal disease in a particular part of the world … it is trade liberalisation which will bring the prosperity and economic interdependency that underpins genuine long term global security.
The reports author does not, sadly, agree.
In 1900 around 40 per cent of the UK population was still employed in agriculture; by the start of the Second World War that had fallen to some 15 per cent; and today it’s less than 2 per cent. Any form of lower-carbon farming, less reliant on climate-change-boosting fertilisers and fossil-fuels, will certainly need more people to be involved again in food production.
Oh joy. We all get to be peasants again. And he\’s ignoring the point that jobs are a cost of production, not a benefit. Anyway, that\’s from the Soil Association. Essentially, bung more money at organic farmers.
This is amusing though.
Unlike other sectors of the UK economy, only 13 per cent of agriculture’s greenhouse gas emissions are in the form of carbon
dioxide. Instead the majority are made up of nitrous oxide and methane – nitrous oxide represents the larger part of this, at around
50 per cent, while methane emissions make up 36 per cent.
You know that organic fertiliser that they would replace the nitrogen with? That\’s the source of the methane that is. So decreasing one will necessarily increase the other and there might be no drop at all in emissions. Indeed, I\’m prepared to wager a small sum that total emissions would rise by replacing "artificial" fertilisers with cow shit.
Why economics can no longer be left to economists
Economics, one assumes, should thus be left to those who know jack shit about economics.
And most amusing is that the piece on economics and the desired new economics is written by someone with such impeccable credentials:
Clive Dilnot teaches at The New School in New York, where he is professor of design studies
If we think of an economy as principally a site for private accumulation,
We don\’t. We all recognise both public goods and their merits.
and if we see it operationally as a series of efficient markets,
Parts of it are and other parts never will be
all of which work best without regulation;
Gloriously untrue. It\’s the method of regulation which is debated, not the necessity nor existence of.
if we think that these markets can be self-regulating;
Some can, others cannot. Basic assumption of all economists pretty much.
if we think that they will tend, over time, towards equilibrium (and will never therefore, under their own volition, come to crisis or collapse);
No, well understood that markets can and will collapse under their own volition. Try reading the Austrians.
if we think that prosperity is dependent on giving these markets the freest possible reign
Sometimes and not always. See public goods above.
and if, finally, we think that those who operate those markets require (as incentive) and deserve (as reward) colossal payments for their labour,
We don\’t. We think that the rewards on offer will be a reasonable (although fallible) measure of the scarcity of certain types of labour….as with other economic resources.
then we will create (or we will accept) an economy very like the one that has just spectacularly fallen about our ears. This kind of (mis)understanding of economics outlined above is what has enabled the economy to develop in the way that it has.
A definite feeling that it is our professor of design studies\’ (mis)understanding of economics that is the problem here, eh?
OK, inequality is a fact, and increasing, so what? Inequality is a violation of human rights.
Err, no. Bollocks in fact. And that\’s all we need to take from the essay on inequality.
Well, a little more.
The poorest tenth of the US population has an income well below the OECD average poor, lower than the poorest tenth in Greece.
Absolute crap. Complete and total bollocks. The bottom 10% of the US has the same income (page 25) as the bottom 10% of the Swedish or Finnish.
And I really cannot face reading Bryan Gould. Have at it yourself.