There are those who argue for democratic control of the economy – it’s often used as a synonym for socialism. It’s just occurred to me that they are in fact arguing for the decision process over which cars are to be made, by whom, in what quantity and at whichever price be subject to the same process which made Donald Trump President. This does not strike me as a good idea and it surprises me that it doesn’t strike them the same way.
Perhaps a slightly ghoulish way to think of it but the death toll appears to be 10 people at present. 10 too many of course, a tragedy each and every one.
And yet, and yet. Firstly, imagine a storm this bad in an economically undeveloped country. We wouldn’t be just creeping up into double digits.
But also, US death rate is some 800 per 100,000 people each year. There’re 2 million in Houston (the city, not the surrounding area). We therefore expect some 45 deaths a day in normal times. That toll of 10 is over several days. We’re in fact seeing a 10% rise in the death rate as a result of a vast and huge storm.
Yes, 10 deaths too many. And yet it’s an amazingly small, tiny, number. It being economic development that makes it such.
The issue is not whether central banks should wean themselves off QE but whether they can do so without bringing to an end the tepid recovery in the global economy.
Quite different from Spudda, who insists that it should never be reversed.
There is also this which is fun:
There were also better ways to boost demand. To an extent QE merely compensated for the fiscal austerity announced by Osborne (and strongly supported by Macpherson).
that is, if we’d not had the austerity we’d have had less QE and still ended up in the same place…..
Is as with Dr Johnson and the preacher.
As is typical of theoretical economists, his model makes gross assumptions, including the idea that consumers have no preference, for example, between a US computer and one made in Taiwan, and that the distance goods travel to market is irrelevant.
Preference is as preference is, our trade rules should allow people to express them, exactly what free trade does and restricted trade does not. But there are no computers made in the US these days of course (assembled, maybe, but not really made). Further given container shipping lines distance doesn’t matter in this sense either. We do not buy out iPhones nor logiciels from France because it’s right next door, do we?
A higher minimum wage acts as a subsidy to automation
There’s even a substantial current in economics insisting that the industrial revolution happened in Britain because wages were higher, thus making automation more worthwhile.
Falling petrol prices are keeping a lid on inflation, and economists believe that means Mark Carney at the Bank of England is less likely to put up interest rates.
Consumer prices rose by 2.6pc in the 12 months to July, the Office for National Statistics (ONS) said, the same rate as in June because falling petrol prices offset rising food and clothing costs to keep inflation steady.
I strongly suspect that the BoE, like The Federal Reserve and even the ECB, looks at core inflation rates. That is, inflation minus the known to be highly volatile fuel and food sectors.
Rather than seek an alternative focus of measurement to wealth, we should instead seek to measure wealth better. The problem with GDP is that it doesn’t measure real wealth at all, only the total cash value of the economy. It is a truism that money has no value in itself, only in what it allows you to buy. Money is only a proxy for wealth, and a deeply imperfect one at that. Real wealth consists in what we are able to own or consume, not in the size of our bank balances. Real wealth therefore grows when we can have more of, or better of, the things that enable us to live well. We are truly enriched by warmer houses, better medical care, healthier food.
Quite true, except we must not conflate wealth with income, stock with flow.
House price inflation has run far ahead of wage inflation in the UK for decades, so although – a few years of recession excepting – proxy wealth has tended to rise, real wealth for many has not, because housing has eaten up more than the increase.
That’s the sort of confusion you get into when making that conflation. Wages are the flow, house prices are the stock. We just shouldn’t be comparing them in this manner. Rent, or even imputed rent can be compared with incomes, should be even. It might even tell us the same story. Or, umm, given interest rates and the financing costs of the asset, perhaps not? Certainly, at times, given the three factors, they will move in different directions.
For example, hold incomes static, house prices double, yields on rentals halve, the effect upon that rent, or imputed, is zero.
Economists rightly celebrate the growth in prosperity that has marked the modern era. But ordinary working people are much better off than their Victorian forebears because they have better homes, better food, free education and healthcare, not because they have more money. The connection between the two is not inextricable, as recent experiences in Japan bear out.
Japan has experienced years of what economists see as the “nightmare of stagnation”. And yet the country is still a safe and affluent nation. David Pilling, the Financial Times’s former Tokyo bureau chief, has argued that “the standard of living, particularly in big cities like Tokyo, has improved significantly in the so-called lost decades. The city’s skyline has been transformed; the quality of restaurants and services improved greatly.”
How is this possible? Because “a lot of improvements in standard of living come not through what we normally consider as growth, but through technological improvements”. This is a concrete example of real growth without what is normally understood by economic growth.
Oh dear. This is the very thing that we try to accommodate into our numbers by inflation adjustments to get to real incomes (ie, deflation can lower nominal income, raises real) and hedonic adjustments (what we buy for the same money is improving in quality). This isn’t something new, this is where all the work is being done.
If we can grasp this, we can see why the argument about whether indefinite growth is environmentally sustainable is bogus. Orthodox economics says that it is essential if the world’s worst-off are to escape their poverty. Critics argue for zero or even negative growth, claiming that this is the only way to ensure we don’t deplete the planet’s resources. Both are wrong. Real wealth is created not just by exploiting more resources and increasing society’s cash pot but by exploiting the same or fewer resources better. The whole question of GDP growth is a red herring if we are interested in real wealth. What matters is that we do more with the resources we have.
But as I have been shouting for a decade we already include that in our GDP calculations. Baggini is missing that we already do this.
Building a better future depends on seeing this clearly. Take the need to reduce inequality, which many now accept is urgent. To do this it is assumed we need to reduce the income gap between rich and poor. But real equality is increased simply by making it possible for the less well-off to do more with the money they have. Social housing was, and could again be, an example of that. Take two people, one of whom earns £30k a year and the other £15k. To close the real wealth gap between the two does not necessarily require increasing the income of the latter. Providing them with a decent council flat at low rent effectively allows their disposable income to equalise.
Quite so, as I have been screaming for a decade. And as wealth (note, wealth, not income) inequality numbers stoutly refuse to incorporate. Good grief, state undunded, old age, pensions are not counted as wealth, private fully funded are. The three all achieve the same thing of course.
Midwives have dropped their decade-long campaign for “normal birth”, saying that it made women feel like failures.
Women will no longer be told that they should have babies without medical intervention, the Royal College of Midwives has said in an overhaul of “misleading” professional guidance.
The imposition of the one central rule upon something that we, and our predecessor species, have been doing for tens of millions of years is wrong then what hope anyone getting the rules right for something we’ve only just started to do, like trade, mechanisation, capitalism and large scale voluntary exchange?
Asking for a friend.
One Thursday night in the next couple of years we could go to sleep knowing that, by Friday morning, neoliberalism in Britain will be over. If a left-led Labour party comes to power, leading a coalition determined to scrap free market economics, that will be a good day for working people. It will be a bad day for Virgin Care, Portland Communications and Saudi Arabia.
The very slight problem here being about Paul Mason’s dreams that free market economics works, not free market economics does not. That is, this is not an optional part of our universe, it’s just reality.
As I have pointed out endlessly this is not about cooperatives and worker ownership, socialism, v the capitalists, this is about the incompatibility of the complexity of a modern economy with detailed planning. Certainly, there are some things markets don’t deal with at all, things they need aid in dealing with – public goods and their mirror, externalities – but there are vast swathes of life where markets and their prices are the only tool we’ve got that actually works. To “scrap” this is not possible, this is just what is. We can fail to take note of it of course but that’s not going to work very well now, is it?
Because Chapman’s move illustrates where the real centre of gravity of a new centrist party would have to lie: it would be a liberal Tory party. The party of Notting Hill and Canary Wharf; the party of free market economics, globalised finance and social liberalism. And its major impact on British politics would be to split the Conservative party, not Labour.
That’s pretty hopeful too. For to most of the rest of us the split is over where Momentum starts, between those who acknowledge reality and those who don’t.
Paul Mason is a writer and broadcaster on economics and social justice
Amusing thought that one can combine those two…..
These developments were the result of nearly 40 years of free market economics and what is increasingly seen as the depredations of “hyper-globalisation”.
In the now all-consuming British debate over Brexit – a rupture with the EU caused in part by austerity – it is important not to lose sight of the bigger picture. The catastrophic collision between Anglo-American de-regulation, the crash in the financial markets it engendered, and the strictures of German and Eurozone austerity sent a firestorm through southern European economies that should never have been allowed to join the single currency in the first place. And it has helped fuel populist movements on both left and right.
Despite some of the EU safeguards, hyper-globalisation has encouraged an explosion in debt, a continued fixation with short-term profit, and a failure to invest in long-term productive manufacturing – all largely to the benefit of the top 1%, today’s greedy and gross super-elite. Not only do we know that the catastrophic collapse in the Anglo-American financial markets resulted in precisely not a single banker being held accountable – but today it is still largely business as usual for the banks. Ironically, EU competition law that largely prevents state bailouts or nationalisation, was suspended in the case of the banks, who had trillions thrown at them or which were nationalised, courtesy of the taxpayer.
A report published by the United Nations Conference on Trade and Development next month identifies some of these corrosive trends and suggests ways of reordering the world economy.
Mark Seddon is a former UN correspondent for Al-Jazeera English, and speechwriter for the UN secretary general Ban Ki-moon
But not only did we in Whitehall fail to see the crisis coming, we failed in anticipating its long-term impact. We expected unemployment, repossessions and business insolvencies to surge, just as we had seen in the recessions of the 1980s and 90s. But none of these reached anywhere near the levels seen in the past. Repossessions peaked at a lower level than in 1991; the annual rate of business liquidations remained well below those seen in the 1990s; and unemployment fell just half as far as it had in the 1980s. Some groups, including black men and the young, paid a heavy price, but the infamous 3 million unemployment figure that scarred Britain in a previous recession was never breached.
In contrast, not a single Whitehall meeting I recall remotely anticipated the colossal pay squeeze that would see real earnings fall by over 10%. We should have spotted earlier the changed dynamic of a flexible labour market, very low interest rates and a big depreciation of the exchange rate, which fed quickly through into the higher inflation and lower living standards still evident today. Had we done so, we might have recognised earlier that employment levels were understating the economic damage being done and, for example, pushed harder against opposition to more radical action from Mervyn King, then governor of the Bank of England.
The first is because of the second you idiot.
Recession = GDP falling. GDP = all incomes. Recession = someones’ incomes, somewhere, falling.
Either 10% of everyone lose all their income through unemployment or everyone loses 10% of their income through falling real wages.
The performance of real wages and unemployment in this recent recession is a fucking success. Fool.
There are indeed some puzzles we lack definitive answers to, such as why our productivity levels are flatlining.
Sigh. We know this very well. Output’s not much higher than it used to be, about the same number of people are in employment. Given that productivity is output divided by hours in how could this be any different? Again, this is a fucking success. Fool. Instead of unemployment soaring productivity fell.
Yes, it’s Mason again:
The vast influence of the Kochs’ “dark money” has been documented in Jane Mayer’s 2016 book of the same name. It funds, among other things, nearly 300 academic courses at colleges and universities, where the syllabus is dictated by the right: students learn that Keynes is bad, sweatshops are good and climate change is a myth.
Sweatshops are good. Hmm:
For example, teachers using Edvantage can find economics videos explaining how the Environmental Protection Agency is bad for the environment, how sweatshops are good for third-world workers, and how the minimum wage costs workers jobs. Content featuring opposing viewpoints, however, is sparse.
But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.
That is, yes, sweatshops are good.
Struggling to survive on the Mississippi Delta: Inside the lives of some of America’s poorest
Persistent poverty has plagued the Mississippi Delta for decades
In most Delta counties the poverty rate is 40 per cent, while nationally its 15
Most residents, like Otibehia Allen, barely make ends meet even with two jobs
Otibehia is working 30 hours a week combined at her two jobs and also supporting 5 children as a single mother.
We would rather expect a certain amount of economic struggle in that situation, no?
She’s also in the top 15% of all income earners globally, yes adjusted for purchasing power, as an individual.
She’d almost certainly be receiving something close to that again in food stamps ($925 a month is maximum possible for family size), there would be a few thousand in EITC and so on. Figure income at double her earnings. Global top 3% as an individual.
Even if we allocate income individually, to each of the children, that’s top 25% globally.
That is, this isn’t poverty. It’s inequality. Poverty doesn’t exist in the US, absent serious addiction or mental health problems.
But I think the governing class in Britain, which includes Labour moderates, has a serious problem with public rejection of the market economy; that the political consequences could be disastrous; and that fragile democratic consent for capitalism must be sought.
Capitalism is useful, works rather well. Markets are vital, economic systems that don’t use them don’t work. It’s vital to understand this difference.
Almost two decades later, we can see the results. PFIs have produced more fleecing than Millets. A PFI primary school in Middlesbrough, only opened in 2006, was demolished in 2015 because its foundations had been built on “defective fill material” – literally, dodgy ground. Children and staff moved to another site – nevertheless, payments on the contract had to be made. In Liverpool, a PFI school has been shut since 2014 – because there aren’t enough pupils to keep it open – yet taxpayers still pay £12,000 a day under the contract. These aren’t one-offs: they are inherent in the structure of PFIs, which dump all the risks on the public and hand the private sector all the rewards.
So, let us consider other contractual arrangements and payment methods.
Say, the government borrowed the money and went out and built these schools. The government would still be paying the interest on those loans, wouldn’t it?
Perhaps the government taxed the rich bastards and paid for the schools that way? The money would still have been spent, and gone, on a school that doesn’t have enough pupils.
That is, changing the method of payment doesn’t change the fact that the money was wasted, does it? And the problem is that the money, those real resources, were wasted by incompetent state planning, however it was paid for.
To comprehend why there will probably not be a non-violent solution to the crisis of Venezuela one must know what is at play in the global geopolitical plan. What is at stake are the largest existing oil reserves in the world in Venezuela. For the global dominance of the United States it is crucial to maintain control of the largest oil reserves in the world. Whatever country, however democratic it may be, has this strategic resource and does not make it accessible to the multinational oil companies, a majority of which are North American, will become the focus of an imperial intervention.
The threat to national security of which the presidents of United States speak of is not solely in access to petroleum but above all in the fact that the global exchange of oil is denominated in U.S. dollars, the true nucleus of power of the United States since no other country has the privilege of printing the bills they wish without this significantly affecting their monetary value.
This is the reason why Iraq was invaded and the Middle East and Libya razed (in the last case with the active complicity of France’s Sarkozy). For this same motive there was interference, now documented, in the Brazilian crisis because the exploitation of the pre-salt oil fields was in the hands of the Brazilian people. For this same reason Iran returned to being in danger.
Is there no economic delusion some lefty isn’t prey to? that oil is priced in dollars just doesn’t matter.
Another one that’s not going to work out well:
So the existential question the chicken issue raises is this: why do we want more trade? What is it for? The old promise was that trade led to prosperity. But what if we have enough already? What if enhanced global trade, far from promoting wellbeing, now undermines it?
To trade fundamentalists, rainforests and ancient woodlands, coral reefs and wild rivers, local markets and lively communities, civic life and public space are nothing but unrealised opportunities for development. Where we see the presence of beauty, tranquillity and wonder, they see the absence of palm oil plantations and soybean deserts, container ports and mega-dams, shopping malls and 12-lane highways. For them, there is no point of arrival, just an endless escalation of transit.
Nowhere is a place in its own right; everywhere is a resource waiting to be exploited. No one is a person in their own right; everyone is a worker, consumer or debtor whose potential for profit generation has yet to be realised. Satiety, wellbeing, peace: these are antithetical to globalised growth, which demands constant erasure and replacement. If you are happy, you are an impediment to trade. Your self-possession must be extinguished.
So this is where the chickens come home to roost. Enhanced global trade now threatens our health, our sovereignty, our democracy. Once it made us rich. Today it impoverishes us.
Here’s the thing about the free part of free trade.
Those who wish to take part in it may do so. Those who do not wish to have no need to. My ability to purchase, if I so wish, chlorinated chicken is an increase in my freedom, as is also the existence of that possibility and my decision not to do so. The same is true for you as well. Sure, it might be a trivial freedom, one of no great or even particular value, but it is about liberty all the same.
The argument about the free part of free trade therefore really is, well, by what right do you restrict my freedom to do so?
It’s not going to work well is it?
The world didn’t run by shareholder value in the past because people didn’t talk about it.
Hmm. You know, there was no buggery in the past because the word gay meant something different?
He’s also missed entirely how it was originally used. Which is to contrast against management running the company for management’s benefit.
Then we get to the idea that shareholder value means gearing up. Nope, it doesn’t. And then we get the allegation that it’s about cutting costs. Err, no. Cutting production costs is something that any economic system is going to try to do. You know, it’s the flip side of rising productivity? The heart of what makes the economy grow?
Seriously bad piece in fact. Entirely missed that original meaning. It’s not as if it’s difficult to find it out either. I mean, how can anyone discuss this subject without talking about Milton Friedman? This newspaper piece from 1970? Or it’s in Capitalism and Freedom from 1962.
Why, we might even link it into that other bugbear of the left these days, Nancy McLean’s gross misunderstanding of Jim Buchanan’s public choice theory. Everyone is motivated, at least to some extent, by their own economic self-interest. This is true of politicians and bureaucrats. This is also true of company management. The point about shareholder value being that we want the corporate executives to be operating in the interests of their employers, the shareholders, not the management itself.
That’s what the idea is about, that CEOs concentrate upon the size of the dividend, not in amassing 22 country club memberships for themselves (a real example of mid-80s CEO behaviour) coughed up for by said shareholders.
Finally, and I know this is unkind, possibly even illegal these days. But what is a radio station doing employing a presenter with a speech impediment?
It is possible to “reboot” capitalism as a defensible system. You do what the post-Poldark generation had to: impose regulations that prevent exploitation, suppress the market, place certain functions and prices under the control of the state. You treat speculators, monopolists and crooks of the Warleggan variety as social outcasts, not invite them to become the biggest donors to your party.
Capitalism and markets are two different things. They’re not even measurements along the same axis.
Capitalism is about who owns productive assets? Markets are about prices and distribution. Information more than anything else, who wants what and who is prepared to produce it?
It’s entirely possible to have a functioning non-capitalist economy. We’ve got large chunks of that in our own economy. John Lewis is not a capitalist organisation. Mondragon works just fine.
But we still need the information capacity of prices to drive production and distribution. Thus we still need to be a market economy. Except, of course, where we don’t, the military being an excellent example of when we want a definitively non-market economy, a totally planned, monopolised, one.
I know I rail about this too much (something I have in common with Brad Delong) but capitalism is a take or leave it sorta choice. Useful, desirable possibly even, but not essential. Markets and prices are indeed essential – except in those areas where they’re not – for we simply don’t have anything else with the coordination capabilities available to us.
And sadly this is an extremely common mistake over there on the left. Much of it stemming from Marx’s inability to get the point but it does go all the way back to Aquinas and to one of other of the bearded Greek blokes, the idea of the “just” price. They rail about the inequities of capitalism – OK, fair enough – then insist that markets be curbed. This is akin to insisting that we don’t like that shade of blue for the living room walls therefore C# instead.
We’ve had centuries of this and they’re still getting the most basic underlying point wrong.
Alexis Tsipras, the Greek prime minister, has promised to defy his critics by taking the country out of its longest-running crisis in modern times. “The worst is clearly behind us,” he told the Guardian in an exclusive interview.
“We can now say with certainty that the economy is on the up … Slowly, slowly, what nobody believed could happen, will happen. We will extract the country from the crisis … and in the end that will be judged.”
Not that it’s got much to do with Syriza or the various EU bonds who have been fucking things up.
Economies do tend to recover, eventually, but that’s not actually he point. How quickly is. By that measure the whole affair has been a disaster, hasn’t it?
Default and the return of the drachma would have been a much better idea.