Ragging on Ritchie

Letter to The Times

Miatta Fahnbulleh
Chief Executive of the New Economics Foundation

OK, we think it could very well be.

Prem Sikka
Emeritus Professor of Accounting, University of Essex

It probably is you know

Fran Boait
Executive Director, Positive Money

Oh yes, now we’re cooking!

Neil Lawson
Director of Compass

Asymptotically approaching 99% certainty here.

France Coppola
Economist and author

Eh? You what?

Richard Murphy
Professor of Practice in International Political Economy at City, University of London

100% now. To be fair here we don’t need all the rest, the last tells us anyway.

Zero-hours contracts must be abolished;
Trade union rights must be recognised and supported;
A true living wage must be paid in the future;
Its gender pay differential must be published, and it must have a policy for reducing it;
Put its full accounts on public record, whatever its size;
It may not use any tax avoidance schemes of any sort whatsoever;
It must never use a tax haven;
If it is a large company it must publish country-by-country reports;
No one must be paid more than ten times UK median earnings;
Every large company involved must have a plan for becoming net-zero carbon and must include the cost of that plan in its accounts, and make annual reports about progress on this issue;
Publish information annually of the type required by the Fair Tax Mark;
Dividends must be based on group retained earnings;
No dividends should be permitted if group retained earnings would as a result be less than the last three years (in smaller companies, with five years being required in larger ones) average net profit after tax to encourage balance sheet resilience.

This is the price of government support in the current crisis.

Oh, plus 25.1% of the equity.

Given what Murph describes as tax avoidance this means not carrying forward tax losses (as Starbucks), not obeying transfer pricing rules (Starbucks), not deducting interest as an expense (Boots) and so on. Gonna be a fun world under the Enabling Act.

If only the government had both guaranteed their incomes and food and other essential supplies through a rationing programme then this would not be happening.

As I have also explained, rent holidays, statutory mortgage and other bank loan holidays, tax payment holidays, and even utility bill payments would also all guarantee people the security that they need at this point of time, albeit that they might, as a result, need less income to maintain themselves, which is a proposal that I have also made.

Food must be rationed and not by price. But rents, mortgages, utilities, must not be rationed at all by abandoning rationing by price.

In return for being aided by government in these difficult times every recipient of said aid must:

then some quite stringent conditions need to be attached including binding undertakings to:

– To sign up to a tax transparency standard like the Fair Tax Mark;

The Sage of Ely having been the founder of the so far remarkably unsuccessful Fair Tax Mark.

Richard Murphy says:
March 18 2020 at 7:40 pm
With the greatest of respect, when did you have your charm bypass?

At the same time guarantee funding to banks to ensure their survival, but on the condition that they are nationalised immediately without compensation: every single bank is now, in any case, effectively insolvent;

That’s news to pretty much everyone, isn’t it?

Nationalise all the utilities (electricity, gas, water) and cancel all their charges for the time being. In this one case the government should make good the lost revenues, but they will now be under state ownership;

You don’t think that he might be refusing to allow a crisis to go to waste, do you?

Introduce food rationing

Eh?

Put price controls in place to prevent racketeering

But if we don’t have rationing then we’ll not need price controls because there will be no racketeering will there?

And when this has been done new commissions are required, with emergency powers, on:

1) Recreating the economy after the demise of financial capitalism;

2) The future of land ownership;

3) The future of work;

4) The new social safety net, including for pensions, that we are going to need, which is linked to the future of tax;

5) Surviving the climate crisis that is to come;

6) Rebuilding our state so that it represents us all;

7) Preparing everyone for the world we’re going to live in by rethinking education;

8) How to remake communities.

And I mean, these are needed now: we cannot wait because nothing is ever going to be the same again. The equivalent of the thinking that created the post-war consensus is now required to create the post coronavirus consensus: I mean it when I say that not only will nothing ever be the same again, but nor should it be.

So children, how many of those commissions should Gauleiter Murphy be in charge of? Note that all of them have “emergency powers”. Yes, that’s right, a sweetie for those who said “all of them”. Brian and Trixie? You and your parents will be shot for saying none.

And don’t you think “rethinking education” has that most ominous sound to it?

The spud gets better and better. It’s as if Charles Pooter was running the Khmer Rouge.

Squawkbox manages to sum up the situation.

Richard Murphy says:
March 17 2020 at 7:52 pm
PPE and an MBA teaches you nothing about this

Or business, come to that

Which is why politicians should run more of the economy presumably.

Apparently, a business accepting a government loan is agreeing that it is insolvent and therefore it must shut down now.

And yet there is a solution!

I could draft that in a morning,

Who else would like the Sage of Ely to reformulate the British economy on the back of a fag packet?

Bank nationalisation, with the shareholders being wiped out, has now to be on the cards.

Yep, quite. Get on with it.

An outbreak of teh sniffles is just the excuse we need to nationalise the financial system.

Sorry, did I say excuse? I meant proves the validity of.

But, there is little reason the supporting many energy companies: when we know that they have been drastically overvalued because of the presumption that oil is the basis for our future, when that is clearly not true we should not be seeking to preserve their value now. The time for their nationalisation has arrived so that the transition to the green economy can be taken forward with speed after this crisis is over.

Oh, and nationalise the oil companies.

And let’s be clear: this is not Keynesian: the claim that we’ll all be Keynesian now will be heard, but Keynes’ relationship with deficit spending was complex, and (to be candid) he did not and could not have comprehended the type of situation we’re now in with the type of economy we now have.

Keynes had just lived through the Great Depression. But he wouldn’t understand a few months of disease related economic disruption.

Still, cometh the time, cometh the man, we are safe with the Sage of Ely.

And this is why his measures should include:

a) Underwriting banks

b) Underwriting insurance companies

c) Bank loan repayment holidays

d) Rent payment holidays

e) Tax payment holidays

f) A VAT cut

g) A universal basic income

h) Rationing

i) Price controls

Well there’s a certain truth that this isn’t Keynes. Price controls for example:

For these reasons, even liberal economists like John Maynard Keynes have opposed wage and price controls. As he wrote in The Economic Consequences of the Peace, “The preservation of a spurious value for the currency, by the force of law expressed in the regulation of prices, contains in itself … the seeds of final economic decay, and soon dries up the sources of ultimate supply.”

But, you know, the Sage of Ely:

This is modern monetary theory in action. All ideas have their time. The world has just realised that the idea that money can be created out of thin air for the public good, and that using that ability to keep people at work is a far more important objective than balancing books, has arrived. There aren’t many modern monetary theorists in the world but they’re very badly needed right now to explain that this is the only sane route down which we can now travel.

One of those experts the world needs right now being both Sage and in Ely.

In the accountancy reform process it is necessary to:

and the integration of a civil society voice into the reform process to prevent regulatory capture.

As Snippa, who quotes this, is fond of pointing out, civil society can only undertake this task if it is financially supported. And the definition of civil society is peeps who think like Snippa does.

He has, for example, been quite clear in the past that Tim Worstall, or the Adam Smith Institute, do not qualify as civil society. Because they doesn’t think like Snippa does.

Trebles all round righteously thinking people, eh?

Practically, Aldi and Lidl would have to set up entirely new loyalty card systems from scratch as they have always considered them an unnecessary overhead.

Richard Murphy says:
March 16 2020 at 12:14 pm
Aldi and Lidl could use Nectar, almost overnight

Erm, well:

On 1 February 2018 J Sainsbury plc announced that it had purchased the Nectar business from Aimia for £60 million.

OK.

At the time of launch, Nectar confirmed it would be open to more companies to join, excluding rivals of existing members.

Ah.

And then this:

Audit of the systems would be easy to spot abusers

You want to audit the purchase habits of 65 million people? In real time? Real time being necessary otherwise the wreckers will have got away with the extra can of baked beans, won’t they?

And this is before we even think about having to reprogram all the systems.

It’s easy to miss things:

All I know is I have a flu type illness that is not going the way these things always usually do with me.

But that, I suggest, does indicate the failure of government policy. After all, it would be really useful to know if I have got coronavirus. I would definitely know what was required now, instead of guessing. And they’d know too. And so would those with whom I have had contact. And I’d also know that if there is such a thing as immunity that I might have it.

But right now, I don’t know, the people I know don’t know and the government doesn’t know, so they have no idea whether or not the stats they issue are in any way useful, or not.

What government policy is it that prevents testing for coronavirus on a semi-retired bloke in Ely?

Given that we all do depend upon the Sage of Ely to save us what can we do now?

Right now I am too tired to deal with the issue….but maybe later on his morning I will return to it. The need for the most radical of thinking, and reforms, has arrived. And let me promise you, this time it is impossible for anything to be the same again. That’s the one certainty we have got.

When the lynchpin of our entire governing system, the centre of wisdom, is unavailable, what is there to do but waily, waily?

And this is not entirely a joke. For, in a system that depends upon direction from an individual what can that system do in the absence? Which is why the internet was built with multiple paths. So that the taking out of any one path does not bring down the system. And why market systems are very much moire robust than planned systems – because the absence of the planner does not bring down the system.

Still, there’s Shakespeare to fall back upon. I shall do such things although I know not what….

….we have one of these:

For what it is worth, a global rationing system of food and energy is my vision.

It’s called the price system.

Thirdly personal freedoms to do things that would otherwise make matters worse, such as travelling where we want to, bulk buying whatever we feel we need, whenever we want it, will be constrained by the state.
…
This will involve listening to climate experts, funding the transition needed through massive government borrowing and Green QE and introducing policies to curb our ‘freedoms’ to travel, eat and consume in ways that threaten the planet.

OK, so, the set up. All the airlines go bust. Hmm, don’t think so, but it could happen. OK, so we’ll accept arguendo. What then?

What we will see is a reversion to the type of airline industry that existed when I was in my youth. Back then ( and it really was ‘back then’ in these terms) the vast majority of airlines were state-owned, and existed as what were known as ‘national flag carriers’. National pride required that every country had such an operator, however much it cost to support it, and that cost was very often quite significant. This, I suspect, will be the new normal in this industry. But the result will be that states will make the decisions on air travel, and if they take climate change seriously this is going to mean that the era of massive air travel growth (which has been up about 50% since 2008) will be over.

Oh, right.

Now for the bit Snippa is missing. The world is littered with entirely fine aircraft that are doing nothing. We’ve the same number of qualified pilots and staff as we had before. Airports exist everywhere. There’s demand to be able to fly.

So, we’ve all the equipment and infrastructure necessary, already extant. The demand for the product is there. It’s never been cheaper to start an airline.

And Snippa insists that only governments will start airlines?

Worse, the risk that all the failings of financial capitalism, accumulated over 40 years, will become apparent simultaneously is very high: markets built on the flimsiest of foundations, such as the zero cost of capital that most banks have enjoyed for the last decade,

Zero cost of capital for banks? When?

We’ve driven up the cost of capital for banks since 2008. Insisted they hold more capital. Investors have demanded higher returns in return.

Banks have enjoyed near zero cost of funds this past decade, true. But anyone writing about banking had better know the difference between capital and funding, no?

And think through Snippa again. If banks had a zero cost of capital then they’d have lots of it. And that would be good in an emergency, not bad, right?

Instead we are now living in the middle of a full-blown economic meltdown. And what is worrying is that unlike 1929, 1987 and 2008, there is a strong and immediate underlying fundamental economic cause rather than a malfunctioning of the financial system, to which those crises can, in the first instance, be attributed.

That’s why it’s not that much of a problem. The facts have changed, prices change, and?

We know why they’ve changed too. We even know that once the cause has passed – as it will – then there will be a recovery. The very fact that we’re not standing around wondering what the hell just happened is why there’s reason to be cheerful. Once it has all passed there will be slightly fewer people, we’ll have the same amount of capital we did have, the same level of knowledge and so on.

No, I don’t claim the interim is going to be all that pretty but the fact that we know what the cause is is exactly what makes this time different. Better different rather than worse different.