Discuss (politely, please)
Aug 232011
Aug 232011
There’s an article in the Guardian this morning that reports:
The recent riots in London and other big cities were the product of an “out-of-control consumerist ethos” which will have profound impacts for the UK economy
Pure Guardian stuff, you might think, except:
The report by the global head of research at Tullett Prebon, Tim Morgan, is part of a series in which the brokerage analyses bigger issues for the UK.
And these guys aren’t any brokerage: they’re bang in the middle of the most complex, and as I’d have it the most feral of City activity. But as the Guardian note:
[The report] details recommendations to resolve what it sees as a political and economic malaise: new role models, policies to encourage savings, the channelling of private investment into creating rather than inflating assets, and greater public investment.
And it does on:
It warns: “We conclude that the rioting reflects a deeply flawed economic and social ethos… recklessly borrowed consumption, the breakdown both of top-end accountability and of trust in institutions, and severe failings by governments over more than two decades.”
What’s to blame?:
A typical internet user sees a hundred adverts an hour, the report says, and the underlying message many receive is: “Here’s the ideal. You can’t have it.” Accompanying this is an inflation of government and private debt, a key theme of Morgan’s other work.
“The dominant ethos of ‘I buy, therefore I am’ needs to be challenged by a shift of emphasis from material to non-material values. David Cameron’s ‘big society’ project may contribute to the inculcation of more socially-oriented values, but much more will need to be done to challenge the out-of-control consumerist ethos.
“The government, too, needs to consume less, and invest more. Government spending has increased by more than 50% in real terms over the last decade, but public investment has languished. Saving needs to be encouraged, and private investment needs to be channelled into asset creation, not asset inflation.”
These are all themes I explore in some depth in The Courageous State. It’s good to see the City is likely to provide at least some support even if there are some aspects of Tom Morgan’s report for which I have little enthusiasm.
The Jersey Evening Post has published a gushing report saying:
PRIME Minister David Cameron should come to Jersey to see his vision of the ‘Big Society’ in action, according to one of his MPs who has been in the Island this week.
Conservative MP Daniel Kaczynski has been in the Island for an official visit, and he has echoed the comments about Jersey’s community spirit that departing Lieutenant-Governor Andrew Ridgway made two months ago.
Mr Kawczynski – a junior agriculture minister who chairs two committees on relationships with the Arab world – said that Jersey’s system of voluntary and honorary service was the model of the more caring society that Mr Cameron spoke about.
Well, let me set some facts straight.
Mr Kawczynski is not a junior agriculture minister. He has never held ministerial office – although his personal web site says he is a member of the ‘shadow’ foreign office team – indicating that he has not updated it since May 2010 – such is his attention to his duties. What he actually is is parliamentary private secretary to a junior agriculture minster - something very different indeed.
And Mr Kawczynski is not a member of any select committees at all right now - because he so rarely turned up when he was.
So Mr Kawczynski seems best noted for being that sort of Tory MP whose concept of the Big Society is getting elected to a pretty safe seat, ignoring the constituents, for whose benefit he can’t even communicate what he’s doing, going on some nice jollies to places like Jersey and doing as little as posible in Westminster.
And we’re supposed to be impressed by this man’s opinion?
Oh come on Jersey! When you can’t even report his status properly please don’t ask us to believe the guff as well.
And guff it is. Because the reality is Jersey is a place riddled by fear, populated by people who can’t afford to buy homes, who know their government is going bust, who are having more tax demanded of them just to support tax avoiders and evaders and which is running an illegal tax regime to ensure that the place continues to be considered a pariah on the international stage.
And that’s the Tory vision of the Big Society?
Well, maybe it is.
I take it all back.
As the Guardian noted today, there appears to be an enormous price attached to the measures needed to stabilise the Eurozone to meet the demands of bankers:
Last week, the German chancellor, Angela Merkel, and French president, Nicolas Sarkozy, announced that they would push for the creation of a Eurozone economic council to police the austerity measures of governments, to be headed by Herman Van Rompuy, the EU president.
Separately, Germany’s economy minister, Philipp Rösler, has proposed the creation of a new, unelected EU institution, a “stability council” that would impose automatic sanctions on countries that do not adhere to rigid budget discipline and pro-business labour policies.
And the head of the ECB, Jean-Claude Trichet, has called for a European finance ministry, charged with dictating to countries their spending policies.
None of those institutions is any way democratic. That is profoundly worrying.
As worrying is the fact that, as I noted last week, these undemocratic moves are associated with demands that all EU countries adopt legislation that outlaws Keynesian economic policies despite these being the only currently available mechanism with any hope at all of dealing with Europe’s economic crisis.
And as is now very obvious from the above reports, these same anti-democratic moves have the clear intent of ensure that yet more wealth moves from labour to capital even though the excess return to capital – which is now, according to Nouriel Roubini yielding higher real rates of return than at any time since the 1920s – is clearly one of the major causes of the current crisis as most people now simply cannot afford to meet their perceived needs so far have their real wages fallen and so high have their debt servicing obligations become.
The net result of all this is that the imposition of these budgetary controls across the EU (The UK included – since it is covered by these measures) will simply exacerbate control of the economy by bankers by proxy in their own sole interest and entirely without democratic control.
I am profoundly worried by this. I am by principle a European. I am a citizen of two EU member states. My family and my wife’s family came to this country as economic migrants. I believe free movement of people is important. And I know all too well that the risk of Europe falling apart is intensely dangerous to us all and the EU has helped mitigate this risk, to date. The history of disputes being resolved through warfare on this continent is too recent and too strong to be risked again.
And yet all that being said there is also an obligation on all democrats to object to these moves in the strongest possible terms.
We have seen the consequences of economic management by bankers – and it is disastrous.
We know that neoliberalism does not work – and that it is already in its death throes; throes which could all too easily engulf us if these EU measures were to be adopted.
And we already know that the potential for social chaos that cuts create is enormous and yet these moves would be designed to deliver more and more cuts with ever greater risk to social cohesion.
There was already, before reading this, much to make me think that we live in dangerous times. My confidence in democracy has however been the one thing that has afforded me comfort in the face of those risks – inadequate as I know democracy can also be. But if we now abandon democracy in Europe – as these moves do in my opinion demand – then we move towards totalitarianism in the hands of bankers faster than it is almost possible to imagine.
Give me the choice of this unelected form of government by central bankers in Europe and quitting Europe I know where I stand in an instant – I would have no doubt that Britain should leave the EU if these measures are adopted. That would be an ethical imperative.
But I say that with the utmost trepidation, because many states will not have that option. Their subjugation through debt would deny them that choice.
And in that case I fear a Europe divided by the financial crisis, and by an attempt by bankers to retain control when it is all too obvious that they, their feral instincts and their feral economy are the greatest real threat to well-being most of us face.
I don’t want to cry wolf: that’s never wise. But this is an issue on which the politicians of the UK – all politicians in the UK, not just the usual band of Eurosceptics – have to stand up and say collectively that democracy has to prevail not just in this country but right across Europe if we are to really handle this crisis and the problems it has created.
Right now the EU is moving away from democracy. It cannot be stated less boldly than that. And you have every reason to be worried if our politicians don’t object to that, now.
As the FT reports:
Some of Britain’s biggest banks have begun quietly ridding themselves of billions of pounds of assets they have found difficult to sell following the financial crisis, moving them off their balance sheets and into staff pension funds.
The moves – designed with the dual purpose of clearing unwanted assets from the banks’ own books while at the same time closing pension fund deficits – have been made as exceptional top-up payments into the pension schemes over recent months.
I often wonder how low the senior management of banks can stoop and they always exceed expectations.
This move shows the straightforward contempt of the directors and senior management of these banks for everyone else in the banks and in the world at large.
Are you really surprised that I want these banks nationalised when they fall over again, probably quite soon? And that the nationalisation should require a clear out of the people who do this sort of thing, for good?
If modern banking depends on ethics like these we can easily do without it. We need banking, for sure. But not like this.
PFI – surely the game is over?
Economics
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Aug 222011
As Tom Clark notes in the Guardian this morning:
The private finance initiative was devised to get schools, hospitals and roads built without swelling the government’s overdraft. Critics discerned a conjuring trick. Instead of the state borrowing, private consortiums did, and then the public paid – at a premium rate. It has often been likened to sticking a mortgage on a credit card; but Whitehall always resisted that charge.
But now the Treasury Select Committee has reviewed the system just as George Osborne plans to use it for another £2 billion of schools, and as Tom also reports (and I’ve edited, a lot):
A committee with a Conservative chair, Andrew Tyrie, and a coalition majority could have played it safe. Instead, it produced a quietly devastating report. Calmly and forensically, the committee weighs costs and claimed benefits to damning effect – and also confronts ministerial motives.
It finds the temptation to fiddle the figures alive and well.
Tyrie set his crunchers to work without fear or favour – with breathtaking results. Post-credit crunch, investors can demand higher returns, and so the financing costs of a typical PFI deal now exceed 8.5%, more than double the rate at which the government can borrow. For PFI to stack up, those claimed benefits around risk thus have to be not merely valid but overwhelming.
No wonder the MPs insist state investing directly ought always to be considered.Rarely has the claimed basis of a policy been so decisively demolished. Only accounting convenience and connivance with the City remain.
It was ever thus with PFI.
It’s time to declare the game over.
Green quantitative easing could do the job much better. So could a new infrastructure bank fund by pensions.
As I have noted (more than once) Jersey and the Isle of Man failed the requirements of the EU Code of Conduct on Business Taxation last year.
On 13 September their proposed revisions go before the Code of Conduct group for review.
I gather both are appearing.
I also gather the Code Group has considerable doubts about representations being given: after all, the history of both places is that they have done all they can to abuse the requirements made of them with a veneer of compliance covering blatant attempts to get round the rules so they could continue to offer tax haven ring fencing. Given that the Code Group rightly notes that both Crown Dependencies are in parlous financial state I suspect few believe they won’t try such abuse again.
It could be an interesting meeting. And there’s no certainty either will walk away with an approval – because there are doubts, as I’ve previously mentioned, that they will. The islands both failed on three counts last time. They look to be addressing two concerns but there is doubt about the third. They may pass, but my doubts definitely remain. But I could be wrong. It’s possible.
In an article in the Observer this morning Julian Coman says:
Why are the failings of capitalism only being exposed by the right?
It used to be Labour that fought against the moral inadequacies of the free market. It must rediscover its voice.
Well, he’s right that Labour has not made nearly enough noise on this issue.
But some of us have been critiquing capitalism for some time. The Tax Justice Network has played an enormous role in this – so I’ll claim a little credit for that.
Then there’s been the Green New Deal group - which called the whole malaise before it happened and offered solutions before anyone thought they needed them, and again I’ll claim a little credit.
The critique has been there all right.
Now Labour must embrace it.
