A vital ingredient of any political system fit for purpose is having a significant amount of policy difference between major parties so that the options placed before the electorate are clearly distinct and represent important alternative choices that would lead to different trajectories and outcomes for society.
But these days I’m reminded of those games in newspapers where you get drawings that look the same in major respects but have some very minor differences of detail. Just like politics today! You can hardly get a tissue paper between the policies of the three main parties. For example, in terms of economic strategy none will contradict the cutting and austerity approach inflicted on the country – mainly on the less well-off parts of it - even though this policy plainly and demonstrably does not work even on the government’s previously stated terms. At least two of the main parties actually believe in austerity as an economic policy. The third believes that the idea of cutting has been sold to the general public and they are now afraid to gainsay this and come forward with genuine alternative basically Keynesian policies.
There is thus effectively an informal political cartel forever looking over their shoulders and using the same focus group approach equally devoid of insight, vision, courage or even an awareness of economic history. As one commentator so vividly expressed it one can imagine a modern variant of martin Luther King’s speech: “I have a dream – a dream to do pretty much what the other lot have been doing…”. No wonder electoral participation rates have been going down and hence also the rise of a fourth party threatening the upper political class in Westminster that at least is different but in the wrong ways.
This last aside, what does it really matter who gets elected nowadays if the policy choices are austerity, austerity or austerity? And of course it will continue not to work. Austerity pushes the domestic economy down and as other countries, being each other's export markets, also pile on the misery it is no use looking abroad for salvation. That only works if other economies with whom you do much trade have different, more sensible and effective policies on which a free ride can be taken - as for example with Canada some time ago when the US was booming. That isn't the case now, as European economies all want domestic cutbacks and export led recoveries.
So we have national and international economic prescriptions equivalent to the 18th century medical 'cures' of leeches and bleeding. If the patient isn't recovering then bleed some more – as we shall see in the upcoming spending review. And if the patient does perk up a bit that is, of course, due to your policies.
The big worry is that short of a catastrophic upheaval here and elsewhere there is no evident solution to all of this - not even in the medium term. Elections need to matter, the common good should be to the fore, a basic financial morality should prevail and loyalty to community and country should permeate our economic and business activities as well as our social life.
That is the essential change that we need to see - along with an unwinding of globalisation a stop to the evisceration of our industries and the re-creation of jobs.
And yes, this could be done if the will was there in major western economies. The mutation of economic and political processes that appeal to the contemporary elite has taken deep hold, but both are human creations not laws of nature as Smith, Marx and various toxic ideologues would have us believe. The economic, social and political worlds are what we choose to make them - and we can make a different and much more attractive picture if enough of us choose to do so.
Wednesday, 12 June 2013
Sunday, 9 June 2013
The Generation Game
The increasingly frequent and disparaging comments in the right wing press about the older generation are now infecting worthwhile newspapers of the centre-left. They peddle the austerity-based argument that older people are scarcely touched by the recession and are becoming an increasing burden on other generations.
Having given the impression before the general election of being on the side of pensioners, the coalition parties are now looking for ways to minimise this clear commitment and maximise clawback. Witness the attempted redefining of the retail price index to give lower values and consequent lower upratings despite the fact that generally the effective rate of inflation for pensioners is well above the average figure. Furthermore, there is the talk about cutting winter fuel allowances, travel passes and free television licenses (for the very elderly) for supposedly ‘better off’ pensioners.
All this as if current and soon-to-be pensioners were not contributing substantially already. All pensioners with savings – so most of this generation - have been severely hit by the artificially cut and sustained minuscule interest rates losing hundreds or thousands of pounds in interest income every year. And annuity values for those coming up for retirement have also tanked as another consequence of the nailing down of interest rates and the policy of ‘quantitative easing’.
There is also the practice of the financial cartel that I’m afraid also includes many building societies as well as the banks of slicing away even further at interest rates on ISAs so that there’s now hardly any benefit from the tax-free nature of these investments. This along with the miserly rates deliberately applied when bonds mature which is another example of the punishment of loyalty. So another big thank-you to our wonderful financial services ‘industry’.
All of this represents a massive transfer from the older generation to those much younger people (and many not so young) who have mortgages and also to those who have run up debts either just to survive (both these cases understandable) or because of ‘must have’ profligacy (not acceptable).
How much longer the pensioner generation can continue supporting the deeply indebted generations to this considerable extent is unclear, but no doubt this patient generation who raised families and did things by the book will soldier on and reflect on all that was built up by them prior to the modern curses of globalisation, privatisation, corporate greed and tax dodging, exploitative pricing and the thoroughly discredited economics of austerity.
Despite these many adverse factors this is not to say that nothing can ever be touched. For example I for one would support the idea of winter fuel payments being taxable so that those eking out small pensions would continue to get the full amount. Similarly, bus passes and television licenses for the very elderly could remain free for those on low incomes and be counted as income in kind and incur a tax liability at graduated rates for those who have been able better to provided for themselves.
This would be all the more palatable if the feral rich were made to pay their fair share in ways that I have indicated in earlier postings. Then for goodness sake let’s invest the money so generated in public works to get things moving again and provide jobs for the young – so much better than financial devices that get siphoned off by the banks.
Leaving aside this wretched government's blatant favouritism towards the outrageously wealthy, big business and those that fund their politics, there is still a sense in which most of us are in this together right across the generations. Taking the long view also involves a look at the past and the near present - especially the last few years - as well as projected futures.
So let’s have an end to spiteful comments about the older generation and understand that we have, over the years, built up a mutually supportive society – something that’s going to be needed as the age of austerity is dragged on by the misconceived policies of this government and now apparently to be followed by the next.
Having given the impression before the general election of being on the side of pensioners, the coalition parties are now looking for ways to minimise this clear commitment and maximise clawback. Witness the attempted redefining of the retail price index to give lower values and consequent lower upratings despite the fact that generally the effective rate of inflation for pensioners is well above the average figure. Furthermore, there is the talk about cutting winter fuel allowances, travel passes and free television licenses (for the very elderly) for supposedly ‘better off’ pensioners.
All this as if current and soon-to-be pensioners were not contributing substantially already. All pensioners with savings – so most of this generation - have been severely hit by the artificially cut and sustained minuscule interest rates losing hundreds or thousands of pounds in interest income every year. And annuity values for those coming up for retirement have also tanked as another consequence of the nailing down of interest rates and the policy of ‘quantitative easing’.
There is also the practice of the financial cartel that I’m afraid also includes many building societies as well as the banks of slicing away even further at interest rates on ISAs so that there’s now hardly any benefit from the tax-free nature of these investments. This along with the miserly rates deliberately applied when bonds mature which is another example of the punishment of loyalty. So another big thank-you to our wonderful financial services ‘industry’.
All of this represents a massive transfer from the older generation to those much younger people (and many not so young) who have mortgages and also to those who have run up debts either just to survive (both these cases understandable) or because of ‘must have’ profligacy (not acceptable).
How much longer the pensioner generation can continue supporting the deeply indebted generations to this considerable extent is unclear, but no doubt this patient generation who raised families and did things by the book will soldier on and reflect on all that was built up by them prior to the modern curses of globalisation, privatisation, corporate greed and tax dodging, exploitative pricing and the thoroughly discredited economics of austerity.
Despite these many adverse factors this is not to say that nothing can ever be touched. For example I for one would support the idea of winter fuel payments being taxable so that those eking out small pensions would continue to get the full amount. Similarly, bus passes and television licenses for the very elderly could remain free for those on low incomes and be counted as income in kind and incur a tax liability at graduated rates for those who have been able better to provided for themselves.
This would be all the more palatable if the feral rich were made to pay their fair share in ways that I have indicated in earlier postings. Then for goodness sake let’s invest the money so generated in public works to get things moving again and provide jobs for the young – so much better than financial devices that get siphoned off by the banks.
Leaving aside this wretched government's blatant favouritism towards the outrageously wealthy, big business and those that fund their politics, there is still a sense in which most of us are in this together right across the generations. Taking the long view also involves a look at the past and the near present - especially the last few years - as well as projected futures.
So let’s have an end to spiteful comments about the older generation and understand that we have, over the years, built up a mutually supportive society – something that’s going to be needed as the age of austerity is dragged on by the misconceived policies of this government and now apparently to be followed by the next.
Thursday, 6 June 2013
The Darling Buds of May?
The economic news for the month of May looks modestly encouraging – we certainly needed something to cheer us up both weather-wise and economy-wise.
It is to be hoped that these modest improvements will continue. I use the word ‘hope’ because there is no guarantee of continuing pick-up and of course nothing by way of Government policy to ensure this.
But doesn’t it mean that Mr Osborne’s austerity policies are working despite the discovery that their academic underpinning was shown to be riddled with errors? Not a bit of it – the improvement comes despite the Government’s policies – there can be no positive correlation assumed.
Back in the 18th century some of the sick people who were bled and had leeches applied did in fact get better. It’s much the same with our economy today – and there are more rounds of cuts to come both in the near future and for 2015/16. Talk about nipping things in the bud!
We shall be hearing more news of the government’s next round of cutbacks in Mr Osborne’s upcoming spending review. One thing we can be sure about is that the rich will not be hammered and the ever-increasing inequality in wealth and incomes will continue.
So it was doubly depressing to hear the Shadow Chancellor bind himself to the coalition’s austere plans for 2015/16. Why are parties these days so frit to be different? Where’s the vision and inspiration? Look what the Atlee government achieved against a far worse background. And thinking of the NHS, thank goodness for it and stop the constant messing about and the cuts by another name. And let’s see a bit of nurturing for those darling buds!
It is to be hoped that these modest improvements will continue. I use the word ‘hope’ because there is no guarantee of continuing pick-up and of course nothing by way of Government policy to ensure this.
But doesn’t it mean that Mr Osborne’s austerity policies are working despite the discovery that their academic underpinning was shown to be riddled with errors? Not a bit of it – the improvement comes despite the Government’s policies – there can be no positive correlation assumed.
Back in the 18th century some of the sick people who were bled and had leeches applied did in fact get better. It’s much the same with our economy today – and there are more rounds of cuts to come both in the near future and for 2015/16. Talk about nipping things in the bud!
We shall be hearing more news of the government’s next round of cutbacks in Mr Osborne’s upcoming spending review. One thing we can be sure about is that the rich will not be hammered and the ever-increasing inequality in wealth and incomes will continue.
So it was doubly depressing to hear the Shadow Chancellor bind himself to the coalition’s austere plans for 2015/16. Why are parties these days so frit to be different? Where’s the vision and inspiration? Look what the Atlee government achieved against a far worse background. And thinking of the NHS, thank goodness for it and stop the constant messing about and the cuts by another name. And let’s see a bit of nurturing for those darling buds!
Tuesday, 14 May 2013
A Farewell to Middle-earth
The festival honours the life and work of JRR Tolkien within the area that inspired him during his early childhood. The weekend is planned and organised by volunteers with support from the City Park Rangers, The Shire Country Park Friends, The Tolkien Society, Harper-Collins Publishers, the Wildlife Trust for Birmingham and the Black Country and Birmingham City Council.
Volunteers, of whom many are needed over the weekend itself and also during the year in the detailed preparation, deserve full recognition - especially the dedicated prime movers Vivienne Wilkes and Stevie Prior. They have added so much to our cultural inheritance, the character of our area and our quality of life.
Alas, time marches on and as in so many areas volunteers get older and fewer and in these difficult times funds are also much harder to raise. So while the spirit of Tolkien’s Middle-earth will last for centuries to come, the 2013 Middle-earth Weekend will be the last of its kind. But there will also be many happy memories for individuals and families, a huge photographic record and many who were introduced to a lifelong love of Tolkien’s work.
Our heartfelt thanks once again to Viv, Stevie and the volunteers.
Wednesday, 8 May 2013
Economics of The Village
Austerity – that self-serving, miserable misconception of basic economics is predictably a dismal failure, producing a bleakness for the vast majority of people that would appeal to the creators of the woebegone TV series ‘The Village’.
The selves that austerity serves are the rich, the powerful and the influential - and of course their acolytes, sponsors and hirelings who, knowing that their lords and masters itch to get their doctrinaire knives into benefits for the less well off, will readily tell them that savage cuts for some are the way to produce growth.
The chancellor and his cronies also suffer a selective historical amnesia that blanks out the record of the national and international experience of the 1930s, which malign forgetfulness dooms all but the privileged few to relive it, in part or in whole. It also blanks out the policies that would put the country on the road to recovery as developed by John Maynard Keynes.
We’ve heard much about the government’s wish to re-do school syllabi yet again regardless of educational merit. But one thing that has become abundantly clear is that there is a strong case for teaching economic history in schools – and in induction programmes for chancellors.
We’ve also heard a former chancellor saying that the country should leave the EU. Of course this couldn’t be anything to do with his friends in the banks - perish the thought. I look forward to hearing what the leaders of productive industry say to this in view of the loss of their markets and because the only banks that are serving the community today are the food banks.
I understand that amazingly there is to be a second series of ‘The Village’ which to be true to its cheerless and despairing tone should miss out the more upbeat 1920s and go straight to the depressed 1930s. Perhaps the people who are writing this stuff are the same ones producing the government’s economic policy – the effects are pretty much the same.
New scriptwriters needed all round!
The selves that austerity serves are the rich, the powerful and the influential - and of course their acolytes, sponsors and hirelings who, knowing that their lords and masters itch to get their doctrinaire knives into benefits for the less well off, will readily tell them that savage cuts for some are the way to produce growth.
The chancellor and his cronies also suffer a selective historical amnesia that blanks out the record of the national and international experience of the 1930s, which malign forgetfulness dooms all but the privileged few to relive it, in part or in whole. It also blanks out the policies that would put the country on the road to recovery as developed by John Maynard Keynes.
We’ve heard much about the government’s wish to re-do school syllabi yet again regardless of educational merit. But one thing that has become abundantly clear is that there is a strong case for teaching economic history in schools – and in induction programmes for chancellors.
We’ve also heard a former chancellor saying that the country should leave the EU. Of course this couldn’t be anything to do with his friends in the banks - perish the thought. I look forward to hearing what the leaders of productive industry say to this in view of the loss of their markets and because the only banks that are serving the community today are the food banks.
I understand that amazingly there is to be a second series of ‘The Village’ which to be true to its cheerless and despairing tone should miss out the more upbeat 1920s and go straight to the depressed 1930s. Perhaps the people who are writing this stuff are the same ones producing the government’s economic policy – the effects are pretty much the same.
New scriptwriters needed all round!
Saturday, 4 May 2013
Getting away from the Dark Side
What alternatives are there to the depressing drag and the dark forces of austerity? The fact that there are likely to be no more well nigh useless tax cuts does not mean that all sensible options are closed. The negative economics of Darth Vader need not prevail!
But it is evident to almost everyone in this country - except of course the government - that more does need to be done urgently to save the economy. The alternative is continuing to bump along the bottom in the face of the widespread imposition of the Vaderian austerity that has spread like bird flu amongst gullible and subservient governments.
In the first place, no matter what LEPs say about enabling and agitating etc in yet more strategies supposed to produce growth, what is actually needed is real resources. These, and a government that is committed to providing them, rather than contradicting itself. It should be positive and get involved directly in projects that improve transport infrastructure, power generation and housing (but not just housing alone) to name but a few. But short of a booming directive from the sky this will not be happening with the present dark forces in Westminster. But there are other things that could be done if the will and the sense were there.
Returning to the positive power of a Keynesian position, I would like to draw attention once more to the concept of the ‘balanced budget multiplier’. This is where, in a broadly neutral overall financial context, spending power is moved towards those with a higher propensity to consume. In other words smaller deductions from the pay packets of lower income earners and higher taxes for the rich - and here I mean the seriously well-off - not the loyal, tax-paying middle classes picking up the bills again.
One way to achieve this would be to smooth out National Insurance contributions, making them a flat percentage of earnings with no limit on the range. Also, to achieve financial balance, the top rate of tax should go up from the recently reduced 45% rate back to where it was at 50%. Alongside this, the 10p rate could be reinstated.
If the flat rate of National Insurance contributions was set at a level that brought in a greater total this would free resources for increased support for manufacturing industry and public works projects. This would come out as around 7% so that the marginal take from the richest group would be 57%. This is less than the 60% that the wealthy were overjoyed to receive from Sir Geoffrey Howe and would be at the same level as in Sweden which has an enviable social market economy.
I doubt if there is a local Authority in the country that does not have ready to go engineering schemes especially after the impact of the prolonged winter on the roads that are thwarted by savage budget cuts and ever-increasing demands on the social care front. Two additional bands to council tax would add to the possibilities for investment without increasing borrowing.
And there are other fiscally neutral measures that could be taken both at local and national level. Here I refer to the procurement of goods and services. The Government must ensure that as much of its purchasing goes to domestic producers - from major defence or construction projects to the cars provided for ministers. Government departments must be made to see the bigger picture, with the negative impact of placing orders abroad far outweighing any saving on departmental budgets.
And there are ways of framing conditions for bids that would not contravene the letter of Euro legislation that can help domestic producers. You can be sure that certain other European countries do this - and more - already. The same goes for contracts from Local Authorities. There is a ‘multiplier’ of around 4, so that when a contract for, say, £250k is awarded to a local business, there is a total benefit of around £1m to the area as that firm and its employees spend and the beneficiaries of that spend also spend and so on.
So there is considerable policy latitude remaining – and I have not even mentioned the recreation of Municipal Banks! Perhaps it is just another forlorn hope, but maybe an element or two of this kind of effective and stimulating Keynesian thinking aligned with the force rather than the dark side of austerity will filter its way through even the Westminster bubble as the next general election approaches.
But it is evident to almost everyone in this country - except of course the government - that more does need to be done urgently to save the economy. The alternative is continuing to bump along the bottom in the face of the widespread imposition of the Vaderian austerity that has spread like bird flu amongst gullible and subservient governments.
In the first place, no matter what LEPs say about enabling and agitating etc in yet more strategies supposed to produce growth, what is actually needed is real resources. These, and a government that is committed to providing them, rather than contradicting itself. It should be positive and get involved directly in projects that improve transport infrastructure, power generation and housing (but not just housing alone) to name but a few. But short of a booming directive from the sky this will not be happening with the present dark forces in Westminster. But there are other things that could be done if the will and the sense were there.
Returning to the positive power of a Keynesian position, I would like to draw attention once more to the concept of the ‘balanced budget multiplier’. This is where, in a broadly neutral overall financial context, spending power is moved towards those with a higher propensity to consume. In other words smaller deductions from the pay packets of lower income earners and higher taxes for the rich - and here I mean the seriously well-off - not the loyal, tax-paying middle classes picking up the bills again.
One way to achieve this would be to smooth out National Insurance contributions, making them a flat percentage of earnings with no limit on the range. Also, to achieve financial balance, the top rate of tax should go up from the recently reduced 45% rate back to where it was at 50%. Alongside this, the 10p rate could be reinstated.
If the flat rate of National Insurance contributions was set at a level that brought in a greater total this would free resources for increased support for manufacturing industry and public works projects. This would come out as around 7% so that the marginal take from the richest group would be 57%. This is less than the 60% that the wealthy were overjoyed to receive from Sir Geoffrey Howe and would be at the same level as in Sweden which has an enviable social market economy.
I doubt if there is a local Authority in the country that does not have ready to go engineering schemes especially after the impact of the prolonged winter on the roads that are thwarted by savage budget cuts and ever-increasing demands on the social care front. Two additional bands to council tax would add to the possibilities for investment without increasing borrowing.
And there are other fiscally neutral measures that could be taken both at local and national level. Here I refer to the procurement of goods and services. The Government must ensure that as much of its purchasing goes to domestic producers - from major defence or construction projects to the cars provided for ministers. Government departments must be made to see the bigger picture, with the negative impact of placing orders abroad far outweighing any saving on departmental budgets.
And there are ways of framing conditions for bids that would not contravene the letter of Euro legislation that can help domestic producers. You can be sure that certain other European countries do this - and more - already. The same goes for contracts from Local Authorities. There is a ‘multiplier’ of around 4, so that when a contract for, say, £250k is awarded to a local business, there is a total benefit of around £1m to the area as that firm and its employees spend and the beneficiaries of that spend also spend and so on.
So there is considerable policy latitude remaining – and I have not even mentioned the recreation of Municipal Banks! Perhaps it is just another forlorn hope, but maybe an element or two of this kind of effective and stimulating Keynesian thinking aligned with the force rather than the dark side of austerity will filter its way through even the Westminster bubble as the next general election approaches.
Wednesday, 1 May 2013
Still Bumping Along the Bottom
So the first estimate of the country’s Gross Domestic Product change in the first quarter of this year turned out to be an increase of 0.3%. While this result is better than the 0.3% decline in GDP seen in the previous quarter, it merely brings us back to where we were six months ago - and indeed to about where the economy was 18 months ago. Flatlining or bumping along the bottom however you choose to put it.
But this small measure of growth is actually quite an achievement for the struggling economy (subject to any later revisions of this initial estimate) given the suffocating austerity imposed by the Government and the senseless policy that it undertook of cutting back on public investment. But what exactly is it that’s been growing? This is the question that I and others kept asking, to no avail, during the pre bust years, and we know how that turned out.
Mostly some kinds of ‘services’ fluffing up again I suspect - with a much more modest performance from manufacturing and other useful industry. There’s a limit to how much of each other’s washing we can keep taking in, or pay day loans that can be issued, or imported goods that can be moved through shops. So much for re-balancing the economy.
I trust that the Chancellor of the Exchequer is a reader of the Financial Times – a newspaper that’s not renowned for its left-of-centre credentials. In the recent weekend edition of the FT Mr Osborne would have seen articles with headlines such as: “Spending cuts hold back US growth”, “Spain – another year of recession” “US – the cuts begin to bite” and of course “United Kingdom – bumping along the bottom”.
Will the Chancellor take heed of these informed views on how real world rather than right wing textbook economies respond to cuts in hard times? I doubt it. But perhaps the impending visitation from the International Monetary Fund, that not-so-radical crew who recently downgraded their forecasts for UK economic growth for both this year and next will be more influential.
And if not the IMF, then perhaps Mr Osborne will feel obliged to take heed of the electorate’s views as reflected in the results of Thursday’s County and Unitary Council elections with a couple of mayoral contests and a parliamentary by-election to boot.
But I strongly suspect that any adverse outcomes in the realm of the much-despised Local Government will be rationalised away and the only views that count will be those of his political confederates. An increasing number of these chums seem to be getting impatient with their own likely electoral fortunes that are also, not surprisingly, still bumping along the bottom.
Such, alas, is the nature of what matters to government in Britain today with the consequences that all but the richest individuals and tax-dodging companies are experiencing.
But this small measure of growth is actually quite an achievement for the struggling economy (subject to any later revisions of this initial estimate) given the suffocating austerity imposed by the Government and the senseless policy that it undertook of cutting back on public investment. But what exactly is it that’s been growing? This is the question that I and others kept asking, to no avail, during the pre bust years, and we know how that turned out.
Mostly some kinds of ‘services’ fluffing up again I suspect - with a much more modest performance from manufacturing and other useful industry. There’s a limit to how much of each other’s washing we can keep taking in, or pay day loans that can be issued, or imported goods that can be moved through shops. So much for re-balancing the economy.
I trust that the Chancellor of the Exchequer is a reader of the Financial Times – a newspaper that’s not renowned for its left-of-centre credentials. In the recent weekend edition of the FT Mr Osborne would have seen articles with headlines such as: “Spending cuts hold back US growth”, “Spain – another year of recession” “US – the cuts begin to bite” and of course “United Kingdom – bumping along the bottom”.
Will the Chancellor take heed of these informed views on how real world rather than right wing textbook economies respond to cuts in hard times? I doubt it. But perhaps the impending visitation from the International Monetary Fund, that not-so-radical crew who recently downgraded their forecasts for UK economic growth for both this year and next will be more influential.
And if not the IMF, then perhaps Mr Osborne will feel obliged to take heed of the electorate’s views as reflected in the results of Thursday’s County and Unitary Council elections with a couple of mayoral contests and a parliamentary by-election to boot.
But I strongly suspect that any adverse outcomes in the realm of the much-despised Local Government will be rationalised away and the only views that count will be those of his political confederates. An increasing number of these chums seem to be getting impatient with their own likely electoral fortunes that are also, not surprisingly, still bumping along the bottom.
Such, alas, is the nature of what matters to government in Britain today with the consequences that all but the richest individuals and tax-dodging companies are experiencing.
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