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Friday, 30 March 2012

Colonists Smash Consensus

George Galloway, a former Labour member of the British parliament, has spend the past decade establishing his new Respect party which seeks pacifist and Muslim votes against wars on Islamic countries. He won an election in east London but left the seat to be retaken by Labour in 2010 when a majority of his Bengali supporters were snatched back to their former voting pattern by the complex of tribal networks to which they are susceptible. Galloway transferred his primary efforts to the ethnically different people from the northern parts of the Indian sub-continent who have colonised the former mill towns on both sides of the Pennines. There is a good chance that those populations will be less amenable to recapture by Labour. While the voting in recent by-elections has been only 30% of the roll, yesterday in Bradford West 51% turned out. In round numbers, 18,000 voted for Galloway, 8,000 for the [Asian] Labour candidate, 2,000 for the Conservatives and 1,000 for the LibDems: Galloway's vote exceeded that of all the established parties altogether.

The political class will spend the next week pretending that the Bradford by-Election result that was announced announced this morning was utterly unimportant. In a couple of weeks, when their pollsters and focus-group technicians report back on the new questions [those their masters had not cared to ask previously] that are raised by the Galloway result, they will find that there is elation among the mass of immigrants who voted for Galloway feeling that they have been patronised and mollified with benefits for decades. They will also report new pressure on the Asians who remained Labour voters to reconsider their position, and despair among the ethnic British who have been coaxed and bullied by patronising politicians who have suppressed discussion about immigration and the benefits bonanza.

These are not trends that the government are capable of understanding. The leading cabinet ministers simply do now know that in addition to the massive Greggs chain of bakers' shops is a mass of well-loved local bakeries and well-used garage forecourts where hot pies and pasties have for generations provided modest refreshment for millions. They are uncomprehending of the fuss that has been created by their decison to levy Value-Added-Tax of 20% to the prices of hot pies and pasties. They have no comprehension of the social structure and daily habits of their fellow-countrymen. There may well be some 'sleeper' in the Treasury who advocated the pasty-tax in full awareness of the probable impact on the popular press and the mass of voters. The nauseating scene of Gordon Brown's mass welcome to the Treasury by its Grauniadista denizens should have been sufficient warning for the Tories when they returned in 2010 to beware of a coven of socialists. But the major political issue is the incomprehension of the future Sir George Osborne Bt, the craven eurorat Clegg  and the Etonian Prime Minister. The pasty tax had no influence on the Bradford West election: but it did enhance the gulf between the government and the people; which is a completely outre way was also George Galloway's charge against the political establishment.

The Labour opposition is almost equally composed of 'intellectual' life-long would-be politicians, most of whom are as remote from the mass of the electorate as the similarly clad people on the government benches. They go through puerile rituals to make themselves seem - in their own conceits - to have speech patterns not unlike some of the lower orders; but examples like the fake-fishwife utterances of a shadow treasury minister [who spent years as a Bank of England official] produce only ridicule. Those like the Labour leader, Ed Milliband, who cannot even affect working-class accents equally fail to display the sort of articulateness that makes Galloway so devastating.

Galloway has exposed eighteen thousand of a million-plus Asian Muslims in Britain to the euphoria of defeating the political establishment. There are at least fifty seats that could fall to the Respect Party unless the indigenous British, with Hindus, Sikhs, Afros and EU immigrants can unite in voting for single candidates: the emergence of another party or network, with the primary object of stopping Respect, is highly probable.Unable to influence Respect, the established parties would bend all their efforts to denigrating and obstructing that new movement; with the result that in some places the new group will fail and in other places the established parties will be eliminated.

British politics suddenly got more exciting, more dangerous, and more likely to be followed by increasing cohorts of Islamic colonists and by those who become scared by the Muslims' new militancy all over Europe.

Nobody predicted this: one can search in vain for any hint in the press [up to and including early editions of March 30 newspapers] that Galloway's victory was even a remote possibility. I was not even aware that he was a candidate. But I live in the parliamentary constituency for which he formerly sat as MP: I recognise his intellect, his speaking ability and his political agility. He has changed British and world politics, and anyone who tries to ignore the fact will come to rue that day.

Wednesday, 28 March 2012

Human Choice

A new book called Poor Economics - dealing with economic choices by the poor - has been published by an academic who works in the USA and has his ancestry in a new-emergent economy. The text unconsciously encapsulates a clear vindication of my concept of ik: the idea that people allocate any discretionary expenditure that they can afford on buying quons - copyrighted and trade-mark-protected entertainment, branded goods and services and other consumer experiences on which a charge could be levied for enjoying access to the input of intellectual property that makes the 'good' desirable to those who buy or hire it. Give a desperately poor person [who has just enough consumption to survive] a few extra pennies and she or he is more likely to to try to broaden their range of consumer experiences by accessing some ik than they are to buy more of the food that makes up their daily diet.

This behaviour is not what typical Grauniad readers expect, and it is 'irrational'  in terms of formal Economics; but it is what the evidence clearly shows. It is also the basis on which governments [from the earliest human societies] have taxed transactions in markets. While income taxes are fashionably considered 'fair' in the degenerate cisatlantic democracies, History shows that expenditure taxes come closest to being 'discretionary' in that people opt to buy things even though they know that in doing so they are paying a tax [indeed, the majority of the price of cigarettes, alcoholic drinks and motor fuel is tax in many countries]. People are more likely to opt not to earn more taxable income than they are to refuse to purchase highly desired items because of the tax imposed on the transaction.

This experience shows clearly the irrationality of formal Economics, as it has been developed since the eighteen-sixties. Economics as presented in universities and in advice to governments is not based on evidence - it is based on assumptions as to what an ideal or 'perfect' economy might look like. The aim of Economists is to make human life conform to their models: which is a fundamentally inhumane objective. There is no reason for surprise that Economics solutions to real-world issues do not 'work'. The alternative has existed for longer than Economics has been in existence: the science of Political Economy was well-developed, and realistic, well before the pioneers of modern Economics decided to create their own academic dreamland. Lord Keynes - who never bothered with a doctorate in Economics and never held a professorial chair - was deeply learned in Political Economy, and although he was loyal to the memory of his teachers [his father, John Neville Keynes and the family friend Alfred Marshall] his work was anything but mainstream Economics: which is why Economists have so imperfectly understood it, and why so many of them have tried to push it out of consideration

My simple objective is the restore Political Economy as a science that is relevant to the human condition, and perhaps to .take some aspects of the science a small step forwards. Anyone interested in this question should open the link from this blog to my text PPE: Personal Political Economy.

Tuesday, 27 March 2012

The Nasty Party: With Extra Twists

Today is the day when the coalition government - in a very evidently Conservative initiative - recasts by Decree the Planning Regulations in England and Wales. Most detailed rules are swept away, procedures are simplified, and a 'presumption' is to be made in favour of allowing changes in rural areas which are shown to be 'sustainable developments'. 'Sustainable' means different things to different people in different contexts, and can be so broadly defined as to be meaningless even before the concepts are moulded for specific cases by clever lawyers. Local 'communities' are supposed to have a clear voice on developments in their areas, but the new principle of favouring building work that can be claimed to conduce to economic development will make it pretty easy to override Nimby [not in my back yard!] objectors.

Britain's economic future depends heavily on tourism; and one of the major assets that the country has inherited is the legendary green countryside. The picture is under threat currently from drought: nobody dreams of 'England's brown and pleasant land'; but an equal threat is the construction of inept industrial plant, factory farms and housing estates in [or close to] beauty spots. Britain is so small, and already so widely a wasteland of sites abandoned by industry, that the conservation of the great asset is a high priority in the majority view of the native population. The Conservatives promised that the NHS would be 'safe' with them, and have set about  disrupting it: the countryside is the next target of the urbanised nasties who have captured the party from its landed grandees. Natural Conservatives will be the most outraged by the potential consequences of the planning policy. The nasties believe that natural Conservatives have no other party to vote for, and are afraid of Labour [as well as contemptuous of the LibDems]: so the core Conservative vote is  still taken for granted. This new planning policy, which is quintessentially nasty, could well mark the tipping point where the Conservative Party alienates its natural support and enters a decline similar to that of the Liberals in the nineteen twenties. These things happen very quickly: and the nasties may just have set the mechanism in train.

Monday, 26 March 2012

Boxed Patents

One of the good things that the Gordon Brown government did in the UK was partially to recognise that the economy has no hope of getting out of the hole that the political class has made for it unless the state recognises and rewards the creation of 'intellectual property'. Unsurprisingly, they did not understand the simple basic nature of  ik, as explained in my PPE [see link from this site], but this was a step on the road to rational management of the most important of national resources.

Under the coalition the grasping hand of the Treasury has been allowed to influence the deign of the concept for protecting British intellectual property, and consequently the government announced their intention to create a 'patent box' . Under this category a company [or possibly a high-net-worth individual] would be able to secure a patent, and to implement it into production, and get tax exemptions and reductions at various stages in the process. The 2010 Coalition government declared that they would implement the plan and a few companies, including Glaxo, entered discussion with the government about using the process. Glaxo planned to extend their UK factories under a Box agreement specifically to exploit a new product for which it was in process of securing a patent. The company announced its decision to invest in the UK on Budget Day 2012 [as featured in the previous Post here], to accommodate the squalid spin doctoring of sad politicians who would seek any propaganda point in the absence of evidence of real economic progress.  In this case, there was real potential in the investment. But [as already noted] the Patent Box is not the only inducement to locate industrial plant in the UK. British labour is becoming relatively cheaper as Chinese workers begin to enjoy consumerism with larger wages, and the tax system in the UK is becoming a little less oppressive. UK and EU Labour law and the omnipresent intrusion of inept and officious 'health and safety' regulations are still deterrents to investment, especially in physical production. But steps are being taken in the right direction, albeit they are hesitant and indecisive.

The bigger issue that is disclosed by the Glaxo announcement is that safeguarding intellectual property is becoming the most important consideration of companies in the global economy: and while the US government has become obsessive about China's 'theft' of such property the EU and European governments have still not grasped the heart of this issue. The leading British ministry, BIS, has focussed on reducing the period between the filing of a patent application and the manufacture of the product; which is a good thing if it can be achieved while maintaining the secret.

But the entire positive story is yet to be told: that Brits, including Glaxo research teams, are unusually fecund in producing both patentable inventions and marketable concepts. The world's leading advertising agents are British, and several of the world's best-known and highest-regarded brands are British: yet a major feature of British business is the sad fact that while ideas continue to bubble up, and patents are registered, there is a dearth of funding to develop products fast enough. Firms  are sold in their infancy, usually to foreign owners who then reap the rewards for developing the product and its marketplace. To concentrate exclusively on implementing patents is to miss the point.

New patents can improve existing brands, or can be the basis for a new creation of brand value. The establishment of a new brand partly depends on marketing, partly on spontaneous shifts in fashion, partly on consumers' incomes increasing enough to embrace the new  consumer experience in addition to the existing standard of living. Investment must be made, often over a series of years, in the development of brand reputation as well as in the technicalities of material manufacture. Investment in systems patents and copyrights, brand-names and trademarks, is needed: these aspects can be more costly than the technical patents that are embodied in a material patent. The total suite of investments is needed to build a brand; otherwise patent-owners who are discouraged from developing their firms and their brands by lack of investments will still be tempted to cash-in their assets and sell the firm and its intellectual property to be developed in foreign hands. The British government needs to move a lot further to meet the need!

Friday, 23 March 2012

Mismanaging News

George Osborne has committed a major gaffe in public relations, by describing his biggest tax 'raid' in this year's Budget as a mere simplification of the tax system. The resentment that this has set in train will mature slowly, and be disastrous for the man's image and for his party. Meanwhile, in the twenty-four hours since he made the cock-up he has resorted to an item of crude propaganda. In the tradition of Potemkin, Stalin and Putin, his sycophants have arranged with Glaxo Smithkline to announce their decision to extend factories in the UK on Budget Day, and even to say that decisions in the Budget were favourable to the decision. Osborne touted his sneer around the TV and radio studios to extol the great investment, and suggest that it was vastly more important than the granny tax.

The company's plans must have been in train for many months. It would have been outrageously improper if the Treasury had shared their plans for setting rates of corporation tax with the company over that period. The actual reasons for the Glaxo decision British manufacturing is becoming 'affordable' again to international companies, as has been evident over many months past in the motor and fashion industries. The company owns sites and has infrastructure with skilled staff around the UK. It will be easier and possibly cheaper to invest in the UK, with or without tinkering the tax system. One can speculate what inducement was offered to the company to arrange its announcement to coincide with Budget Day, but it was probably trivial.

Osborne used the same trick a few weeks earlier, when he grabbed for his own publicity machine the announcement that a Chinese Wealth Fund was buying a block of shares in Thames Water. This transaction had been arranged as a business deal over some months but the announcement was arranged to coincide with the Chancellor's 'triumphant' return from a nugatory visit to China. There was no correlation between the visit and the deal: the announcement was crude propaganda. Such are the standards and practices that impress the current crop of puerile politicians: indeed a country gets the government that it deserves!

Thursday, 22 March 2012

Osborne Bashes the Old and Threatens the Future

George Osborne, the British Finance Minister, yesterday performed the annual ritual of presenting a plan of spending and taxation [known as the Budget] and the Labour opposition joined in the ritual by quibbling about the data that were presented. None of the lead speakers in the discussion has ever held a job in the 'real economy' for a significant number of years, and all the performers read statements that were prepared by teams of script writers and Economists.

The hallmark of the Budget was the expressed intention that all the concessions that were made to taxpayers were compensated by equivalent increases in other taxes. An increase in state retirement pensions was offset by a reduction in tax reliefs for millions of pensioners. The Liberal Democrats' cherished policy of increasing the level of income that is exempt from income tax was offset by cuts in benefits and tax credits, and by raised taxes on fuel, cigarettes and alcohol: they were shown even more than previously to be totemistic twerps as they boasted of their 'great achievement'. The star of the day, Osborne, again showed the depth of his nervousness by  exaggerating his swagger and by the reedy edge that worsens his always-sneery voice: the more cock-sure he looked, the more his voice betrayed the fact that he was well beyond his comfort zone. His minders had clearly not recognised that critics and opponents would set together proposed tax reliefs for the rich and  increased taxes, diminished benefits and reduced tax reliefs for the relatively poor. The elaborate game of balancing gains and losses for each income decile that so pleases the inner circle means nothing to the electorate at large.

Osborne presented a 'tidying' of taxation that turned out [only after examining the supporting documents that were published the same day] to be the biggest tax grab in the Budget: his misjudgement in trying to introduce the new grab from pensioners as a mere administrative detail will haunt him. Alongside his support for the ruinous Health and Social Care Act and the leading role he has taken in the government's campaign to undermine the protection of the cherished countryside he has probably done enough to bring down the government at the next election. The sooner the coalition government collapses, the fresher will be the public memory of Osborne's duplicity and silliness and the more certain will be the public repudiation of both coalition parties. Labour are a shambles, and they will fail spectacularly as a government: but they are 'not this lot' and that is all that is needed to return them to power.

The British newspapers today bash the 'granny tax' but recognise that much more important news is happening outside little Britain in their features on the siege in Toulouse [France] where a confessed killer is holed-up in a flat after exacerbating racial tensions and affecting the volatile mood of Israelis. Analysts of Britain will recognise that the Budget does nothing to accelerate the reduction of the endemic deficit on state spending and nothing that will significantly foster economic growth. For the last two years Osborne's 'austerity' programme has encouraged international investors to continue supporting British government debt: yesterday's Budget brought forward the date when analysts will stress the precariousness of the government  and the probability that an early election will open the gates to chaos. This tragic inevitability is made one significant step more certain by Osborne's performance yesterday.

Wednesday, 21 March 2012

National versus Local Pay Rates: Part Two

More millions of migrant Chinese are moving into the cities, where they accept low-paid jobs in terms of the average incomes of residents of that city. Migrants leave behind their homes, their parents, often their partner and their child; because they see no chance of entering the consumer economy in their native villages. In the city the 'lucky' migrants get jobs requiring seventy hours a week attendance, often in repetitive but meticulous tasks. They get low wages - even by the standards of that city - and they sleep in cramped and unhealthy conditions The gain that comes from such pain is that they are able to buy some desired consumer goods: and on their rare, brief visits home they can take commodities - including rare western-branded [possibly fake] items which would never otherwise break in to the constricted economy of their home villages. Many migrants are inspired by the hope of being able to bring enough money back to the village to rebuild the house, and take on more farmland or start a business there: some achieve that, but the majority come to accept the alternative aspiration to bring their partners into the city  - or to marry somebody met in the city - and aspire to own an apartment. Some learn business acumen and acquire the requisite technical ability to rise within the company that has employed them, others can branch out into their own businesses and have the chance to build fortunes; though the 'shadow banks' that are the only source of capital available to many such people to accelerate the growth of the business often bleed them dry or capture their businesses.

The geographical mobility of people within the country and the openness of the economy to entrepreneurial success that characterise contemporary China were strongly approved in Britain from the days of Dick Whittington [Mayor of London in 1397, and of London and Calais simultaneously in 1407] to the nineteen fifties. The proto-statisticians Petty and Graunt [1668] demonstrated [in their Observations of the Bills of Mortality] that many more people died than were born in London, inferring that the dynamic growth of the City as the hub of trade for the whole country depended absolutely on immigration. Many of the migrants lived short and deprived lives ending in an early death: but always some prospered hugely and their stories attracted others to try their luck. Social mobility increased with rising prosperity and in the eighteenth century exceptional individuals were able to implement inventions and create world-beating businesses: great names from the era include Wedgwood, Boulton and Arkwright who built their businesses well away from London [though they marketed their products through London and relied on the system of patents that was administered from the capital]. The nineteenth century was the great era of innovative industrial capitalism, but even now exceptional individuals like Sir James Dyson demonstrate that the route is still open to high-quality graduates: though it is now much constricted by the dominant alliance of rotten politics and degenerate education.

When was the turning-point? When and how was the long-prevalent dynamic spirit extracted from the British economy? It seems to me that the narrow defeat of the radically reformist Labour government in 1951 foreshadowed the catastrophic events by which - over the next half century - the British economic and social systems were set in reverse.

The king who had supported Churchill and triumphed over huge personal stresses died early in 1952 and he was succeeded by his young daughter, Princess Elizabeth. The new Queen's reign began with the anomalous near-octogenarian Winston Churchill as Prime Minister. He was a deeply ambiguous character who had been an enthusiastic member of the most radical government that the country had ever had, between 1906 and 1914, when the Liberal majority in the House of Commons [with lukewarm support from the few Labour MPs] introduced pensions for citizens over seventy, unemployment insurance and medical  insurance for the working man, and the widespread grant of cash benefits - rather than automatic committal to the workhouse - for the [economically] 'impotent poor'. Despite this radicalism, Churchill as Home Secretary was blamed for soldiers shooting striking miners in South Wales, earning the lifelong enmity of a core cohort of trade unionists and contributing to their determination to create their own political party - Labour - on the assumption that the Liberals were not to be trusted. Labour precipitated the dramatic decline of the Liberals' electoral support after the First World War, bolstered by the radicalism of many women who had been given votes for the first time. Churchill accepted Stanley Baldwin's invitation to change sides in the Commons and became the Chancellor of the Exchequer. The subsequent collapse of Baldwin's government in 1929 put Churchill out of office, as a member of the Conservative party where he was little trusted and not widely liked. In exceptional circumstances he emerged as Prime Minister of a coalition government in 1940, and that government laid the plans for a post-war welfare state to which he declared his own adherence. Labour won the 1945 election by a landslide, notwithstanding the personal popularity of Churchill who had been appointed officially as Conservative Party leader, and the Labour government combined the introduction of the welfare state with a major programme of nationalisation of basic industries and utilities, that the Conservatives vigorously opposed.

Churchill's 1951 government inherited the nationalised industries and the new National Health Service, and took on the military burdens of the Korean War and other overseas campaigns to arrest the spread of communism. Finances were very tight; wartime rationing and price control over many consumer goods was retained. The huge loan that had been provided by the USA to help postwar reconstruction had largely been dissipated to alleviate austerity: imports of American films, stockings and cosmetics soaked up dollars that had been intended for  machine tools and farming machinery. A balance of payments deficit continued and it was clear to Conservative political strategists that they could only win elections by offering people a rising standard of consumption of branded goods, without rationing, in combination with the welfare state. This huge support for consumption rather than production would obviously make the negative balance of trade worse. Churchill was followed by his long-standing 'heir apparent' Anthony Eden who collapsed under the stress of the Americans' repudiation of Britain's 'intervention' in Egypt - the Suez Campaign. The next Conservative leader was at the extreme 'left' of the party, a millionaire supporter of the welfare state, Harold Macmillan. He won the 1959 election by promising to develop both the Health Service and the rise of consumerism: and he could point to his track record as Housing Minister. Wartime bombing and demographic change had meant that by 1950 the country needed at least a couple of million new homes to provide the population with what every family regarded as a basic necessity, and in the early 'fifties Macmillan had led a ministerial team that pushed through the tangle of planning laws and supply controls to orchestrate the amazing achievement of building more than 300,000 homes each year [something the present government dare not even aspire to].

Macmillan's election slogan - You've never had it so good! - both reflected the mood of the times and was simply true: most voters had never previously had so much social security, health support and access to consumer experiences: television, record players, fitted carpets, bathrooms, constant hot water [and, in more households each year, central heating], washing machines, cars and even holidays in Spain. The concept was embedded into electoral politics, that the Labour Party could only beat the Conservatives if they could convince voters that they would enable people to retain their gains in standard of living and, in addition, that a Labour government would provide improving health, social and educational services. By 1960 it was clear that the policy of encouraging consumption [especially as a growing minority of the population were maintained n benefits that were set at levels that allowed a 'reasonable' living standard] was causing government spending to increase; in some years at the cost of increasing the national debt. The balance of payments steadily got worse. The Labour leader, Harold Wilson, captured the principle that the economy had to grow quite spectacularly if the delusional consumerist state was to be maintained: how was the necessary productivity boost to be achieved? His answer was to enlist pure and applied science: wealth was to be generated by the 'white heat of technology'. On this slogan, with the electors displaying widespread boredom with the Conservative government, Labour narrowly won the 1964 election. A larger majority was obtained in  a snap election two years later, even though it was becoming apparent that technology was not a magic force: so the government turned to the old socialist idea of comprehensive economic planning.

By the late 'sixties the policy of plenty combined with worsening balance of payments was producing rising prices. The trade unions began a round of strikes, that made nonsense of the targets that had been set in the National Economic Plan. The government party depended on the financial support of the unions, whose leaders were increasingly at odds with the government. The government tried to control the situation by legislation and became factionalised: in 1970 they lost power to a superficially renovated Conservative party which quickly lost control of labour relations as inflation increased: then inflation was stimulated further by a huge increase in the global price of oil.

By 1970 it was inescapable that the way in which the two 'parties of government' competed by offering the population better and better living standards without requiring commensurate increases in real national earnings was undermining the economy. Rising inflation of prices was being met by increasing demands for more wages, in which the trades unions were usually successful. The declining Wilson government divided into acrimonious factions in the late 'sixties, in response to a paper - In Place of Strife - adopted by the Secretary of State for employment matters, Barbara Castle, which would have subjected pay demands to government oversight and to the possibility of a veto. It was thus a deeply divided Labour Party that lost the election of 1970; ceding power to Edward Heath's supposedly 'technocratic' Conservatives, who had no satisfactory understanding of the fundamental problem that had been embedded on the economy. The Tories quickly superseded Labour as 'the worst-ever government': and the sad saga of the 'seventies will from the next episode in this series of blogs on National Versus Local Pay Rates.

Monday, 19 March 2012

Public Sector Regional Pay Cuts in Context

The British Treasury is publicly advocating a new policy concept: that state employees [from driving examiners to Head Teachers to tax officers] should be paid according to an index of private sector remuneration in the locality where their jobs are. This would replace nation-wide pay scales iin the public sector, and would begin - of course - with categories of staff who have the least power to disrupt everyday life for the rest of us by going on strike. This proposal is part of a reaction to two forces: the 'excessive' total cost of employment by the state as a demand on the national budget, and the fact that employment in the private sector outside London has become much worse-paid than government service as deindustrialisation has devastated the regions that were historically major drivers of the economy.

Thirty-three years after the onset of the Thatcherite revolution the economy displays precisely the opposite outcome to what the cohort of advisers who gathered around the new Prime Minister and her guru, Sir Keith Joseph, intended. Their aim was to free the economy to expand, by releasing it from the restraints of the welfare state, from intensive regulation of trade and industry, and from what was perceived as the Keynesian delusion that full employment and general prosperity can be provided by government intervention in the total economy. Selective 'support' for chosen industry sectors was also seen as a costly drain of resources, and was an early casualty of the new policy. The unsupported [and heavily taxed] hard work of inventors, engineers and entrepreneurs has kept 'manufacturing' in being as a strong sector of UK export markets, with the result that surviving British firms are increasingly targets for technology capture by firms from both both old and new economies that have more rational industrial policies. This is in defiance of the Thatcherite and Blair-Brown regimes and the do-nothing coalition. 'Manufacturing' makes a positive contribution to the balance of payments, pays heavy taxes, and conforms to oppressive health, safety and labour laws. But it does not provide a great pool of unskilled employment: on the contrary it requires relatively small numbers of specifically skilled people with very little low-skilled support.

Retailing has grown massively over the decades while fewer and fewer people have contributed inputs to the material economy; but shop work is differently structured from the pattern that prevailed until 1970 under which families shared coverage of the long hours and varied tasks in family businesses which mostly stuck to specific trades like drapery, butchery, grocery, or hardware. Now huge general retail supermarkets [supported by drop-in stores run under the same logos] take most of the cash that is spent in retail stores: while small household items, especially newspapers and payment points, are still taken from family stores that are [mostly] kept by the small minority of Asian immigrants whose work ethic is rarely replicated in either the uneducated indigenous population or the mass of non-EU immigrants who have come to exist on benefits in 'free' housing.

Alongside employment in retail outlets [much of which is on part-time contracts] the only significant growth in recorded employment in most regions of the country is in the public sector. The inexorable growth of the bureaucracy - including the administrators of benefits, housing and the health service - has meant that many people have been able to get jobs that are paid according to national pay scales. This has enabled many such people to buy higher-priced houses, cars and  commodities that most of the surrounding population; though the minorities who have lived by crime and in the black economy have also been relatively affluent customers for the shops, pubs, betting shops and casinos. Lawful spending will decline in the areas that most need trade, causing the closure of more shops: especially specialist shops whose main customers are people with above-average incomes. The rise of internet shopping makes it less disadvantageous for affluent consumers when   local music shops or fashion specialists close down: and today's report that Britain is the world leader in internet shopping is in some measure a reflection of the fact that the retail infrastructure in the regions - especially the least affluent regions - is being reduced. One consequence of the disappearance of higher-priced shops from local high streets is that poorer people who have always looked in the windows during the sales and occasionally decided to make a purchase [with which they were highly satisfied] are less likely to look at the offers on financially 'inaccessible' websites and consequently miss out on the opportunity for random enhancement of the consumer experience. This is all contributory to life becoming grimmer in the already-deprived regions.

When I was young, some people - a far smaller proportion of the population than now - were 'deprived': some suffered disabilities or the consequences of illness which made them unable to earn a satisfactory living standard. Some people were impoverished as a result of their own fecklessness or bad behaviour. Few whole regions could be described as 'deprived'. Then came the twin curses of de-industrialisation and the immigration - especially into areas where housing costs had plummeted - of the mass of benefit-seeking immigrants. The government policies that bolstered both those adverse developments created the 'deprived regions'. Above all else, the withdrawal of common-sense government policies and the increasing shift of power from local authorities to central government made areas 'deprived'.

And now the coalition has decided to make things worse for the mass of ordinary people by its proposal to allow businesses to tinker with roads, by applying modest investments, and then taking tolls from users of those roads. There can be little doubt that the first and biggest investments will be in the areas where the drivers are most likely to be able to pay: leaving roads even more under-funded in the poorer areas, and so left largely to decline. For longer than the lifetime of the oldest person now driving the government has taxed car users, notionally to pay for road construction and maintenance. The driver's windscreen disk was originally a certificate that the Road Fund had been paid. Then successive governments raided the fund to pay for other things, paying for roadworks as part of the annual budget. The twerps who advise the coalition presumably think that people have forgotten - or never knew - that they have traditionally paid a licence fee for the use of roads, on the assumption that satisfactory roads would be provided [leaving plenty of opportunity for argument about what is a 'satisfactory' system]. Now the government propose to introduce a wholly new pay-for-access system to the existing road network, subject to cosmetic changes. Like so much other policy: it stinks!

Tuesday, 13 March 2012

Harvard and Red Meat

A team of researchers, with a heavy statistical input, has gained global publicity this week with a report that claims definitively to have shown that humans who eat significant quantities of red meat [beef, lamb, pork, venison etc] have an enhanced chance of dying 'prematurely'. Those whose intake of red meat includes processed red meat [bacon, burgers, sausages etc] are said to be at even greater risk.

The research does not tell us whether or not the red meat eaters have red wine with their meat, or how much wine. It does not tell us whether the higher death rate coincides with people who eat fried potatoes with their meat. Are whisky drinkers more or less likely to die early from eating red meat? Are the early deaths also associated with smoking? Are the red meat eaters more or less obese than the norm?

To take a single factor in lifestyle and attribute an outcome to 'high' or 'low' exposure to that one element carries no conviction whatsoever. This applies to the entirely arbitrary 'safe limits' for alcohol consumption as much as to any other attempt to consider one lifestyle factor in isolation; and the validity of any such research depends on survey results which assume that respondents give accurate data to the researchers. The media love such news releases because they like to scare the public. Health scares do attract attention; but older and wiser people have heard so many such reports of research outcomes that they treat them with entirely appropriate scepticism.

Sunday, 11 March 2012

Why Should Putin Cheat

The great paradox of the current situation in Russia is that Vladimir Putin's rating in the opinion polls declines as the accusations increase that he had arranged a massive manipulation of last year's parliamentary election and the recent presidential election. More and more evidence has been presented, some describe the most blatant vote stuffing, impersonation and non-identification of voters. Despite immense publicity, videocameras in polling stations, and the emergence of an army of 'observers' equipped with up-to-the-minute ICT, examples of the most idiotic visible breaches of the simple rules for the conduct of polling stations were reported in the presidential poll.

The great question in the western media has been; how stupid is this man? How arogant is he? Certainly his self-publicity shows a degree of hubris and of contempt for intellectual opponents. He and his cohorts do not seem to have recognised the profundity of the change in the Russian intelligentsia that has been facilitated by contemporary technology. Classically the Russian intellectual isolated himself in an unheated garret, with insufficient food, while he produced elaborate prose about issues that were imprecisely defined. His contemporary successor thrives in crowds and thinks in the cloud, the blogosphere. The new intellectual feels strength in numbers and reassurance in white ribbons - coincidentally the colour of the old regime's hopeless fightback against the Bolshevik revolution..

I reckon that the explanation for the 'cheating' by Putin's cohorts is much more simple. There is no sense of 'civil service' in Russia. People randomly survived - often well - as servants of the party, when the state was subordinate to the party. Then came the collapse of the Soviet Union and the effectual evanescence of the Communist Party. The military stayed in being, and so did the security services: the notorious KGB. Putin was quite a minor officer in that immense service but as all institutions collapsed those who had been verified insiders were accepted by an informal network as 'one of us'. Ex-KGB officers will not welcome the analogy [though most of them are bright enough to accept it] that the reputed ODESSA network that spirited SS personnel out of Europe in the later nineteen forties was replicated - without attribution - by the KGB after 1990. Such a network brought Putin to the Presidency, as Yeltsin collapsed into alcoholic incoherence.
 Thereafter, all those officials across the whole of that vast country who had lost their directive from a 'centre' still knew very well how to ensure that 'advice' from Moscow were implemented at the local level. They enthusiastically supported Putin in a notionally-contested election, using the methods that had been routine in the Brezhnev era. They have simply carried on doing what had been done for more than half a century. They don't need to be told to stuff ballot boxes: they would find it strange to be told not so to do. The new city-slicker tactic of  bussing selected voters from polling station to polling station is new, a product of affluence [and an indication that the regime is slightly fazed by democracy] that was easily spotted by dissidents toting mobile-phone cameras.

It would probably have been impossible for Putin to make all the officials who were responsible for the conduct of elections behave as if they were the Town Clerk of Walmington-on-Sea, who was pompously obsessed to serve democracy without partiality.  Putin probably welcomed the assurance of winning successive elections that the soviet tradition gave to him in thousands of polling stations, but it is more likely than not that he did not ask for it. Plenty of crass examples of ballot-rigging have been collected by the opposition, but I would be astonished there was any trail of evidence that took the inauguration of such gerrymandering back to Putin personally, or to his immediate circle. When a country has been corrupted utterly for more than half a century, as was the USSR,  officials learn to guess what 'the Boss' wants and they try under their own steam to make that happen. If they guess wrong: tough. If they guess right, they survive a little longer and just may get a step of promotion. The successor regime has not yet scratched the surface of the embedded bureaucracy: especially those aspects of the system that are gathered together only occasionally, as for elections. It remains to be seen how far the favour that the 'corrupt' election officials did to the president-elect will harm his reputation in the medium term. That may influence the next election; but Putin is there now.

Saturday, 10 March 2012

What about 1834?

The heading to yesterday's Blog invited comparison of the situation in Britain in 2012 [in respect of benefits under the Welfare State] with what happened in 1834; but made no further comment on the earlier year. Anyone who has followed the Blog for a long time, or interrogated the system via key words, would have recognised that 1834 was the year in which a comprehensive nationwide system of family income support was abolished. There was no tinkering of the sort that Iain Duncan Smith is currently advancing, and there was no gaderene rush to fund fake jobs. Cash benefits were withdrawn. Thereafter people who could not maintain themselves had the option to present themselves to a Workhouse, where they surrendered most of their civil rights in order to be kept at a standard of living that was - by law - "less eligible" that that which could be earned by a recipient of a minimum wage in the open economy.

This draconian change in the law could only be carried once the political system had been changed. In 1832 parliament passed the Great Reform Act, which gave the vote to the taxpayers who funded the Poor Law levies from which benefits were paid: and only to those taxpayers. Recipients of  benefits had no votes. The Reform, supposedly a great step forward in the progress of democracy, enabled the taxpayers to slough off the burden of cash benefits: and they accepted the minimalist obligation to fund the [vastly cheaper] workhouse system. The economic objective of the change in the law was achieved: the rising 'middle class' invested heavily the railways, factories, shops and workshops that pushed forward the industrial revolution; and that provided employment for the vast majority of the expanding working class.

Charles Dickens and many others drew attention to the downside effects of the 1834 reform. The horrors of poverty between 1840 and 1870 were almost too easy and too omnipresent to chronicle; but the reform package of 1832+1834 was considered by the Victorian political class to have been irrefutably successful on its own terms. It took seventy years after 1870 for ideas of fairness and generosity to permit the wartime coalition government of 1940-5 to plan a complete welfare state. It took another six decades [1945 to 2010] for the system to undermine the economy and demoralise society.

Now in 2012 the recipients of benefits are voters: together with pensioners they are close to being a majority of the electorate. But they seem not yet to have recognised their potential power. They acquiesce in the 'reform' of the benefits system, and are mystified observers of the 'reconstruction' of the National Health Service. Unlike their forbears in the eighteen thirties, the political class has no clear and simple Political Economy on which to base their strategy. They have no confidence that their own mantras about 'economic growth' will in fact be vindicated; and they can point to no mechanisms that will deliver growth in practicable terms. The cuts in welfare and health spending are being made simply for book-keeping reasons. There is no underlying ideal, and no promise of 'light at the end of the tunnel'. The hopelessness of the situation is its principal characteristic; is this really the ultimate triumph of 'democracy'?

Friday, 9 March 2012

Benefits and Dependency: 1834 and 2112

New legislation in the UK will modify provision of a huge complex of benefits that have been developed over the past seventy years. The total cost of the welfare state, excluding the National Health Service [which is separately undergoing upheaval], is by far the largest segment of state expenditure. With deindustrialisation and mass immigration of people who come to Britain specifically to live on benefits, this spending has grown massively; and all other categories of state spending have been accommodate it.

The very first duty of government - defence - has been reduced, erratically and detrimentally, in order to protect the social budget. The latest crazy notion for 'saving' from the puerile Department of Defence is to expel soldiers from their homes if they stay in the forces for more than seven years. This will create a huge incentive for the most experienced and useful troops to move on from their service to another career [or even on to benefits if they can't get jobs]. By supporting devices of this kind the Conservative majority of the coalition government is constantly betraying the unwritten rules by which society has been bound together for centuries. The 'Military Covenant' is a pattern of informal but firm understandings as to how society will fairly support soldiers and sailors and their families so that the serving members of the family could give their full commitment to their hazardous duties: and it is being treated with contempt. The plan will submit long-serving soldiers and their partners to the competitive private housing market; where their modest savings and small salaries will place them and their families at a disadvantage . Their children will be plucked out of their schools and transferred into schools in the low-cost housing zones that their parents can afford - which will almost certainly increase the aggregate disadvantage of their environment. Parents compete hard to keep their children out of the sink schools in which arrogant do-nothing head teachers draw high salaries while allowing so-called teachers to encourage their 'students' to run amok in a hierarchy of bullying that is supposedly following a programme of self-directed experiential education.

The current 'reform' of the benefit systems is intended to compel as many people as possible to offer themselves for jobs; any jobs, including the fake jobs that have frequently featured in this blog. Opportunist lobbyists are pressing the government to abolish the minimum wage and reduce requirements on employers to treat their employees fairly. There is a massive push to force benefit recipients of working age [eighteen to sixty-eight] to take jobs: but the economy is not generating anything like a sufficient number of jobs for the non-employed. The state plans greatly to reduce the public sector employment that was recklessly expanded [on borrowed money] by the Blair and Brown governments, so the government will not directly provide employment for the under-educated masses; especially those who have little or no experience of the self-discipline and compliance with regulations that employment demands. Nevertheless the Treasury is providing funds to subsidise notional jobs in charities and in firms. This is a seriously dangerous method:
1. The more people whose fake jobs are subsidised by the state each represent a charge on the Treasury, so the 'saving' from  benefits is transferred to another head of expenditure; and the longer each person is kept in such a post [or in a series of such posts] the more is the cost to the state.
2. People know very quickly when they are being deceived in a fake job. The is demoralising in itself, and it deepens the individuals' disillusion with public authorities.
3. The employers who take on such people are likely to face managerial problems in allocating tasks to people who have no [recent] work experience and no practical skills, which will be disruptive to established employees. Both groups of workers are likely to give the employers more discontinuities of attendance due to stress, threatening the delivery of outputs or services by the organisation. And employment law is a great inhibitor to the organisation accepting short-term state-subsidised jobs, because the occupants of any such posts have a very large range of protection as employees under EU law.
4. Trade unions and lobby groups use both sincerity and cynicism to undermine the whole charade. A recent scam promoted by the government to give 'work-experience' to young people without giving them formal employment contracts [or wages] was subjected to a storm of ridicule and criticism that induced several firms to withdraw from the plan, some of them before anybody had been taken on under the scheme.

There is evidence, visible on the streets in every town and city, that there is a huge pool of non-employed young people who exist in peer-groups whose ethos is inimical to the sort of social values that LibDem and Tory Members of Parliament share. They are on the streets because they find their homes uncongenial, with no legally-earned income to pay admission for them to anywhere else. A reasonable fear of theft and vandalism makes churches reluctant to open their premises to such people; and after paying diocesan levies and pension costs parishes have no resources to provide salaried leaders for youth organisations [while reasonable laws to ensure that volunteers are 'safe'  are a huge deterrent to volunteering].

Young people who incur huge debts to get degrees from marginal new universities fare little better than their uneducated peers in the 'real' employment stakes: one in five recent graduates is unemployed, and additionally about 30% of young graduates are employed in unskilled posts. This problem of a 'wasted generation' is growing week by week. They have no awareness of the phantom of an ephemeral 'big society'.

Many young people in Brazil and in India are also alienated from their families and exist in even deeper poverty than their contemporaries in the UK; but around them they see growth. They see new indigenous branded goods in the shops, and even though they cannot immediately buy them they can aspire to add them to their lifestyle: and they can become motivated to seek real employment opportunities as an access route to consumerism. There are positive reasons all around them which point to advantage from participation in a burgeoning economy. A similar picture faces the single children of hard-working and poorly paid Chinese parents: the parents tell the child that the struggle is worth it, because their family standard of living is palpably improving. There are four grandparents who are all keen to reminisce about the hard times of cultural revolution and sing the benefits of controlled capitalism as a way station on the route to unimaginable prosperity.

In the relatively successful emergent countries politics is seen as part of the pattern of institutions that should foster growth: there would be riots if a government tried to extract tens of billions of dollarsworth of taxation from dynamic firms and hard-working employees to pay benefits to a growing mass of skivers who were allocated to fake jobs by firms whose owners creamed off millions of dollars. In Britain Labour members of parliament applauded such plans when their lot was in power, and now LibDems and Tories applaud their own ministers when they present the same fantasies; while their elderly electors look on in sullen despair and the young [except tiny, perverse, politically ambitious minority] turn their backs on politics altogether. The ways in which politics and the economy interact are very different in different parts of the world. The relationship of the two in China and Brazil is positive, in the UK is it destructive.

Brazil and Britain count as 'democracies' and China does not so qualify, in the view of the US State Department. That test does not take account of economic efficaciousness. The world needs a method of evaluation that reflects the range of  human aspirations, that puts politics in the appropriate place. Democracy on the US model is not a necessary condition for human happiness.

Thursday, 8 March 2012

McNulty and Mansions

The McNulty report, commissioned by the British government, offers the prospect of saving £7billion on the government subsidy to the railways: at the cost of closing smaller ticket offices and raising prices for travel at peak periods. This clever proposition ignores basic facts. Peak periods are such because they are the periods when people are going to work in the morning and home in the evening. Ticket machines are notoriously  inflexible - unlike a human being who can respond to customers' questions and interrogate the system of fares and timetables to optimise the cost of travel for the customer. Even the prospect of a supercharge on peak travel is adumbrated. This would be a direct tax on jobs, a deterrent to employment.
The withdrawal of ticket offices would hit the people with the last money, making travel for them more expensive and inconvenient. Many people travelling to hospitals have to travel at peak periods: including those whose illnesses have already caused them to loose their jobs.
The proposals are so profoundly unsocial that they are almost certain to be adopted by the coalition government.

Such ideas stand alongside the proposed 'mansion tax' which is also largely regressive and deterrent to job creation. Both are likely to be carried; such is the irresponsibility of the political class. 

Monday, 5 March 2012

China: More Good News

China's Premier has announced his expectation that economic growth this year will fall below the amazing 8% average of the past 25 years: to about 7.5%. Behind the raw number - which is still massively greater than the world's average rate of growth - is the important fact that this is a period of consolidation and change in patterns of consumption.

In the terms of Personal Political Economy the great shift is that there is an increasing number of empowered consumers each year: people with greater disposable income [and in some cases borrowing power that enables them to make bug purchases] are able to move from subsisting only on marcoms [basic commodities that meet needs] t being able to enjoy the experience of consuming quons. Just a few western Economists, including notably Harry Johnson, recognised in broad terms the difference between quons and marcoms. Johnson called quons 'positional goods' but he did not live long enough to develop any significant theory; and it remains probable that the mainstream of his 'profession' would not have accepted the concept. In the decades since that aborted airing of the issue, naive Economists have continued to treat 'goods' as a whole; while Chinese economic planners - in particular - have recognised the significance of the differentiation and the importance of fostering a shift of consumption from having more 'essentials' [which in excess can make people obese] to being able to acquire quons which embody consumer experiences that invoke a different sense of satisfaction.  

As Chinese consumers gain flexibility over spending their increased wages they acquire the power to make a different sort of choice. In their millions they have opted to acquire different sorts of meat as well as computer games and, more recently, a whole range of 'aps'. Higher up the income scale, people have bought hundreds of thousands of quintessential quons: new apartments. Financing the boom in property has led to a huge extension of borrowing, both overt and illicit, and the authorities have not been completely successful in controlling that expansion. In periods when restraints on funding property purchases have really bitten, the market has lost momentum; then measures have been found for expanding credit again and restarting the building and the sales - and confounding the western Economists who have seen the 'property crunch' as evidence of the fundamental instability of the Chinese economy and an imagined 'need' to move to a neo-marginalist market model.

China is a much more rational system than those Economists can understand. People rising from abysmally low standards of living have been brought in their hundreds of millions into a market economy, where at first they receive subsistence wages [which a majority of urban workers still receive]. Then their productivity rises to enable them to be paid enough to become highly selective consumers of quons. The first little luxuries are the most highly prized, as they open up a new horizon for the individual. The payment made for them is sacrificial, and the satisfaction received is incalculable. Of course, if the buyer is cheated and receives consumption that is not what they had been led to expect, the anger and disappointment experienced by the consumers is also incalculable: which justifies significant control of products and markets.

The best way to raise workers' productivity in an already-industrialised country is by adding quon production to marcom production. If China can produce the majority of the quons that spread over the country from its own industries, that is the best way of combining the dissemination of quons with spreading around the incme that enables more people to consume more quons. This is precisely what is happening: and the slight reduction in reported economic growth while an increasing commitment to quon .is implemented will be followed by a period of rapidly rising productivity and then of incomes. Once Chinese quons are well proven in the home markets they will be ready for export: often under established western trade marks, which the Chinese have assiduously been buying over recent years.

Those who choose not to recognise what is happening will suffer when the development of the Chinese economy faces them with further reductions in their western standards of living. The sadness is, that Economists will not bear the brunt of the impact: that fate, as usual, falls to the poor who have been so appallingly deceived by the politicians who remain deluded by market models.

Saturday, 3 March 2012

Welshing Bookies

In the streets of terraced houses in which I grew up in the era before betting was a fully open licensed trade it was not uncommon to hear of a bookie - a man who received bets informally, usually on horse or greyhound races - miscalculating the odds that he had offered and was found to be unable to pay winnings to the people whose selections had won their races. I cannot recall any account of such a man [they were, to my knowledge, always men: though I suspect there must have been some women in the trade] being killed by an angry mob; but it was common to hear of them being treated with extreme violence, ordered never to appear in that community again, tarred-and-feathered, threatened with castration and otherwise subjected to the sanctions that ordinary people could apply to those who failed properly to provide them with an illicit service.

Gambling - as commonly understood - is strictly regulated in the advanced economies. The USA has been slow to allow various activities on the internet and this negativism is not luddism: the potential for gambling to become addictive is real and the internet allows large numbers of people to commit vast sums to bets placed with companies that are registered in states where enforcement is weak or subject to corruption. Individuals using credit cards or opening their bank accounts in such activities can be ruined in seconds. Recent UK court cases featuring Pakistani cricketers made millions aware of the range of possibilities that now exist for corruption in all sorts of games. Nanny states have sophisticated regulatory systems that seek to ensure that gamblers understand the contract that they are making, the subject-matter of each bet, the value of their own assets that they are putting at risk, the relative value of the stake they put down to the winnings they will take if their bet is vindicated, and the odds against winning. The regulator also ensures that the trader in bets is solvent and able to meet obligations, and does so on demand.

Thus betting has become increasingly like banking used to be: risk-taking in defined conditions with regulatory systems to ensure solvency and compliance with the law. Meanwhile, banks have increasingly allowed their star traders to act more and more like gamblers who press outward the boundaries of their betting; and by 2007 they had incurred obligations that vastly exceeded their reserves. Assets accumulated in the traditional banking business were only a fraction of the liabilities that stood in the name of their 'proprietary trades'. If the banks had welshed on those day-to-day obligations, due to their gambling losses, the entire system of international, national and local business would have imploded. So governments bailed them out.

In the nineteen fifties [when police still patrolled every beat every day, on foot] if a policeman saw a mob chasing a man, crying for his blood and their money, as often as not they would allow the man to be caught and 'given a good hiding' before they intervened to disperse the mob. In 1907-9 governments were in the position of the policeman as creditors demanded back their deposits from the banks; but instead of standing back they came forward with magic sacks of newly-invented money with which to enable the banks to meet their obligations. When the market realised that the banks had this support the immediate crisis was resolved and very little of the magic money was actually passed out from the banking nexus.

The banks' stabilisation has lasted until now: with some very tricky moments: and not a few of the difficulties have come from Greece. The EU and the IMF have been prepared to keep the Greek state [just] solvent in return for certain undertakings. Meanwhile banks and other agencies have found that they could not sell all the Greek bonds that they bought before the crisis: though some speculators have been prepared to buy some types of Greek debt, heavily discounted, in the hope that their investment would pay off handsomely in the event of a complete rescue; but the European Central Bank and others have no wish to oblige the speculators. Finally towards the end of this past week the Greek authorities have agreed with some creditors that existing bonds will be replaced by new ones each worth 46.5% of the bonds they replaced. For some speculators who bought the debts at less than 45% below par the deal was profitable. It was also welcome to those institutional investors who had already written down the value of Greek debt in their own books by more than 55%, in that their loss was mitigated. Other creditors of Greece will be offered the chance of swapping old binds for new: voluntarily or by compulsion. Whatever they might think of the justice of such a 'haircut' [the 53.5% cut in their nominal asset value] the creditors were stuck with it.

Some of the creditors had bought betting slips that are often mis-described as 'insurance' against such a default. These Credit Default Swaps - CDSs - have several times been mentioned in this blog. In 2008-9 AIG paid-up on the contracts that fell due to be met until they were bust, and then the US government lent them billions more to carry on doing so until the demand was met. In 2012 the financial institutions that had issued the CDSs were obliged to pay up; if the Greeks had staged what was described in the contracts as a credit event. Here is where arises the parallel to a 'fifties bookie: in the former case the punters knew what they had bet on what horse, and what they were due to be paid. The issuers of CDSs know what they owed] if there is a credit event but they, and not the punters, nor some independent regulator, would decide what was such an 'event'.

So when the issuers of CDSs gathered on March 1 as the committee of the International Swaps and Derivatives Association it took less than two hours for the [reputedly] 15 members to agree that no credit event had occurred: so none of them would have to pay out. There was no independent assessor or regulator involved: the bookies welshed and there was no comeback. The descent of the 'banking' world into gangsterism proceeds.

Gambling remains relatively well regulated. Hence I have proposed, and do so again, that derivatives, swaps and related contracts should be subject to Gambling Commission regulation and absolutely severed from the legitimate Financial Services sector.