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Thursday, 19 April 2012

Access to Justice

The USA leads the world in the density of lawyers among the population, and the 'financial services' sector is virtually unable to take any action without engaging expensive lawyers. By contrast, the former communist countries have relatively underdeveloped legal professions; and in some cases - not least, Russia - the subordination of the courts to dominant political forces makes their independence non-credible. Because of its British imperial history, India has a massive legal 'profession' and the courts are slow-acting, arcane and little trusted because of the methodologies used by lawyers [including judges] to maximise their own earnings.

The former sovereign of both India and the USA is, unsurprisingly, deeply in thrall to its lawyers. British lawyers talk, often and cleverly, about the rule of Law and access to Justice, as if Law and Justice were absolutes of which they are devoted and humble servants. Laws are promulgated in the name of the Queen, and Justice is supposedly delivered by judges who are acting directly as representatives of the Queen under the unconditional authority of a medieval monarch. The second verse of the National Anthem summarises the formal situation:
            May she defend our laws
            And ever give is cause
            To sing with heart and voice  
             God save the Queen!
In those terms the last ten Prime Ministers - and especially the Conservatives Heath, Thatcher and Major - have led their governments and parliament in a series of effectively traitorous actions under which they have used the Queen's authority to accede to European Union treaties and laws, and to interpretations of the European Convention on Human Rights by the Court that was established under the Convention, that result in a situation where only a minority of British laws are made by the traditional constitutional process. In most cases laws and regulations established by the EU are adopted into British law without even a pretence of debate in parliament. As a more loyal follower of the Constitution than her ministers, Queen Elizabeth II, has acquiesced in the policies that her ministers assure her are approved by the nation through their elected representatives, even though this has vastly diminished her ability [through her government] to defend the laws that the nation supports. She has similarly acquiesced in the removal of her ability to defend the nation through the series of cuts in defence spending, and by permitting huge laxity in immigration law and in the administration of immigration processes.

While successive governments have effectively diminished the sovereignty of British laws and institutions vis-a-vis those of the EU, the numbers of people engaged in the 'legal professions' [Barristers, Solicitors and Legal Executives] have burgeoned both on the basis of indigenous law and EU law and as the central component of the massive 'human rights industry'. As part of their programme to reduce the rate of increase in state borrowing the current government has cut spending and services in the courts and has also reduced the budget for 'Legal Aid', the system by which the Exchequer pays fees to lawyers to act for defendants in criminal cases and for litigants in some classes of civil [social and contractual] cases. All public prosecutions are paid for by the taxpayer. There thus remains a massive force of courtroom lawyers, the majority of whom are at least partially funded by the state. The other lawyers who sell their services to the public, especially to firms, rely on the fact that their clients could be put to huge expense if they try to make deals without recourse to lawyers that could then open them up to prosecution by the state or to litigation by other firms and people; so people and businesses buy legal services to gain a measure of reassurance.

In earlier centuries people accused of petty offences, such as drunken assault or vandalism or motoring offences which cause no injury, were taken next day to a court of their 'peers' [ordinary folk like them] where lay magistrates would dispense 'summary jurisdiction'. The only lawyer involved was the Clerk to the Court; modest penalties would be imposed there and then, and that would be the end of it. Now, even for trivial offences, people are allowed access to a lawyer at the state's expense: such a person can try to maximise their earning from any case by getting hearings deferred, challenging even the most obvious evidence, impugning the competence and integrity of police officers [requiring them to spend a huge amount of their time on trivial record-keeping] and making appeals whenever possible. This causes huge delays in the dispensation of justice. Cases are often heard months after the event, when witnesses are not available and [when they are available] their memories are not fresh; and with a frequency that cannot be assessed witnesses - both attendees and absentees - have been intimidated into withdrawing or modifying witness statements or into absenting themselves from the court. There is a great deal of reason to believe that near-universal access to lawyers [at no cost to the criminal] works against the achievement of truth in the courts and thus the administration of justice.

Thousands of people have set up in business as human rights lawyers and hundreds of them specifically as immigration lawyers. They know that a huge proportion of their clients will become dependants of the state who will produce only progeny. They know that the national economy is failing: but they blithely take their fees from the state and push the cases for more people to be added to the millions who live on the state. The legal professions collectively have committed the huge injustice of reducing the average living standard of ordinary people.

Of course, the massively remunerated cohort of City lawyers are major contributors to the huge turnover of the precarious finance sector and of the always safe insurance industry: overall the so-called financial services have provided significant turnover for the economy and paid a lot of taxation and the law is an indispensable part of those businesses. At least, they all pay the lawyers' fees out of their earnings: and London attracts worldwide business as a centre for arbitration and litigation.

As with almost every other aspect of British society, the 'parasitic' band of lawyers who themselves earn near-average incomes impose a net cost on the mass of the population who have modest incomes and falling living standards: while the highly affluent minority of lawyers take their place among the rich and privileged minority whose incomes and living standards are continuing to rise. Right across the piece, however, the key fact is that  the Law has become ever more obviously the field in which lawyers make the best living that they can: public benefit and Justice are still quoted, but with diminished sincerity; and every increase in what lawyers extol as  access to justice can only realistically be estimated in cash. High-flown rhetoric on the subject is mere hot air.

Monday, 16 April 2012

Money and Value

It is a key principle in my text Personal Political Economy - PPE [see link from this blog] - that while value is a common noun in everyday speech, and to value is a verb that matters hugely to anyone who is contemplating selling a house or an antique cabinet, the search for a comprehensive 'theory of value' has been one of the most useless components of academic Economics. Sometimes a chapter heading on the lines of The Theory of Value appears in a textbook above an exposition of the idealistic, mechanistic, normative model of Supply and Demand that has only ever applied to any real-world situation by chance for a very short period in specific circumstances. The concept that the untrammelled operation of Supply-and-Demand would 'in the long-run' produce an equilibrium, under which the optimum distribution of the available resources would be achieved throughout the economy, is utterly impractical and unconvincing.

In examining what is the 'optimal' allocation of wealth, Economists have no concept of justice that they assume to underpin their value theory. Tutored in Economics, the contemporary pack of machine politicians present voters with promises that they will promote fairness, which boils down to a variant of the package of trivial changes in taxes and benefits that the civil service Grauniadistas consider to be feasible. Fairness is one of the woolliest slogans that can be devised; but in contemporary politics it is a descriptor of a mixture of policies that intrude into the economy, and divert the patterns of payments, to achieve social objectives that might satisfy naive concepts of 'justice'. The dogmas of Market Economics that drove politics in Britain and the USA from 1980 to 2008 are in direct conflict with the 'fairness' agenda, which implies increasing transfers of wealth from those who generate it to the mass of dependants of the state: requiring more taxes from the diminishing minority of the population who can be classified as 'productive', and more government activity. While the Obama administration has increased state spending, especially through benefits and by funding projects that would not attract market investment in current circumstances [if ever], the UK government is committed to containing government spending and - in particular - capping benefits. The US economic data appear to show modest recovery [but not enough to pay for the increase in borrowing]: the UK data show less certainty of growth and increasing state borrowing. Benefits have been restricted for many tens of thousands of people, who will experience real hardship, while spending on benefits in total is still increasing.

Tens of thousands of immigrants are admitted every year to the UK who have no prospect of employment, and often a positive intention not to work. These people are admitted as asylum-seekers and as 'family members' of settled immigrants and as 'students' [notwithstanding efforts by the underperforming UK Border Agency to stem the flow]. These new migrants, and the children of settled immigrants, increase the total cost of benefits plus social housing plus schools plus health care: while the government attempts to reduce the rate of increase in spending on all those services by reducing eligibility to indigenous British subjects, many of whom have become retired or redundant after a lifetime of taxpaying employment. The resentment that has built up is not simply directed at the Conservative-LibDem coalition; voters recognise that a Labour government would not depart significantly from these policies, whatever the windbags say in their tedious speeches where attacking the coalition is much easier than making convincing policy proposals.

Economists [who are still being over-produced by the bloated university system] are now finding employment as 'valuers' of medical treatments, environmental 'assets' and other assets and actions that nobody considers can be traded on a basis of market Economics. The Health service evaluates treatments by setting the improvement in patients' lifestyle, or the prolongation of their lives, against the price of the medicine and the wages of the staff who administer it and the estimated cost of space and supplies in the hospital. It is impossible to 'value' a human life, and it is mere charlatanry to purport to state a 'benefit' that is equal to, or superior to, the computed cost of the treatment. Similarly any attempt to state the 'value' of a clean river or pollutant-free farming in money terms is simply voodoo Economics since nobody ever would, or could, set a price on such 'benefits' that the public would be willing to pay. There are areas of life where most mature people would agree that those who want to consume a product should be free to do so if their earnings enable them to afford the price. There are many other areas, such as healthcare and the preservation of parkland, where the vast majority would agree that the cost should be met from taxation. Whether it is local taxation or national taxation, whether it falls on income or spending [or whether the taxation is disguised as levies on water companies or petrol sales, so that the consumers paying the tax do not even recognise it] it is a societal levy. The more that deluded politicians follow the Economists' advice to 'privatise' public assets, the more they promote either the degradation of the environment or of health care or of education or the concealment of taxes within the prices that people pay for the output of the privatised businesses. The whole thing is a con: and the proof of that is that there is no credible system for the valuation of the 'benefits' that can be claimed to offset the costs of providing these services. The outcome is diminishing credibility for politics.

Wednesday, 11 April 2012

Gold and Value

When a group of aspirant 'scientists' developed modern Economics, between 1860 and 1875, they were not able to dream up any alternative to the monetary system that was endorsed by the precursor Science of Political Economy. So in tandem with their normative [and highly imaginative] concept of 'perfect' results being achieved by the free operation of their theory of supply-and-demand, they accepted the definition of money as a special commodity, recognised and often managed by the state, that served the functions of:
          a medium of exchange
          a means  of making deferred payments
          a measure of value
          a store of value.
In retrospect, these attributes only applied to money that was based on a Gold Standard; and by coincidence the spread of Economics through the world's universities was accompanied by the spread of the gold standard. Between 1870 and 1914 a succession of countries adopted the principle that the national currency was pegged to gold, so that at the start of the first world war a British Pound or a US Dollar was defined in terms of equivalence to gold: so-many dollars for one ounce of gold, so many pounds to an ounce of gold. Anyone who held pound notes could go to the Bank of England and demand [and receive] gold - in the form of sovereign coins, which were legal tender; and similar rules applied in the USA and Russia and France and most other advanced economies. Just a few states maintained a 'silver standard'; and a few, mostly the imperial possessions of western states, had a gold-exchange standard that seemed to work but no Economist clearly understood it until a bright young man presented a brief, brisk and profound account of how it worked: this was the serendipitous first publication by John Maynard Keynes.

It was serendipitous because within just a few months of the start of the war all the combatant European countries had to abandon the 'Old Gold Standard' and move uncertainly each to their own gold-exchange standard.   Britain had the one global expert on the subject, and Keynes was drawn into the centre of the government to lead a new way of managing the unprecedented amount of payments that passed through the Exchequer to pay for the war. He recognised at once that the massive creation of paper money made any return to the old system impossible: and that the attempt to equal the inflation of the money supply with the issue of government bonds that were notionally equivalent to gold reserves was pure fantasy. The idea that war-loan would be redeemed in the postwar world by payments of gold-standard money was absurd: but it was built into the unprecedented system of war propaganda which most government ministers allowed themselves to believe. The United States kept its gold standard, and required its allies to pay gold-standard money or gold-standard guaranteed bonds [denominated in dollars] for the supplies that they necessarily bought from the USA.

Thus at the end of the war the victorious allies recognised their obligations to pay each other immense sums of 'money'. To make this easier for them, they demanded vast reparations from Germany, and those payments were written in to the Treaty of Versailles. The Austro-Hungarian monarchy had collapsed into a significant number of separate new countries that acknowledged no obligation for the debts or other obligations of the former empire: so no reparations could be expected from there. The collapse of the Russian monarchy also meant that the massive holding of Russian state and corporate debt, that were due to be serviced in gold-standard roubles or pounds, had become worthless. Thus most of the load was dumped on Germany, which was obliged to deliver gold, coal, steel and other commodities free of charge, principally to France and Belgium, so that the 'victors' could meet their obligations to their own people and to foreigners in gold-standard money . Keynes had been taken to the negotiations as an economic adviser, and he resigned in exasperation when it was clear that even if Lloyd George understood Keynes's advice the Prime Minister would not act on it. Keynes came home and set out his objections in the prophetic tract on The Economic Consequences of the Peace. As the inflation that Keynes had predicted to be inevitable gathered pace in the ensuing years, the government forged ahead with its plan to restore the monetary system and in 1925 Winston Churchill as Chancellor of the Exchequer proudly announced the 'restoration of the Gold Standard' [which was in fact a variant of the gold-exchange standard]. Keynes published his reckoning of the inevitable Economic Consequences of Mr Churchill and pressed on with his main work; which resulted in 1929 in the publication of the Treatise on Money.

Since then 'money' issued by governments has gone through many redefinitions, has been subject to massive manipulation, and has been subjected to assorted 'analyses' by various schools of Economists whose only common link is to have been wrong in their predictions and disastrous when they have become policy advisers. Their 'profession' has avoided open acceptance of Keynes's Treatise; and the International Monetary Fund - of which Keynes was one of the founders - has still not adopted his concept that world financial stability can only be achieved if they create a global reserve currency [bancor] to which national currencies relate in a disciplined order. Exactly a century has been lost since Keynes wrote on Indian Currency and Finance and there is still no sign of his plain solutions being adopted.

In a world of ill-managed currencies, reckless debt creation and the inevitable consequential inflation, it is obvious that money is NOT a 'measure of value'. After the default of Greece we are all reminded that money is NOT a stable means of making deferred payments; and it would be a very poor joke for anyone to suggest that money is a 'store of value'. It is a 'medium of exchange' simply and solely because the law demands that prices are quoted and debts are denominated and settled in the national currency. Money is used because it has to be used: it is an imposition of the incompetent state, and the one certainty is that it loses purchasing-power: the longer you keep it [whether as banknotes or on deposit] it looses 'value'.

In future blogs I will develop this simple story that Keynes's genius is better appreciated when he is recognised as an authority on money, instead of being misrepresented as an inflation-inducing proponent of 'big government'. Over the recent past hundreds of millions of lives in the postindustrial countries have been conducted under a massive cloud of monetary delusions in an environment of debt; a system that is becoming unsustainable. Keynes warned what would happen if such fantasies were pursued: it is now sensible to return to what he wrote, on the record, and to understand his theories in the context of the pre-Economics science of Political Economy on which he built.

Saturday, 7 April 2012

Universities and A-Level

The British educational system, especially at the level of secondary schools, is widely recognised to be failing a large proportion of the rising generation. Far too many young people are entering rapidly-expanded new universities to find their courses undemanding and their teachers overstretched [with staff-student ratios little different from those in schools; sometimes more adverse]: their justified complaint is that they were coached into taking simplified final school exams which enable them to enter those courses, without the class receiving any satisfactory counselling about the options that would be available on graduation. Three or four years after school these people present themselves as graduates to employers who consider their degree useless and their standards of literacy, numeracy and verbal communication to be abysmal and their assiduity in work non-existent. Graduates of 2015will typically leave university with debts well in excess of £20,000, which diminishes their hope of ever being able to find the deposit to buy their own home.

Of course there are exceptions: many tens of thousands of graduates emerge literate, numerate and competent  in valid sciences and well-tested arts subjects, with their degrees awarded by sound institutions; but most employers report that from their perspective such graduates are the minority.

For the school leavers who leave earlier that the university-destined cohort there are limited opportunities for genuine trainee or apprenticeship opportunity. Very many of them have even lower standards of literacy and numeracy than do the graduates. They have not been educated to respect work, or their country and its vaunted democracy, or the law of the land. They have been brought up to feel entitled to be treated with respect, regardless of their own behaviour; and they expect financial benefits as a right which exempts them from any question of obligation to contribute to the economy.

 In these circumstances it is amazing how many families are able to bring up their children with standards of decency and social obligation, who are eager to make their own way in the world and who recognise their need to generate income honestly. Despite the educational system, families are able to overcome the state schools system and discuss among themselves the career options for the children. Families scrape together the money for visits to careers fairs and universities' open days so that rational choices can be made, and support students on a clear understanding that they will work hard with a view to a valid degree and a remunerative career.

Part of making good choices is being able to select school-leaving examinations that point in a useful way; but it would be more useful if schoolchildren were able to be guided in their schools through an examination that is set by good universities and accepted by them [and by eventual employers] as proof of suitability for study at the higher level.

I am so old that I remember that my Advanced Level examinations were set by the Northern Universities Joint Matriculation Board ['the JMB']. Other parts of the country took London, Oxford, Cambridge and Durham University pre-university examinations. The universities managed these examinations carefully and with great attention. Senior academics served as examiners, administrators and even went into schools to conduct oral examinations and inspections. The system worked: so, in the way of the British educational system, it had to be destroyed. A mixture of uppety school teachers and commercial interests persuaded government that the excellent system should be replaced, and it was, and standards steadily declined. After thirty-odd years of the charade, the universities are suggesting that they should recapture this field: and to most people [including, apparently, some of the university representatives who are promoting the idea] this is a novel concept, rather than the possible restoration of something that served its purpose efficiently and economically. Such is the way in which the political class has bent to the demands of interest groups, to the detriment of the entire nation.

Thursday, 5 April 2012

BRICS Ascendant

Readers of most Newspapers in the postindustrial economies, and the wider spectrum of society that half-notice news headlines on television and radio, have been left unaware of the fact that the last days of March produced major news in the field of Political Economy, from Delhi. A meeting of the Heads of Government of China, India, Brazil, Russia and South Africa disappointed US and EU delusionists who hoped that major areas of disagreement - and different perceptions of their national interests - would cause this group of countries [commonly called the BRICS] to come to no practically-useful agreements. They instead issued their Delhi Declaration summarising a developing shared view of the state of the global economy, an increasing frustration with the unfairness of the nineteen-forties institutions that regulate world affairs [insofar as such matters are regulated], and a shared determination to gain appropriate recognition for their group - and for its members individually - in global institutions.

Their importance in the global economy has already gained recognition as a fact, as more of the goods in a typical European or American hardware store are marked as having been made in some of those countries; and oil, crops, minerals and other 'primary products' from those sources are increasingly important. China has gained control of the global market in 'rare earths' as well as a massive market share in simple manufacturing. Indian firms control globally renowned brands of high-quality cars and have exported their software building and managing skills into the highest technology laboratories and factories worldwide. Brazil is increasingly gaining respect for the balance between sectors that is being achieved as it grown rapidly. Despite the threat to economic stability that is posed by Zimbabwe-style pressure to dispossess 'white' firms and farms that comes from the 'left' of the ruling party, South Africa has managed to display economic data that currently justify their membership of the club. Enemies stress the weaknesses of Russia - declining population, oligarchy, corruption, the failure to establish 'real democracy' and the dubiety of the rule of law - but the combination of military strength and natural resources that always provided the basis for Tsarist power is still enough to ensure the global significance of the biggest country on the planet.

The Delhi group asserted that half of the world economic growth that is forecast for the next few years will take place in those countries. When 'the west' was in the lead, its Economists and politicians extolled their role as 'the locomotive' for the world economy: the concept has quietly been forgotten now that the BRICS can claim to be the motive forces for the present era. The most influential of the post-war institutions, the International Monetary Fund [IMF], was structured to serve the victorious wartime allies and even after many revisions to reflect changes in the world [and much weakening of the role of the US dollar] the EU together has 36% of the votes, the US still has 17%, and the BRICS together have just 11%: while their turnover is 28% of the global economy [and rising quickly as the west stagnates]. The Delhi assembly criticised this, demanded a reorganisation of the United Nations, and especially of the permanent seats on the Security Council, to reflect the shift in power. The rigidity of the World Bank - and the probability that yet another American would become its chairman - led to the BRICS examining the possibility of creating a South-South Development Bank through which they could lend money to each other and their emergent-country clients.

If the old-world institutions do not open themselves to recognition of the shift in the basic facts of Global Political Economy, they will compel the BRICS to set up their own parallel institutions: and the potential of global institutions to foster Peace among the Nations, which was promised to the whole world by the victors of 1945 - which included China and Russia and Imperial India - will be vitiated. The BRICS have the resources and the ability to go their own way: within the first half of the present century the Chinese and Indian economies will both be larger than the American. If these powers are not welcomed with due respect into the global institutions, the postindustrial countries will be much the loosers.

Wednesday, 4 April 2012

Flogging the Big Society

It is an old adage, that conmen first convince themselves of the value of their propositions. This appears to be true of the British Prime Minister, who seems to be persisting in pushing the 'Big Society' concept that has caused yawns all over the country. The latest manifestation of his apparent persistence in a delusion is the launch today of the Big Society finance initiative. £400million have been filched from 'dormant' bank accounts  to which the banks have added £200million as part of the Merlin deal by which the banks were allowed to carry on pretty well as they had become accustomed to do.

The £600million will be made available to established social enterprises that can show an income stream and offer some evidence of continuing ability to service any loan they are given. Such enterprises have taken over local swimming pools and bus services [among other activities] that would otherwise have been closed down when state funding was removed or radically reduced under government 'cuts'. Such enterprises have to keep the statutory requirements relating to heath and safety, which often require them to make 'investments' that cannot be funded from their income streams. By lending them the money, in a small number of selected cases, the new fund can enable enterprises to continue in being and [with luck] be able to increase their turnover [and thus their ability to repay]. Supposedly hard-headed business people will assess applications, and I predict now that cronies of those assessors will appear as Directors or Trustees of the enterprises in a special position on the board to censure any action that could weaken their ability to repay.

Some good causes will be helped by this initiative, but it will come at a high price in dynamism and with serious diminution of the scope of enthusiastic volunteers to innovate.

Monday, 2 April 2012

Burma, Globalisation and Automation

Yesterday by-elections were held in Burma for fewer than 5% of the seats in the parliament that is still under the absolute control of the military junta. Reports that the government was determined to permit [if not to 'manage'] the election of leading democrats appeared highly credible, and appropriate results - thought genuinely to represent the votes cast - are likely to lead quickly to some reduction in sanctions against trade with Burma and investment in Burma.

China and other south-Asian countries have ignored the sanctions in making their significant investments in the country: mostly in infrastructure [ports and highways] and in exploiting natural resources, but some factories are also appearing. The po-faced powers that have enforced the sanctions have exempted themselves from taking part in such activities: they have passively supported the cause of democracy, which gives their Grauniadistas a feelgood factor but adds nothing to their national balance of trade. By giving the democracies the opportunity to withdraw the sanctions the junta has given itself a wider range of firms who will tender for major contracts and bid for licences to export timber and minerals. A wider range of firms will also offer to open factories, providing employment for the increasing population. New factories have the highest productivity: after a century of 'automation' computer-controlled mass production can be planted anywhere in the world, and firms locate their newest plant where rents are low, where planning and pollution controls are minimal, and where labour is both adaptable and cheap. Burma can easily meet these desiderata: and so long as the regime is basically unchanged, so that alien investors can be sure of the security of their plant, the investment will come.

This paradox needs carefully to be noticed: the token acceptance of movement towards democracy will reduce the external sanctions, while the continuity of governance internally gives confidence to investors. Any move towards a socialist democracy would deter the investors. The junta have seen how China has delivered growth and prosperity without democracy; they have also experienced pressure from the democracies to allow limited access to the political process for essentially conservative indigenous campaigners for liberal ideals. The junta hope to achieve their own balance for Burma, which will enable employment and wealth to grow - making the regime less unpopular - without any lurch towards what the generals perceive as a threat of anarchy. It will be interesting to see how far the currently recognised advocates of democracy feel able to co-operate in the junta's aims without risking the loss of younger and less patient supporters.