I have rabbited on about sprinklers in buildings on several occasions in the past, most notably in the context of the Grenfell Tower disaster in Kensington. I do it today in the context of another issue that has surfaced in the media in the past 24 hours: namely the fact - as officially recorded - that fewer new schools are built with sprinkler systems than in past decades.
Sprinklers are devices to produce a heavy shower of water inside a building that is on fire, and if they are properly installed to a good design [and an appropriate specification of devices used] they massively reduce the risk of destruction of the contents of the building and of death and serious damage to people and animals. There are advanced techniques for drying-out water-damaged assets.
The aspect of the prevalent free-markets dogma that is most directly damaging to human beings is the reduction and removal of controls that prevent dangerous structures and situations from being permitted. There was an almost-golden age of safety in factories and public buildings, when the local fire brigade had the power to insist that safety systems like supplementary escape staircases and sprinkler systems had to be installed in a building before it was granted a 'fire certificate' that permitted a range of uses of the premises. Buildings with fire certificates were usually acceptable to be insured - with their contents, including liabilities to people and to other entities than the owner or operator of the building - but nevertheless the insurance companies employed their own Inspectors who could enter the premises and check that safety systems, including sprinklers, were appropriate and properly maintained and fully functional. That last sentence is important, because it is possible to have a well-designed system that is regularly inspected but which can be switched off [or the water turned off] by human oversight or negligence: or as part of the preparations for a fraudulent insurance claim for loss of goods kept in the building which were burned in a fire where the sprinklers 'failed to operate'.
The free marketeers have been dominant in the United Kingdom since the Labour government submitted to the International Monetary Fund [IMF] in 1976: in return for being allowed a loan which was intended to 'stabilise' the external value of the pound sterling during a period of extremely high inflation and 'industrial strife', the Callaghan government accepted [very reluctantly] the free-market dogma that the Thatcher regime was to embrace after their election victory in 1979. On that reckoning, the free markets dogmatists - the Econocracy - have dominated society and the economy for forty-one years [though I have pointed out several times that 364 then-practicing Economists signed a letter to the Times in 1982 rejecting the dogma that was to gain hegemony by 2002].
The period since the autumn of 1976 is exactly the period of Britain's absolute decline as a manufacturing country. We have wantonly destroyed coal mining, most steelmaking, large-scale commercial shipbuilding, our separate aircraft industry, the mass production of textiles and most of the armaments industry [including even the capacity to supply uniforms for a mass military]. The economy has grown because new industries have arisen in high technology such as pharmaceuticals and microprocessors, and in the games and the entertainments industries; due to the brilliance of British inventors, some of them in the university system. The balance of payments deficit has been mitigated by sales of much of the new intellectual property to aliens.
At least equally important for the growth of the economy has been the expansion of government and personal debt. Some of the government's debt has been hidden from the official balance sheet, for example in the PFI schemes by which schools and hospitals have been built and funded by businesses on the understanding that the government [or agencies including the NHS and local authorities and their semi-independent social housing departments] will pay for the use of those buildings when complete. Those charges will for decades to come be paid out of the users' annual budgets; and the debt that would otherwise be required to build them is not listed in the public accounts.
In order to pare bits of expenditure off the public accounts, both from the admitted debt for construction and from the the running costs of premises, devices like sprinklers have been made optional. Building operators - including providers of social housing and free schools and the trusts that manage [and profit from] 'academies' - are exempted from costly requirements such as installing and maintaining sprinklers. Thus the 'economic burden' of building and operating the facilities is reduced: and so is the safety and utility of the premises.
The extreme shabbiness of this policy has rightly been attacked by the Commissioner of the London Fire Brigade, Dany Cotton. Human lives - even those of children is school and in care - are at unnecessary risk: due to the implementation of policies directly derived from Econocratic dogma. Thus has Economics become directly and fundamentally inhumane.
Showing posts with label Economists. Show all posts
Showing posts with label Economists. Show all posts
Wednesday, 25 October 2017
Sunday, 8 October 2017
Monopolies, Markets and Mumbo-Jumbo: Privatised Utilities
Telecommunications are - so far - the only sector of privatised provision of utilities where the original network of copper wires has largely been replaced by the use of airwaves. The great Volta achieved some measure of success with his experiments to transmit electricity without wires, more than a century ago. So it is not beyond the bounds of possibility that some equal genius, with the advantage of a century more scientific discovery to draw upon, will be able to distribute electrical energy safely without the infrastructure of a National Grid. But that it not yet on the horizon.
It is most improbable that gas or water could be distributed to their millions of domestic and commercial users other than by pipelines; and trains will always need tracks, even if they become vacuum tubes through which the vehicles are sucked or pushed at hundreds of miles per hour.
By selling the licence to use the copper wire telephone system [that was originally laid across the country by Post Office Telephones] to the shareholders of British Telecom [BT], the Thatcher government did not extinguish the material monopoly that POT had created: they simply sold the ownership of the system. Alongside the massive development of airwave communications, some rival firms have put their carbon-fibre equivalent of wires in some parts of the country, to compete with the mix of copper and carbon-fibre that BT now use; but in most of the country the BT infrastructure provides the single means by which a consumer can connect their devices to the global telecoms system. As a result of this fact, which is derived from the impossible cost of replicating or triplicating the BT infrastructure, 'competitor' companies of BT have to hire the use of BT capacity. An 'economic regulator' OFCOM was established at the time of privatisation with the task of making the 'competition' of BT and other providers look a bit like the sort of a market that Economists imagine in their fantasies, and teach to captive students on the basis that acceptance of the 'model' is necessary to pass the exam. Thus the students are in the equivalent position of students of literature who are studying 'nonsense' poems by Edward Lear: with the difference that the Eng Lit students know that the content is not real-world rational thought; while the Economics students are expected to pretend that the Econocratic model is superior to the reality that prevails in a corrupt and inefficient world.
The job of OFCOM in communications, like that of OFWAT in the mock market in water and that of OFGEM in the speculative sphere of energy, is to make rulings which set the basis for the provider firms to charge customers and to maintain and enhance their distribution systems. Each of these organisations hires youngish Economists who are still at least half-convinced of the 'scientific' validity of Econocratic assertions, and these constantly come up with ways of 'refining' the models that the regulators use to bring the regulated system closer to the models they had from their teachers. When one of these tweaks of the system seems to be effective, some of the Economists who introduced the new wrinkle are recruited on higher wages by the other regulators to tinker with their systems.
Hence we have seen water companies urged to invest massively in replacing old pipes: then suddenly to stop as the regulator realises that the notional capital value of the company is being increased too much [for their model] at the expense of consumers' bills. We see constant attempts to compel users of electricity to join in a game of swapping 'suppliers', when everybody knows that the competing firms all use the same power stations and wires: the competition is only in publicity and customer relations [including billing]: and on a basis of 'swings and roundabouts' over a ten-year period of staying with the same supplier there will be periods when that is the most expensive and periods when it is less expensive than a firm to which one might have switched.
The whole experience of privatisation is of an expensive game: paid for by the poor consumers. The gut reaction of the British people has been to agree that Labour has a point, in putting re-nationalisation of at least some of the utilities back on the political agenda.
It is most improbable that gas or water could be distributed to their millions of domestic and commercial users other than by pipelines; and trains will always need tracks, even if they become vacuum tubes through which the vehicles are sucked or pushed at hundreds of miles per hour.
By selling the licence to use the copper wire telephone system [that was originally laid across the country by Post Office Telephones] to the shareholders of British Telecom [BT], the Thatcher government did not extinguish the material monopoly that POT had created: they simply sold the ownership of the system. Alongside the massive development of airwave communications, some rival firms have put their carbon-fibre equivalent of wires in some parts of the country, to compete with the mix of copper and carbon-fibre that BT now use; but in most of the country the BT infrastructure provides the single means by which a consumer can connect their devices to the global telecoms system. As a result of this fact, which is derived from the impossible cost of replicating or triplicating the BT infrastructure, 'competitor' companies of BT have to hire the use of BT capacity. An 'economic regulator' OFCOM was established at the time of privatisation with the task of making the 'competition' of BT and other providers look a bit like the sort of a market that Economists imagine in their fantasies, and teach to captive students on the basis that acceptance of the 'model' is necessary to pass the exam. Thus the students are in the equivalent position of students of literature who are studying 'nonsense' poems by Edward Lear: with the difference that the Eng Lit students know that the content is not real-world rational thought; while the Economics students are expected to pretend that the Econocratic model is superior to the reality that prevails in a corrupt and inefficient world.
The job of OFCOM in communications, like that of OFWAT in the mock market in water and that of OFGEM in the speculative sphere of energy, is to make rulings which set the basis for the provider firms to charge customers and to maintain and enhance their distribution systems. Each of these organisations hires youngish Economists who are still at least half-convinced of the 'scientific' validity of Econocratic assertions, and these constantly come up with ways of 'refining' the models that the regulators use to bring the regulated system closer to the models they had from their teachers. When one of these tweaks of the system seems to be effective, some of the Economists who introduced the new wrinkle are recruited on higher wages by the other regulators to tinker with their systems.
Hence we have seen water companies urged to invest massively in replacing old pipes: then suddenly to stop as the regulator realises that the notional capital value of the company is being increased too much [for their model] at the expense of consumers' bills. We see constant attempts to compel users of electricity to join in a game of swapping 'suppliers', when everybody knows that the competing firms all use the same power stations and wires: the competition is only in publicity and customer relations [including billing]: and on a basis of 'swings and roundabouts' over a ten-year period of staying with the same supplier there will be periods when that is the most expensive and periods when it is less expensive than a firm to which one might have switched.
The whole experience of privatisation is of an expensive game: paid for by the poor consumers. The gut reaction of the British people has been to agree that Labour has a point, in putting re-nationalisation of at least some of the utilities back on the political agenda.
Thursday, 22 June 2017
Rates of Interest
The media employ thousands of Economists, whose principal roles are to unravel the impenetrable prose and the ludicrous dogmas that permeate their subject, and to explain economic policy to the victims on whom it is inflicted. These Economists have been allowed more air-time and column inches in the past few days to explain how the US Federal Reserve Board can raise the controlling rate of interest in the US economy, while the Monetary Policy Committee of the Bank of England has done nothing since it foolishly lowered the bank rate after the Brexit vote last year. This arid discussion is slightly enlivened by the fact that the Governor of the Bank of England and the Bank's Chief Economist have very recently made public statements which appear to be conflicted. The Governor says the time is not yet ripe to raise the rate, the Chief Economist seems to think that it is just the right time.
Interest rates in all the major western economies [though not in some well-run states, like Canada] were lowered to historically absurd levels in 2008, as governments and central banks strove to shore up the world's banking industry as the monumental extent of their past reckless gambling became clear. The supply of money to the banking system was expanded beyond all historic precedent, and interest rates were reduced to a fraction of one per cent. In effect, monetary policy was abandoned in face of the perceived need to avoid an economic collapse that would make the slump of the nineteen-thirties seem like a trivial glitch in the long process of growth in the global economy.
A whole generation of adults has grown up in a world where there has been no regime of interest rates. The lack of interest in Economic History on the part of most university teachers of Economics has compounded this issue. So here is just a brief reference to the 'real' world that existed before 2007. That world was epitomised in the British economy between 1819 and 1914.
After paying for the wars against revolutionary France and reactionary Napoleon by high taxation and high inflation, the British government decided to stabilise the monetary system. This was achieved through the implementation of a new Bank Charter Act. The Act specified that the Bank of England could issue a limited amount of paper currency, under the condition that the notes would be exchangeable, on demand, at the Bank for fine gold at a specified rate. Thus banknotes were as 'good as gold' and the amount of them could only be increased as the Bank's reserve of gold increased. The Bank could also lend notes, at a standard rate of interest that was known as the Bank Rate. If the Bank increased the Bank Rate, that signaled that money was only available to borrow on stiffer terms, and investors were thus discouraging from taking higher risks. When the Bank rate was reduced, credit was relaxed and business relatively boomed. While most private borrowing and lending was undertaken by agencies other than the Bank of England, at higher rates of interest than the Bank Rate, rates on private loans rose and fell in response to the changes in the Bank Rate. Thus control of the system was established by the Bank: and that has effectively been abrogated since 2008.
More on this topic to follow, but the above dollop is enough for one day.
Interest rates in all the major western economies [though not in some well-run states, like Canada] were lowered to historically absurd levels in 2008, as governments and central banks strove to shore up the world's banking industry as the monumental extent of their past reckless gambling became clear. The supply of money to the banking system was expanded beyond all historic precedent, and interest rates were reduced to a fraction of one per cent. In effect, monetary policy was abandoned in face of the perceived need to avoid an economic collapse that would make the slump of the nineteen-thirties seem like a trivial glitch in the long process of growth in the global economy.
A whole generation of adults has grown up in a world where there has been no regime of interest rates. The lack of interest in Economic History on the part of most university teachers of Economics has compounded this issue. So here is just a brief reference to the 'real' world that existed before 2007. That world was epitomised in the British economy between 1819 and 1914.
After paying for the wars against revolutionary France and reactionary Napoleon by high taxation and high inflation, the British government decided to stabilise the monetary system. This was achieved through the implementation of a new Bank Charter Act. The Act specified that the Bank of England could issue a limited amount of paper currency, under the condition that the notes would be exchangeable, on demand, at the Bank for fine gold at a specified rate. Thus banknotes were as 'good as gold' and the amount of them could only be increased as the Bank's reserve of gold increased. The Bank could also lend notes, at a standard rate of interest that was known as the Bank Rate. If the Bank increased the Bank Rate, that signaled that money was only available to borrow on stiffer terms, and investors were thus discouraging from taking higher risks. When the Bank rate was reduced, credit was relaxed and business relatively boomed. While most private borrowing and lending was undertaken by agencies other than the Bank of England, at higher rates of interest than the Bank Rate, rates on private loans rose and fell in response to the changes in the Bank Rate. Thus control of the system was established by the Bank: and that has effectively been abrogated since 2008.
More on this topic to follow, but the above dollop is enough for one day.
Friday, 4 January 2013
Economic Blindness
The start of 2013 has brought more mild, cloudy and [here in the Peak District] drizzly weather. Just a dawn on which to take the BBC's TODAY Programme with the morning tea.
One of several depressing items was a discussion by Economists about the phenomenon that is thrown up by British economic statistics. Employment is at its highest level in recent decades: but perceived productivity has declined and the national product is not increasing significantly [indeed, it may just have 'flatlined' over the whole of 2012].
Wages are increasing overall at less than the government's indexed figure for 'inflation', and a high percentage of the workforce are attending their workplaces for less than the 35 hours a week that sensibly can be classified as full-time employment. Some firms have put reliable, trained employees on 'short time' to keep them on-side in case business improves; but the majority of part-timers are engaged on that basis. Many of the part-timers receive only the statutory minimum wage per hour; and for the majority there is no pension provision. The new catch-all pensions legislation will draw many such people into basic schemes: which implies that a further deduction will be taken from their wages and put into a pot with a promised yield in retirement that will be derisorily small. The loss of even a couple of percent of an exiguous wage will have a depressing effect on overall 'cansumer demand' in the economy, when multiplied by millions of affected individuals; but the sums gathered for investment by the pension providers will not be sufficient to create investments that will absorb significant numbers of the unemployed into new jobs and thus increase demand through their enhanced spending.
Wage-earners are still buying imports on an heroic scale: everything from East African fruit, veg and flowers to web using technology from the Far East.
Any increase in the real wages of empoyed people, or in the number of employed people, would most likely increase the deficit on the balance of payments: so in a seriously depressing sense the government is contributing to its target of deficit reduction by keeping a pretty tight cap on incomes.
This is the context in which the Economists this morning discussed these recent economic data. One of them had recently publiched a Paper with a mind-blowingly complex title, replete with pseudo-scientific terminology adding up to zero usefulness. They spoke of productivity as if there was no qualitative difference between the various categories of output: as if it did not matter what was the level of notional value-added by different firms' plant. This is in line with the textbook assumption that all output is of widgets: it is almost impossible for non-Economists to understand the primitivism of this lack of thinking.
To say that "the productivity of the British economy is declining" is to say that products and services are sold for a declining number of money-units per unit of output. This means that prices of goods made in British factories are falling. This does not necessarily mean that fewer units of output are being sold; it can equally mean that goods are being sold for lower 'factory gate prices'. How could such a thing occur?
A] It could mean that global competition is forcing factory owners to lower the prices at which they sell their branded goods Or
B] it could mean that firms have been bought by foreign owners who buy the output as being part-processed [though it is physically complete] and then ship it to the export markets where it will be sold, and the magic transformation by which a pile of coats or a cartoon feature film becomes a branded commodity [in the terms of my own analysis, a quon] takes place outside the UK - it may even notionally be reinported to the UK as a quon - so that the final, most significant 'addition of value' is ascribed not to the UK factory but to the corporate owner's success in transfer pricing the product offshore. Or
C] it could mean that rising wages and other industrial costs in China are making it viable to start or restart or increase the output of basic industrial products in the UK; which only have modest price tags such that an increasing proportion of British factory output is of modestly priced goods [what I describe as marcoms].
All those three possibilities point to a sharp decline in the profitability of British industry, and in the taxes that firms can pay to the state, and the level of wages they can pay to employees: all of which presage declining investment, declining public and social services, and diminishing real wages.
The policy options that are being presented to the government, and to the opposition, and to the Bank of England display the economic ignorance of Economists.
Hard times are ahead of us: and mitigation will only become feasible when the proven principles of Political Economy are reinstated as the basis of policy.
One of several depressing items was a discussion by Economists about the phenomenon that is thrown up by British economic statistics. Employment is at its highest level in recent decades: but perceived productivity has declined and the national product is not increasing significantly [indeed, it may just have 'flatlined' over the whole of 2012].
Wages are increasing overall at less than the government's indexed figure for 'inflation', and a high percentage of the workforce are attending their workplaces for less than the 35 hours a week that sensibly can be classified as full-time employment. Some firms have put reliable, trained employees on 'short time' to keep them on-side in case business improves; but the majority of part-timers are engaged on that basis. Many of the part-timers receive only the statutory minimum wage per hour; and for the majority there is no pension provision. The new catch-all pensions legislation will draw many such people into basic schemes: which implies that a further deduction will be taken from their wages and put into a pot with a promised yield in retirement that will be derisorily small. The loss of even a couple of percent of an exiguous wage will have a depressing effect on overall 'cansumer demand' in the economy, when multiplied by millions of affected individuals; but the sums gathered for investment by the pension providers will not be sufficient to create investments that will absorb significant numbers of the unemployed into new jobs and thus increase demand through their enhanced spending.
Wage-earners are still buying imports on an heroic scale: everything from East African fruit, veg and flowers to web using technology from the Far East.
Any increase in the real wages of empoyed people, or in the number of employed people, would most likely increase the deficit on the balance of payments: so in a seriously depressing sense the government is contributing to its target of deficit reduction by keeping a pretty tight cap on incomes.
This is the context in which the Economists this morning discussed these recent economic data. One of them had recently publiched a Paper with a mind-blowingly complex title, replete with pseudo-scientific terminology adding up to zero usefulness. They spoke of productivity as if there was no qualitative difference between the various categories of output: as if it did not matter what was the level of notional value-added by different firms' plant. This is in line with the textbook assumption that all output is of widgets: it is almost impossible for non-Economists to understand the primitivism of this lack of thinking.
To say that "the productivity of the British economy is declining" is to say that products and services are sold for a declining number of money-units per unit of output. This means that prices of goods made in British factories are falling. This does not necessarily mean that fewer units of output are being sold; it can equally mean that goods are being sold for lower 'factory gate prices'. How could such a thing occur?
A] It could mean that global competition is forcing factory owners to lower the prices at which they sell their branded goods Or
B] it could mean that firms have been bought by foreign owners who buy the output as being part-processed [though it is physically complete] and then ship it to the export markets where it will be sold, and the magic transformation by which a pile of coats or a cartoon feature film becomes a branded commodity [in the terms of my own analysis, a quon] takes place outside the UK - it may even notionally be reinported to the UK as a quon - so that the final, most significant 'addition of value' is ascribed not to the UK factory but to the corporate owner's success in transfer pricing the product offshore. Or
C] it could mean that rising wages and other industrial costs in China are making it viable to start or restart or increase the output of basic industrial products in the UK; which only have modest price tags such that an increasing proportion of British factory output is of modestly priced goods [what I describe as marcoms].
All those three possibilities point to a sharp decline in the profitability of British industry, and in the taxes that firms can pay to the state, and the level of wages they can pay to employees: all of which presage declining investment, declining public and social services, and diminishing real wages.
The policy options that are being presented to the government, and to the opposition, and to the Bank of England display the economic ignorance of Economists.
Hard times are ahead of us: and mitigation will only become feasible when the proven principles of Political Economy are reinstated as the basis of policy.
Wednesday, 30 May 2012
Little and Large
There is no doubt that the USSR regarded Britain as a potent enemy during and after the Second World War. After Hitler launched his Blitzkrieg on The Soviet Union, Churchill openly said that if Hitler invaded Hell the British coalition government would make a pact with the Devil: the read-across from 'Devil' to 'Stalin' was unambiguous.
While Churchill ran the war with the support of his inner War Cabinet, the Lord President of the Privy Council - Clement Attlee, the Labour Leader - effectively ran the home affairs of the nation as Chairman of the Lord President's Committee of the Cabinet. When the war ended, Attlee became the Prime Minister, pledged to a programme of specifically democratic socialism in which he was constantly harassed by Moscow-supporting Communists who campaigned overtly and covertly, most obviously by infiltrating the trade unions which both provided funding of the national Labour Party and local support for MPs and Councillors through Trades Councils. Other significant fields of infiltration were the expanding universities and 'higher journalism': a very limited number of people wrote editorials and think-pieces in the broadsheet newspapers and in the upper-end periodical magazines. In those pre-television days the fashionable commentators also got a platform on BBC radio. Among their un-idealogical pupils and followers the 'fellow travellers' disseminated a dogma that Britain had done magnificent things in the war, but that this had been the last hurrah of an exhausted political and economic system: Britain was now finished. We should give up the Empire - let tiny cohorts of Marxist guerillas take over one colony after another, just as quickly as Moscow could train and equip them, and thereby save British soldiers from risk in confronting them. The government should reduce the defence establishment while it taxed incomes and inheritances so heavily that the aristocratic and capitalist cohorts would be squeezed out of existence in a few decades. This would leave the country to be led by a 'meritocracy' of people whose qualifications for power would be based on education and experience: assessed and monitored by the cohorts who were most heavily penetrated by the inspired left.
The political right was too powerful to be submerged. There was a strong corps of right-wing intellectuals, especially in the older universities, who could keep key posts from capture by disruptives. The military and the civil service mostly stuck to the plain meaning of their oaths of loyalty to the Crown. Religious institutions remained strong and largely uninfluenced by the left; and the most powerful trade union leaders had obtained and retained their positions by confronting assaults from the left, which left people like Ernest Bevin among the strongest and most-aware resistants to left-wing 'entryism'. This resistance did not defeat the left; it forced them to adopt Fabian tactics [named after a Roman commander who waited for the right moment to strike, despite the frustration that his approach provoked in many of his contemporaries].
The right also settled down to a long and largely unheralded strategy of defence: by a mixture of influence and 'philanthropy' conservative graduates influenced appointments in universities; magazines [most notably Time and Tide] were funded heavily by UK and US institutions to counterbalance the prevalent left tendency in 'heavy' journalism.
Meanwhile the mass of the population was presented with a policy that was essentially the Roman model: bread and circuses, paid for by exploiting the empire. As the empire shrank in area as as Britain's former preponderance in global trade shrank with it, the limits to taxing the rich were quickly exposed. Spending on investment [which had largely been paid through defence procurement] was reduced dramatically, leading to the decline of shipbuilding, aviation, computing and a massive range of other industries over four decades between the 'sixties and the 'nineties. As industry declined, the options of allowing credit inflation and 'selling the family silver' - disposing of the nationalised industries - became the preferred methods for balancing the books as the state spent vastly more than the economy earned.
This came to a head in 2007-8, but it had been inevitable since at least the mid-sixties, when the policy of handouts regardless of earning-power became evident. The major factor in making this bizarre impossibility the reality was the charade of democracy by which politicians acted out a shadowy conflict that blinded almost everyone to the economic reality. In this they were abetted by Economists, whose normative models transcended material reality. This blog has spent a lot of words on trying to present that situation in palatable doses. it has repeatedly been pointed out that a major component of the current incomprehension is the fact that the inventors of Economics progressively dropped the older and mature science of Political Economy as the fantasies supported by Economists became increasingly discordant with the truths exposed by the older science. Over the next couple of weeks I will lay out the Principles of Political Economy for the twenty-first century. People may now become willing to pay attention, as the evidence of failure of Economics and of charade-Politics becomes more blatant.
While Churchill ran the war with the support of his inner War Cabinet, the Lord President of the Privy Council - Clement Attlee, the Labour Leader - effectively ran the home affairs of the nation as Chairman of the Lord President's Committee of the Cabinet. When the war ended, Attlee became the Prime Minister, pledged to a programme of specifically democratic socialism in which he was constantly harassed by Moscow-supporting Communists who campaigned overtly and covertly, most obviously by infiltrating the trade unions which both provided funding of the national Labour Party and local support for MPs and Councillors through Trades Councils. Other significant fields of infiltration were the expanding universities and 'higher journalism': a very limited number of people wrote editorials and think-pieces in the broadsheet newspapers and in the upper-end periodical magazines. In those pre-television days the fashionable commentators also got a platform on BBC radio. Among their un-idealogical pupils and followers the 'fellow travellers' disseminated a dogma that Britain had done magnificent things in the war, but that this had been the last hurrah of an exhausted political and economic system: Britain was now finished. We should give up the Empire - let tiny cohorts of Marxist guerillas take over one colony after another, just as quickly as Moscow could train and equip them, and thereby save British soldiers from risk in confronting them. The government should reduce the defence establishment while it taxed incomes and inheritances so heavily that the aristocratic and capitalist cohorts would be squeezed out of existence in a few decades. This would leave the country to be led by a 'meritocracy' of people whose qualifications for power would be based on education and experience: assessed and monitored by the cohorts who were most heavily penetrated by the inspired left.
The political right was too powerful to be submerged. There was a strong corps of right-wing intellectuals, especially in the older universities, who could keep key posts from capture by disruptives. The military and the civil service mostly stuck to the plain meaning of their oaths of loyalty to the Crown. Religious institutions remained strong and largely uninfluenced by the left; and the most powerful trade union leaders had obtained and retained their positions by confronting assaults from the left, which left people like Ernest Bevin among the strongest and most-aware resistants to left-wing 'entryism'. This resistance did not defeat the left; it forced them to adopt Fabian tactics [named after a Roman commander who waited for the right moment to strike, despite the frustration that his approach provoked in many of his contemporaries].
The right also settled down to a long and largely unheralded strategy of defence: by a mixture of influence and 'philanthropy' conservative graduates influenced appointments in universities; magazines [most notably Time and Tide] were funded heavily by UK and US institutions to counterbalance the prevalent left tendency in 'heavy' journalism.
Meanwhile the mass of the population was presented with a policy that was essentially the Roman model: bread and circuses, paid for by exploiting the empire. As the empire shrank in area as as Britain's former preponderance in global trade shrank with it, the limits to taxing the rich were quickly exposed. Spending on investment [which had largely been paid through defence procurement] was reduced dramatically, leading to the decline of shipbuilding, aviation, computing and a massive range of other industries over four decades between the 'sixties and the 'nineties. As industry declined, the options of allowing credit inflation and 'selling the family silver' - disposing of the nationalised industries - became the preferred methods for balancing the books as the state spent vastly more than the economy earned.
This came to a head in 2007-8, but it had been inevitable since at least the mid-sixties, when the policy of handouts regardless of earning-power became evident. The major factor in making this bizarre impossibility the reality was the charade of democracy by which politicians acted out a shadowy conflict that blinded almost everyone to the economic reality. In this they were abetted by Economists, whose normative models transcended material reality. This blog has spent a lot of words on trying to present that situation in palatable doses. it has repeatedly been pointed out that a major component of the current incomprehension is the fact that the inventors of Economics progressively dropped the older and mature science of Political Economy as the fantasies supported by Economists became increasingly discordant with the truths exposed by the older science. Over the next couple of weeks I will lay out the Principles of Political Economy for the twenty-first century. People may now become willing to pay attention, as the evidence of failure of Economics and of charade-Politics becomes more blatant.
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.
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.
Tuesday, 17 January 2012
Back to Basics: Political Economy [1]
As an independent backstreet blogger I am fascinated to observe the clouds of intellectual debris that flit through the internet in thousands of blogs written by people who desperately want to be regarded as innovative mainstream Economists. Most of them are academics who have contracted duties in a university or a research unit; and some - especially those who produce branded research for a bank or a commercial think tank - have a direct business interest in publishing their opinions. The academics are desperately keen to be quoted by other bloggers and their output is already systematised so that those with academic ambitions cite the number of references to their output that are made by other participants in the racket, just as they do in respect of the 'peer reviewed' academic journals. Soon indexes of citations will list references to blogs alongside references to more formal articles; and citations in blogs written by senior professors will have a higher allocation of points.
The most tragic aspect of this ballooning exocrescence of academic blogging is that almost all the participants display the usual sycophancy to the seniors who can help their careers, who might deign to mention the mini-bloggers in their own blogs.Therefore they are anxious not to step outside the orthodox boundaries of the subject as it is set out by the dominant professors. The majority of the bloggers also display a painfully serious intent to classify themselves in sub-schools within the ever-more-diffuse 'discipline' of Economics, built on phrases like dynamic stochastic general equilibrium that attracted well-deserved ridicule when it was uttered in the House of Commons: but are commended in the hypoxic atmosphere of an academics' conference.
The more intelligent mainstream Economists are forced to realise that Economics fuelled the hubris that caused the credit crunch, but they cannot yet face the fact that the 'discipline' itself has failed. Such an admission would require them to admit that they have spent their careers on presenting doctrines that have condemned their fellow citizens, and themselves, to a lower standard of living in future than should have been available to them.
Economics fails most obviously at the interface between macroeconomics and microeconomics. In principle, socialist planning is a system for directing firms' and individuals' activities day by day, with the intention that each participant delivers outputs that serve as inputs to a planned macroeconomic aggregate. Keynes was in his prime precisely at the time when Stalin's Soviet Union was claiming success for its planning mechanisms: while the world became aware of the brutality with which The Plan was enforced and the disasters [including deaths through famine] that were caused by its inefficiencies. Keynes's wife was a Russian refugee, whose table-talk frequently included information and anecdote about Soviet repression. In The Economic Consequences of the Peace [1919] he had forecasted a strong reaction in Germany to the way the country was treated by the victorious allies at the end of the First World War, and fourteen years on he took no pleasure in seeing the fulfilment of his prediction by Hitler's National Socialists. The Nazi's economic programme was built onto a Four Year Plan controlled by a Commissioner, Goring, who took draconian powers over businesses and the trade unions. The principal objective of that Plan was to prepare the economy to support an aggressive war in Europe.
Keynes was a Liberal who deplored the emergence of tyranny in Europe and during the nineteen-thirties he was concerned that Britain must avoid an economic collapse that would allow communist or fascist ideas to capture any significant proportion of the electorate. Keynes's mentor, Alfred Marshall [1842-1924], was the great founder of authoritarian academic Microeconomics: within a decade of his death it was painfully clear that his Economics provided no prescriptions for solving the practical problems that were causing mass unemployment in democratic societies. Keynes recognised that the macro-economy, the environment in which firms and the buyers of their produce operate, must be managed actively by the state. He suggested techniques for creating employment by government intervention through taxing and spending, and by adjusting the supply of money and by manipulating the factors that determine the rate of interest.
Keynes was crucial to the management of the command economy that supplied the country and its armed forces during the Second World War, and he worked hugely hard at international negotiations in planning for the postwar settlement. The extreme demands that were made on his mind and body were at least contributory to his death from heart failure very soon after the war. Had he lived for another decade he may have addressed the mechanisms by which macroeconomic devices could be made to articulate efficiently with microeconomic systems; but posterity was denied that guidance.
The lack of effective articulation between macroeconomic interventions and the achievement of intended outcomes by firms and people has been ducked by the entire 'Economics profession' through the six decade since Keynes died. Whenever the data disclose a trend that the government decides must be addressed by a shift in macroeconomic policy, it increases or reduces the money supply, raises or lowers rates of interest, increases or reduces taxation, increases or cancels government orders to firms, and/or to increase or reduce the number and rates of pay for state employees. Recently in Europe restrictive policies have been imposed on the economies of Greece, Ireland and other heavily indebted states. Within the eurozone, in cases where the elected governments have hesitated to act in the required manner, a change of government has been imposed; composed of technocrats: - which means Economists.
Because it is outside the eurozone, Britain still has monetary independence and control of most taxation. The current coalition government came together [and will probably stay together] because the party leaders recognise that the economy is in a very perilous situation. The government is taking radical steps to reduce the rate of increase in state spending to a level where - in an ideal world - the economy in total would be growing faster than state spending, so that government spending and borrowing would become smaller percentages of the gross national product. The appearance of 'stable economic growth' that was delivered by the Blair-Brown regime was derived from increased direct spending by the government and by increased consumption by the increasing numbers of employees who were taken on in the civil service and in state agencies: supported by strong but ultimately unsustainable growth in demand arising from the bubble in the financial services sector.
De-industrialisation had been occurring by default in Britain since the collapse of traditional textiles in the nineteen-fifties: But after Mrs Thatcher came to power in 1979 it became deliberate policy. Coal mining, railways, shipbuilding, steel making and heavy engineering were regarded as the natural breeding grounds for militant trade unionism, so it was fashionable to argue that they should be cleared away like mosquito-breeding swamps. When the Second World War ended significant sectors of UK industry were old-fashioned and inefficient compared to newer factories in the USA and to the newly reconstructed plant in Germany. Rather than direct the bulk of the nation's disposable income into re-equipping the world's leading shipyards, aircraft factories, motor plant, electronic and chemical industries, successive Labour and Conservative governments raised taxes from industry to support the welfare state. While Germany developed the regional banks that supported the development of the Mittelstand of small and medium firms that supplied specialist products and services for industry and commerce, British banks took an increasingly dim view of industry. Within a democratic structure, Germany provided means by which firms could be funded to deliver desired growth. Britain had no such system; but nevertheless enough of industry survived, and new industries grew up - without government support - such that even now manufacturing is still a greater contributor to net national income than financial services ever could be.
Under the 2010 coalition government state spending is being held in check and employment in the public sector is being cut. Ministers talk often and grandiloquently about how the country will achieve macroeconomic salvation through the growth of real-world enterprises: but they become increasingly vague when pressed for details, and show that they are ineffectual in directing funds from state-controlled banks to promising businesses. This is the nub of the present problem: how are individual firms to be enabled to deliver the contribution that they can - and must - make to recovery? What policies can build a proper articulation between the macro-economy and the firm? This vital topic must be the subject for further bogs in the coming days.
The most tragic aspect of this ballooning exocrescence of academic blogging is that almost all the participants display the usual sycophancy to the seniors who can help their careers, who might deign to mention the mini-bloggers in their own blogs.Therefore they are anxious not to step outside the orthodox boundaries of the subject as it is set out by the dominant professors. The majority of the bloggers also display a painfully serious intent to classify themselves in sub-schools within the ever-more-diffuse 'discipline' of Economics, built on phrases like dynamic stochastic general equilibrium that attracted well-deserved ridicule when it was uttered in the House of Commons: but are commended in the hypoxic atmosphere of an academics' conference.
The more intelligent mainstream Economists are forced to realise that Economics fuelled the hubris that caused the credit crunch, but they cannot yet face the fact that the 'discipline' itself has failed. Such an admission would require them to admit that they have spent their careers on presenting doctrines that have condemned their fellow citizens, and themselves, to a lower standard of living in future than should have been available to them.
Economics fails most obviously at the interface between macroeconomics and microeconomics. In principle, socialist planning is a system for directing firms' and individuals' activities day by day, with the intention that each participant delivers outputs that serve as inputs to a planned macroeconomic aggregate. Keynes was in his prime precisely at the time when Stalin's Soviet Union was claiming success for its planning mechanisms: while the world became aware of the brutality with which The Plan was enforced and the disasters [including deaths through famine] that were caused by its inefficiencies. Keynes's wife was a Russian refugee, whose table-talk frequently included information and anecdote about Soviet repression. In The Economic Consequences of the Peace [1919] he had forecasted a strong reaction in Germany to the way the country was treated by the victorious allies at the end of the First World War, and fourteen years on he took no pleasure in seeing the fulfilment of his prediction by Hitler's National Socialists. The Nazi's economic programme was built onto a Four Year Plan controlled by a Commissioner, Goring, who took draconian powers over businesses and the trade unions. The principal objective of that Plan was to prepare the economy to support an aggressive war in Europe.
Keynes was a Liberal who deplored the emergence of tyranny in Europe and during the nineteen-thirties he was concerned that Britain must avoid an economic collapse that would allow communist or fascist ideas to capture any significant proportion of the electorate. Keynes's mentor, Alfred Marshall [1842-1924], was the great founder of authoritarian academic Microeconomics: within a decade of his death it was painfully clear that his Economics provided no prescriptions for solving the practical problems that were causing mass unemployment in democratic societies. Keynes recognised that the macro-economy, the environment in which firms and the buyers of their produce operate, must be managed actively by the state. He suggested techniques for creating employment by government intervention through taxing and spending, and by adjusting the supply of money and by manipulating the factors that determine the rate of interest.
Keynes was crucial to the management of the command economy that supplied the country and its armed forces during the Second World War, and he worked hugely hard at international negotiations in planning for the postwar settlement. The extreme demands that were made on his mind and body were at least contributory to his death from heart failure very soon after the war. Had he lived for another decade he may have addressed the mechanisms by which macroeconomic devices could be made to articulate efficiently with microeconomic systems; but posterity was denied that guidance.
The lack of effective articulation between macroeconomic interventions and the achievement of intended outcomes by firms and people has been ducked by the entire 'Economics profession' through the six decade since Keynes died. Whenever the data disclose a trend that the government decides must be addressed by a shift in macroeconomic policy, it increases or reduces the money supply, raises or lowers rates of interest, increases or reduces taxation, increases or cancels government orders to firms, and/or to increase or reduce the number and rates of pay for state employees. Recently in Europe restrictive policies have been imposed on the economies of Greece, Ireland and other heavily indebted states. Within the eurozone, in cases where the elected governments have hesitated to act in the required manner, a change of government has been imposed; composed of technocrats: - which means Economists.
Because it is outside the eurozone, Britain still has monetary independence and control of most taxation. The current coalition government came together [and will probably stay together] because the party leaders recognise that the economy is in a very perilous situation. The government is taking radical steps to reduce the rate of increase in state spending to a level where - in an ideal world - the economy in total would be growing faster than state spending, so that government spending and borrowing would become smaller percentages of the gross national product. The appearance of 'stable economic growth' that was delivered by the Blair-Brown regime was derived from increased direct spending by the government and by increased consumption by the increasing numbers of employees who were taken on in the civil service and in state agencies: supported by strong but ultimately unsustainable growth in demand arising from the bubble in the financial services sector.
De-industrialisation had been occurring by default in Britain since the collapse of traditional textiles in the nineteen-fifties: But after Mrs Thatcher came to power in 1979 it became deliberate policy. Coal mining, railways, shipbuilding, steel making and heavy engineering were regarded as the natural breeding grounds for militant trade unionism, so it was fashionable to argue that they should be cleared away like mosquito-breeding swamps. When the Second World War ended significant sectors of UK industry were old-fashioned and inefficient compared to newer factories in the USA and to the newly reconstructed plant in Germany. Rather than direct the bulk of the nation's disposable income into re-equipping the world's leading shipyards, aircraft factories, motor plant, electronic and chemical industries, successive Labour and Conservative governments raised taxes from industry to support the welfare state. While Germany developed the regional banks that supported the development of the Mittelstand of small and medium firms that supplied specialist products and services for industry and commerce, British banks took an increasingly dim view of industry. Within a democratic structure, Germany provided means by which firms could be funded to deliver desired growth. Britain had no such system; but nevertheless enough of industry survived, and new industries grew up - without government support - such that even now manufacturing is still a greater contributor to net national income than financial services ever could be.
Under the 2010 coalition government state spending is being held in check and employment in the public sector is being cut. Ministers talk often and grandiloquently about how the country will achieve macroeconomic salvation through the growth of real-world enterprises: but they become increasingly vague when pressed for details, and show that they are ineffectual in directing funds from state-controlled banks to promising businesses. This is the nub of the present problem: how are individual firms to be enabled to deliver the contribution that they can - and must - make to recovery? What policies can build a proper articulation between the macro-economy and the firm? This vital topic must be the subject for further bogs in the coming days.
Tuesday, 10 January 2012
The Truth About Immigration
Today's UK media carry stories that disclose - yet again - the infinite capacity of Economists for earning the contempt of the public. A think-tank, the National Institute of Economic and Social Research [habitually described by economic journalists as 'the respected NIESR' ] published a paper that asserted, unequivocally, that there is "no association" between higher immigration and the rise of joblessness in the UK.
Within a few hours the government's Migration Advisory Committee published a paper which declared that one Briton lost their job for every four non-EU migrants arriving over the past five years, which put 160,000 workers onto benefits. It also found that wage-rates for less-skilled jobs were pushed down by immigrant labour: while wages of higher-paid employees seemed to rise with immigrant numbers. This paper also indicated that further pressure would be put on living standards, particularly for the lowest-paid, because the inflow of immigrants would compete for housing [especially in London and the south-east] and cause upward pressure on rents and house prices.
Yesterday MigrationWatch - a pressure group opposed to 'excessive' immigration published its own findings, which were that: "Youth unemployment in the UK increased by almost 450,000 from [the first quarter of] 2004 to [the third quarter of] 2011. Over the same period, numbers of workers from the A8 countries [the new entrants to the EU, who became free to enter the UK in 2004] grew by 600,000". MigrationWatch made the caveat that "Correlation is not, of course, proof of causation," but went on to make the crucial point that "given the positive employability characteristics and relative youth of migrants from these countries, it is implausible and counter-intuitive" to draw a conclusion that "A8 migration has had virtually no impact on UK youth unemployment."
Readers will have noticed that the data sets taken by the three reports are different. MigrationWatch focuses primarily on youth unemployment and the relative attractiveness to employers of the work ethic and numeracy displayed by continentally-educated people, compared to the low literacy, negligible numeracy and unpreparedness for employment displayed by a very large proportion of young Britons [broadly regardless of ethnicity]. The government's committee compares total unemployment with the number of immigrants from outside the EU. The NIESR took all migrants who were issued with national insurance numbers [which are a necessary condition for gaining legal employment] and compared their numbers with the pattern of unemployment among the pre-existing population. The NIESR noted also that the growth of juvenile unemployment in the UK had begun before 2004 [when A8 citizens gained full rights of entry] and reached greater heights after 2008 although east European immigration was reduced and some Poles and Slovaks went home.
Recruitment to jobs in general diminished during and after 2008 as the recession intensified. Reliable, hard-working east Europeans generally kept their jobs in greater numbers than did Brits, and the number of east European arrivals tailed off when the word reached potential migrants that opportunities in the UK had diminished.
Political correctness forbids 'decent' researchers from ascertaining which specific categories of immigrants get well-paid jobs, badly paid jobs or no jobs; beyond the differentiation between EU and non-EU that is sanctioned by the Brussels bureaucracy and the European courts. Since increasing numbers of immigrants from outside the EU obtain citizenship in other EU countries, then come to the UK, there is no implicit ethnic connotation to the EU non-EU differentiation even though the overwhelming majority of A8 migrants were white Europeans. Consequently bar-room assertions about some ethnic groups 'coming here for benefits and free houses, with no intention of working' remain untested, but the legends fester with repetition: and the political class avoid mentioning the matter even though it is a widely expressed concern 'on the doorstep' to political canvassers.
The net effect of the three reports is to serve no useful purpose: they present no clear guide for policy-makers and their different selection of data contributes to a confused cacophony that has long been characterised by the lack of any agreed basis for comparison. On this issue, quintessentially, the disparity between the dialogue that emanates from the political class and the dialogue that rumbles on among the electorate has become extreme and will some time soon create a major political problem that will tax the present generation of politicians to the all-to-apparent limits of their competency.
Within a few hours the government's Migration Advisory Committee published a paper which declared that one Briton lost their job for every four non-EU migrants arriving over the past five years, which put 160,000 workers onto benefits. It also found that wage-rates for less-skilled jobs were pushed down by immigrant labour: while wages of higher-paid employees seemed to rise with immigrant numbers. This paper also indicated that further pressure would be put on living standards, particularly for the lowest-paid, because the inflow of immigrants would compete for housing [especially in London and the south-east] and cause upward pressure on rents and house prices.
Yesterday MigrationWatch - a pressure group opposed to 'excessive' immigration published its own findings, which were that: "Youth unemployment in the UK increased by almost 450,000 from [the first quarter of] 2004 to [the third quarter of] 2011. Over the same period, numbers of workers from the A8 countries [the new entrants to the EU, who became free to enter the UK in 2004] grew by 600,000". MigrationWatch made the caveat that "Correlation is not, of course, proof of causation," but went on to make the crucial point that "given the positive employability characteristics and relative youth of migrants from these countries, it is implausible and counter-intuitive" to draw a conclusion that "A8 migration has had virtually no impact on UK youth unemployment."
Readers will have noticed that the data sets taken by the three reports are different. MigrationWatch focuses primarily on youth unemployment and the relative attractiveness to employers of the work ethic and numeracy displayed by continentally-educated people, compared to the low literacy, negligible numeracy and unpreparedness for employment displayed by a very large proportion of young Britons [broadly regardless of ethnicity]. The government's committee compares total unemployment with the number of immigrants from outside the EU. The NIESR took all migrants who were issued with national insurance numbers [which are a necessary condition for gaining legal employment] and compared their numbers with the pattern of unemployment among the pre-existing population. The NIESR noted also that the growth of juvenile unemployment in the UK had begun before 2004 [when A8 citizens gained full rights of entry] and reached greater heights after 2008 although east European immigration was reduced and some Poles and Slovaks went home.
Recruitment to jobs in general diminished during and after 2008 as the recession intensified. Reliable, hard-working east Europeans generally kept their jobs in greater numbers than did Brits, and the number of east European arrivals tailed off when the word reached potential migrants that opportunities in the UK had diminished.
Political correctness forbids 'decent' researchers from ascertaining which specific categories of immigrants get well-paid jobs, badly paid jobs or no jobs; beyond the differentiation between EU and non-EU that is sanctioned by the Brussels bureaucracy and the European courts. Since increasing numbers of immigrants from outside the EU obtain citizenship in other EU countries, then come to the UK, there is no implicit ethnic connotation to the EU non-EU differentiation even though the overwhelming majority of A8 migrants were white Europeans. Consequently bar-room assertions about some ethnic groups 'coming here for benefits and free houses, with no intention of working' remain untested, but the legends fester with repetition: and the political class avoid mentioning the matter even though it is a widely expressed concern 'on the doorstep' to political canvassers.
The net effect of the three reports is to serve no useful purpose: they present no clear guide for policy-makers and their different selection of data contributes to a confused cacophony that has long been characterised by the lack of any agreed basis for comparison. On this issue, quintessentially, the disparity between the dialogue that emanates from the political class and the dialogue that rumbles on among the electorate has become extreme and will some time soon create a major political problem that will tax the present generation of politicians to the all-to-apparent limits of their competency.
Sunday, 13 November 2011
The bankers are the beneficiaries, not the causes of the problem
Fund managers, and creators and traders in derivatives and in swaps and in futures, are lumped together with manager-underwriters of corporate mergers and with buyers and sellers of 'money' under the blanket designation as bankers. A significant majority of participants in those trading activities [including the huge volume that are simply gambling] have been content to receive incomes that are multiples of industrial wages for playing their market games under the delusion - shared by governments and stimulated by Economists - that 'markets' should predominate over the economy.
Economists have asserted - contrary to all the evidence - that 'markets' behave 'rationally'. Rationality is a function of human intelligence. It is not an emanation that emerges within inanimate trading spaces, which is what markets are. Markets have an immense range and diversity, from fish markets on riverbanks and at the side of harbours through the pre-1986 Stock Exchange to the complex interactivity that takes place in cyberspace. In recent days the media have been replete with repetitions of Keynes's dictum that both in periods of euphoria and of stress [such as is being experienced now in Europe] markets are dominated by 'animal spirits'. If any conventionally-qualified Economist can tell us how animal spirits - which Keynes also linked to 'waves of irrational psychology' - can be presented as an epitome of rationality in the contemporary context they should rush forward to do so. The proponent of any superficially plausible explanation will be a prime candidate to receive the pseudo-Nobel prize that Economists have handed to each other annually since the nineteen-sixties.
After the big bang of 1986 the bankers were freed to gamble and to gather their bonuses because politicians - on the recommendation of Economists - created regulatory bodies that facilitated their fantastical creations.
We are told that the fallout from the 2007-8 credit crunch is an unprecedented situation. It is generally presented as being the outcome of modern inventions in monetary policy, in regulation, in consumer empowerment and [above all] in computerised deployment of algorithmic methodology. But these are merely phenomena. Within the human beings who participate in markets - from fishmongers to creators of Credit Default Swaps - there exist the same abilities, tendencies, ambitions, urges and complexes as have existed in humans for the last dozen millennia. We don't have detailed records for the banking activities that almost certainly existed several centuries BC, but we do have Assyrian and other tax records and businessmens' notes on clay tablets which show that trade had become sophisticated before Roman times. We also have the comments that were made on people who became powerful in markets; and many of those observations fit with the attitude to 'bankers' that purportedly animates the sad crowd beside Saint Paul's Cathedral.
The Jews who established their first state under Saul, David and Solomon almost a thousand years BC inherited texts from their.own ancestors and from the surrounding [more mature] cultures, and one of the most marvellous products of the resulting culture is the Book of Psalms. One psalm, in particular - Psalm 73 - is an exposition of a decent human being's reaction to seeing:
"the wicked.......in such prosperity".
Like the bankers of 2006:
"they do even what they lust......therefore fall the people unto them [and the mortgages and credit cards and derivatives and Credit Default Swaps that they provide] : and thereout suck they no small advantage. These prosper in the world, and these have riches in possession":
But they inevitably get their cum-uppance:
"Oh how suddenly do they consume, perish and come to a fearful end!.......even like a dream, when one awaketh: so shalt thou [God] make their image to vanish out of the city".
[Quotations from the Book of Common Prayer]
Religious belief is not necessary for a person to recognise that throughout history forces that exist deeply within the human spirit react as the psalmist did when the behaviour of self-identifying elites become seriously deviant from what is sensible. The crazy trading practices of 2001-7 have been allowed to continue until now, in the residual financial market that was patched together after governments had rescued most of the component firms. People in Greece and Italy are being forced to recognise that they have been set 'in slippery places': the economy has been 'cast down and destroyed' by what the regulators allowed the bankers to do. But it is not the regulators or their Economist cheerleaders who are being 'cast down and destroyed': the casualties are the politicians, the group under the media spotlight who are susceptible to democratic accountability.
In Greece and in Italy Economists - proven delusionists - have been given power without democratic responsibility. Their priority will be to support the core fantasy promulgated by their 'profession', the efficiency of autonomous 'markets'. Their first steps in power will be to squeeze living standards; which will work regressively, with the least articulate and least skilled people suffering the biggest proportionate attack on their standard of living. When the combination of increased rates of taxation, increased collection of taxes, frozen or reduced public sector salaries and pensions, failed firms and rising unemployment are seen to have worked adequately they will seek permission in European institutions to loosen the squeeze on money creation. Bankers will be encouraged to dissipate inflation through the economy, which will reduce the perceived 'value' of the debts that the bankers and the governments owe, while further reducing the real purchasing power of wages. Whether or not they will be allowed to get away with it is highly problematic: demos - the voters - must be allowed to decide whether or not they accept such a programme, both at its inception and as its impact becomes apparent. If the democratic sanction is not applied, riots and insurrections can confidently be predicted; even revolution. It will matter less what the revolutionaries promise than how effective they are in exposing the fallibilities of the Economists' policies.
The politicians are falling, the Economists will have their day and may succeed or not: the bankers will sail serenely on, providing essential services and engaging in their self-centred gambling. The people who take most of the blame from the populist media will bear the least of the pain.
Economists have asserted - contrary to all the evidence - that 'markets' behave 'rationally'. Rationality is a function of human intelligence. It is not an emanation that emerges within inanimate trading spaces, which is what markets are. Markets have an immense range and diversity, from fish markets on riverbanks and at the side of harbours through the pre-1986 Stock Exchange to the complex interactivity that takes place in cyberspace. In recent days the media have been replete with repetitions of Keynes's dictum that both in periods of euphoria and of stress [such as is being experienced now in Europe] markets are dominated by 'animal spirits'. If any conventionally-qualified Economist can tell us how animal spirits - which Keynes also linked to 'waves of irrational psychology' - can be presented as an epitome of rationality in the contemporary context they should rush forward to do so. The proponent of any superficially plausible explanation will be a prime candidate to receive the pseudo-Nobel prize that Economists have handed to each other annually since the nineteen-sixties.
After the big bang of 1986 the bankers were freed to gamble and to gather their bonuses because politicians - on the recommendation of Economists - created regulatory bodies that facilitated their fantastical creations.
We are told that the fallout from the 2007-8 credit crunch is an unprecedented situation. It is generally presented as being the outcome of modern inventions in monetary policy, in regulation, in consumer empowerment and [above all] in computerised deployment of algorithmic methodology. But these are merely phenomena. Within the human beings who participate in markets - from fishmongers to creators of Credit Default Swaps - there exist the same abilities, tendencies, ambitions, urges and complexes as have existed in humans for the last dozen millennia. We don't have detailed records for the banking activities that almost certainly existed several centuries BC, but we do have Assyrian and other tax records and businessmens' notes on clay tablets which show that trade had become sophisticated before Roman times. We also have the comments that were made on people who became powerful in markets; and many of those observations fit with the attitude to 'bankers' that purportedly animates the sad crowd beside Saint Paul's Cathedral.
The Jews who established their first state under Saul, David and Solomon almost a thousand years BC inherited texts from their.own ancestors and from the surrounding [more mature] cultures, and one of the most marvellous products of the resulting culture is the Book of Psalms. One psalm, in particular - Psalm 73 - is an exposition of a decent human being's reaction to seeing:
"the wicked.......in such prosperity".
Like the bankers of 2006:
"they do even what they lust......therefore fall the people unto them [and the mortgages and credit cards and derivatives and Credit Default Swaps that they provide] : and thereout suck they no small advantage. These prosper in the world, and these have riches in possession":
But they inevitably get their cum-uppance:
"Oh how suddenly do they consume, perish and come to a fearful end!.......even like a dream, when one awaketh: so shalt thou [God] make their image to vanish out of the city".
[Quotations from the Book of Common Prayer]
Religious belief is not necessary for a person to recognise that throughout history forces that exist deeply within the human spirit react as the psalmist did when the behaviour of self-identifying elites become seriously deviant from what is sensible. The crazy trading practices of 2001-7 have been allowed to continue until now, in the residual financial market that was patched together after governments had rescued most of the component firms. People in Greece and Italy are being forced to recognise that they have been set 'in slippery places': the economy has been 'cast down and destroyed' by what the regulators allowed the bankers to do. But it is not the regulators or their Economist cheerleaders who are being 'cast down and destroyed': the casualties are the politicians, the group under the media spotlight who are susceptible to democratic accountability.
In Greece and in Italy Economists - proven delusionists - have been given power without democratic responsibility. Their priority will be to support the core fantasy promulgated by their 'profession', the efficiency of autonomous 'markets'. Their first steps in power will be to squeeze living standards; which will work regressively, with the least articulate and least skilled people suffering the biggest proportionate attack on their standard of living. When the combination of increased rates of taxation, increased collection of taxes, frozen or reduced public sector salaries and pensions, failed firms and rising unemployment are seen to have worked adequately they will seek permission in European institutions to loosen the squeeze on money creation. Bankers will be encouraged to dissipate inflation through the economy, which will reduce the perceived 'value' of the debts that the bankers and the governments owe, while further reducing the real purchasing power of wages. Whether or not they will be allowed to get away with it is highly problematic: demos - the voters - must be allowed to decide whether or not they accept such a programme, both at its inception and as its impact becomes apparent. If the democratic sanction is not applied, riots and insurrections can confidently be predicted; even revolution. It will matter less what the revolutionaries promise than how effective they are in exposing the fallibilities of the Economists' policies.
The politicians are falling, the Economists will have their day and may succeed or not: the bankers will sail serenely on, providing essential services and engaging in their self-centred gambling. The people who take most of the blame from the populist media will bear the least of the pain.
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