There are degrees that purport to qualify their graduands in 'Political Science': there are even some professorships under that title in British universities. That there is some degree of scientific precision in some aspects of the study of politics has been proved in recent British general elections, where 'Exit Polls' that systematically ask voters how they have actually voted have displayed an astonishing degree of accuracy; as demonstrated 24 hours later when all the votes are counted. I describe this accuracy as "astonishing" because it contrasts with Opinion Polls conducted right down to the day before the election, which are often wildly wide of the mark; thus, politicians and commentators who rely on them can grossly be misled, as were most of both those groups when the Tories' chances were over-rated and Labour's popularity was grossly under-reported in the polls before the election this year. This appears to show that people are in large measure unsure how to vote [or whether they will vote] until the last minute, while it can be inferred that many do not tell the truth in advance of their casting their ballots. After voting, people seem more confident that they can not be swayed in their decision-making by the lift of the questioner's eyebrow or their sniff of disapproval; so then they tell the truth, and the statisticians and psychologists who set and assess the actual questions to be asked are vindicated in the precise methods that they use.
The scope of 'Political Science' is much wider than this, of course. Where it combines statistical rigour with sound social analysis or experimentally validated psychology, interesting and potentially useful data are produced. But where it attempts to explain the underlying factors which make a population of humans behave in this way or that to determine the direction of government it can only follow the conclusions presented by sociology, psychology or history: and within each of those disciplines there is no agreement on what are the rock-bottom principles emergent from the study that should be followed by government with the same degree of authority as applies to Botany, Geology or Medical Science. There are, of course, fundamental disputes within the natural sciences; but there is also a sufficient consensus to validate measures that are taken to support public health, safe transport and the control of thousands of potentially dangerous substances.
Politicians with some degree of common sense - and many such people still exist, though their expression of their views is often limited by the need to have the support of their party at the next election - make a mix-and-match pragmatic personal portfolio of ideas drawn from the natural sciences, and from academic politics, history, psychology and sociology; and accept that they must be willing to change their understanding in line with new facts [including new false interpretations that capture the public mood]. This inner assessment of the situation is necessarily combined with what the electorate in the particular constituency where the politician is based understand and want. This is a precarious situation to be in and politicians usually recognise their vulnerability within the nexus of shifting popular opinion.
The biggest intellectual problem that many politicians face is that of Economics: the pseudo-science that has been captured by the Econocracy, the hegemonic advocates of the crazy dogma that markets can become so developed - on their own - that they produce results that could not be bettered by any amount of detailed direction from the political machine. The tragedy to which that dogma has given rise is that in the countries that have partially opened up their markets to untrammeled competition it has increasingly become apparent that untrammeled [or even relatively unrestricted] free operation of markets conduces against humans having an inner sense of wellbeing. This is now the very nub of political debate in the USA and in the United Kingdom, and must be a major theme in this blog for the next few days.
Showing posts with label politicians. Show all posts
Showing posts with label politicians. Show all posts
Sunday, 6 August 2017
Monday, 8 October 2012
The Great Pensions Tragedy
The economic naivete of politicians is most clearly seen when financial planning for the future is brought into their arena. The political class has been warned for over forty years that the number of surviving retired people will continue to rise at least until 2030. During the same past four decades Britain's envied position as the country with the best pensions coverage in the world has disastrously been lost. The huge expansion of public sector employment, which provided those employees with the promise of generous index-linked pensions in addition to their state pensions, requires the rest of the population to pay higher taxes [and incur more public borrowing]. Meanwhile the decline in pension provision for taxpayers in private sector employment has been so precipitous that fewer people are members of optional pension schemes than at any time since the nineteen-fifties. In addition, hundreds of thousands of hereditary paupers have no access to any supplementation of the state pensions that they will receive in their sixties, in succession to their benefits.
The present coalition government has increased universal state pensions and promised to maintain their 'value' in future in line with 'inflation'; and one cannot imagine a Labour-led government reneging on that promise. No similar promise can be made by any government in respect of personal or employer-funded pensions. Inflation inevitably and inexorably diminishes the purchasing power of funded pensions over the years, and the impact is greater the more years pass after the date of retirement. A small number of pension funds are so well endowed that they have been able hitherto to increase pensions-in-payment in line with the rising cost of living, but in general pension fund trustees have asserted [and most of them have exercised] their right to make annual increases of less than officially declared 'inflation', or to freeze the amount paid out. A majority of the people who are classed as 'pensioners' are no longer members of funds managed by trustees; they are 'annuitants'': people who on retirement were given notional control of the 'pot' of cash that had accrued to their account in an employer's pension fund, to which contributions were made jointly by the employer and the employee. The recipient individual is required by law to buy an 'annuity' which is an income of a fixed sum of money each year. Most funds allow individuals to take a portion of the 'pot' as a cash sum, in which case their annual income thereafter will be reduced. As an additional complication some annuities provide limited compensation for inflation in future years, and in such cases the annuity is reduced to cover the cost and risk to the provider of having to pay the promised increases in the event of future inflation.
In response to the collapse of banking governments in most developed countries engineered massive increases in the money supply have been used to keep the banking system afloat. At the same time a huge increase in government borrowing has been needed to support the banks, and to pay both civil servants and recipients of state benefits. Government acquiescence in the continuing deindustrialisation of the economy has meant that the UK now has minimal earnings from sales of goods into international markets; yet every indication for the future is that the emergence of powerful new economies will drive up the prices of commodities that Britain needs to import. Worse still, with the abandonment of Britain's capacity to process raw materials means that imports come in prepared forms and as manufactured goods.Relative to the eighteenth, nineteenth and early twentieth centuries, and relative to population size, Britain generates grossly insufficient material exports to compete as a long-term buyer of commodities in which it is not self-sufficient. The kingdom faces both declining real standards of living and the phenomenon of dramatically rising prices for things that are material necessities for life. A glaring example of the increasing problem is in the energy market: Britain dissipated the benefits of North Sea oil largely on paying benefits to the people cast out from industry by Thatcherite-Blairite policies, and sold nuclear firms like Westinghouse to foreigners: and now cannot afford to build nuclear power stations as imported oil and gas prices face long-term increases. The phenomenon of rising prices will be compounded by the devaluation of the currency, as the country's import bill far exceeds it export earnings. Pensioner poverty will escalate; and younger people, seeing the poverty of their pensioner relatives will be disincentivised themselves voluntarily to 'waste' their current income on buying pension rights.
There is no obvious way out of this impasse. It is a stark indication of the means by which the national impoverishment prepared by generation of politicians will begin seriously to bite.
.
The present coalition government has increased universal state pensions and promised to maintain their 'value' in future in line with 'inflation'; and one cannot imagine a Labour-led government reneging on that promise. No similar promise can be made by any government in respect of personal or employer-funded pensions. Inflation inevitably and inexorably diminishes the purchasing power of funded pensions over the years, and the impact is greater the more years pass after the date of retirement. A small number of pension funds are so well endowed that they have been able hitherto to increase pensions-in-payment in line with the rising cost of living, but in general pension fund trustees have asserted [and most of them have exercised] their right to make annual increases of less than officially declared 'inflation', or to freeze the amount paid out. A majority of the people who are classed as 'pensioners' are no longer members of funds managed by trustees; they are 'annuitants'': people who on retirement were given notional control of the 'pot' of cash that had accrued to their account in an employer's pension fund, to which contributions were made jointly by the employer and the employee. The recipient individual is required by law to buy an 'annuity' which is an income of a fixed sum of money each year. Most funds allow individuals to take a portion of the 'pot' as a cash sum, in which case their annual income thereafter will be reduced. As an additional complication some annuities provide limited compensation for inflation in future years, and in such cases the annuity is reduced to cover the cost and risk to the provider of having to pay the promised increases in the event of future inflation.
In response to the collapse of banking governments in most developed countries engineered massive increases in the money supply have been used to keep the banking system afloat. At the same time a huge increase in government borrowing has been needed to support the banks, and to pay both civil servants and recipients of state benefits. Government acquiescence in the continuing deindustrialisation of the economy has meant that the UK now has minimal earnings from sales of goods into international markets; yet every indication for the future is that the emergence of powerful new economies will drive up the prices of commodities that Britain needs to import. Worse still, with the abandonment of Britain's capacity to process raw materials means that imports come in prepared forms and as manufactured goods.Relative to the eighteenth, nineteenth and early twentieth centuries, and relative to population size, Britain generates grossly insufficient material exports to compete as a long-term buyer of commodities in which it is not self-sufficient. The kingdom faces both declining real standards of living and the phenomenon of dramatically rising prices for things that are material necessities for life. A glaring example of the increasing problem is in the energy market: Britain dissipated the benefits of North Sea oil largely on paying benefits to the people cast out from industry by Thatcherite-Blairite policies, and sold nuclear firms like Westinghouse to foreigners: and now cannot afford to build nuclear power stations as imported oil and gas prices face long-term increases. The phenomenon of rising prices will be compounded by the devaluation of the currency, as the country's import bill far exceeds it export earnings. Pensioner poverty will escalate; and younger people, seeing the poverty of their pensioner relatives will be disincentivised themselves voluntarily to 'waste' their current income on buying pension rights.
There is no obvious way out of this impasse. It is a stark indication of the means by which the national impoverishment prepared by generation of politicians will begin seriously to bite.
.
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.
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