Category Archives: Fairness

The Care Home Pandemic Lesson

The mortality statistics reported as resulting from Covid-19 refer only to those who die in hospital. Those who die at home or in care homes are not included, even though, despite such obfuscation, it is known the death rate among the elderly and infirm accommodated in care homes far exceeds death rates among NHS patients. It has become clear that such care home residents have been abandoned, not by care home staff – there have been many stories of their heroic human caring – it is the system that has abandoned those in care. It is a valuable lesson, first learned decades ago, and it has far wider relevance than care homes.

That abandonment is longstanding and is well known and understood. The sector has been made available for rape and pillage with impunity, as indicated in the following quotes. The solution is clear.

The Lesson of Southern Cross, 10th June, 2011:
10th June 2011: “On 1st September, 1976, Professor Milton Friedman of Chicago University, economic theoretician and Nobel laureate, addressed the Institute of Economic Affairs in London. The title of his talk was “The Road to Economic Freedom: The Steps from Here to There”. Friedman, being the quintessential free market fundamentalist, took a dim view of the mixed British economy with around 60% of national income then being spent by government. He prescribed the ‘shock treatment’ of low flat rate taxes and wholesale privatisation which a few years later Margaret Thatcher implemented.

His justification for privatising provision of education and healthcare was simplistic in the extreme. ‘There is,’ he argued, ‘a sort of empirical generalisation that it costs the state twice as much to do anything as it costs private enterprise, whatever it is.’ Friedman didn’t actually have any data to support this contention, but added that ‘My son once called my attention to this generalisation, and it is amazing how accurate it is’ (See Friedman, M, 1977, From Galbraith to Economic Freedom, London: Institute of Economic Affairs, p57).

That simplistic assertion held sway for the next three decades and still rules our lives. His advocacy of privatisation of public provision justifies, among other things, the provision of care homes for our aging population by the likes of Southern Cross. It turned out not to be twice as efficient as any public sector provision, and it threatens to go bust leaving the state to clean up the mess.

The nub of the Southern Cross problem arises from another Friedmanism, that corporate officials had no social responsibilities other than ‘to make as much money as possible for stockholders’. In the case of Southern Cross, those stockholders were at one time the private equity firm Blackstone, headed up by ex-Lehman Brothers mergers and acquisitions specialists. Their interest in making as much money as possible led Southern Cross to the classic asset strippers’ strategy of the sale and lease back of its portfolio of care homes, realising an estimated surplus of £500m for Blackstone. It may or may not have been ‘as much money as possible’.” (https://gordonpearson.co.uk/2011/06/10/the-lesson-of-southern-cross/)

Big Society Public Services – the Next Government Shambles, 22nd July, 2011:
22nd July 2011: “The Open Public Services White Paper, announced on 11th July, sneaked out under cover of the Murdoch mess, looks like being the next government created shambles. Like its approach to the NHS, it betrays a breathtaking lack of nouse and understanding. The government claims its aim is to improve the quality and reduce the cost of all public services. This magical result is to be achieved by opening them up to provision by private and voluntary organisations, in competition with their existing public providers. … opening public services is likely to result in bids from the private for-profit sector, against the existing public provider. And private for-profit providers can, by definition, go bust. Health Minister, Paul Burstow says the new NHS regulator, Monitor, would ensure providers do not copy the “risky business model” of Southern Cross, the bankrupt care home provider.”( https://gordonpearson.co.uk/2011/07/22/big-society-public-services-the-next-government-shambles/#more-942)

Looting and Rioting – Bob Diamond Again, 15th August, 2011:
15th August 2011: “Over the past few days, the famine in East Africa, the US loss of its S&P triple A credit rating, the Murdoch disgrace, the Eurozone indebtedness and Greece’s odious debt, and even the World Championship Hen Races in Derbyshire, have all been driven from the front pages, at least in UK, by the looting and burning street riots. Consideration of their underlying causes and recommended solutions have dominated the media. Prime Minister Cameron, for example, expert in policing and broken societies, apparently wants to appoint a native from gun-toting America, to show British police how to do their job …

What is the main difference between those young people stealing mobile phones, laptops, trainers, and so on, and the likes of Fred ‘the Shred’ Goodwin, Bob Diamond and Stephen Schwarzman? One-time RBS CEO Fred Goodwin broke the bank with brainless debt and acquisitions and ‘shredded’ many thousands of jobs. Bob Diamond, currently CEO of Barclays Bank, has featured from time to time on this site primarily for his socially useless work and exorbitant take home pay. Stephen Schwarzman is billionaire boss of Blackstone Group, the private equity outfit that among other things, stripped the now bankrupt Southern Cross healthcare group of its main assets and made off with an estimated £500million. They differ from the looting, burning rioters in two main respects, Firstly, the scale of their looting far exceeds anything which has happened on the streets. And, secondly, what Goodwin, Diamond and Schwarzman do, has over the last thirty years been legalised, so they can do it with impunity.” (https://gordonpearson.co.uk/2011/08/15/looting-and-rioting-bob-diamond-again/)

Screwing care-homes still makes the easiest money, 5th September, 2015:
5th September 2015: “Taxpayers are going to have to pay for another big care home operator, throttled by tax avoiding financial predators. According to its chief financial officer, Four Seasons, which runs 450 care homes and 50 specialist care units, ‘is reviewing its finances with all options considered’. One option would be to close down, leaving the taxpayer to pick up responsibility for its 20,000 residents and patients.

Four Seasons is carrying debts of £500million on which it is paying interest of around £50million. It’s not immediately obvious how they got into so much debt nor why they should be paying interest at 10% pa when the official bank rate is 0.5%….
The tax avoiding financial predator that acquired Four Seasons was private equity Terra Firma Capital Partners, owned by Guernsey based Guy Hands. The acquisition was completed a few months after the collapse of Southern Cross had demonstrated how profitable such deals could be.

Terra Firma was in the news earlier this year with demonstrations against subsidiary Annington residential homes’ proposed demolition of 142 homes on the Sweets Way estate in north London. They were accommodating families on Barnet Council’s waiting list, but Hands’ plan was to replace them with 229 houses and flats for sale on London’s booming property market.

Four Seasons is losing money at a rate of knots, £26million in the second quarter of the current year. While they blame the losses on various extraneous factors, it is clear that public funding of social care for the elderly is inadequate. But the only way it will be increased is when the mess has to be sorted at public expense when Four Seasons goes bust. That the taxpayer has to pick up the tab is a major attraction of care homes and any privatised NHS services. Once privatised, the new operators can profit by delivering sub-standard service, till they go bust and the state has to pick up the pieces.

Guy Hands explains his perspective on private equity on the Terra Firma website http://www.terrafirma.com/private-equity-investment.html:
The private equity funds we raise are used to acquire asset-backed businesses that can be transformed through fundamental change.’

This is a rather more sophisticated way of making the asset stripper’s case as succinctly expressed in The Times by Jim Slater protégé, John Bentley, forty five years ago:
‘The theory of what we are doing is to release half the cash, half the assets and half the number of people employed.’
(https://gordonpearson.co.uk/2015/09/05/screwing-care-homes-still-makes-the-easiest-money/)

There are many long standing, ethical and professional operators in the care home sector. But they appear to have been largely deserted by the state. The Southern Cross and Four Seasons examples show just what a perfect opportunity care homes present for predatory exploitation. Being asset rich and earnings poor, means they can be acquired at low cost, their assets cashed in and they can then be driven on a shoe string and if they subsequently go bust, so what! The state will have to pick up the tab.

But the problem goes much wider than just the care home sector. Four decades of ideologically driven privatising and outsourcing of public sector provision, including health services, places much of the work previously fulfilled by the NHS in private hands. Predatory, tax evading and avoiding, private equity acquirers who are not subject to public quotation or review, could then fulfill their mission by extracting value and leaving enfeebled operations to be picked up and paid for by the tax payer.

The solutions are fairly obvious and have been highlighted many times in the past. The care home pandemic lesson in particular is a relearning experience and reminder of what needs to be done. But it is unlikely to be easy to implement.

F D Roosevelt identified the basic problem over eight decades ago when he referred to organised money, which “had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that government by organised money is just as dangerous as Government by organised mob.” (F D Roosevelt, announcing the Second New Deal, October, 1936.)

It remains to be seen if state responses to Covid-19 will amount to a 21st century New Deal, which as well as defeating the pandemic, will need also to  remake the real economy as well as escaping destruction by organised money.  And if planet earth is to be made fully sustainable, to do so on a permanent basis.

Technological innovation changes everything

The economy is headed for a period of decline. The explanations of the economists and politicians who represent the self-perpetuating organised money establishment, lack any kind of credibility. They are so bound up with the latest set of figures and next quarter’s results, they have completely lost sight of the long term and its more profound effects. Technology is of far greater importance than Brexit, but it just doesn’t hit the headlines in quite the same way.

At the beginning of the nineteenth century, no country in Europe had yet re-attained the living standard of Imperial Rome. But three decades ago it was noted that over the previous hundred years, real income per head had risen by around 700% on average. It has slowed considerably since then, of course, but the only explanation for that explosion in income growth rates is technological innovation. Otherwise, William Baumol wrote, ‘the economic history of the period, and its contrast with the world’s economic performance in the previous, say, fifteen centuries, is difficult to account for.’

Technology is the engine which drives economic, social and organisational change. The connection between innovation and economic growth has been widely accepted since the original work of Kondratiev and Schumpeter. Analysts associate the great expansions with periods when major innovations coincided, referred to as technological revolutions. We appear now to be coming towards the end of the third such.
Continue reading Technological innovation changes everything

There is an Alternative

According to the current edition of the Economist, Britain appears to be questioning the wisdom of its devotion to ‘the liberal economic credos of its recent past.’ Those are the credos which include free trade with open access to unregulated markets, minimised public sector, and so on and so forth – the whole baggage of neo-liberal economics to which the Economist itself is committed.

This questioning was prompted by popular responses to the threatened closure and disposal by Tata of its British steel operations. They were said to be losing around £1m a day, at least in part as a result of Chinese dumping cheap steel on UK markets. The outrageous suggestion had been made that the Brits should protect their domestic industry by charging an import duty on Chinese steel so as to at least level the playing field. Thus the classic dichotomy was drawn up between the two childishly simple minded economic ideologies: free trade on the one hand; protectionism on the other. These are the tips of the two ice-bergs of neo-liberalism and totalitarian communism. Continue reading There is an Alternative

Fighting for Fairness in 2016

Fighting for fairness and social justice for the population at large may be a minority concern at Westminster, but it has considerable appeal beyond that bubble. The problem is how that legitimate, democratically supported pursuit might be achieved, without any un-British revolutionary disturbances. That is the recurrent problem for Parties seeking social justice for all. Traditionally, they only come to power following prolonged periods of social injustice. And the only Parties currently onside are the Greens and Corbyn-led Labour.

We’ve been here before. The 1929 Wall Street crash followed by Hoover’s austerity driven Great Depression. That ushered in Roosevelt’s presidency and the stimulus driven New Deal, the second wave of which he introduced as follows:
“We had to struggle with the old enemies of peace – business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that government by organised money is just as dangerous as Government by organised mob.” Was that really 1936?

That quotation is borrowed from “What a Waste”, a study of the disastrous social effects of outsourcing of public services to private business interests reviewed in the previous posting on this site. It also includes a quote regarding the disposal of public assets from Joseph Chamberlain in 1885:
“Some of them have been sold; some of them have been given away by people who had no right to dispose of them; some of them have been lost through apathy and ignorance; some have been stolen by fraud; and some have been acquired by violence.”
Continue reading Fighting for Fairness in 2016

Outsourcing: What a Waste!

Occasionally I have read stuff which seems so timely and apposite to work on which I am then engaged, that I’ve been motivated to provide an aide memoire of the text. This posting provides such a review of one 2015 text; it is not a summary and includes some personal interpretation; it is more a personal aide memoire of the opening chapter.

The book starts off with two rivetingly relevant-to-today quotes, one from 1936, the other from 1885.

Reading Review: What a waste: outsourcing and how it goes wrong, Bowman et al, 2015, Manchester University Press

Chapter 1 Outsourcing: organised money and disabled government

“We had to struggle with the old enemies of peace – business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs.  We know now that government by organised money is just as dangerous as Government by organised mob.”  F D Roosevelt, announcing the Second New Deal, October, 1936.

“The common rights of ownership have disappeared. Some of them have been sold; some of them have been given away by people who had no right to dispose of them; some of them have been lost through apathy and ignorance; some have been stolen by fraud; and some have been acquired by violence.  Private ownership has taken the place of these communal rights, and this system has become so interwoven with our habits and usages, it has been sanctioned by law and protected by custom, that it might be very difficult and perhaps impossible to reverse it.  But then, I ask, what ransom will property pay for the security which it enjoys?” Joseph Chamberlain, Birmingham Town Hall speech, January, 1885.

1.1 Introduction: The text addresses new problems created by outsourcing public services to private contractors. It considers the gap between efficiency rhetoric and delivery reality and between public service and the outsourcers’ profit maximising and tax manipulation.

Continue reading Outsourcing: What a Waste!

Budgeting for Climate Change

The aim of the UN climate change conference in Paris is to achieve a legally binding and universal agreement to reduce greenhouse gas emissions, so as to limit the global temperature increase to a maximum of 2°C above pre-industrial levels. Only then could this generation lay any claim to having fulfilled its responsibility to bequeath a sustainable planet earth.

Climate summits are notorious for agreeing targets and then not keeping to them. It is not clear how Paris will be any different. There are huge problems in the way of a committed agreement that could produce an effective and lasting solution. Not the least of which is the fact there will be 196 nations attending, all with different histories, cultures, economies and futures.

An example of these ‘local’ difficulties is the Philippines plan to build 23 new coal-fired power stations in response to growing electricity demand, all too frequent power blackouts and the fall in coal prices. They might, with some justification, argue that if developed nations want the Philippines to invest in renewable alternatives, they should contribute the additional cost.

These practical difficulties caused by the differences between different nations are only part of the story. A bigger problem was identified by MacKay in a Comment in the science weekly, Nature. Agreement would require an ‘upward spiral of ambition’ and the ‘science of co-operation’ in order to ‘harness self-interest by aligning it with the common good’. That head-on collision between the maximisation of self-interest and the protection and development of the common good, is the most fundamental of all the myriad of problems in ensuring the sustainability of life on earth. Solve that and the other difficulties could almost certainly be resolved. But achieving MacKay’s alignment will be difficult. It is not immediately clear how maximising self-interest can be aligned with the common good.
Continue reading Budgeting for Climate Change

TTIP – Plutocratic Victory

The Friedmanite Neoclassical Economic Belief System (FNEBS) now dominates the developed and developing world. It is taught across the globe in business schools and universities. It is the orthodox wisdom among the Self-Perpetuating Industrial, Financial, Media, Academic and Political Establishment (SPIFMAPE).

The SPIFMAPE is the shadowy presence in our economy which has the real power and resources to ensure its continued dominance. It includes those Industrialists corrupted by the pursuit of wealth, Financiers who pay the £billions of fraud fines as the necessary entry fee, the Media controllers who shape the news to their advantage, Academics who accept ‘research’ income for conformist enquiry and teaching, and those Politicians nurtured within the SPIFMAPE, warmly accepting the FNEBS, otherwise referred to as in the ‘Westminster bubble’.

Those who know the FNEBS appear to really believe in it; and those who don’t know it, accept it as a truth. However, J K Galbraith identified such matters as ‘institutional truths’: that is not a truth at all, but a downright lie that people must buy into if their careers are to progress within their chosen institution.

Continue reading TTIP – Plutocratic Victory

Corbyn-led coalition government

The dominant political, financial and media establishment seems close to resolving the outstanding Labour leadership problem to its satisfaction. There will be no serious challenge from Andy Burnham or Yvette Cooper, or, of course, Liz Kendal. Nor would there have been from Mary Creagh who pulled out of the leadership race, blaming Miliband’s lack of business friendliness as the reason Labour lost the election. The only difficulty might lie with Jeremy Corbyn, should he achieve the necessary nominations to stand for the leadership.

Corbyn could be dangerous to the established Tory/ New Labour Westminster consensus simply because he does not go along with it. His candidacy would challenge that Osborne-Cameron clique in a way the other candidates would fear to tread.
Continue reading Corbyn-led coalition government

Tory’s Rocky Road Ahead Confirmed

Survey data re the 2015 general election is confirming the previous posting. But it is not a picture that is widely acknowledged. For example, Martin Kettle in today’s Guardian, suggests it is more important we should ask why the Tories succeeded, than why Labour failed. But the truth is the Tories are only a smidgeon ahead of their 2010 vote when they had to rely on Lib-Dem support to form a government. That can hardly be regarded as great success. The 24 additional seats those few additional votes produced was a quirk of the first past the post system. Labour undoubtedly failed, being stuck only 1.5% above their 2010 low point in terms of votes, but losing 26 seats, also a result of first past the post.

The survey sample referred to in the previous post has produced some further confirmation. The Lib-Dems were written off some time ago as having completely sold out. That may be grossly unfair, but that is the predominant reason being given by those former Lib Dems surveyed. The main cause emerging for Labour’s rejection was their failure to offer an economic programme that was significantly different from George Osborne’s. In particular, Ed Balls’ adherence to the Tory austerity programme, in case Labour should be seen as irresponsible, appears to have been a prime cause of frustration and rejection.

Those small changes in voter numbers disguise a lot of voter movement. In the survey, a significant number of former Labour voters turned to UKIP and the Greens, where they substantially increased numbers to around 5m but produced no additional seats. Labour’s losses to UKIP and Greens appear to have been more than compensated by deserting Lib-Dems.

Continue reading Tory’s Rocky Road Ahead Confirmed

New Tory’s Rocky Road Ahead

The election result took many by surprise. As the results became clear, George Osborne briefly stated the Tory commitments to an essentially social democratic sounding manifesto, including more jobs, affordable housing, tax cuts for working people, help with childcare, improved educational chances for all etc, etc. He concluded that they had put it all in the manifesto and “it seems to have been warmly received.” Further detail was later spelled out by David Cameron in his victory speech outside No 10, a transcript of which follows.

It is possible there may be some misunderstanding. Osborne’s perception of a warm reception may be sadly mistaken. Prior to the election, extensive campaigning was focused on what appeared to be deliberate misinterpretations so as to spread misunderstanding and deliver tactical voting, ie voting not for what you believe in but in order to prevent what you actively reject. The result is uncertainty about the electorate’s true position.

The most actively rejected were, of course, the Lib Dems, followed by Labour. A rather non-scientifically designed survey sample, but nevertheless one of considerable geographic spread, is being conducted to identify reasons for that rejection, with some preliminary results are already to hand. In both Lib-Dem and Labour, the main cause emerging for their rejection was their failure to offer a real alternative to the Tory manifesto. The Lib-Dems were written off as having completely sold out. That may be grossly unfair, but that is the predominant reason being given by those former Lib Dems surveyed. Labour also lost support because of their failure to offer a significantly different economic programme. In particular, Ed Balls’ adherence to the Tory austerity programme in case Labour should be labelled as irresponsible, appears to have been a prime cause of frustration and rejection.
Continue reading New Tory’s Rocky Road Ahead