The shocks and discontinuities impacting the global economy have led governments to seek ‘business as usual’ as the ultimate desirable state. However, they appear not to recognise that business is not a coherent singularity, but a mess of virtue and vice. Fragile start-ups, innovative fast growing SMEs, and predatory extractors of value for the benefit of “investors”, are all classed as businesses. Few politicians have any direct experience of the virtuous categories, though some have made substantial gains from the vice.
Governments need to diagnose and be specific about what categories they are referring to, before offering their so-called ‘business friendly’ prescriptions. Light regulation may benefit the innovative SMEs earning their keep in highly competitive markets. But that same light regulation, if applied generally, will encourage the monopolistic leviathans to use their market power to exploit their customers and all other stakeholders for the sole benefit of shareholders. That predatory action has a negative impact on the real economy and is damaging the common good.
This is not solely the result of actions by powerful but corrupted individuals. There is a natural evolutionary process leading business along those tracks unless constrained by relevant regulation to prevent monopolistic market abuse.
Continue reading Business as Usual
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
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
Our world is headed towards disaster. That appears to be widely accepted; as are the reasons for it and what should be done to change direction to a safer, more sustainable, future. The Green Party exists for little else. All that is lacking is the power to achieve that change. Disaster is defined in many different dimensions: climate change, global population growth, unsustainable inequality of wealth and incomes within and between nations, global food insecurity and many other measures of impending doom. The underlying reason why those in power steer their disastrous course, always assuming they are not motivated solely by their own short term self-interest, is their belief in a fundamentally flawed version of what was formerly known as political economy.
Nobel laureate Paul Krugman flagged up one of the most basic errors of the currently dominant Friedmanite take on neoclassical economics [‘Challenging the Oligarchy’, Krugman, New York Review of Books, 17th December, 2015]. Friedman had argued that the development of monopolistic businesses was of no importance since it made no real difference. Krugman identifies that as one of Friedman’s fundamental errors. A complementary Friedman error was to claim business had no responsibility other than to make as much money as possible for stockholders. No wonder discredited ex-Barclays CEO Bob Diamond regarded Friedman as his ‘favourite economist’!
Market power has huge implications for economic behaviour. Failure over the past three decades to pursue anti-trust regulations vigorously has been a major reason for the economic trends we are now experiencing. Krugman identified two as of major importance: the financialisation of business and the ever increasing degree of inequality. Neither is sustainable in the long term, but it is unclear how their termination will be achieved.
Continue reading Impending Disaster, made in Davos, by Bilderburg
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
The TTIP is a series of trade negotiations, being carried out mostly in secret, between the EU and US apparatchiks, acting for Trans-National Corporations (TNCs), intended to reduce the regulatory barriers to trade on big business. The powers being negotiated include the sovereign powers of individual nations which might be used to protect entities involved in such as the provision of education and health.
Six widely expressed objections are:
1. It threatens privatisation of the NHS
2. It will impose laxer US food regulations on the EU, eg allowing GM foods in EU
3. It will impose London’s lax banking regulation on the rest
4. It threatens to reduce personal data privacy (eg Anti-Counterfeiting Trade Agreement – ACTA being brought back by the back door having been democratically rejected in EU)
5. It will cause job losses as lower US labour standards and trade union rights applied in EU
6. It is anti-democratic – the Investor State Dispute Settlement (ISDS) arrangements, which are part of TTIP, will enable TNCs to sue governments if their policies cause loss of profits.
With TTIP being negotiated in secret, people do not have the opportunity to debate and vote. Once implemented, it will be extremely difficult to undo.
But it is much worse than that.
Continue reading Transatlantic Trade and Investment Partnership Revisited
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