The financial crisis is only one aspect of a much bigger systemic crisis that encompasses the social, financial and ecological crises, says Susan George and suggests radical reforms that would create more just wealth distribution while saving the economy and the environment: an environmental Keynesianism.

Could Susan George and I be talking about the same thing?

My point was from a slightly different angle however, that the uses to which people put their money - a collective intelligence diverging between binge spending and that moving toward responsibility is what has brought the crisis about.

The structures that house the new economy need to acknowledge where it sits and where it needs to go.

Equity is key - as Susan George talks about in the video linked to above - the economy needs legs, not only that it needs roots in a sustainable environment.

I'm concerned about references to Keynes however. Keynes produced the General Theory to repsond specifically to his time. Things are different now. Information economy means that there is more emphasis on innovation than before.

What is more, the shift from information to a values-based economy means that even recently developed analytical tools are becoming outdated.

We need a new Keynes. One ready to see what's going on and propose a similarly elegant solution.

Mathematics - the inelegant fool

You'll notice that conceiving of economies as informational flows exposes the limits of mathematical procedure.

To do so requires the fencing off of a proportion of the informational flow and then asking it to operate in a particular way (by means of a function).

To be accurate the model needs to be correct in two ways.

1) By describing the area of information fenced off - this can be done in very precise detail with matrices of ever-dizzying order but nonetheless amounts to drawing a circle by means of straight lines.

2) By describing the way this area operates - in other words the quality of the mathematical function. It is in this way that the greatest amount of contrivance and guesswork occurs. Functions are chosen for mathematical convenience not how they accurately describe the way information is flowing.

Functional quality can be likened to drawing a circle using straight lines and then using these as a design for bicycle wheels.

No one uses straight lines to make bicycle wheels. Firstly they don't work and secondly, those forced to use them are in for a bumpy ride.

What's depressing is that mathematics is not used to describe but to inform economic theory.

At school, a classmate of mine operated a scam where he would pretend to send vintage LPs to a friend who received them smashed (as they were before they entered the envelope). When questioned by the post office to verify the claim, the guy would post himself as a quality dealer and vastly inflate the records' prices. He made a lot of money this way as well as for others who would pose as bunnies to pose and receive the records.

Economics does the same thing. It not only proposes models based on mathematical theory, but verifies them in the same way. At both ends we get the same limitation describing behaviour and verifying its existence. As long as the theory is bounded by this tight mathematical system it will be forever suspended above what's going on on the ground.

What's suggested is the need for a more qualitative approach, understanding of the way organisations, people and fields of operation interact.

For this we need a syncretic approach that more greatly acknowledges sociology, anthropology and by crikey - real human existence.

Otherwise we'll be locked in a discipline that allows people like Larry Summers to rise to the top of the tree. A man who thought carbon trading was a good idea because it didn't matter so much that people in Africa got lung cancer because (guffaw!) they were hardly likely to live that long anyway.

Welcome to change we can believe in.

For this reason, this blog is beginning to look at ideas and concepts that can manoeuvre economic thinking in a direction that is more accurate and therefore more just.

Cones not castles

Heyo - I'm playing around these days new conceptions of the economy.

For the macro, micro and meso economy it's more important than ever to clear out the junk and set our ideas of how the world works with greater boldness and fortitude than we have hitherto.

The time demands it. I can't call myself a brilliant theorist but use what intelligence I have to get heads thinking in a certain way to launch their own, more thorough investigations.

In the following when using 'traditional' or new I'm not commenting where the state of modern theory is, merely demarcing what is desirable in the new theory and obsolete in the old. Much of what I say is well understood in management theory and in practice, but in greater need of permeating the slightly more trudging economic discipline, where it will have a more long lasting impact o policy and understandings of how our world is formed.

The traditional idea is that companies are like war fortresses. Directors are the captains and the organisation is conceived as a homogeneous entity making decisions as one. All occurs as one unit.

In the new conception, boundaries are softened. The organisation is defined as a community of participation (see Leve and Wenger). There is a centre which has greater control over the actions of the community and a periphery, which has less. Alongside managers and employees we can now include in the community of practice contractors and consultants, each participating at different levels of the community.

Leve and Wenger talk of the CoP as a mountain but it may be more helpful to think of it as a mountain to take into account power hierarchies. Well-established employees could thus be at the centre of the circle but at the bottom of the mountain - well respected and powerful in their community but uninfluential in the upper management sphere.

In this way, it makes sense to talk about nested hierarchies and spirals. Nested hierarchies (after Wilbur) suggest that the peak cannot do without the lower levels but upper levels contain more power (when applied to the political realm).

Spirals are used to link these hierarchies together. For example an experienced employee may have a low official position but work as a competent information node for upper levels (perhaps being a reliable lunch partner for a higher level manager).

Note that we're talking in terms of information flows and nodes. The nodes owe as much to their access to information as they do to their personal qualities which give them saliency within the organisational framework.

I'm throwing these concepts as I write, as they illuminate a holistic perception of organisations and how they behave. Please relax your hold on each particular conception and keep in mind the behaviour of the whole - a mountain or cone of dynamic information.

People matter in so far as their qualities determine the way the information flows round the cone. It is also an acknowledgement of how these qualities direct and suspend information flow that can help us to build better cones or better still - flatten them!

When we conceive of organisations as informational networks the need for hierarchies dissolve. Each community of Practice can be broken down into smaller ones, with the whole seen as an alliance of its composites.

That information runs from the base to the tip is vital for organisational health - to use the knowledge that the base accumulates with the insight and perspective gained from the tip.

So much emphasis is placed on codifying knowledge - endless series of reports and consultations, that informal information flows are under-acknowledged as a resource to direct organisation - I'm talking here of established management technique, the pros have always known where to get their intelligence from.

Acknowledging informal knowledge flows would help to redress current pay imbalance. These are currently designed as compensation for personal responsibility and power. By softening this definiton, and acknowledging the strength of the community in generating and channelling knowledge to its required position, we recognise a greater equity in wage distribution.

(This idea builds on the work of Gareth Orr - working in the realms of organisational science)

A last point for this entry - informational cones and communties of practice are not just a way of thinking about organisations. They can be used as a conceptual tool to describe individuals, departments, organisations, conglomerates, industry sectors, economies and trading groups - each seen as a conglomeration of cones of a lower level of magnitude.

Thus we can better see the relations of each part as connected to the whole. An exercise in boundary softening between individuals, organisations and nations to increase understanding and thereby economic justice.

The Environmental Shoe Horn

A quick point before I shuffle off to bed.

Climate change is such a stick thin end of the environmental debate. The ecological devastation wrought by the way we live - essentially because of the divoroce of demand from its consequences - is so much wider than carbon emissions.

No doubt dumping billions of tonnes into the atmosphere hasn't helped Mother Gaia sustain her elegant balance but the way the world has become carbon obsessed is laughable.

Need an extra flight - then offset it a little better...worried about your country's emissions - farm them off to the third world. This excellent interview by George Monbiot with the UN's leading climate change officer describes how the Clean Development Mechanism (proposed by the vastly over-inflated Al Gore) vastly ramps up the charges of cleaning up through a wad of bureaucracy that distributes the revenues to God knows where.

It's frightening and entirely expected. In the same way as PFI, ID cards and nuclear power are worldwide used as mechanisms to make sure public money goes into specifically few hands, not to mention control of these systems, so is carbon trading.

Environmentalism has been shoe horned into its area of greatest profit and so issues such as resource use and bio-diversity get slumped to the bottom of the pile.

Is this a premeditated state of affairs or the result of our collective ignorance?

I'm afraid that the one conjures the other. We had better get ready to look.

Fluffy's World in 2025

I've remembered where the last post started, but ended up somewhere quite different. To save you trawling through it - it argued that the necessary next step is a world federation, in order to avoid the clashing of rising world tensions.

It's a truism that behind the most intense tension, lies the greatest possibility for peace.

On a micro level, I'm arguing that the shift to increasingly values-based decisions, as opposed to self-interested ones is causing a shift that is having an impact with a delightfully global reach. The discussion spanned into the implications for global international relations. But that's how it goes. I don;t write these as planned essays. They just emerge.

So there's a whole lot of movement in between. I've made the point that people (or us - I'm speaking as though out of the bubble)...that people will not put up with a socialist retrenchment, thay value their choice too much.

(((This by the way is the astuteness that unites Blair and Cameron, they have an acute idea of social changes afoot, but seek to manipulate it in different ways)))

What changes can we predict for the values economy? Here's Fluffy's five:

1) Corporate and Social Responsibility will become more entrenched, perhaps even institutionalised and regulated by public bodies. This is not just to keep an attractive public face but to ensure that more ethically-minded talent doesn't stray (you see - diffuse actions causing institutional change, we'll ignore for now that cultural attitudes are themselves institutions...))

2) Procurement policy - government will increasingly have to show it is meeting social targets with its own buying power. This is a reverse of the last decade's centralisation and managerialism, which squeezed out small suppliers and encouraged corporate concentration (perhaps the most significant institutional power today)

3) Localisation - return of the rural economy, green housing schemes and the rurality shared more equitably amongst the plebs. Companies forced to become more individualised even as ...

4) Federalisation occurs. We'll see the break up the multinational and associations of small businesses, alliances of services will be provided. This will be a mirrored at the state level, as the demands of greater international integration and closer attention to the needs of the people stretch centralised government both down and up.

5) One man as everything - multi-skilled, multitalented, renaissance man, more valuable than absurdly overspecialised tasks of today. This is the result of a two way push, people wanting to express themselves more broadly mean they enrich themselves in many more ways than narrow job tasks allow and the need for holistic thinking to join up segregated areas of thinking.

It's not me that says these things - - it's happening all around...


Til next time - El Fluff

If this is the new era of state control, it will have a very different edge

Could you have imagined the changes that are afoot, six or twelve months ago?

Such is the scale of the collapse that the government has been forced to take an ever increasing role in the economy. Banks are no longer economic automatons but dealers in public interest. We'd gotten cocky about credit and it turns out it's a lifeline we cannot do without.

It was always Keynes' argument that the state should intervene to save capitalism. The system, he argued, works rather well, just need to polish some of its flaws.

The public discussion is that the current situation is the result of an extremely big cock up - shuffling debt into incomprehensible packages - that have unravelled to reveal the depth of their incomprehensibility. Greed was the seed that sprouted this miss, and now we all have to pay.

So much for systemic collapse and so much for the finger-licking of idealists everywhere, and the counterclaims of so-called pragmatists, disgusing their idealism as conventional rationality.

The invisible hand of the last 15 years was not self-interestedness, but increasing concern for values. The rise of fair trade, increasingly vocal opposition to the global trading regime, organic food, understanding of IMF malpractice each has been gaining a stronger foot. All are signs of a values-based economy. That these signs take place in such different theatres does not reveal their diffuse nature, but the undercurrent of deep social change.

As self interest has reached its zenith with the ridiculously nepotisitic Bush administration, it seems the people, through market choices are wanting a world that sits more easily with their conscience.

So here comes are the steps in my thinking. Firstly, following economics, I believe that the economy reflects the values of those who take their part in it. This occurs in a weighted way, so those with more market power have a greater say over the values that arise in it. In countries with strong government, weak corporations, governments have more say over the values that preside. If the government represents its people well, this power is a direct channel of the people, then the people have power. In less representative democracies, we get what has been caled the "self-regulating state" an organ looking out for its own interest.

Secondly, the values represented by the overarching societal structure can only discoincide with the prominent values of the people for so long. The point is not that the people necessarily revolt up but will evolve their own institutions, through the natural course of their behaviour, that undermine the existing regime. This is the thinking of Schumpeter, who coined the term creative destruction, an Austrian with a beautifully evolved sense of the interplay between society and the economy. To rephrase, if the overriding structure diverges from the emerging values of the populace, the people will act so as to render the overriding structure obsolete.

What looks like a revolution, or rapid evolution has its seeds at an earlier time.

What is occurring now is a structural shift in the way society thinks and works that will determine how it thinks and works for the next fifty years, perhaps centuries. It's revealing of problems that are deliciously deep-seated. The size of the collapse will reflect how deep seated the problems are, by nature of just how far society has begun to shift.

Thus, as my my third point, I argue that it is not the greed of the bankers that is new, this has always existed and in forms far more despiccable than are apparent today. What is new is society's lack of tolerance to put up with ths greed. This ha occurred, not in some upright frenzy of moral attack, but by the diffuse nature of how it has been going about its business for perhaps the last 15 years.

The move to the value based system was triggered by the absurdly individualistic Reagan/Thatcher shift. In some sense, this showed socialists the game was up, that markets has taken primacy. The moral case was thus retracted and fed through the unavoidable architecture of consumer choice.

The diversity of expression that consumer choice allows (depsite its undeniably herd instinct) will not be thrown into the dustbin. We'll just have to be a bit nicer with the choices we make. And superstructural decisions (those on defence and international trade) will have to shift too, or risk becoming violoently obsolete.

We're coming to a point in international relations where interests very much opposed to each other are coming into extremely close contact. Shortages of resources from oil to water will strain a world that divides its thinking into who owns what. That the Arctic is being divided into plots for oil claims is a frightening signifier of the strains that are already present.

What is necessary is that a global system is produced that harmonises and absorbs these tensions. This, consistent with the earlier point, is purely a reflection of the harmony the world population is able to deal with.

I argue that we're ready for such a step, that moves for world governance should move ahead so to show the interelatedness that this world already enjoys.

Finance will not stop, though must be made more sensible. International relations takes place round the debating table and not on the battlefield or through violent resource strong arming.

The rise of values becoming more central to their lives, coupled with a better idea of what their current ideas are having, will demand that these changes take place. Whether the ride is smooth or bumpy is up to Messrs Brown, Bernanke, Sarkozy, Obama, Wu Jintao, Rockefeller, Buffett et al.

The UK cultural revolution

There are many who accuse the UK of being culturally in a slumber. Music produced is tired, post-modern rehashing of 80s, 60s, 70s or otherwise imported hip hop so violent and mysogonistic – in some misconceived version of a power display – it would make a suffragette blush. In art we relish the same rehashing – lauding puerile conconctions that resemble scientific propositions rather than displays of creative and aesthetic virtue. Government itself is stale and reactionary, committed to policies that disharmonise rather than the desirable opposite. Committed to targets and powerpoint displays of how things are meant to be run (by the people, for the people – anyone?).

These are adequate pointers to depict the somnolent quality of what we may call La Malaise Anglaise. However the next few years will see changes that given correct treatment could result in the flourishing of the UK culturally, socially and therefore economically.

Where do these changes have their seed? With a certain Mrs Thatcher.

At the end of the 70s Britain was experiencing the collapse of a system that had become all but obsolescent. The era of social control – the idea society could be operated by levers to produce precise results and responses – was coming to an end. The Keynes-inspired revolution after WW2 had founded a great architecture for state intervention and welfare programs. These substantial programs had a great effect in raising well-being, redistributing income and maintaining economic growth. This architecture – being the first of its kind - was made to withstand only a narrow band of external events. Outside of this band was the Middle Eastern-created oil crisis that saw oil prices rocket and Britain’s more or less continual decline in international trade standing after World War 2.

The second of these was to have a more lasting effect and required as its solution ever more extreme solutions – a discussion that concluded with Thatcherism.

Thatcherism – a dogma that reflected as well as created its reigning era – was about freedom and creative forces unleashed. And unleashed they were but in such narrow channels that Britain’s development became overwhelmingly single track. Providing, that is, for material comfort to such precise and scientific degree that all else was excluded and eventually diminished.

Thatcher was a radical and fantastically intelligent. After decades of Keynesian ascendancy, Economics was swinging back to the Austrian school of Friedrich von Hayek and now expounded by Milton Friedman (see). In this the market was king and could be relied upon to create whatever counter measures and safety valves were necessary to ensure its (and therefore society’s) survival. It was a theory enhanced by the more consistent application of statistical technique which in the large part was a process of stripping vast chaff heaps of informational content in order to refine the wheat of noble ‘economic data’ . As acceptance of these techniques grew, it became overfed to its greedy older brother – reliance. Statistics were taken as true and the society they predicted became the one to be enacted. That is, one that married virtue with material success and equated freedom with institutions that doled out power to an ever narrowing corporate elite.
Its a truism that economic power begets economic power. As such, liberated market structures allow the most powerful players involved to shape the playing field according to their wishes. A major role of government is regulate the market so that it serves the widest possible good, judged with humanness and awareness of life’s riches outside of the human sphere.

Thatcher’s regime and the theories that inspired them were antihuman. Unable to explain anything that couldn’t be quantified and reproducible on a flipchart, Thatcherism expounded a stealthy form of fascism that robbed two thirds of society of their ability to be human by letting free market dogs run rampant amongst them.

To a large extent Britain was still hanging on to 19th century industrial principles, which were steadily losing their grip. These principles still tied commodities to the area they were produced. As such entrenched economic structures had given rise to social ones in the form of settled communities relying on particular forms of industrial production. The structures themselves were becoming obsolete as the resources themselves ran out or become more cheaply available elsewhere. What was necessary at this point was to recognise this obsolescence and produce a program of steady reform that eased social pain.

The actual response met the first of these conditions and utterly failed the second. In the belief that rampant egotism would create a harmonious society, the market was unleashed so as to, as mentioned before, favour those with economic power, which it should be clear by now, serves a narrow band of human interest.

Social protection in the form of cutting welfare, education and health budgets and the breaking of the unions, were swiftly eroded and within ten straight years the market had ascendancy. The Blairite refocusing of attention on the public services only served to empower this trend – making sure public services became the plaything of corporate interests. A sign of the surrender that had taken hold nationwide.

But human nature has never been successfully suppressed for long. Recognising the deficiencies of its environment, it seeks to balance and counteract them, and it is precisely at this point that UK society, in synchronicity with much of the world now rests: the evolution of new paradigms to counteract the deficiencies of the past three decades and the move to conditions more encouraging to the human spirit.

You’ll note this is a cosmological view of human history; that humanity’s fate is the development of its consciousness to some supreme self aware degree. It is this force – simply described as the need to know itself – that drives evolution of the human psyche. Limiting factors are the structures in which it finds itself a result purely of inherited beliefs – and these bring about a process of natural selection. This is not the blind advancement Richard Dawkins but one underpinned and aiming towards an ideal: Humanity, as indefinable and recognisable as that concept remains.

Part 2 will now briefly describe the deficiencies brought about by Thatcherism. It is argued that remedial to these were the creative forces that are about to take hold worldwide. We should therefore not view Thatcherite developments in such a harsh light; perhaps more accurately depict them as the Harsh Winter before the Great Spring.

"Spending on productivity"

"The peer said public spending that did not enhance productivity would push up inflation"

Yo - spending has no relation to productivity. What matters is the structures and institutions this spending is channelled through AND their ability to change should the needs arise. Indeed sometimes we'd prefer them not to change.

Education - doesn't need more spending, just more sensibly so - community-based schools of smaller size, curricula that encourage blooming of individuals not being told repeatedly - the world's shit - this will help you cope (cf high school in Sunderland that set up a call centre training department with money from, er, a local call centre).

Health - wider view of what it is to be healthy. Again, megaoplis approach to hospitals does not work, just persuades people how much they really are sick.

Paper work - EVERYWHERE - needs to be slashed - people letting go to the extent that folk do things as they are supposed to rather than submitting to jingo as soon as anything goes wrong. Teachers, health professionals businessmen are choked beyond the point of creativity which is what propels productivity in the long run.

Innovation is the product of a solid bed (health, education) and enough fluidity. Regulation is too easy to throw in when things are going wrong. Let's try a harder way of regulation that allows things to flourish.

The more I read the above points the more I see the all-pervasive problem is a lack of spine. Principles are considered inconvenient, non-expedient. It's time we started standing up instead of submitting to lobbies and reacting to opposing dogma, which only serve to cloud our view.

In need of a new Keynes

Thanks to Anglefish for the ensuing flurry of opinion.

He's been reading about Gordon Brown's "return" to Keynesianism. Without having read the article and basing the following on pure jingo I splutter:

PPPPPPPPPHHHHHHWHAAAT!!!!!! (---tea --- biscuits - - - hitting your shirt).

Let's get this clear. Keynesianism is the doctrine that one reigns in spending in good times and plumps it up in the bad. Brown and Blair pumped in masses of money when things were on the up, increased the throttle just as things were looking really good and didn't hold back as it peaked. Brown all but claimed to have beaten the trade cycle by laughably readjusting just when it was that it would end.

The trade cycle cannot be appointed a distinct time, it's only really clear it's precise topography once it has happened. However, if GDP growth is at 3.5% when the 200 year average for the economy is nearer 2.0% you have to be a pretty massive sense of your own Divine Blessedness to think you're the one that's cracked it.

Did Brown really believe this? Let's presume he's a little clear-headed. Chances are he knew exactly what was going on - knew that the opening of international markets was keeping inflation extremely low (by essentially doubling the labour pool the West had access to in less than two decades) and knew that the balance of trade was way in Britain's favour (because of demand for knowledge products at which Britain excels) - Brown knew all of this but due to an overwhelming lack of spine (not to piss off voters) did not reign in spending or raise taxes when times were hot.

Brown operated exactly the opposite to Keynes's common sense recommendations, created at the time to rail against doctrinal madness.

Now let's get this clear. The chancellor is not in charge of the economy. He's more like a shepherd in charge of a very unruly flock. One of several shepherds, acting against some vey large wolves. However his actions do matter. The conventional wisdom in economics says that a budget deficit induces a trade deficit. This is because higher spending at home means people have more money to spend on a greater amount of imports, thus creating a negative trade balance. Last week in the commons, Brown was blaming the entire credit crunch on unruly bankers while Cameron was blaming the whole thing on Mr Brown. Neither was correct but Cameron more so.

Just as the the trade deficit is influenced by government spending so are conditions of credit. If the government is spending profligately (and let's not forget this is only the spending we know about) borrowing huge sums year on year, then so will the people. Borrowing in the UK and abroad reached such hysterical levels that one has to have some sympathy for bankers given such vast amounts of debt, that they wouldn't go hog wild.

The bankers hysteria reflects that of the people and that of the government. It cannot be meaningfully separated.

The crisis is broadly the result of financial markets losing touch with reality, just as consumers and government have done. This detachment is now being made plain in the environment and social breakdown. There is a clear and honest need for the economy to re-embed itself in the workings of a more desirable world.

There are signs this is happening. Consumers are leading the way, and as elsewhere commented, the ensuing regulation of financial markets - although it may take time to get right - is a most welcome development.

There's a move towards authenticity. I heard recently of the move from an information economy to an "economy of meaning". It's a move so subtle as to be completely all-pervasive.

We are in need of thinkers of economists and thinkers to reinterpret this situation for us. Just as Keynes reconnected economic theory with the requirements of relaity, we need academics to throw off the old paradigms and see without such restricting goggles. For it's the way the world is going anyway, economics would do well to catch up.

Writing elsewhere

Hi folks - you can see my freelance work here.

It has an attached blog here.

And the rest of my creative output is here.

Soon to be here.

End of plug.

S

Fluffy's verdict on the financial crisis

...it's going to get a whole lot worse for the better.

The flee from capital invested in stocks and dodgy derivatives is not a temporary slip in trust - this is a systemic shift in how people use their money. With banks nationalised, hitherto profligate highly leveraged practics will no longer be possible, politicians will remind banks just how much they owe them (ie the public) their lives.

Why are people fleeing high finance and what will replace it?

We're moving into an economy that no longer wishes to be decoupled from the world's real goings on. People are very much in anguish at what they see the current system is doing to the Earth and their fellow humans. Financial instruments will have to more closely track the movements of not only resources but also values and this is why the nationalisations are so important (and they will become more complete as it is found that this round of measures has not worked).

People are looking for values to be dealt into their economy. Witness the boom in Fair Trade, Organic produce, CSR in just the last FIFTEEN YEARS and you'll see how folk desire to do good with their dollars. But they don't want a return to socialism. They relish the freedom the market brings, socially and economically, but are getting wise to the fact that it only deals in the values that are built into its infrastructure by the powers that be (ie the players and institutional rules).

So the new market economy is going to look a lot shinier. Governments will less likely reign in financial practices but make sure they run along friendlier lines.

A large part of the change will come from the people that run these companies - a more socially, environmentally and globally aware generation there has never been and board rooms, governments and populations worldwide will see very different complexion in the next 10-15 years as baby boomers die, become less politcally relevant.

I can't say what these changes will be like but we can imagine stocks traded with an environmental, social component rolled into each one. These latter two will be assessed and priced just as the market does today and the very act of doing this will increase knowledge in these areas which is still painfully thin (see how much the credit crunch has attracted column inches compared to the food crisis which has thrust 44 million more people into malnourishment taking the world total to just under one billion).

The key is that wider concerns are dealt in to every transaction. We're not going back to mud huts but neither will people tolerate the run away recklessness of the last 28 years since dear Reagan came to power. Making sure the market economy continues to function by including as much of what we value as possible will go a long way to bring the benefits of its efficiency to a wider social and environmental base.

Reagan's acolytes

Peter Morici, professor of business at the University of Maryland, said: "Things are going to get so bad something will have to be done in the next few weeks. Banks will sink, credit markets will seize, the economy will go into something much worse than a recession."

The Guardian

The above article suggests that the Republicans rejected the bailout because it riled their beliefs in Reaganesque liberalism.

How completely ridiculous. To stand aboard the sinking ship whining about a doctrine that is largely responsible for the crisis itself is woefully out of touch.

Ideology doesn't sit well with FE. Tends to blind rather than illuminate.

Working in fair trade agriculture

Thanks to Simon for inviting me to contribute some thoughts to his excellent blog. As my first post I'd like to share some thoughts on my experiences to date working with the Association of Organic Producers of Sangria (AOPS)*:

For the uninitiated, Fair trade is an increasingly popular form of exchange, especially for buyers in Europe. It is managed by the Fair Trade Labelling Organization (FLO), who allow producers to display the fair trade label on their produce in return for meeting a set of standards for labour conditions, environmental performance, and most importantly distributing a premium to be paid by the clients in a way which benefits the producers as a community.

Much debate exists about whether fair trade is a form of "charity" (ie. the buyer donates to the seller a bit extra to improve their quality of life) or if it is in fact a new way for producers to compete in the international market (ie. the producer offers to guarantee certain standards to its workers in return for higher payment from the seller). The answer is of course that both are true, and thus arises the hope that fair trade may be the way to create "a market with a human face." But what is the balance in reality?

My experience in four months working as an intern in post harvest production and financial analysis amongst other things (including acting as a tour guide!) for AOPS has shown me that in the eyes of this particular Association, the "charity" side of fair trade is more important than the "market" side. In a community meeting in Mamonito, high up in the mountains of Sangria, the president of the association asked an associate (producer) "has AOPS helped you this year?" The associate replied no. Then the president explained to all the gathered village members who have worked with AOPS for 20 years how fair trade works, that AOPS is different from "the competition" which simply wants to buy the product at a price higher price in order to break the association and then reduce the price, and that every time a producer sells to AOPS they are receiving "help" because AOPS is providing a market for their produce, and is "helping" further by providing the communal funds which last year were used to provide... a trailer. The producer was again asked if they had received help. He nodded enthusiastically and illuminated smiles filled the palm thatched community building. But had the message real sunk in? And was it believed?

Producers are asked to be loyal to the association because they are receiving "help". But unfortunately for AOPS, in the four months that I have been working in their offices in Pat Pat this deal has not been selling too well. In both bananas and cocoa, producers are increasingly selling to the competition and every producer I have spoken to sees the dilemma not as a moral one (of loyalty) but an economic one- who is offering the best price? And the immediate answer is not AOPS.

In economic terms, this can be viewed as a classic "prisoners dilemma"- in the long run the associates would be better off if they sold to AOPS, maintaining the association and the fair trade premium and thus making sure everybody receives a good price as well as non price benefits such as trailers and other communal goods (a previous premium was used to purchase school grounds). But the producers have a short term incentive to "defect" and sell to the competition at a higher price. Economic theory predicts that the outcome of the "game" will depend on the degree of trust between the producers- a rational strategy to maintain the association depends on having a credible belief that others will do the same. In the case of AOPS, it appears that producers don't even know what they are supposed to be having trust in- the basic information about how the association works is not widely disseminated. Or perhaps just not believed.

I think this particular dilemma raises issues on a number of levels. The producers can hardly be criticised for being shortsighted in selling to the competition if they are genuinely unaware of the benefits AOPS is offering. But could it not also be the case that the benefits are known (if a little vague) but are simply not considered worth waiting for? What is a share in a community owned trailer worth in comparison to the possibility of having a little extra money to repair the motorbike lying in disrepair in the producer's own backyard right now? And why should the producer be made to feel like a charity case for selling the product which they have produced with all their own effort at a price which isn't even the best available?

I still believe that fair trade can work in theory. And that it can work for AOPS. But perhaps producers need to be offered a little more than a far off promise of a communal "gift" and some of the harsh economic realities of competing in the market need to be addressed for this to be possible. But if the competiton really is a on a vendetta to break the cooperative and then lower the buying price, it can only be by creating trust and communality between the associates that AOPS can survive.

*Names have been changed to preserve profesional confidentiality. But factual details are correct to best of author's knowledge.

Lunchtime rambler

I like this.

It appears that when leaving a country it heightens the desire to give greater scrutiny to its politics. I never gave an election closer attention that that in 2005 when I lived in Canada and now newly arrived in Amsterdam, the blood is boiling again for some good old labour/tory swing around.

David Edgar in the Guardian links the Tories 'broken society' campaign strategy with a long line of Conservative strategy, showing that's it's little different to that employed in the 80s and 90s.

And let's make no mistake, Britain's current social problems are of Tory manufacture. By making the economy the centre piece of British life, rather than an important aspect of it, Britain ended up with an pretty good economy, but pretty rotten society.

We are spoon fed by our jobs, unable to work out what the hell to do with our time other than throw cash at it, sucked dry of creativity by numbing operations then wonder why it is our children throw thensleves about lost and angry. The money man came to call and we let our families and communities drop.

It's always been the argument of this blog that the economy and society cannot be separated. Further,it is more and more apparent that a strong cohesive society is necessary for a good economy to function. America's Golden Age was more underpinned by its commitment to redistribution and investment in education than it was to market forces. Reagan's legacy was to systematically plunder this wealth (in the form of monetary and social capital), let the market rule in the misguided belief that this was for the good of the people. It is not, the market takes into its bounds what is good for the market, however short term, depraved or economically unexpedient that may be.

Why? because it's people that run it. people making phone calls, making links. Economic specialisation played a large part in breaking these down. We lost a diversity in social interaction thus making our ties more purely economic. Think next time you need a plumber why you're unable to contact the one who lives two doors down from you instead of consulting the yellow pages.

Thatcher ensured that the economy wrote the rule book, as such stripping it of its legs, the basket in which it functions, the creation of its very own aggregate demand that isn't borrowed on a million credit cards but through human ingenuity and satisfaction.

If the Thatcher built the house of cards, Blair came along with a fine water spray can and made sure it got all soggy. It was the return of government. Hugely involved and taking care of our money in quantities that defied economic sense. Any sense in fact as it was raised in ways so devious and unaccountable that it was impossible to know from where the money originated. Unaccountable in its raising and so too in its spending. Private Finance Initiatives, privatisation and increasingly centralised procurement policy meant that projects were handed out to a carefuly selected few. It was government-sponsored industrial concentration. More money ending up in fewer hands - the tune of the so-called glorious decade 1995-2005.

It was the tune the whole country sang. Finance and non-doms entered the scene, both getting disproportinately large say in how the country was run with a disportionately diminishing contribution. The elite was doing very well indeed, bankers included, which led it to a curious attitiude when dealing with credit:

"Sure - money's cheap. We'll be fine."

And so vast sums were doled out to people who could ill afford it. In our arrogance we believed we were so well insulated, so much better thought out than our ancestors that we were immune from the bursting that characterised previous delusions.

For all the political blame laying, it is overstating the case to say this was Thatcher's or Blair's fault. It's just that they so purely characterised the spirit of their era that it seems the whole situation is created by them. Truly we get the leaders we deserve.

Suffice it to say, the Blair era took Thatcher's weak legs and loaded it with a ton of concrete. We're now stuck with an economy that's done very well for corporate concentration but enjoys little of the ingenuity enjoyed of having small to medium-sized companies (SMEs) easy to set up, and smooth to run. These companies act as the mortar to the rest of the economies bricks. Moreover the smaller communities involved in running them mean that their workers are, on the whole, happier, more involved in their work, more motivated to generate it profit. Speak to the analysts at Accenture to get an idea of the stress and inhumanity of working for a multi-national (not to mention a management consultancy, which must be left for aother rant).

Back to the point - SMEs are now so overloaded with regulation that can be easily sideskipped or complied with by the big boys that they're been sucked of ingenuity.

For that it is most certainly Blair and Brown that are to blame.

Fiat Healing

"The economy is not healing itself." *

It's the economy stupid

"A recent study showed that more than 90 per cent of recent conflicts were resolved by mediation, not victory on the battlefield. And of course failure to generate durable peace agreements leads to a resumption, all too often, of war. Conflict costs Africa an estimated 18 billion dollars a year - a figure it can obviously ill afford as a region."

Lord Malloch Brown, UK Foreign Office Minister, in a statement to UN Security Council - gaarrrr!

FE kicks back

In anticipation of a reboot of FE and the mouthwatering prospect of Anglefish joining the team. I thought I'd write a little on what FE is about.

Erm......

1) Economics means people dammit
- Economics has a disastrous propensity to shred any and all humanity from its theorising. This is especially evident when using ita tools to make conclusions about people subjects. Cf Steven 'Freakonomics' Levitt and Gary Becker's risible attempts to summarise life in a series of desitute precepts that do nothing to delineate its colour much less generate useful conclusions. Even if the problem is not theory itself, the statistical gymnastics that is applied to socially generated phenomena strains essential humanity from that data. It loses texture, spice and has a hideous effect when reapplied (or inflicted) gentle men and women.

2) Managerialism is the opiate of the people
Codependent nature of human relations does not rub with overpaid, self-inflated tossers told they can rule the roost. New Labour's failing has been lack of recognition of this fact.

3) Trust the people and they will provide for themselves and trust them enough to help them!
This wonderful paradox gets it about right. Agan its a slant on managerialism and the dystopia propogated when people are treated as units not souls aware of their own position and able to make good decisions. A lack of trust or faith in each other is a major failing, not only of British society, but its economy. Trust breeds social connections breeds productivity. (You'll note I'm happy to return everything to the economic in order to show how socially defined the entire economic process is so as to be indistinguishable from it.) Part of breeding trust is to provide social stability through insulation of the people from raw market processes, the latter being nothing but a chimera and a plaything for the economically powerful to get their way. Insulation consists in: education, arbiting approprately between corporate, financial interests and those of the people (ie goddamn spine!) and (gasp!) SPACE for people to breathe - a certain gp of non policy for communities to flourish. Community activation policy also helpful to this end.

It's a liberalish standpoint. Left Libertarian is the best term I've found to describe it: a recognition that what matters are peoples substantive freedoms measured by life as its actually lived - not an excuse for laissez-faire that far from being hands off result in a big hand up and crushing loss of empowerment for everbody but the very very few.

Much of what is written is a railing against the limitations of theory in general and for that matter overbearing policy which acts to restrict lives which are simply beyond definition.

Sing me a song of a midnight waltz? And then theorise it and you'll see what I mean.

Heroes: Karl Polanyi, EF Schumacher, Amartya Sen
Villains: Becker, Friedman, the entire political class (with the exception of perhaps Tony Benn)