Political Economy

Goodness me it's been a while since I've dusted off the fluffbooks and made it over here. I've been writing for sometime as Arjuna's Octupus which you are welcome to take a look at, but I thought it was time to get back into the Econo-back seat and deliver my take on the economics of the last years.

First, Labour did not ruin the economy. In some respects they made it more broadly-based. Look at the quality of life across the UK that people now enjoy compared with the mid-nineties and it is astonishing. Even working class dole getters have mobile phones and can eat.

They raised the bar of the poverty trap but it is still there and more mercilessly entrenched. Tax credits make it extremely difficult to earn more than a particular level, but they did raise the bar.

People on the whole got richer. But they also turned the heat up on a system that rewards the very rich. More people got richer than they should have. The reason that Labour saw Britain's woes as a lack of management. Managers were implemented at all levels and corporations levered in to supplant public administrators. This was under the guise of efficiency but in truth wafted up vast tracts of power to people not acting in the best interests of the people. Banks, as we have seen were a great sign of this shovel up and do over culture.

The wealth - technically income - was not spread wide enough. Come a wobble the wealth upped and left and so the economy wobbled.

Economies are strange things. They are run by people but those that run them believe they are run by levers. By run, I mean the actual running, acting in and dishing out. When you ignore the people who are running the economy, which Britain - and almost every industrialised country - continues to do, you run down the lifeblood of the country. I'll come to some proposals on restoring this lifeblood in a minute.

To repeat, Labour did not ruin the economy but they did run it dry. Politics of the manager that saw systems instead of communities that could flourish. Social disturbance was an outgrowth of this. People ignored become violent, rejects of the system that ignores their vital being. You can't combat that with police officers or surveillance but with an assault on people's sense of worth. The kind of assault that leaves them gasping and joyful with each breath of life. The Labour government did not deliver this, and neither will a Tory one.

In strict economic terms, Labour did OK. What happened was that spending was over-extended for longer than it should have been and there is some intelligence in the argument that says they should have concentrated more on system reform - or allowed innovations within the system to occur - than their politics could allow. In this sense Blair may have been on the right track, were in not for the ridiculous terms of PFI agreements and their implementation. This is a change of hear from some of the old posts on this blog.

The Tories may run the economy in a responsible fashion but they will completely ignore the reason behind the collpase, which is social in nature and in deep need of healing. There is not a rupture, but an overload of sclerosis. And the sclerosis comes from a deep loss of freedom.

If you build a system in which to run people, to contain them or administrate them, the people will show you its limits fairly soon. If you give them no running of their own country, if you keep this between your self and an elite, people will start to revolt. But they won't see it as a revolt because the system you have created is so intricate as to sway their attention.

The story of British society today is boredom and social breakdown. The breakdown is shown on horrendous estates, petty crimes and people disenfranchised from their neighbours. The rise of the BNP is typical of this. The boredom is shown in hysterical hedonism, binge drinking, obsession with entertainment and little room for real expression that is not economically governed. Those that try get closed down or ignored until irrelevant.

Why are the people bored? We told them their life was worth nothing but a job and an injured community.

Why do people seem so happy? We told they were managers and they believed.

The system is running down - through no fault of its own, it was elegantly designed', but through its components, the people rusting up. Some people have noticed and are living from a deeper freedom than any system can contain. They move in and throughout and away from the normal boundaries. You see them through the lights of their eyes, their endless energy for innovation and ability to walk inexplicably when there appeared a chance for greatness.

They are not Ken Wilber, Paulo Coelho or Yann Martel or any Booker prize winner. If they are a yoga teacher, they have kept quiet.

The life-blood of the economy will be restored through participation. The lifeblood of the economy will be restored through people having a say in the real factors they hold as valuable. Communities should not be told what happens on their land. Anyone working on that for a civil purpose, such as a company working on it for greater returns of efficiency - should be beholden to the needs of the community as well as those that they serve.

Education should be run in partnership with community boards. Healthcare broaden its vision of well-being. Companies should be managed with more votes. Old people's homes should resemble less cattle farms and more places with dignity.

On the subject of older people. More respect should be given to the wisdom of the elderly and especially Elders people worthy of the name. For this reason the House of Lords should stay as it is, a guarantor of enlightened democracy.

Community participation through networks and overlays of communities. Of course some people need to administrate at a higher level - governments and collections of nations will continue to exist but they will be beholden to the people at all levels. This is not the case now and I doubt has been in any real world democracy. So far it's been a myth.

The most stunning fact of economics, which is too large to include in any theory, is that the strength of economies is defined by their social quality. The care and attention needs to be for people and their communities, not revving up the engines that drive them into the ground. This has been the practice in Britain for too long - social strength only being tangentially improved by economic focus.

That focus now needs to shift. It has been the contention of this blog that in people's minds and hearts it has shifted, but the system is now adjusting to this deep shift in people's psyche. Economic consequences are now no more an issue. The fate of people is.

and on...

there's something of contribution in it - the quality of measurement that makes it meaningful, and valuable

It needs to contain the totality of human contribution in it.

It needs to be more than a physical object, or not reduced to that either by sloppy mathematical handling.

It needs to represent value - my will and how it is associated with the entirety of all wills.

Objects will then follow, but in more pleasing streams.

Contributing to each other and us, as we begin to identify what we share here on Earth. But the objects are now serving us - people, communities, animals, nature - not dictating how we go about our business - as they have hereftofore done too much.

Martin Buber knew: [quote to follow]

The definition of a values-based economy

Interesting - as one thought follows another - that the measurement of value question should bring back into the fold another concept I have toyed with: the values-based economy.

It seems to me, in these times of unfolding consciousness worldwide - that we are better able to appreciate our place in the world; the objects we use day to day and their place in the world ; the relationships we have; and the place they have in our lives too and yes, co-mingling across the world as well.

You see now the purpose of an economy?

To allow these to flourish to the full and to - serve each other.

The values -based economy to which I have referred is therefore an economy whose participants understand increasingly the relation of objects and people as well as the thoughts and feelings that constitute the same and reflect these values in the choices they make.

Hence - the rise of organic, fair trade, worldwide peace and environment movements - which small fry in themselves constitute a shift of realisation of who we are.

And it is not who we thought.

Peace - maximally,

Fluffy

Measuring value

It's been quite a time away from these walls since I last professed an aim to weave together that will produce the economic models.

This is not surprising, I get easily distracted and have found a variety of projects with which to busy myself.

The ideas, however, are flowing again: much inspired by chance events and the reading of the Economics of Happiness by Mark Anielski

It seems vitally important, after years railing against the conspet of measurement, that we go ahead and do it, but do it right.

The case against measurement is easy- it describes in certain limitations what is really going on. A lot needs to happen before it is illuminating, both in the mind of the observer and the person producing the study.

One of the problems of our age - if I can be so grandiloquent as to name one* - is that measurements dictate our moves and it pains us to admit we have become slaves of the machine:

to produce to specifications, not dreamed by a scientist, philosopher or our own good sense.

But by other numbers. And it is pulling our planet, our society and great civilisations apart.

The rumble you have heard or experienced this last economic year is barely a whisper.

But enough of that. We are people of progress, advancement and resolution on the face of the quake, and the fluffy economist is nothing but an optimist.

So - the measurement chink of light that I saw is that we make our measurements better - so they circumscribe more juicy stats to give us an idea not just of material, nor reduce genuine feelingness or knowingness to a material base.

What is required are measurements that reflect 'real value' of us as beings in the world and our rightful place in it.

It requires a certain trust of our fellow and their impressions and it needs more than soundbite surveys, but questions that listen.

Dear Reader, my thoughts have not got further than this. The next question is:

What qualities does a measurement need in order to reflect real value?

I have an idea the answer will blow apart the question.

Comments please!

Fluffy


* as well as so grandiloquent as to say 'grandiloqient'**
** and then use grandiloquent twice in the same sentence***
***I'll stop there

The new Europe

Hear well, good people of Earth - the EU has now shifted decisively out of the hands of the its people. We demand a fully elected commission, president, foreign minister and Parliament before matters are taken out of our hands.

Here - the people have spoken. This is what is happening.

The European Union formally appointed Herman Van Rempuy and Baroness Cathy Ashton as respectively president and high representative of the EU. Critically, the appointments were made via recommendation from the Parliament and not democratically elected heads of Europe (see the Economist). While the EU parliament is elected its workings are still remote and its effectiveness as an elected body - ie the quality of representation it provides - are questionable.

It is vital that the EU represents its people and is governed by directly represented individuals, responsible to the people and not heads of state - it's another layer removed from our hands and subject to more manipulation.

There are those who argue that no democracy is truly in the hands of the people, but which would you rather have? Some say or no say? Exactly. Please get writing to MPs and especially foreign ministers. This is moving extremely fast and the constitution being cemented now - for it will swiftly be followed up - will have an impact for decades and centuries.

I love Europe. I feel as a continent we have a lot to offer ourselves and the world. Not in an imperial sense - which Europe's trade behaviour tries to impose - but in a benevolent way of encouraging development and promotion of well-being.

But we are asleep. In resisting a super state we run the risk that now it is formin of having no say in how this collaboration occurs. So please, use whatever channels of representation you have to urge the discourse in the direction you feel most appropriate. We do have power, and must use it for the good of all.

To sit aside deprives us of responsibility, and finally freedom.

Fluffy out.

Hollywood, my love

Hollywood, my love

For you to weep

Is the tragedy of forgotten wishing

My love, my love

For you to weep

Is the sorrow of Civilisation dying.

The better for tomorrow

A letter to the tragic man

Dear Gordon Brown,

Thank you.

You have displayed vanity and carelessness in dealing with the press, not great sins by any measure, but ones punishable by a great deal of booing.

I like you. Your policies have been fair and well thought out except for the bit when you kept spending during boom time, mortgaged off our public services and introduced redistributive policies that buried more than they lifted out - this was was not the point:

You did your thinking, followed procedure, cracked a few skulls and finally your hour came.

Except it didn't. Sitting on your chancellery toilet you could not have dreamt of the power you would actually wield, over health care, academics, the press, minor niches of world important events. We were finally to get the sensitive philosopher king we had asked for. Except he came with big clumping fists and a strange propensity to open his mouth after every sentence, perhaps drawing breath, perhaps waiting medium-like for the ghost of William Ewart Gladstone to speak through him and save you from your next verbal thud.

You succeeded a magician. A nasty one, a callous one and to all intents and purposes a shit and while we know you got him where he is today by graciously stepping aside, a magician he remained. Whirling you in circles and wowing the World except for his whoopsy in Iraq.

He left you with a seething pile of electorate who were ready to take the scalp of anyone who came after him. We need you, the great grey man, a man of extraordinary abilities but not enough vim and polish to make you the final article. You are so painfully one of us - the Great British nearly man - we just have to tear you down. Blair took us away from ourselves - poof to all that talk of driving Europe and dancing on the world stage - and in bringing us back it's necessary that we torture you mercilessly with all our own self-revulsion.

You are therapy. Please don't take it personally and commit suicide.

We just would not know what to do.

Yours Sincerely,

The Fluffy Economist

Narrowness of Greenspan

I find Greenspan's view so narrow. The idea of regulation is to admit human nature and guard against it with appropriate systems, doing this well and with balance is of course not easy, but he's essentially putting his hands up and saying "We're all greedy bastards so let's go fuck ourselves again. With chainsaws. And why not up the ass?"

One aspect of regulation is that it limits the role of speculation in the economy. This is healthy. Why should 35 year olds looking after the interests of the quality of their next family holiday determine how so much of resources are allocated. Economics, after all, is about incentives and the current (soon to be former) system gives these guys too much of a strong play. It's such an imbalance, I find it amazing that Greenspan continues to support anti-regulation. He's no doubt a man with exceptional qualities but his restricted view speaks of precisely the fuck up that maybe not individually him, but his generation presided over.

It's so good they're on their way.

An article by Naomi Klein

John Bricks was the slipper on the lap dog of a puppy when economic ruin came and savaged his last gasp of heper winter. $250 billion dollars have caught this last gasp of chumzy weasle and left a hapless sergeant with choking gasp of pain.

Governmental corporations built the sway side and no one was left to breath in Tanzania, Frurtania and other classless objectifiers given by society, the Queen and all her kin. We've been rosy-topped and shallied along and meanwhile there a throat hold on the 10.22 at Doncaster that 7,000,000 boat holders are going to miss off the coast of Gambia.

This can only point to one thing: the government owns you and you lazy son of a bitch are too stupid to follow all the words in my column.

:)

A BIG deal

In time of economic, social and environmental disintegration the openness for exploring new ideas has never been more fertile. One of these, the basic income guarantee (BIG), has yet to make an impact on public stage and this article is an attempt to bring it and its benefits to a greater light. My own experience with BIG was as an undergraduate, where it formed the basis of my thesis in Economics. My studies convinced me of the power, simplicity and benefits that implementation of a BIG would bring to the UK and the global economy and from the basis of a more equitable and just society.

What is a BIG?

A Basic Income Guarantee, known variously as Universal Basic Income, Negative Income Tax and Citizen’s Basic Income, is a monthly grant given to every person in society regardless of age, income, employment status or nationality. It would replace, fully or partially, current benefit systems and paid at the household or individual level. Its aim is to provide a certain level of income below which a civilised does not tolerate. As such it forms the basis of economic and social freedom that current systems of redistribution lack. Obviously, a BIG requires a greater contribution from the richer sections of society.

The current UK system

The current benefits system in the UK is based on tax credits, transfers which depend on the beneficiaries current state of income and/or social and economic arrangements, such as single parents and those out of work. Its flaw lies in its division of the deserving and the non-deserving poor, the administrative tangle this produces and the way repayments are made.
Dividing between deserving and non-deserving poor requires definitions most of which are hangovers from the 19th century. Workers and single mothers are favoured while those out of work or non-nationals are believed to be less worthy of society’s support. In practice, these definitions mean that many people fall through the gaps and rather than being a tool of supportive integration, the benefit system fuels stigma of those who receive benefits and marginalisation of those who don’t.

In part stemming from these divisions, the administration of tax credits is cumbersome. Over and underpayments are frequent and the system of means testing adds confusion, complication and exclusion.

Finally, beneficiaries are required to pay back tax credits as their income rises on a sliding scale, so for a one pound increase in income, 35p of credit is withdrawn. In theory this sounds pragmatic but in practice households receiving a number of tax credits, for example working tax credit and child tax credit, often have a repayment rate of over £1 per extra £1 earned. This punitive so-called Effective Marginal Tax Rate contributes to just the sort of poverty traps tax credits are supposed to eliminate.

Justification for BIG

Proponents of the BIG come from a broad church. Free marketeers – most notably Milton Friedman, prominent Keynesians and the UK Green Party support it as a way to compensate and create a income floor below which none should fall.
The current free market paradigm contains a paternalist instinct that economic expansion requires people to be looked after but chiefly holds to the idea that we earn the incomes we deserve. An alternative view, and one that justifies BIG, is that the market system inadequately represents the interdependent way in which income is generated. Structural deficiencies define that bankers are the most deserving in society, whilst nurses, teachers and creative class less so. A BIG is an acknowledgement that whatever one’s role in society your contribution is equally valued.

BIG benefits

The most striking feature of the BIG is its simplicity. Society designs an income floor below which no one should fall and pays this to each individual or household regardless of social and economic status. Economic poverty would cease to exist and the dependency on the material as a definition of well-being would vanish. BIG’s simplicity would also solve the current administrative miasma and give economic recognition to each and every member of the population.

The economic freedom generated by a BIG would allow society to focus more on its social problems and give people space to pursue activities that are less economically motivated. As a result, communities and social projects would be given a solid basis to thrive as people defocused from purely economic activity.

Employment impact

One of the criticisms most quickly levelled at a BIG is that people it would be a boon for the unemployed and lazy. There’s no doubt that having a bit of extra income would decrease people’s desire to work but as described above, this is in itself desirable. What a BIG will not remove is the human need to create, have purpose and also find social inclusion in work. The criticism stems from the outdated and mistaken idea that the poor are lazy rather than the victims of an unjust socio-economic apparatus. One of BIG’s benefits is that the socio-economic stigma created by the current benefits system will be removed, allowing the poor to make a greater contribution to society.

Practical attempts

One of the most forward leaning attempts at implementing a BIG comes from the Nixon administration in the 1970s, who conducted a series of experiments on a negative income tax, ironically involving Donald Rumsfeld. Apart from the economic benefits the NIT gave experiments participants was the change in behaviour. A permanent rise in income meant that rather than splurge on colour TVs, participants spent their extra money on welfare improving items such as better accommodation and labour saving devices. Around the edges of the experiment were also noted substantial improvements in school test scores and better nutrition. The holistic improvements of NIT were therefore verified.

The NIT was at one point given serious consideration by Nixon but academics are still at a loss to explain its lack of progress beyond experimentation and the speed at which it dropped from the agenda. We can only guess that the tax required to make NIT/BIG worthwhile was found at the time to be appalling.

The state of Alaska redistributes its oil wealth as a $1,500 grant to each household each year. While an ideal BIG would be higher, the grant is said to contribute to Alaska’s status as the most egalitarian state in the US and gives households a much needed boost to spend on winter coats and heating, ensuring a basic standard of living for everyone to cope with the harsh winter.

Affordable

A UK BIG would realistically be about £50 per week or £2500 per year for each individual. Calculations by some highly regarded economists in 2002 found this level could be funded by a flat tax of 33%, which would also provide for all other commitments in the then current budget. The calculations showed that a BIG is not only affordable but could lead to a better deal for richer members of society. A progressive taxation system is not only more desirable from an equity point of view but could also increase the BIG’s affordability.

What would need to change for the UK to accept a BIG? Firstly, outdated stigma attached to redistribution policy that brands the poor as undeserving or worthy of only our small change and secondly, an adjustment of how we view activities in purely economic terms.
A BIG would have a direct social and economic impact in the UK and, by removing our dependency on the material justification, could well unleash creative and community-based activity would no doubt produce its own favourable economic consequences, albeit nested in a more inclusive, supportive and just environment than is currently the case.


Those interested in following the BIG debate could take a look at US BIG Network and Citizen's Income in the UK.

Carbon capitualtion

This is no new victory.

We see a repeated retreat from wrong-headed thinking and advance again with more wrong-headed thinking.

The Earth is being plundered, we've dug too much of it up so now we think it's a fantastic idea to bury our carbon. A solution, certainly, a postponement of tough decisions, though in itself something of great damage.

To pump gas into disused oil and gas fields. Has anyone considered the tectonic impact?
Or the fact that poison is now being pumped underground? Will other gases from coal be released or pumped underground too and, wait up a second - we're still using coal, still digging from underground things that should have lain there for centuries.

This Earth is a strange and complex thing. It's built in ways we're not given to understand. One thing is sure, it doesn't like the digging. Another is, it won't enjoy having poison pumped into it.

Don't come with these cries of "But what else can we do?". Plenty. Technological priorities should be carbin free not carbon captured or scrubbed. We can be fossil free in fifty years, we just need to keep moving, keep researching and stop piling effort and energies into half-answers that leave us with a greater problem.

I've written previously that carbon is not the issue, but a shoe-horning of a much wider substantial debate about where we are going, how we want to live.

This by the way, extends to carbon trading, something I'll write on again. That a problem which has commoditisation at its root is solved by further commoditisation - of the air, people, of the air! - shows similar wrong-headedness as that described above. Clutching at straws while the whole ship goes down.

You think I'm dramatic? Take a look around!

Radicalism has never been more necessary. The time for free-thinking is come.

(There's some here)

A sober post

There was funny time when Britain was doing really well, the economy was singing and Public Borrowing was still at 3.5%. This was about 2 years ago.

I would like to see some figures on how much of the deficit is going where. A lot must be from falling tax receipts and rising benefits and there are some job creation schemes but a huge chunk of the rest must be from bank subsidies.

This is entirely the wrong channel to go through, although I accpet this wasn't easy to see three months ago. Banks are moving from the central mechanism of the economy to one of its servants and filling them with cash is like piling bricks under the high side of the leaning tower of Pisa.

There's got to be a more decentralised way of getting money into the hands of people and easing the massive structural shift the economy is experiencing.

Oh wait, there is.

Genius!

"The G20 agreed to allow the IMF to create $250bn of Special Drawing Rights, its own currency, comprising dollars, euros, yen and sterling, boosting the foreign exchange reserves of every country. Most of this will go to the big economies, but poorer countries facing budgetary strains will gain new cash." [link]

From the same article:

"Only about $80bn will be going to all the middle-income and poor countries combined [of the $250bn]"

Fluffy's take on the financial descent

We're really falling now - yet to hit the bottom and this frightens the life out of policy makers.

SURELY they must do something. SURELY!!!!

They scream and so do the followers and counter-arguers and media. Oh the media! Whipping up a storm over a single gilt bond auction that was only slightly undersold and THEN the UK government reacts and backs away. Timid and uncertain.

It's no problem being uncertain - the last ten years we've gotten away with kidding ourselves that we can be even as species, climate and food sources are knocked away beneath us.

Being timid, however, can only further the panic.

So what would Fluffy do?

Nothing - hold fire for the time. Money is moving in ways that no one alive has a clue about. Repeated stimuli will only have the effect of pouring money into the sink - and by sink I mean that referred to by chaos theory, the energy that literally goes to nowhere. It will induce stagflation and saddle us with debt for years to come.

This is infuriating for governments, press and practically the whole conversation. BUT we can't DO NOTHING!!!

But you did do something and it did nothing so now you're only tempting a bigger nothing than you've earned before. And if you think the world economy is bottoming out - haha!! - you're wrong.

The structural change that's underway is harking back at LEAST to the creation of the inter-related market mechanism, typically set in the 17th century. If that's the case we've got a whole lot more cleaning out to do. the more apocolyptic and mystical trace its origins to Babylon, when man first looked at the Earth and saw a competitor not a jewel.

The economy - the set of inter-relating structures that channels goods and services - is moving to another footing. More in keeping with the time and mood of the people and these people have become a little less greedy.

The current system is set up for greed - for infinite accumulation and one that's out of touch with the needs of the planet, its creatures and the people that walk on it.

Some folk began to realise this and spend their money differently. It's only so long that the old system, which went beyond a joke with Reagan/Thatcher, could keep up with conscience-driven demand. Its rails simply run the wrong way. One day I'll get round to describing how this is actually done but hopefully the concept is well-drawn enough to be understood.

Once the shift occurs in people's actions (and it's more of a trend whose consequences are now becoming fully known) it's only so long before the structures that were built to house people's previous actions become obsolete and crumble. Evolution is possible but if the previous actions were well set, it's crumbling that occurs. (This is Schumpeter's thinking who, like Darwin, hit upon a theory far more powerful than even his galactic brain could surmise)

The current system is built on greed and therefore banking. Banking depends on infinite creation of money and people to whom to lend to. The latter are charged for the money they borrow - ostensibly to cover risk - but the effect is that the banking system charges cash-strapped people for their credit and enrich themselves beyond the dreams of avarice.

For this reason 250 families own 45% or the world's wealth. Not income. not the golden breeze that flutters by, but long standing, ill-liquid, stuff that survives for generations wealth. These people make Bill Gates and Warren Buffett look like minnows. It's also the reason the creation of perpetually unevenly rewarding system goes back to the founding of the banking system itself - again a 17th century phenomenon.

What's peculiar about our time is that the dream began to believe itself. The bankers actually thought they could deceive and create money our of leaves. A little bit of borrowings OK but the extent of self-delusion - and I genuinely think they thought they could away with it - that led to our globally over-leveraged economy is staggering, frightening even to the level of being humorous.

So the banks are based on greed and the people no longer wish to be greedy - banks must therefore fail and they know it and are therefore holding on to every last scrap they can. Opening their books to each other now would reveal such failure to make the current situation seem like a haven. They are all in the shit, for now they struggle on alone.

So what would Fluffy do?

Restore money to the people. If the economy's moving along new lines there's no point the government or banks deciding for us which way that's going to be. Have some faith in the people and let them spend or save as they wish. Allow them to set up community savings trusts and invest in local initiatives. Support them in this with a light touch.

The idea is that people are waking up quicker than the media-phased government is allowing them to. Give the responsibility of their own decisons. Give them a sustained increase in their income for the next four years and see what they do.

It doesn't need to be much - maybe 40 pounds per month, though the higher the better and should be in the form of a lump sum not a tax cut, which disproportinately rewards the better off.

The first effect would be to limit timidity. The second would be creative redistribution as the generally unselfish people - who have long been thought to be otherwise - invest in their communities and not wars and over-extensive surveillance systems.

Also give them a vote on how government money should be spent. Health, education or war. make the each of these more representative and less conglomerate and...

for fuck's sake de-privatise education, health and other public projects. Stop the mockery of a belief that in an intention-driven universe (and it is my purpose to let the cosmic influence my thinking, it does anway so let's wise up to it) it is possible to build the best possible health or education when the primary intention is to make a profit.

It's such a dim view of humanity we have shovelled down our throats when we told we're profit hungry soldiers marching to the drum of the banks. It's bullshit and they know it - time we knew it too.

Put money in our pockets, let us show you the way we're going to go. Don't be scared we voted for you.

Shame you're too blind and stuck up your own arse to see clear as day your tired thinking is over. Time for the creatives to step in and wipe the floor with you. This shift is bigger than even old Karl could predict. All that is solid really is turning to air to the extent that even the socialists could not build structures to support and sustain it.

Let the people be creative and above all trust them.

It's the last thing you haven't tried.

How about it?

Love and inspiration,

Fluff

Dear Dr Greenspan

Dear Dr Greenspan,

Thank you so much for your sincere and elegant autobiography, or rather your autobiography that shows you to be so elegant and sincere.

Having studied Economics I had read a lot about you and drawn a number of conclusions, some of them perhaps not altogether savoury due to idealistic bias. Reading your book has taught me how often we project onto prominent characters those problems we find most dissatisfying. How easy to put the world’s problems down to a Greenspan or a Bush rather than seek how we could better them ourselves. As a young man, this is a lesson I’m slow to learn.

Reading your book was an eye opener. I was inspired by your life, your industry and integrity. I remember when you received an Honorary PhD from Edinburgh University – the university at which I studied - you compared the good economist to Sherlock Holmes, hunting for as many clues as you can but drawing no firmer conclusions than that which the evidence presents. It was inspiring to read that this was the method of your own economic research.

I also found that we treat prominent figures as if they have just stepped out from behind a curtain, into the glare of public spotlight, rather than grant them the respect of people in their position, having worked hard to get there and doing the best they can under the circumstances. Reading your book has given me a deeper respect for public people as they operate in their positions – although I don’t discount that a certain amount of guile and sharpness of elbows has helped to get them there.

In this context, it was interesting to see how ideology often melted away in the context of the situation. While you no doubt have strong principles about how the world should be run, these were often secondary to your analysis of the situation. The public debate would have it that having a Republican or Democrat in office is most important but when faced with decisions it seems to be character that is most instructive.

My own economic thinking has nothing of the erudition or practical experience of yours – a four year undergraduate degree and a lay interest in public affairs – but I would like to pick you up on a few points in your book – chiefly because they touch on problems I have been thinking about for some time.

Firstly, your devotion to the market principle. From what I understand, markets are exceptional traders of information. That a cement works in Kazakhstan can attract finance from New York or London is a testament to this efficiency and of obvious material benefit to both the financiers and workers in Kazakhstan. However, the quality of information and the way it is transformed into action owes a great deal to the institutions that govern, control and surround the market. You point to this when looking at Russia. If the pursuit of material interest contravenes what we believe to be human it makes sense to calm it and align it accordingly.

In a globalised world these contraventions are more often carried out through ignorance rather than deliberate malfeasance further increasing the need for strong and credible institutions all over the world.

Regulation can be thought of as presenting to the market information it would not otherwise admit. Whether laws, taxes or regulatory authorities such measures are essential to humanise market forces which are far stronger than the social or political structures they prevail upon (I’m thinking now of large corporations and financiers with respect to small, newly formed states).
As a student I was most profoundly influenced by Karl Polanyi, a Hungarian who lived in Vienna and then London before becoming a teacher of General Economic History at Colombia University (forgive me if I’m insulting your intelligence with this detail). The brilliance of Polanyi was that he understood the dynamic interplay between economy and society. In fact, he saw that you really could not separate the two – one runs along the lines of the other in differing orders of ascendency. He described the economy as becoming disembedded from society. Whereas before it had run along social and political lines, the rise of the market meant that the economy was being run for its own sake and the needs of people – such as the self-esteem you so rightly point to – were put in second place.

This no doubt was the purpose of the Enlightenment thinkers. They saw society as such a constraining factor and, as anyone who attends family reunions knows, social ties are just such a blessing and a curse. They constrain creativity and ingenuity, but also support it.
What is clear is that people need buffers between themselves and economic disturbance. Economic forces worldwide are now so great that the socialist ideas of keeping the economy fixed to protect society no longer apply. That argument has surely been won.

But what if there was a way to protect people in a dynamic way. That funds be diverted to protect populations and allow them to create their own defences. I’m talking here about community initiatives - that space and infrastructure be allocated to allow communities to better flourish. Just as the market allows entrepreneurs to receive great rewards, so is infrastructure created to allow space for social entrepreneurs. It would be a way for society to strengthen itself through its own ingenuity and not top down, centralised systems, developed far from their centres of impact.

The economy running at the expense of society is like an engine running on petrol and no oil and in Anglo economies I fear we’re seeing precisely that – economic strength is bought at the expense of societal degradation. Keynes recognised this clearly but his solutions were so of their time that I do not think they are readily applicable today.

For developing economies the situation is worse. Economic forces generated in foreign countries and able to be contained by those countries institutions, land on foreign soil where institutions are under-adapted. The result, as you recognise, is social dislocation at a pace that does not justify the economic rewards it brings, or certainly not in such a short time frame.
For this reason I disagree with your assertion that freeing markets makes economic sense. In the long run it promotes societal collapse, which tempts greater strictures on economic freedom. Indeed, writing in 1944, Karl Polanyi attributed the rise of fascism to the unconstrained market forces of the 19th century.

If legislation and taxes can be used to slow the pace of economic development in order that society has time to adapt, then it should do so.

I would be most grateful of you saw fit to answer this letter; I hope you have found it interesting. There may be numerous positions attributed to you that are not actually your, but such are the limitations of a letter. Once again, thank you for your book, it stimulated discussions in me that have remained dormant for some time.

With very best regards,

The Fluffy Economist

This letter appears as part of the forthcoming series Letters to Important Men, currently available online.

Brown moaning

This is strange

In the same press conference Gordon Brown paints the consumer as the victim of irresponsible usury and the next as a desperate suckling in need of banks aid.

Opening up the books is a punishment for previous naughtiness.

Do banks operate in a vacuum?

Or are the actions and desperate grabbing hands also to blame for the current crisis.

Credit cards don't spend themselves.

The banks greed certainly got out of hand but let's stop divorcing this crisis from our own responsibility. We spent too much - especially you GB - and now pay the price.

I'm not a pre-Keynesian or neoclassicist. But get pissed off with the bitching that it's all someone else's fault. GB is making political capital out of a situation that he presided over as Chancellor.

In what way can he credibly separate himself from it now?

It makes his solutions a little harder to swallow.

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)

Social Enterprise

Well it's been a long hop but finally I'm doing something vaguely computer-based that allows me a few moments on the old blog. One segment of my wonderfully whimsical graduate lifestyle is an internship for the Scottish Green Party and Edinburgh Cyrenians, looking into social enterprise and how charities can make the transition to social enterprise.

For the uninitiated - which I was until most recently - a social enterprise is a company which exists for the benefit of the community and not for its shareholders. By using socially excluded groups as employees or volunteers, SE's exist to benefit the community by their normal operation. It would be wrong to call them 'not-for-profit' because profit making is very much part of their brief, it's just that these profits are reinvested in the SE itself or skimmed off to fund a parent charitable organisation. More exactly SE's exist to maximise what Iain Gordon of Bethany Christian Trust calls a Triple Bottom Line of monetary profit, social improvement and environmental concern.

The profit motive, therefore, is not a guiding aim, but the desire to be self-sufficient ensures some degree of efficiency. Moreover because social enterprises offer their services on the market they cannot expect to guilt trip people into buying their goods just because a homeless person made them. The more successful SEs have realised that their products first of all have to be worthy of the market, ensuring a quality of business practice hitherto anathemaic to the charitable sector. BCT, for example, uses internal markets to monitor and control costs, something, I gather, UK business has adopted only recently.

The beauty of social enterprise exists so that their goals are achieved by their day-to-day operation, appreciating the Marxist idea of the social dimension of work. SEs recognise that the problems of the socially excluded cannot be dealt with by dealing with the presenting symptoms of that exclusion but by dealing with exclusion itself. SEs, often supported by wider charitable activities, allow service users to again become functioning members of a community. This can only be done by participating in the community itself and the forgiving environment of the enterprise allows those with low self-esteem to do this at their own pace.

There is a second aspect that this embrace of the market that is worth mentioning. The business activities of social enterprise mean that service users not only develop self-esteem within a community but do it in relation to mainstream society. Thus, the needs of homeless and mentally ill are not catered for in an idyllic forest getway only to have their new-found inner power crushed at the first sign of a bastard on the street.

It may seem strange to hear FE wax lyrical about the benefit of market mechanisms but I have never doubted the power of markets to relay information, but was dismayed their ability to uproot social structures in the name of allocative effieciency. My problem was that latter is unduly predominant in the world today (oh and the fact that 'market forces' are often a smokescreen for obscene breaches of corporate power - e.g.). Polanyi - who recognised that pre-capitalism, economic actions were subordinated to social ones - described this process as a disembedding of the economy from society. As 'all that is solid melts to air' most people cope, the disadvantaged get hammered. Social enterprise acts as a way to re-embed the economy in society, whilst not losing the benefit that market mechanisms undoubtedly bring. Hopefully that should give my feelings something of a whiff of intellectual consistency.

Of course there are down sides. Being subject to market forces gives SEs an instability not encountered by their charitable brethren. However, because SEs exist for the benefit of those that work for them, there exists a feeling of ownership amongst volunteers and employees that in the words of one 'simply won't allow the organisation to under'. Others may point to the perceived injustice of using volunteers to carry out business activities*. Superficially, this smacks of exploitation, but from what I gather so far, this is mainly due to an unforgiving benefit climate (the New Deal is uttered like a curse round here). One volunteer I spoke to, simply did not want to return to paid work, another said that his voluntary work gave him enough self-satisfaction without a wage. Conservatives may baulk at this lack of self-reliance, but these attitudes should be recognised as an important step in the building of self-respect that allows them to engage in the workplace once more. Evidence of this can be found at BCT where many managers and regular employees are ex-service users.

I'll be writing a little more on SEs over the coming months, filling in detail on legislation and giving a bit more of a view from the ground. In brief, SEs seem an effective approach to coping with social ills, especially once we drop anti-market dogma for its own sake. That they require minimal government intervention should attract people of any stripe

DISCLAIMER: All opinions expressed in this article, whilst perhaps coinciding with those of Edinburgh Cyrenians and the Scottish Green Party, are entirely my own and should not be attributed to these same organisations. Thought I'd better add that in.