This evening I went to an event at the New Economics Foundation featuring a discussion between Ed Miliband (former leader of the Labour Party) and Nick Srnicek, co-author with Alex Williams of Inventing the Future: Postcapitalism and a world without work, which I have read. I found the book and the discussion stimulating in a number of ways.
My policy interests centre on climate change and its economic implications and I am increasingly finding that the biggest challenge in dealing with it is political. Climate change is an intrinsically difficult political problem because the people who will suffer the worst consequences will be future generations and few people seem to think they have a personal interest or a moral imperative to help tackle it. Furthermore there are some rich and powerful people who have - and pursue vigorously - a vested interest in our not tackling it. This has parallels in other policy areas, including the one discussed in the book.
The central argument of the book concerns the spread of automation and its implications. The authors say that the left should embrace automation and aim to use it to allow people to work less or not at all, with a universal basic income making this possible.
Monday, April 11, 2016
Thursday, March 24, 2016
The budget gorilla
Matthew Green had rather a good piece in his blog last week, following the Budget. As usual, I found it interesting and generally in line with my own views but with some exceptions.
His piece is about "the gorilla in the room". In my experience it's usually an elephant, but I won't quarrel on a matter of fauna-in-camera. He's talking about the big difference between public sector financial commitments over the coming years and the plans to finance them. I agree with his main thesis that there is a serious problem.
I was quite surprised that he takes the standard Coalition line where he says "That this has still meant dramatic cuts to public spending shows just how out of control the government finances had become under the previous government, as it pursued the illusory goal of Scandinavian public spending backed by US taxes."
My own take on this is that the deficits run up by Labour in the mid-noughties were not a major cause of our post-2008 problems. The real problem was that we had come to rely on the banks too much as a cash cow for the Exchequer. When the profitability of the banks collapsed in 2008, tax revenue collapsed with it and that left us with an ongoing hole in our finances. I think the more serious failing of the Blair-Brown years was in allowing the banking system to develop the way it did. However, I don't remember many commentators talking about this at the time, whereas the failure of Gordon Brown to comply with his own "golden rule" on balancing the books over the business cycle was widely noted.
The issue of banking failure is dear to my heart at the moment because at the next meeting of the Kennington Sustainability Study Group (on Wednesday, April 6th, the start of the UK fiscal year, if anybody's interested) we will be discussing "Money". Now the first thing to bear in mind is that the economy of a nation with its own currency is not like a household. The government can create out of nothing whatever money it needs to finance its spending or to keep the economy running. The notion that governments must borrow the difference between what they spend and what they raise in taxes etc is a piece of fiction that politicians use to justify either raising taxes or cutting spending. They get away with it partly because most people don't understand what money is and partly because the fiction is not all that far from the truth. Real resources commandeered through government spending - labour, capital, raw materials, foreign currency etc. - are then unavailable for use by businesses and households. Also, the stability of the currency matters a great deal and, if deflation, excessive inflation or a roller-coaster exchange rate are to be avoided, the supply of money needs to be matched to the potential of the real economy.
This is particularly important in an economy as open as the UK's, which reminds me of what I think of a second large mammal in the room - our trade deficit. This issue raises interesting questions for me. Which causes the other: the surplus on the capital account and hence an over-valued pound, as more of our industry, infrastructure, national debt, land and property gets sold to foreigners; or a deep-seated propensity to over-consume imports and/or under-produce exports? Could an underlying problem be inadequate private saving and excessive borrowing for consumer spending during boom times? I suspect there is a complex pattern of cause and effect working both ways between the capital and current accounts and others no doubt have a much better handle on this than I do.
Matthew Green alludes to the current account deficit but only in the context of the constraint he thinks this would impose on "people's QE". As it happens, I think "people's QE" or "sovereign money creation" is rather a good idea, but only as part of a balanced strategy that reduces money creation by private banks from a typical 97% of all money in circulation. In other words, I tend to favour the idea that the public sector should create more money and private sector less. This would have at least three major advantages.
Firstly it should make for greater stability in the banking sector and make us less vulnerable to the sort of things that happened in 2007-8.
Secondly, money creation is a very profitable activity. With increased sovereign money creation, some of the profits that currently accrue to banks would go to the government instead, so helping to reduce the deficit.
Thirdly, if there were another banking crisis (as some commentators think there almost certainly will be) the effects would be more limited.
Against all this, of course, there would be no return of the banks as a cash cow for the Exchequer. But I have to confess that I have a lot more reading to do around the issues of money and banking.
While I have my differences with bits of Matthew Green's post, I think his overall message is right. The public sector deficit is a serious problem and there is no simple, painless answer to it. I think that sovereign money creation might play a substantial part in the solution and might facilitate a much-needed increase in public-sector investment in infrastructure, particularly in energy conservation and clean energy. But this will not obviate a need for reduced consumption by some so that the government's commitments to others can be honoured.
His piece is about "the gorilla in the room". In my experience it's usually an elephant, but I won't quarrel on a matter of fauna-in-camera. He's talking about the big difference between public sector financial commitments over the coming years and the plans to finance them. I agree with his main thesis that there is a serious problem.
I was quite surprised that he takes the standard Coalition line where he says "That this has still meant dramatic cuts to public spending shows just how out of control the government finances had become under the previous government, as it pursued the illusory goal of Scandinavian public spending backed by US taxes."
My own take on this is that the deficits run up by Labour in the mid-noughties were not a major cause of our post-2008 problems. The real problem was that we had come to rely on the banks too much as a cash cow for the Exchequer. When the profitability of the banks collapsed in 2008, tax revenue collapsed with it and that left us with an ongoing hole in our finances. I think the more serious failing of the Blair-Brown years was in allowing the banking system to develop the way it did. However, I don't remember many commentators talking about this at the time, whereas the failure of Gordon Brown to comply with his own "golden rule" on balancing the books over the business cycle was widely noted.
The issue of banking failure is dear to my heart at the moment because at the next meeting of the Kennington Sustainability Study Group (on Wednesday, April 6th, the start of the UK fiscal year, if anybody's interested) we will be discussing "Money". Now the first thing to bear in mind is that the economy of a nation with its own currency is not like a household. The government can create out of nothing whatever money it needs to finance its spending or to keep the economy running. The notion that governments must borrow the difference between what they spend and what they raise in taxes etc is a piece of fiction that politicians use to justify either raising taxes or cutting spending. They get away with it partly because most people don't understand what money is and partly because the fiction is not all that far from the truth. Real resources commandeered through government spending - labour, capital, raw materials, foreign currency etc. - are then unavailable for use by businesses and households. Also, the stability of the currency matters a great deal and, if deflation, excessive inflation or a roller-coaster exchange rate are to be avoided, the supply of money needs to be matched to the potential of the real economy.
This is particularly important in an economy as open as the UK's, which reminds me of what I think of a second large mammal in the room - our trade deficit. This issue raises interesting questions for me. Which causes the other: the surplus on the capital account and hence an over-valued pound, as more of our industry, infrastructure, national debt, land and property gets sold to foreigners; or a deep-seated propensity to over-consume imports and/or under-produce exports? Could an underlying problem be inadequate private saving and excessive borrowing for consumer spending during boom times? I suspect there is a complex pattern of cause and effect working both ways between the capital and current accounts and others no doubt have a much better handle on this than I do.
Matthew Green alludes to the current account deficit but only in the context of the constraint he thinks this would impose on "people's QE". As it happens, I think "people's QE" or "sovereign money creation" is rather a good idea, but only as part of a balanced strategy that reduces money creation by private banks from a typical 97% of all money in circulation. In other words, I tend to favour the idea that the public sector should create more money and private sector less. This would have at least three major advantages.
Firstly it should make for greater stability in the banking sector and make us less vulnerable to the sort of things that happened in 2007-8.
Secondly, money creation is a very profitable activity. With increased sovereign money creation, some of the profits that currently accrue to banks would go to the government instead, so helping to reduce the deficit.
Thirdly, if there were another banking crisis (as some commentators think there almost certainly will be) the effects would be more limited.
Against all this, of course, there would be no return of the banks as a cash cow for the Exchequer. But I have to confess that I have a lot more reading to do around the issues of money and banking.
While I have my differences with bits of Matthew Green's post, I think his overall message is right. The public sector deficit is a serious problem and there is no simple, painless answer to it. I think that sovereign money creation might play a substantial part in the solution and might facilitate a much-needed increase in public-sector investment in infrastructure, particularly in energy conservation and clean energy. But this will not obviate a need for reduced consumption by some so that the government's commitments to others can be honoured.
Tuesday, February 16, 2016
A tantalising glimpse....
A report this week in The Guardian (Europe's climate change goals 'need profound lifestyle changes') gives a tantalising glimpse of what might be in store in Europe on action against climate change following the Paris Agreement. It's tantalising because the report is about a leaked document from European commission. Because it is not yet published, what we know about it is confined to what is in the Guardian article and that is very scant.
However, I am encouraged for two reasons. Firstly, I am struggling to work out just how far-reaching will be the lifestyle changes needed to reduce the threat from climate change to acceptable proportions and the report, when it is finally published, should help me on my way. Secondly, this seems to be a rare example of an official document recognising that far-reaching changes will be necessary. Not long ago, the message from on-high seemed to be that climate change was a serious problem but all would be well as long as we didn't leave our televisions on stand-by.
My joy is damped by two thoughts. One is about possible Brexit, which, if it happens, could release our Government from any climate-related obligations coming from the EU. The second is about the ability of the EU to agree on necessary action, particularly following the recent change in government in Poland. The Guardian this week has a long article about the party now in charge in Poland and it's not comforting reading. I'm no expert on EU procedures but I have a feeling that the new Polish government will strain every sinew to try and stop any effective action by the EU against climate change.
However, I am encouraged for two reasons. Firstly, I am struggling to work out just how far-reaching will be the lifestyle changes needed to reduce the threat from climate change to acceptable proportions and the report, when it is finally published, should help me on my way. Secondly, this seems to be a rare example of an official document recognising that far-reaching changes will be necessary. Not long ago, the message from on-high seemed to be that climate change was a serious problem but all would be well as long as we didn't leave our televisions on stand-by.
My joy is damped by two thoughts. One is about possible Brexit, which, if it happens, could release our Government from any climate-related obligations coming from the EU. The second is about the ability of the EU to agree on necessary action, particularly following the recent change in government in Poland. The Guardian this week has a long article about the party now in charge in Poland and it's not comforting reading. I'm no expert on EU procedures but I have a feeling that the new Polish government will strain every sinew to try and stop any effective action by the EU against climate change.
Monday, February 1, 2016
The Paris Agreement and the Committee on Climate Change
When I wrote my blog post a couple of weeks ago on the implications of the Paris Agreement, I was looking forward to seeing how the Committee on Climate Change would respond. Last week it gave its first response, as you can see from this report from The Guardian.
The main thrust of the response was to reaffirm its recommended fifth carbon budget for the UK covering the period 2028-32. This has disappointed some climate activists and made me curious to see what was the committee's logic. Given the major gaps in my knowledge, I found the committee's letter to Amber Rudd interesting and informative, particularly the Annex.
The main thrust of the response was to reaffirm its recommended fifth carbon budget for the UK covering the period 2028-32. This has disappointed some climate activists and made me curious to see what was the committee's logic. Given the major gaps in my knowledge, I found the committee's letter to Amber Rudd interesting and informative, particularly the Annex.
Tuesday, January 19, 2016
Paul Mason's end of capitalism
I have recently had my attention drawn again to a seminal Guardian article by Paul Mason, which first appeared six months ago.
I'm almost a fan of Mason. He writes some thought-provoking stuff, much of which I'm inclined to agree with. I think of him as a natural political ally but not quite a kindred spirit. This is because I don't share his preoccupation with the "end of capitalism".
A number of agents and factors motivate the provision of goods and services - markets, public administrations, community spirit, the intrinsic satisfaction of productive work, sheer creativity and perhaps much else. What Mason would describe as the decline of capitalism, I would describe as a decline in the importance of markets as motivators of production.
For a variety of reasons, markets are in decline in some areas. As Mason points out, they are being undermined in the information industries and beyond as digital technology has made it cheap and easy to make and store perfect reproductions of text, software, data, pictures, sound and video. In other areas, increased government intervention is likely in response to environmental threats such as from climate change.
Further government interventions may become unavoidable in the area of banking and other financial services - if only to allow markets to function better. Growing perceptions of social injustice may generate political will to address, through government action, such issues as gross income and wealth inequality.
Let us assume that, over the world economy as a whole, these actual and potential blows to the significance of markets are unmatched by the enhancement of markets in other areas - such as a de-bureaucratisation of economic life in India. Does there come a point where we can say that the world economy, or some major part of it, is no longer "capitalist"?
Perhaps, but "frankly, my dear, I don't give a damn". I am not a Marxist but I am not a fervent economic liberal either. I see threats to individual welfare and liberty coming as much from plutocracy as from an overweening state. I think the state should be as big as it needs to be to do what we want it do and no bigger. Reversing what I see as a drift towards plutocracy is one of the things I want it to do.
If we reach a happy state where the major threats are averted, where acute suffering is much reduced and where most people have before them growing opportunities to flourish, then I won't care if we call our economic regime capitalism, post-capitalism or something else.
I'm almost a fan of Mason. He writes some thought-provoking stuff, much of which I'm inclined to agree with. I think of him as a natural political ally but not quite a kindred spirit. This is because I don't share his preoccupation with the "end of capitalism".
A number of agents and factors motivate the provision of goods and services - markets, public administrations, community spirit, the intrinsic satisfaction of productive work, sheer creativity and perhaps much else. What Mason would describe as the decline of capitalism, I would describe as a decline in the importance of markets as motivators of production.
For a variety of reasons, markets are in decline in some areas. As Mason points out, they are being undermined in the information industries and beyond as digital technology has made it cheap and easy to make and store perfect reproductions of text, software, data, pictures, sound and video. In other areas, increased government intervention is likely in response to environmental threats such as from climate change.
Further government interventions may become unavoidable in the area of banking and other financial services - if only to allow markets to function better. Growing perceptions of social injustice may generate political will to address, through government action, such issues as gross income and wealth inequality.
Let us assume that, over the world economy as a whole, these actual and potential blows to the significance of markets are unmatched by the enhancement of markets in other areas - such as a de-bureaucratisation of economic life in India. Does there come a point where we can say that the world economy, or some major part of it, is no longer "capitalist"?
Perhaps, but "frankly, my dear, I don't give a damn". I am not a Marxist but I am not a fervent economic liberal either. I see threats to individual welfare and liberty coming as much from plutocracy as from an overweening state. I think the state should be as big as it needs to be to do what we want it do and no bigger. Reversing what I see as a drift towards plutocracy is one of the things I want it to do.
If we reach a happy state where the major threats are averted, where acute suffering is much reduced and where most people have before them growing opportunities to flourish, then I won't care if we call our economic regime capitalism, post-capitalism or something else.
Wednesday, January 13, 2016
Airport expansion and the Paris Agreement
A couple of weeks ago I commented to a fellow blogger on a posting about airport expansion at Heathrow or Gatwick and said:-
COP21 brought a touch of reality to thinking in high places on climate change. One implication is that the UK’s commitment to 80% cuts [in greenhouse gas emissions] by 2050 can no longer be considered adequate. By 2050 we will need to be completely carbon neutral, as will the whole world shortly after. This means that by then any aviation will either need to be completely carbon neutral (running exclusively on biofuels or something not yet invented) or offset by carbon-negative activity.
The date by which we become carbon neutral is less important than what we emit in the meantime. We need to start making big cuts in emissions now and I don’t think an optimal mix of cuts could exclude aviation.
Hence the big issue is not where we site a new runway but how quickly we can reduce aviation, so turning any new investment in airport capacity into stranded assets....
Sorry – I’ve made a lot of sweeping statements here. I’ll try and justify my position in a resuscitation of my own blog.
Sunday, February 2, 2014
Climate change as the paramount issue
I may have mentioned before that I participate in a local study group on sustainability which has now been running for slightly less than a year. We discuss many aspects of sustainability but so far we have tended to focus on social and economic issues. Although the issue of climate change has always been there in our minds, we have tended not to focus on it. This, I think, is because none of our early participants has a significant scientific education and so other aspects of sustainability have seemed more accessible.
I think we have to tackle the subject nevertheless. This is because I think the threat from climate change requires us to overturn a lot of generally-accepted thinking about the economy and this has profound political and social implications. Furthermore, other perceived threats to our civilisation - such as food shortages resulting from over-population - would look manageable were they not amplified either by the effects of climate change or by action needed to tackle it. Before I elaborate, I should clarify some of my premises:-
I think we have to tackle the subject nevertheless. This is because I think the threat from climate change requires us to overturn a lot of generally-accepted thinking about the economy and this has profound political and social implications. Furthermore, other perceived threats to our civilisation - such as food shortages resulting from over-population - would look manageable were they not amplified either by the effects of climate change or by action needed to tackle it. Before I elaborate, I should clarify some of my premises:-
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