Monday 29 August 2016

Olympic Hoo-ha

I've been away on holiday for the past  couple of weeks so have missed most of the media coverage of the Olympics. Nevertheless I've picked up enough to find much of the British coverage extremely disquieting - indeed, not at all according to my understanding of  "British values"  which I acquired in my youth (we were taught to be modest and unassuming and our our patriotism should be understated.)

Without wishing in any way to detract from the wonderful achievements of all the athletes (and particularly the gymnasts and divers) I find the emphasis on national rather than individual performances distasteful.  Much is made of Britain's ranking in the  "medal tally - second if you count just golds, and third of you count them all.

But, as was pointed out  in a Guardian graphic recently (6th August) if we count the number of medals per population  per contested games, up to 2012 Finland came top with 2.30, Estonia second with 2.29 and the Bahamas third with 2.26.  Britain was way down with only 0.44, but ahead of the US with 0.29.  These figures will doubtless have altered slightly, but probably not significantly, when the 2016 results are included.

Then we are reminded that much of Team GB's success is the result of John Major's decision to funnel wads of Lottery cash to the training of élite athletes.  Somebody has calculated that each medal has cost  in the region of £5.5 million.  I wonder how well the two poor countries in which I have worked, Papua New Guinea and Malawi, would have fared  with that kind of money to fling around.

As Simon Jenkins pointed out in a recent article,  we are now doing exactly what we used to mock Russia for -  hot-housing  (though I hope without illicit drugs) a tiny élite  in order to bolster our international image  and sustain a pretended "great power" status.  At the same time our austerity-obsessed government  is closing sports centres and public swimming baths and flogging off school playing fields.  As in the  economy, there is little evidence of a tickle-down effect as a result of success confined to  the very top.

One week of my holiday was spent with other choral society singers preparing, among other things, to perform the Bach and Rutter  Magnificats.   We amateur singers practised together during the week with varying individual success (mine was pretty limited in the Bach -the runs were just too quick), though the over-all achievement was acceptable.  However, when on the day of the public performance we met  for the first time the orchestra, presumably made up mainly of amateurs, their standards,  individually and collectively, were superb.

By contrast with the choir, who were mostly or "riper years ( as the Prayer Book kindly puts it) most of the orchestra were young..  They presumably had talent to begin with, but like athletes,  had reached their high standards by hours and hours of dedicated practice. Yet music in schools is being downgraded because the subject is not included in the government's misnamed  Ebacc, and local authority music schools up and down the country are being closed.

Rather than a focus on false prestige though the triumphs of the athletic élite I should like to see the governments "generosity" spread around to include sports and athletics at all levels for those  who want them,  music, and all those other arts which could benefit

 The result might  not lead to quite so much strutting of our stuff draped in Union Jacks at future Olympics, but it would lead to a more civilised society.

Friday 12 August 2016

Westminster manoeuvres v public appeal

There is just time to listen again to an enlightening interview with Vince Cable on

Sir Vince (as he now is, and probably the only one of our lot to deserve it) seems pretty pleased with himself, and I've no quarrel with that. He's rightly proud of several ways in which as Business Secretary he was able to  introduce a few Liberal ideas, and also prevent the Tories from implementing a few bad ones.

Unfortunately the way politics is conducted these days that is not enough.  People are simply not prepared to look at the small print (or even, sometimes, the large print, as the EU Referendum result shows). In terms of public impact, Cable's successes were minor compared to the major gaffe of conniving at the raising of student tuition fees when the party was pledged not to do so.  It's student fees that pulled the rug from under Liberal Democrat support and it will be years before we regain the public's trust.

I think there's a lesson here for the Labour Party in their leadership election.  Jeremy Corbyn has "lost the confidence" of his parliamentary party (PLP) for allegedly bad management, failure to work with his colleagues and inept performances at Prime Minister's Questions.  Well, maybe so, and maybe his challenger, Owen Smith would do a better job of it.  Maybe if Smith wins and does, the PLP will "hold the government to account", win a few minor victories and the Labour MPs will feel pleased that they're serving their purpose and earning their salaries.

But, as with Cable's little victories, will anyone notice?

These parliamentary manoeuvres may make a big impact in the Westminster bubble and associated media, but do not resonate with he public.  I've observed that much the same happens with local government councillors, who get very excited over various  tactical successes, of which the minority who read the local paper may have some inkling but the vast majority are indifferent.

Jeremy Corbyn's advantage is that he does have the ability to communicate successfully with a vast swathe of the public that the others don't reach.  No other current politician is able to draw and enthuse crowds as he does.

I strongly suspect that if Smith wins the Labour leadership (which at present seems unlikely) then the PLP will be heartened, our politicians will continue their semi-private game and the Tories will continue with what they take as their God-given right the rule and remain in power at the next election and beyond.

One positive message we can take from the Referendum result is that the electorate is fed up with
"the mixture as before."

True, supporting Corbyn is a chance but it is just, just, possible that,  under his leadership, and if he and his party recognise the necessity of working with others on the left (Liberal Democrats, Greens, SNP) then the disgraceful  xenophobic right wing hegemony could be defeated.

Friday 5 August 2016

The Bank's interest rate cut:: pushing on a piece of string.

So the Bank of England yesterday lowered the interest rate from half a per cent to a quarter per cent, and producers and consumers have joyfully hit the streets, the former to invest and the latter to buy like crazy with such a low borrowing rate.

It was probably not Albert Einstein who said: “The definition of insanity is doing the same thing over and over again, but expecting different results,” but it is never-the less a good definition of the UK's economic policy.

After the crash of 2007/8 the interest rate was dropped from 5 per cent  to 0.5 per cent, and this, coupled with some orthodox Keynesian fiscal policy -  a tax cut  (VAT reduced from 17.5% to 15%) and some modestly increased infrastructure spending by the then Labour Chancellor, Alistair Darling -  averted a more serious recession  

 By the time of the election in 2010 the economy was once again growing, albeit slowly.

The Conservatives' Chancellor of the Exchequer in the new government, Gorge Osborne, now celebrating his elevation to the posh Companionship of Honour (you couldn't make it up) promptly put the process into reverse by raising VAT to 20% and introducing a regular series of annual cuts in government spending..

So the economy flat-lined for the next two years, then stumbled into a hesitant recovery, probably as a result of infrastructure expenditure sneaked in by the Liberal Democrat Businesses Secretary, Vince Cable, but is now, post Brexit, poised to dive again.

The chances of the Bank's action  by itself promoting a revival are negligible.

The case against relying exclusively on monetary policy to revive a flagging economy is at least 80 years old.  Keynes described it as  "like pushing on a piece of string."  His arguments  are no secret: they formed a prominent part of the A-level syllabus for most of my teaching career:

  • cheap money will not tempts investors to expand their businesses or found new ones unless they are confident of demand for their products.
  • cheap money will not tempt consumers to borrow unless they are confident about their future jobs and incomes. (This many be less true now than pre-the 70s, when unnecessary debt was, rightly in my view, regraded as immoral).
  • by expanding the money supply (now called QE) and relying on investors and consumers to take the bait, the government has no control over what actually happens to the money.  When the Tories tried it under Edward Heath (the Barber Boom) most of it went into commercial property.  Since 2010, rather than stimulating the productive economy, most of the cheap money has gone into shoring up the assets of the commercial banks, into asset prices, and fuelling the rise in house prices. 
If cheap money is to be effective in reviving  the economy it needs to be combined with fiscal policy: government spending where the government does not leave things to the caprices of the market but directs where the money goes.  There is absolutely no shortage of projects in desperate need of funds:

  • the NHS - especially training medical staff for when the flow from the EU dries up.
  • research and development, spearheaded by our universities.
  • improvements to the railway infrastructure - the existing networks rather than prestige projects like HS2.
  • repairs to the roads.
  • local authority expenditure, especially on  care for children and the elderly.
  • affordable housing, affordable housing, affordable housing.
  • technical education.
  • the arts.
  • the BBC, especially the World Service.
  • an improved social service safety net to protect the unfortunate.
  • renewable energy sources, especially tidal power.
  • maintenance of cathedrals, churches  and other buildings of historical interest .
Well, that's nice round dozen off the top of my head. It shouldn't be difficult to to think of a few more.  Keynes is alleged to have argued  that, if you can't think of anything better, pay some people to dig holes and others to fill them up again.  My own favourite on those lines has always been to bury the pylon line

Such projects provide employment, put money into people's pockets, revive demand and do useful things, so we end up with a more efficient, vibrant and civilised society.

Presumably our new Chancellor of the Exchequer, Philip Hammond, is thinking on these things for his autumn statement. He could start a few projects off now.

Thursday 4 August 2016

Energy costs (and more): trust, not competition, is what's wanted.

The powers that be have acknowledged that the privatised energy suppliers (gas and electricity) are ripping us off, and have proposed a series of measures designed to make we consumers  become more alert. Their solution is to persuade us to "switch" - either to another tariff or another company.

Indeed, the energy suppliers have been ordered to tell OFGEM, the government regulator for the gas and electricity markets, of anyone who has not changed supplier for three years, and then all the others , of which there are six major ones, will be able to write to us offering what may be a better deal. 

As recorded in my previous post, one of the reasons  the "Leave" campaigners  were successful in the EU was that they listened (and came up with the slogan "take back control" which resonated with the disaffected), but the Remain campaigners lived in their own little bubble and didn't listen.

I suspect the Competition and Markets authority, who have come up with the "switch"suggestion, are equally deaf to our real needs.

What I believe most people really want is not to be pestered with all sorts of alternative, and often incomprehensible, suggestions, but firms which we can trust to deal with us fairly.  This applies not only to energy suppliers, but house and car insurance, banks and possibly other areas as well.

I have come to dread the months of June and July, when my house and car insurance are due for renewal.  I am neither innumerate not completely computer illiterate, but I do not relish spending great chunks of sunny days messing about getting matching quotes and trying to bargain down my existing supplier.  Yet this is what the system imposes on me.  

For example Saga, a firm allegedly designed to look after the elderly, proposed to increase car insurance by 36%.  In the past I have spent time getting a matching quote and holding them to their promise to beat it (which they do by 1p.)  This year I couldn't be bothered but simply went to another company and obtained similar cover for about two thirds of their price.  Ditto for house insurance

What I really want is a bank, insurance company and energy supplier  who will treat me fairly, so  that I can spend my days doing what I enjoy doing, confident that I may not be getting the lowest price, highest rate of interest, or whatever, but that I am being given a fair

As it happens, as far as energy supplies are concerned, I buy both gas and electricity  from ECOTRICITY who aim to obtain as much of their supplies as possible form sustainable or renewable sources.  As afar as I know they are not over-charging me, but if they are then at least it's for a good cause.  

What the Competition and Markets Authority needs to do is find means of creating firms capable of balancing ethical values of service and fairness  with reasonable profit.

Wednesday 3 August 2016

John Lanchester's "Brexit Blues."

 John Lanchester is a restaurant critic, journalist  and novelist ( his novel "Capital" is the best page- turner that I've come across in years) who has turned his hand to explaining economics to the general reader, and does it very successfully..

His recent article on Brexit in the London Review of Books is, in my view, exceptionally perceptive.  Read it at:

but here are a few mots justes to whet your appetite

"Billionaire James Goldsmith founded the Referendum party in 1994 and stood  against David Mellor in Putney in the 1997 General  Election, coming fourth with only 1518 votes.

What was self-evidently ridiculous  in 1997 came to be a reality in 2016.

Boris Johnson was a man known not to be in favour of his own arguments.  [Lanchester doesn't] think there's ever been  a time in British politics when so many people in public life [have] spent so much time loudly declaring things they knew not to be true.

We're used to political analysis based on class . . . [but now] the primary reality in modern Britain is not so much class as geography.  Geography is destiny.  And for much of the country not a happy destiny.

In general there's no shortage of jobs and the labour force participation rate is the highest it has ever been . . .  .but it's unsatisfying, insecure and low paid.  This new work doesn't do what the old work did: it doesn't offer a sense of identity or community  or self worth.

 The reality of the modern British economy is that the thriving sectors raise the taxes which pay for the rest

UK manufacturing  is now a high skill, high value industry; we don't make cars and fridges and washing machines and phones and things that everybody notices, but we do make high-technology components and industrial devices of a sort that nobody ever thinks about.

The Labour government  offered more social protection but did so largely by stealth  and without explaining and arguing for its actions.  .  There was [under Labour, 1997 - 2010] no strategy to replace the lost industry: that was left to the free market.  With these policies, parts of the country have simply been left behind.  The the white working class  is correct to feel abandoned: it has been.

. . . most people in the UK receive more from the state, in direct cash transfers and in benefits such as health and education, than they contribute to it.  The numbers are eerily similar to the referendum outcome: 48% net contributors, 52% net recipients.  It's a system bitterly resented  both by the beneficiaries and by the suppliers of the largesse.

. . . young people in particular feel they are living in an economic system  rather than a political one.

Whoever came up with [the slogan"take back control"] had spent more time listening than talking.  The Remain campaign failed to do that.

. . . most of the people  who appear as immigrants in the immigration statistics are students . . . Of the
330 000 net arrivals in the latest numbers, 169 000 are students.  Do you consider students to be migrants?  Personally I don't.*

. . . the referendum has exposed splits in society which aren't mapped by the political parties as they are currently constituted . . . To simplify, the Tories are a coalition of nationalists, who voted out, and business interests, who voted in; Labour is a coalition of urban liberals, who voted in, and the working class, who voted out.

Leave's arguments were based on lies . . . the fact that so many prominent Brexiters started rowing backwards on the day after the vote is a sign that they knew it all along.

. . . Continental elites feel just as strongly  about the continued existence of the EU as the Leavers feel about Brexit.  For the EU to survive, it will be important for the UK to be seen to pay a high price for leaving.

The mendacity of the Leave campaign may represent a recalibration of our system along American lines, where voters only listen to people whom they already believe, and there are no penalties for falsehood, especially not on the political right

The second toxic legacy  of the campaign concerns the shamelessly xenophobic nature of the leave campaign.

. . . if we want to keep our healthcare system, pensions  and welfare states [T]he Office of Budget Responsibility  puts the necessary level of immigration at 140 000 a year.

The campaign's dual legacy is the end of the idea  that politics is based on rational argument, and a new permission to hate immigrants.

. . . the weakened pound is a good thing.**

Nobody outside the City loves the City, but the tax revenues  raised by London's global financial services are very important to the UK.

A reduction of the dominance of finance might be a net positive; we should have a smaller GDP, probably, but the country wouldn't be bent out of shape - or at least not to the same degree.

The City is creative, opportunistic, experienced and amoral; if any entity has the right 'skill set' to benefit from the post-Brexit world, it is the City of London.

* Neither do I. They provide me with my one remaining source of paid employment.  I act as a tutor on a post-graduate course at a local university.  Most of the students are from overseas, with richly varied backgrounds and great fun to teach. They are business-studies students and I believe most of them leave with an enhanced love and respect for our neck of Yorkshire (and sometimes promises to set up a branch here when they are successful tycoons in their own countries.)

** I don't agree.  True the economy grew quickly after the depreciation which followed our expulsion from the ERM in 1992.   But devaluation or depreciation of the currency is the cowards' way out.  It means that future generations, about whom Tories in particular are so anxious not to "burden" with debt, have to work all the harder or longer to earn the foreign currencies necessary to pay for the imports they need. That's a real burden.