Britain's World Status:

A real problem in Britain today is definitely how we view ourselves, on one hand we view ourselves as the pragmatic defenders of liberty, the ones who helped see of the Nazi's then quietly began to dismantle our empire as the Americans took over. In the modern sense we tend to be very negative about our own chances to become something better, we think we suck at making and doing everything, we think we have a terrible government system and that we are all lazy and useless, thing is all of this is totally contrived and wrong, yet i think it explains a lot about our society today.

The first part is fairly obvious, it makes quite a few people a lot more racist than need be and makes it very hard to apologies for unanswered crimes against many cultures, i mean i do think the Empire did have some good qualities for the time, they tended to export liberal ideas about equality before the law and strong private property laws that were initially well received in places like India where people were used to having there property spontaneously taken by local dignitaries. But at the same time there is the stuff like the tens of millions starved to death in India to keep up the price of certain exports, or the whole half the population dying out in Ireland due to no aid relief that the country has never recovered from (8 million to 3 million in the space of about 5 years, and you wonder why republicans are a tad sensitive about you taking the piss out of there accent.) Also, it builds an idolized idea about the state of our society back when, which gives more unneeded fire for conservative rhetoric.

Still the second is the one that most irks me day in day out. The idea that we can't make anything firstly makes me annoyed because it tends to be blamed on the Unions, who granted played there part wiggling the growth figures but were ultimately a small part of the problem, secondly it makes me annoyed because it tends to come from a position of no idea about how we relate to other countries, so here is some British econ history done very briefly, and some stuff about free trade. All stats are rough estimates.

So firstly, in 1948 Britain was actually looking like it was going to be the golden boy of Europe in terms of growth figures, its industry was back on track, its debts kept under control from post war inflation and austerity measures imposed by the Atlee government, the NHS provided the grounds for a healthy workforce and generally things were going relatively smoothly, until conservatives got in. Now its not that conservatives are bad with economics (though its a part) but due to a trade union system that had little central control and very militant grass roots there were a lot of pointless, and disruptive union actions, it was also very political as it was felt that England had modernized and the old class privilege had eroded, they were now citizens not servants. A larger part of the problem was that there was a government in that had no scope for what to do with the half finished plan the Labour party had set out with, they were aversion to fights with the Unions, so Unions often got their way, but worst of all, was that they had no idea what to do with the nationalized industries, let alone the rest of the economy. This is the big issue because what was needed at the time was a serious industrial plan to bring the economy upwards faster, Germany did this by managing the unions, keeping wages low but with a social security safety net while giving incentives to small business's, the Netherlands nationalized their finance and used it to pump money into the other services and France nationalized industry to pump government investment into it.

This was the key problem, for while the Netherlands, Germany and France all soured in growth throughout the 50's and on wards, the British and the Irish were the only ones to not meet their growth targets (Ireland because they initially focused on creating a land owning small farmer ideal for its people and failed). This is a systemic issue with our country, we tend not to directly invest in our industry at all, Ted Heath bought shares in company's, Labour nationalized services but didn't do much else to them. This was alright while there was little inter country trading but when the barriers went down we did suffer, we didn't need to suffer in the way Thatcher led us to, but the system did need resolving, it still does, and it revolves around actually working with the Unions and founding a proper plan for investment into our industries.

Secondly is about free trade, now a lot of people tend to think China has us horrifically outprices, and if you think of it in terms of wages then you would probably be right, you can't really compare 25p an hour to £6.40 that is i think roughly our minimum wage. But in industry wages only account for about 5% of the total cost of running a secondary industry. The main money is in the 100 million or so to set up a factory, the millions in getting the machinery and buying the stock afterwards, the cost for line workers is tiny so even a big gap is ultimately a small part of the issue, this is why we loose business but the Germans still have a lot of it. This brings me back to my point about planning and investment, it isn't hard to beat wage competition if we invest in our industries, and by that i mean the government collects tax money and directly invests it in infrastructure and the companies themselves, get them better machinery and they will be able to stay ahead of the Chinese undercutting them.

Of course, we may not even want that with our many other business ventures in the services and high tech fields.

What i am trying to point out is that England isn't in some deep seated decline, nor is it hopelessly doomed to be devoured by the Asian giants, our problems are real and achievable and they don't exist in the over-romanticized lessaiz faire system we had before the 20th century.

Economic Drivel 3: An Alternative to the Market

To be honest i lied, this isn't exactly an alternative, its more of a way of neutering the evils of the market, or going part way to do so. It is also a partial continuity of my previous post as i feel that just discussing what the state should do as an incomplete part to how we can rebuild a powerful left wing economic ideal. It is not also grounded economics, while i do not think it would destroy our ability to develop a grow, i do not think it is something an economist would say is a smart move, but i do think that on a social scale this would be the better course for us to take.

So last time i said basic monopolies should be handled by the state, but that is a medium sized area compared to the big picture, what about all those other services and industries out there? Am i suggesting we let a bunch of corporations run them? Fuck no, the corporation is a nasty piece of work as it is by its nature psychopathic, it has to be, if it did not, it would not function as a business model. It's like the Xenomorph from alien, the perfect predator, almost admirable for its single minded operating procedure. This is the problem, it will attempt to overcome any boundaries in its way, regulations, democracy you name it. Its not that its made up of bad people, its just these people cannot act with conscience when running the business. I would advocate then, the complete abolition of corporations in this country from operating, they can still import their goods, we can still invest in them, but all domestic business must be operated through co-operatives. Maybe not all the shares need be owned by employees of this company, maybe a safe dominant share will do so we can still have a stock market to allow private investment to flow. But no longer will there be any law demanding these industries seek the greatest profit, rather the workers can seek how much of the market they want, what they want to make and so on to their own moral convictions.

We have already democratized government, why the hell not democratize industry. I mean it makes a lot more sense when you think about it, humans desire a sense of agency, community and autonomy, all those are given if we give workers direct control over their work place. Many people used to say that Democracy was a weak and ineffective form of government, but for all the short comings we have had the last 100 years have been determined by democratic countries as the main power houses across the argument list, economically, militarily, socially and ideologically. This is also way more unexpected than business, after all in representative democracy a citizen is supposed to have knowledge of events he or she may be far removed from whereas how a persons workplace operates is something everyone is directly involved in. Maybe a direct kind of democracy might unfold on the office floor, maybe it will be more of an elected board, or just referendums on key issues while a board still do most of the work. But it will be the key necessity to putting empathy in business, and that is what we need more than anything right now.

Although some co-ops naturally choose to take this route anyway, i would still say that a real need after this would be to equalize wages within each work place. This would ensure that there would still be a jobs market and that basic mechanical industries won't go totally ineffective on us, while at the same time making a direct link between the productivity of a company and an individuals pay packet. It would also naturally deal with any major issues in pay discrepancies that currently haunt the corporate world. Think of how many issues this would solve? No more class rivalry on this front, no more gender differences in pay (at least industry by industry), and yet at the same time we could keep all that fancy investment cycle stuff that allows for investment beyond the low slow arm of government.

Businesses below a certain size of course should be allowed to go private, perhaps anything under the size of 200 people since that is the size a person can actively keep up with everyone within that group. Its the optimum size and beyond this a head of the company could become distant and natural connections to the workforce that occurs in small business ventures would be removed. Even though of course 200 is more of a medium sized business but oh well, I don't know anything that wouldn't be arbitrary under this number. But i digress. My point is that much as there is no point in creating a democratic system between a shop owner and his three clerks who may well be his kids and/or other relatives, the connection between the owner and the workers are so minimal i doubt there is much point in creating an official democratic structure around it.

I genuinely believe that this system would not only be a far more moral economic structure to follow, but it may well be more efficient in the delivery of services. The key to making this an actuality is also in place. The UK owns dominant shares in Barclays and other banks. We could use this position like the Dutch did post 1948 to channel the funds into buying up the shares of various business' while issuing an ultimatum to various companies to sell off their shares now or be liquidated later when your business is no longer wanted. We won't need them after anyway and this will make the whole process move a lot faster. Pumping all that money into the system may also cause enough force to help kick start a recovery as shares pass to employees, i am sure that the perceived sense of wealth increase (shares) backed with job security could do wonders for the economy.

Drive and the impact on economics

This issue is a more difficult chalice for left wingers to take I think.  Yes we can chime the successes of State run NHS over the terribly inefficient American system, and the impartiality and creativity of the BBC against many corporate opponents, but I don’t think it really does proper service to the issue, especially when right wingers can just mention the 1970’s and its horrible, ineffective model of economics. And although it’s not true it pushes us into a debate that won’t lead anywhere, so I will attempt to explain how the state is not the problem, but there is certainly a problem here.

Now firstly please take a look at this little thing, (most papers are pay-walled and this is shorter and more succinct). The first test mentioned here, undertaken by the federal reserve shows that most creative industries have an inverse effect to what is assumed in the theory of incentives (an idea with a fraught enough history as it comes, especially since its creator has railed against it.) I would say this leads to three main points we can make from it:

1. Humans desire a sense of agency

2. Money is a disincentive to creative work after a point.

3. Humans are at their core fixers and value a sense of purpose (social capital) to large paychecks.

This is important because the main arguments against the state run industries are:

1. Humans are self interested to a psychopathic degree

2. Earning money without any fear of it going is a disincentive to work hard.

3. Humans have no sense of moral duty, work is work is work. It all about making them papers!

What these sort of tests prove is that there is nothing innately wrong with state run industries, the government isn't magically stupid. The failings of the state to provide certain services, while in others they surpass the private sector is a matter of no small debate, one i am in no way capable of easily answering, but here are some suggestions:

1. Services which have a high degree of agency but with little need for diversity are brilliant at being lead by the state. The obvious one for this is the NHS and other types of socialized medicine. Doctors and nurses work in very unsociable hours for very long periods of time, in incredibly stressful conditions, and although Doctors make quite a bit of money this is still less than a lawyer who probably doesn't have to deal with the psychological stress many hospital staff must go through. This job has a great sense of purpose: I am saving peoples lives. And a clear goal to this, use the most cutting edge practices to do so (which is of course decided by a medical review board). Other groups have a similar advantage like the armed forces and education, rather the inefficiencies in these departments grow when the private sector is brought in (the wasted billions in NHS budgets on private outsourcing, billions wasted in overdue deliveries from MoD weapons beneficiaries and the Academy system which pulls out much needed funds and bright children from areas (Not strictly bright children but kids with pushy parents as Academies are often built in the better areas of cities.)

2. Micromanagement, Unnecessary bureaucratic and target based managerial does not really work in creative fields, regardless of the sector: A difficulty arises here in that it is clear that bureaucracy and it being unnecessary is one of those length of string arguments, its very unclear, but large organisations, be these a multinational consortium or a state monopoly tend to have a larger than necessary middle management team, all too often get into weighty guidelines on trivial matters of dress codes. These three matters all serve to abstract problems and bring less agency to those on the front, but also make everyone feel like less of a valued workforce. Teachers groan at offsted inspections because these things force you into a conformity that doesn't really serve any use, why the fuck do we need to outline the lesson to people in the beginning? Not that it's necessarily bad but its totally nonsensical to demand. Guidelines are of course important for any work, but when they begin to micromanage every aspect of the work environment then firstly there will be a lot of wasted time calling people up on it (think of the millions wasted on offsted inspection teams and other such quangos, many of which are filled with useless bureaucrats, but more importantly all the time wasted). 

3.Monopoly's issues are offset on the product they sell, a simple product that is a necessity works well as a state run industry. Water, Energy, Education, Health, Transport. Are all areas i would say don't need to be in competition to work. These are all products that do not need to change with consumer demand, there will always be a need for these things in their raw form, they don't go out of season, they don't become outdated. All that is required is for a government to run these institutions is to be able to keep investment reasonably strong to stay ahead of the curve and this can be hugely beneficial to other industries in the country. We say what happens when you deregulate energy and allow private interests to run amok with Enron in 2005. I would say that with looming environmental catastrophe approaching that it is a public necessity to ensure that our energy needs have direct oversight, as they need a radical change to green energy as soon as possible. There are certain industries that just work best as a monopoly, energy, water and transport do best with one set of taps, power lines and rail tracks, putting a company in charge of any monopoly is just a moral hazard waiting to happen, corporations are by their nature psychopathic, in legal documentation they have to pursue profit (otherwise shareholders wouldn't invest, makes perfect sense but that's the problem) and if in control of a public necessity like water, well as was seen in Bolivia in the mid 2000's would raise the price to as high a point as they could conceivably go. Attempting to create a market doesn't help either, there are 33 companies with a stake in the ticket fairs alone in our rail system and the costs and inefficiencies have ballooned since its inception in the early 90's.

So yes, the state is not the perfect engine for everything, by any means. But when it comes to industries where the good that is being sold is clearly definable and unchanging in what it basically does - Education needs to educate, Healthcare needs to stop people dying, Then the state champions the private sector because it does not need to declare a profit (though there should be an overall gain in the welfare of society from their actions)  

If a monopoly is in the hands of a party not interested in turning a profit then society as a whole need pay less for that service and more into whatever the hell they feel like. Which is good, expenditure should equal the cost of the product (taking into account wages etc) not the amount someone is willing to pay for it. Just because everything can be priced and everything has a willing buyer does not mean that all products are essentially the same.

Economic Drivel 1: Why Austerity is horribly stupid.

I have seen quite a bit of confusion in our camp lately about austerity and expansion and so on, anyway, it spurred me on to right something about it, it has also awakened my hunger for more economic drivel so i think i might do a mini series on it, since while i am by no means qualified to talk in depth about wonkish stuff, i have devoted quite a lot of my spare time trying to answer for myself old skeletons in the lefties cupboard. I don't think we ever quite recovered from the 1970's and 80's and we really need to get a grip on that stuff, i blame you all of course for not doing enough economics courses but then again i do tend to do that and its often quite unjustified retrospectively so. yeah sorry. Anyway... Some myths hand around that will do serious damage if we don't start confidently answering them. So my first one, probably the most easy to answer as there isn't much fear in this, is Austerity, and why its stupid.

In almost all recessions (the 1970's slow down may be the only exception to this) there occurs some loss of confidence either demand or supply side, one will follow the other though. This can be due to a sudden market shock like an oil crises, or a speculative bubble in a particularly large market sector (Housing, debt, Gold reserves?) it varies but these bubbles are often caused by a lack of fiscal control: the central bank doesn't tighten interest rates or currency values to stop speculation running wild. (There is more nuance to this, but keep in mind that there were no world wide recessions from 1950 to 1972 and 1972 could well have been down to a supply shock in oil). Now businesses being very good and not wanting to go out of business generally cut back on their Labour force and shrink their scope of operations, if this was in stable period this would make perfect sense, but when everyone is dealing with a slower rate of transfer in money and all business reigns in their work, then this leads to higher unemployment, which it turn leads to less spending power due to people being out of work but also a bigger desire to save among the remaining workforce who now feel the pinch of job insecurity.

But then many people will say: 'But if more people are saving and the government reduces its bond usage then the banks can lend at cheaper rates to business and we can get things moving again.' Wrong i say! Because if the economy is not growing then there is to great a risk, investment in business is only smart when you can be sure that a company is going to expand and pay you dividends! Rather what these banks will do is put their money into government bonds which have increased in number due to smaller tax receipts and larger numbers of the unemployed. Then they will say 'Ah but don't you see? The government is crowding out the market with its bonds, also if you keep on at this then eventually the rates on those bonds will rise and you will be in a trap of putting more and more money into servicing the debt, crowding out the market and leading to a self fulfilling prophecy of stagnant growth and ever growing debt. We have no money so you can't create it out of thin air, that inflationary!' AHAH you fools! I say, because you have just fallen into the trap! Well not a trap, more a cheap way of me continuing this dialogue, but still. Firstly we are not printing money in this situation, we are issuing bonds, which although inflationary at times in a normal economic cycle does not have the same effect in a liquidity trap. This is because we are not as a whole poor on money, private groups just don't want to put it in business with no expectation for growth. So yes they put it into bonds which will stay at very low rates until growth picks up, don't believe me? Look at the rates for low yield interest bonds after the S&P's downgrade on America, their bond rates went down even more. Basically the downgrade had no impact on the bonds, in fact but correlation they improved it (obviously not). 

So then what about Austerity? You could argue that if they weren't putting it into bonds they would be investing it in the next big thing right? I mean, banks do need to promise returns to those billionaire investors right? Well what happens then is generally they just put the money into hard products that are price stable like Gold, which has been increasing in value since like, ever. This won't do any good for anyone really, its just a way of securing your goods in some kind of hard commodity instead.

The government on the other hand can have almost permanently low bond rates and can use this to fund a recovery. Putting people into any kind of work will help to fill the spare capacity of an economy and while at its worst this can just be pushing the money around without adding much at all to it - Like making two men do a task one could do, the old ditch digger scenario. This will at least ease long term social fears brought on by unemployment and create a greater sense of confidence in the market as rates of consumption increase. Fortunately there are usually a shit tonne of things we can do with state money - rebuilding old infrastructure, investing in green energies, investing in high speed broadband, we could even revitalize some segments of our industry by offering low interest, or even no interest rates to companies to build or run factories in the country which could really modernize to stay ahead of outsourced wages.

The whole point is that there is a need to get confidence up, but this is not done by showing off to the markets on how fiscally disciplined we are, the only occasion that may have been true for is Greece but this is a country with an average of $44,000 of debt per head where the average GDP is about $10,000 per head and rife with all sorts of other problems unlike any other developed country that has had issues with growth. What our problem is, is we have (as in, the private sector of the country.) a lot of money but very little room to circulate it. No company is going to act, there is no company large enough whose actions would kick start the whole economy and nor would we want it to. Currently only government has large enough weight behind it to really kick start anything here, it needs to use those private funds now to bring the economy into action once more.