A campaign to avoid ‘Shock Doctrine’ for the UK


1:48 pm - May 19th 2010

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contribution by Adam Ramsay

We’ve now launched a website and a petition for our campaign against a “shock doctrine” for Britain – that is, the use of the recession to force through right wing policies which would otherwise be politically impossible to secure.

On the same week, it looks ever more likely that students at Sussex University will be severely punished for the ‘crime’ of protesting against cuts to the funding of their education – this discipline could cost these students degrees they have worked three years towards.

One of the reasons that we called the campaign “No Shock Doctrine for Britain” was to highlight that those in power, if motivated to do so, often use crises to push through a number of right wing economic or socially authoritarian policies – not just the cuts we are currently seeing.

Just as the Government is pushing through an ‘emergency budget’, so Sussex University hired a Vice-Chancellor to break it’s staff unions and culture of student activism (or so I’m told).

While this is not the same scale, it is a good example of what we may well begin to see at various levels across the country in the coming years.

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Reader comments


Do you think Nick Clegg’s speech today was part of some hard-right shock doctrine?

I mean, if you thought this was happening, you should be able to do better than an academic dispute at a second tier University.

Martin has a strong point. Clegg’s speech this morning – particularly on removing restrictions on the right of peaceful protest – was the reverse of the sort of ‘Shock Doctrine’ approach you appear to believe the coalition is about to engage in.

So, well done on winning before the campaign has begun.

Adam, these HE cuts were brought in under the previous government. Why didn’t you campaign then? Or is this all a bit of anti-LD/Tory wanking?

The government spent too much money for 13 years. You as a Green don’t even believe in growth, let alone uninhibited growth. It was unsustainable. Now we have to cut back. Call it national contraction & convergence.

I mean, you accept that we can’t carry on burning on fossil fuels forever. Why do you assume we can carry on spending huge amounts forever?

“You as a Green don’t even believe in growth”

Genius.

Why on earth is it necessary to use the recession to force through right wing policies. If the party in power has a democratic mandate (or even if they haven’t) they can enact whatever policies they want. Labour didn’t need a recession to follow an authoritarian agenda for the last 13 years and Cleggs promise to roll some of it back sounds good to me.

I have no problem with protesters breaking the law but they have to be prepared to take the consequences. It changes nothing that “such protest actions have a long tradition at Sussex” and the students miscalculated that they could misbehave with impunity.

In fact, some will find the consequences, (that six students have learned that sometimes actions have consequences) rather amusing.

Such protest actions have a long tradition at Sussex.

“those in power, if motivated to do so, often use crises to push through a number of right wing economic or socially authoritarian policies – not just the cuts we are currently seeing. ”

Umm, I’m really not sure about “right wing” there. Look at what’s happening in Europe…the Greek and other debt problems have led to the banning of various short selling in Germany on the small scale and on the large, an insistence that there should now be an economic government of Europe.

Neither are “right wing”. Both have been imposed by those in power as a result of crisis. We could go on, regulation of hedge funds for example…..

Even, dare I say, it, various Greens using the “crisis” of climate change to insist upon changes in the structure of society….amazingly, changes in hte structure of society that they would prefer whether or not climate change existed.

What you’re really describing is the preference of all and any politicians to grasp any reason whatsoever to impose their preferred society upon the rest of us.

Nothing “right wing” about it at all.

“You as a Green don’t even believe in growth”

Oh dear. This is what you call just ignorance. I call myself a greenie. I believe in grwoth. But we believe in (ecologically) sustainable growth. Not pretending scare resources will be around forever

Also – Clegg’s speech was strong on civil liberties, it said very little on where economic cuts would be and they would impact people.

10. Luis Enrique

How do you tell the difference between urgently needed responses to a crisis (let’s say, far reaching reforms to the banking sector) and nefarious plots by political factions to force through their agendas under cover of crisis?

I mean other than calling things you like the former and things you don’t like the latter.

Do you think Nick Clegg’s speech today was part of some hard-right shock doctrine?

Absolutely, yes, When someone like Clegg says ‘transform our politics so the state has far less control over you, and you have far more control over the state’ you need to realise what that actually means: it is not good.

There is no real thing called ‘the state’. Outside of the armed forces, and a few extreme circumstances, it is made of nothing but people doing jobs that happen to be paid for by taxation, instead of profit. It’s an economic concept, not a civil or legal one.

Consequently, to assume it has fundamental relevant in a discussion of civil rights is just a category error. There is no logical connection between the source of a person’s income and whether or not they are an officious enforcer of unnecessary rules, brutal, moralising, corrupt, and/or dangerous. People like that exist whatever the funding arrangement for their salary.

If you want a picture of what Clegg’s rhetoric leads to, look across the Atlantic.

In the US, they have about 7 enumerated and enforced rights we don’t. And also:

http://crookedtimber.org/2009/11/09/the-prison-industrial-complex-texas-style/

Prisons are owned by local governments, but local oversight of finances is rare, and the condition of prisoners is often ignored. Inmates such as those in Pecos are technically in the custody of the federal government, but they are in fact in the custody of corporations with little or no federal supervision. So labyrinthine are the contracting and financing arrangements that there are no clear pathways to determine responsibility and accountability. Yet every contract provides an obvious and unimpeded flow of money to the private industry and consultants.

One percent of all american adults are in jail:
http://crookedtimber.org/2008/02/28/one-percent-of-all-american-adults-are-incarcerated/

Large percentages have access to health care dependent by continued employment. So they work for a boss who can not only fire them at will, but has the legal right to cause harm to come to their children. The only role of the state is trying to mitigate some of the damage:

http://nielsenhayden.com/makinglight/archives/011516.html
Now, with bills piling up for the mother and child due to complications brought on from the birth, Malone is talking to local, state and federal authorities to try to get the company to back pay the insurance money to get the coverage for his wife and child.

The part of New Labour that wanted such things was never able to do them on any scale. The Tories by themselves would never dare try. But with the right wing of the Lib Dems spurring on the Tory mainstream, it could be an ugly next few years.

Sunny, you’re sane: you’re also not a Capital G Green. Look at this stuff, it’s nuts:

http://rupertsread.blogspot.com/2010/05/green-not-yellow-and-blue.html

“(They’re neoliberals to a man – even Huhne is basically a downtheline Orange-Booker) want nothing more than to restart economic growth. (Of course, their mad rush to cut cut cut may create a recession or even a (disastrous) Depression for a while, rather than, as Greens wish to do, stabilising the economy; but sooner or later, they will probably succeed in starting up the conveyor belt of ‘economic growth’ once more.) ”

The cuts might cause a double dip recession (not create one, we’re in one at the moment) but what’s wrong with economic growth?? Why would re-starting it be a bad idea??

13. Luis Enrique

Do you think Nick Clegg’s speech today was part of some hard-right shock doctrine?

Absolutely, yes, When someone like Clegg says ‘transform our politics so the state has far less control over you, and you have far more control over the state’ you need to realise what that actually means: it is not good.

There is no real thing called ‘the state’. Outside of the armed forces, and a few extreme circumstances, it is made of nothing but people doing jobs that happen to be paid for by taxation, instead of profit. It’s an economic concept, not a civil or legal one.

Consequently, to assume it has fundamental relevant in a discussion of civil rights is just a category error. There is no logical connection between the source of a person’s income and whether or not they are an officious enforcer of unnecessary rules, brutal, moralising, corrupt, and/or dangerous. People like that exist whatever the funding arrangement for their salary.

If you want a picture of what Clegg’s rhetoric leads to, look across the Atlantic.

In the US, they have about 7 enumerated and enforced rights we don’t. And also:

http://crookedtimber.org/2009/11/09/the-prison-industrial-complex-texas-style/

Prisons are owned by local governments, but local oversight of finances is rare, and the condition of prisoners is often ignored. Inmates such as those in Pecos are technically in the custody of the federal government, but they are in fact in the custody of corporations with little or no federal supervision. So labyrinthine are the contracting and financing arrangements that there are no clear pathways to determine responsibility and accountability. Yet every contract provides an obvious and unimpeded flow of money to the private industry and consultants.

One percent of all american adults are in jail.

Large percentages have access to health care dependent by continued employment. So they work for a boss who can not only fire them at will, but has the legal right to cause harm to come to their children. The only role of the state is trying to mitigate some of the damage:

http://nielsenhayden.com/makinglight/archives/011516.html
Now, with bills piling up for the mother and child due to complications brought on from the birth, Malone is talking to local, state and federal authorities to try to get the company to back pay the insurance money to get the coverage for his wife and child.

The part of New Labour that wanted such things was never able to do them on any scale. The Tories by themselves would never dare try. But with the right wing of the Lib Dems spurring on the Tory mainstream, it could be an ugly next few years.

Can we stop with the ‘Tory/LibDem cuts’ meme before it even starts, please?

Any cuts to be made will be as a direct result of 13 years of economic mismanagement of the economy by another party.

The pain that we’ll suffer in months/years to come are ‘Labour cuts’ — they are necessary to fix what Labour did to the public finances.

Also, the Green Party’s favourite think tank on why “economic growth [is] no longer possible for rich countries”

http://www.neweconomics.org/press-releases/economic-growth-no-longer-possible-for-rich-countries-says-new-research

WTF?? Sunny you might be a green in the sense of the German Green Party, who also support the war in Afghanistan and aren’t rabidly anti-growth. But Adam and the UK Greens think economic growth is oppression.

Sunny, “green” views on growth aside, surely this is undeniable:

“The government spent too much money for 13 years… It was unsustainable. Now we have to cut back.”

The timing of the cuts is immaterial. Adam and his student friends will protest whenever they come.

Sunny, that’s probably because we don’t yet know exactly where the cuts will come from. That’s why campaigning against unspecified cuts that *might* impact on vulnerable members of society appears to be more LD-Con baiting than an actual campaign against real things. It’s not helped by using an illustration of an event spurred on by the previous governments’ cuts.

Also, Soru, you appear to be mad. There’s a clear distinction between the state paying someone’s wages and a private company paying someone’s wages, which is that the source of those wages comes from, correspondingly, a compulsory levy and the voluntary purchase of goods and services. I await your evidence that the coalition wants to stop the NHS being free at point of use for all UK citizens, which is what you imply.

Of course, what the anti-Labour mob are busy sweeping under the carpet as they decry “economic mismanagement” is the fact that public services in this country were left in such a parlous state by the outgoing Conservative government in 1997 that the spending was necessary to get us within even spitting distance of the quality of life enjoyed in mainland Europe. Brown’s mistakes were twofold – giving the banks too free a hand, and being tempted by the lure of PFI to keep things from the balance sheet.

If there was any justice in this world, the cuts to come would be ditched in favour of taxing the top 1% (i.e. those that stole our money to bet at the City CDS casino) at whatever it took to close the hole as quickly as possible. However, seeing as they’re the masters of the universe, it’s been decided that they get off scot-free, get to keep the money they personally pocketed, and the least well-off are going to pay for the rich’s thievery with a rise on VAT and cuts in the public services they rely on to make their lives bearable.

It’s the “kinder, gentler” Shock Doctrine.

Way to miss the point, soru.

“they are necessary to fix what Labour did to the public finances.”

Can we stop this “labour messed up the finances” meme before it starts please. The finances were fucked because of a major financial crisis that hit the entire developed world and thus deprived the government of its cash cow because the british economy was based more on the financial industry than others. Secondly balancing the budget is only necessary in the long run, the likes of Krugman and others warn that cutting too soon risks the recovery. You can even logically argue that simply freezing spending and letting growth and inflation do the rest is perfectly fine.

Cutting now is therefore a political, not a financial decision, and even then what you choose to cut is a major choice. When the tories choose to keep trident and high military spending then they lose all grounds to seriously claim cutting health, education and welfare services is only being done for financial reasons. they are political choices.

22. Watchman

So how is the University authorities at Sussex, a chartered University which will therefore have Regulations or similiar which set out what to do when students break rules (as in this case) anything to do with a right-wing government. I doubt the University of Sussex’s senior management would like the association for a start.

This is very weak, linking together a very tenuous right-wing social control meme (you do realise it was a left-wing government playing hell with our liberties for the last decade and more?) with a particular incident where it appears University authorities have chosen to discipline students for breaking rules (and presumably disrupting the education of other students). You will find the University of Sussex is required to have policy on free speech and protest, and beyond allowing these things can act as any institution under any government (other than it seems Greece) to deal with those bent on disruption. But these rights accord to all Universities, whichever government set them up…

There’s a clear distinction between the state paying someone’s wages and a private company paying someone’s wages, which is that the source of those wages comes from, correspondingly, a compulsory levy and the voluntary purchase of goods and services.

Yes, that is exactly the core of the neoliberal agenda Naomi talks about: thanks for restating it. In that view, the very existence of the BBC and NHS a violation of someone’s rights, as someone is being taxed to pay for it.

It’s not just one option amongst many for organising things, which sometimes happens to work out. It’s something inherently evil, that needs to be stamped out regardless of the consequences.

I await your evidence that the coalition wants to stop the NHS being free at point of use for all UK citizens, which is what you imply.

Not even in the USA does anyone typically show up at the paediatrician with a wodge of bills. So ‘free at the point of use’ is usually code for individually purchesed, typically by some form of insurance mechanism, instead of tax-funded.

So yes, there evidently are those who think the abolition of the NHS is a matter of civil rights, that taxing person A to pay for curing person B’s cancer is just as immoral as arresting person A to prevent person B’s crime.

It’s telling how many of the individual measures Clegg is proposing will have the net effect of limiting the ability not of the policeman to police, the spy to spy or the judge to judge, but of the taxman to tax…

And if the taxman can’t tax, then, as in Greece, the lender will eventually stop lending.
http://www.bloomberg.com/apps/news?pid=20601109&sid=apSz28ifLL9U
Greece’s revenue from income tax was 4.7 percent of GDP in 2007, compared with an EU average of 8 percent, EU statistics show. Tax revenue fell by 2.5 percentage points of GDP between 2000 and 2007 to a euro region-low of 32 percent even as economic growth averaged 4.1 percent a year.

Everything else that follows will be presented as an inevitable response to changed circumstances.

24. Luis Enrique

Planeshift,

yes, the only sense in which Labour messed up the public finances is that they made spending plans that only made sense if the golden goose was to continue to lay eggs. Martin Wolf is good on the economic legacy of Brown.

still, I’m less sure than you that the need to cut is a pure political decision, not a financial necessity (although as you say, where to cut is …. Trident etc.). I think that if we don’t take action cut the deficit, the economy will not grow quickly enough to balance the budget over the long-run. Of course I could be wrong, and the effect on growth of trying to balance the budget is impossible to know, and I’m basing my opinion on things like IFS forecasts and analysis that could be wrong. Still, I think it’s a mistake to think that we could choose to ignore the deficit if we wanted to, with no serious negative consequences.

I know the left-wing instinct is to prefer tax increases to public sector cuts, but I think left wingers need to remember three things:

1. tax increases also cause job losses, but in the private sector, and there’s nothing left-wing about about putting workers in the private sector on the dole instead of public sector workers. This is a tricky argument to substantiate in a blog comment, but the basic idea is that taking money out of the private sector leaves less to be spent, so demand falls.

2. the size of the deficit is such that, sadly for bluepillnation, limiting tax increases to the rich won’t suffice, so a “no cuts + tax increase” policy would require really big tax increases that would really hurt.

3. it’s just not feasible that public sector spending decisions are so efficient that there’s never a case for cuts. After a good run of spending increases, there are bound to be some areas of over expansion where the tax payer is coughing up money and not getting enough back in return (perhaps, some universities that have too many academics). If being left-wing means advocating lots of state spending on good things (which it doesn’t necessarily, this is just for the sake of argument) then that means left wingers have an interest in the state being efficient and one that tax payers are happy to fund because they’re getting a lot back. You can’t expect to get an efficient public sector if you “always resist cuts” as a rule, you either need to have a process of continual evaluation and cutting back excess (which would be nice in theory) or occasional periods of retrenchment when the political wind blows in the right direction (which is how it tends to work in practice).

25. Yurrzem!

I wouldn’t take the Brighton Argus article too seriously, it seldom leaves any fact unmangled.

There’s a long history of daft student activism at my old uni. The history of poor management is more recent.

Luis @ 23

I seem to remember reading somewhere that a tax of 0.05% on every CDS transaction to pass through the city would clear our deficit in a little over a year. I’ll dig it up when I get home.

the very existence of the BBC and NHS a violation of someone’s rights……It’s something inherently evil, that needs to be stamped out regardless of the consequences…..taxing person A to pay for curing person B’s cancer is just as immoral as arresting person A to prevent person B’s crime

Soru, you’re a little too hardcore for my taste but you do seem to have a good grip on the fundamentals………

28. Luis Enrique

bluepillnation

if you do locate that claim, you will have located a lunatic.

@27

How so? Makes perfect sense to me… Unless, as I have long suspected, you’re one of those libertarian types to whom libertarianism means “the rich get to do what they like”.

Ah – found it. The proposer is the economist Joseph Stiglitz, and he puts his argument forward in that known hive of Trotskyite villainy, the Evening Standard

http://www.thisislondon.co.uk/markets/article-23804049-joseph-stiglitz-robin-hood-who-wants-to-tax-the-rich-for-the-poor.do

31. Luis Enrique

bluepillnation

I think you must have me confused with somebody else. As it happens, like Stiglitz, I’m reasonably sympathetic toward a Tobin tax (see here) I just think the “how much money it will raise” claims made by some of its supporters are hilariously wrong, and usually predicated on the volume of financial transactions staying constant post-tax. Of course the tax would simply shut down swathes of the financial market and sharply reduce volumes (as it is intended to do). Stiglitz supports a Tobin tax, along with a fair few other economists (see my links above) but I don’t see him endorsing the campaigners forecasts of how much money would be raised.

The UK deficit was £160bn in 2009, let’s say it falls to £100bn as the economy recovers. I’m having trouble locating the data, but I think that’s more than the total profits of the UK banking sector (which it already pays tax on). You think you can simply remove by taxation an additional quantity of money from an industry equivalent to 100% of profits, every year? (remember, the deficit is an annual gap between income and spending, paying it off is not a one-off thing). Be serious. Taking an additional £100bn per year in tax out of the entire UK economy (GDP £1350bn based on data here) would be no joke, see point 2 #21.

“If there was any justice in this world, the cuts to come would be ditched in favour of taxing the top 1% (i.e. those that stole our money to bet at the City CDS casino) at whatever it took to close the hole as quickly as possible.”

Won’t work. Total household income in the UK is around £750 billion. The top 1% get 10% of that. £75 billion.

The deficit this year is £160 billion. We could take all of their money, every single last penny, and we still wouldn’t have solved the problem.

“I seem to remember reading somewhere that a tax of 0.05% on every CDS transaction to pass through the city would clear our deficit in a little over a year.”

No, you’re wrong. Stiglitz is talking about the Robin Hood Tax.

1) It’s not only on CDS contracts. It’s on every single financial market transaction in the globe.

2) The amount raised is a global amount, not a UK amount.

3) It’s a barking mad idea as certain people (like me) have been pointing out for months. For it wouldn’t be, as advertised, a tax on baks or bankers, it would be a tax on every user of financial markets…that’s you and me when we buy euros for our beer on our hols, Tesco when it changes currencies to buy imports, every exporter who changes money to pay their workers, everyone saving for a pension, every insurance policy in the land…..you get the picture.

@30

From the article:

“What’s particularly moving him today, he says, is that we’ve been presented with a great opportunity — one that unites much of his past and present argument. He’s a backer of the campaign launched this week by charities for a Robin Hood tax on financial companies to reduce cuts in public services and assist the world’s poor. Taking 0.05% from world bankers’ transactions would raise £250 billion a year.”

Unless the Standard is misrepresenting him, this statement comes from Stiglitz himself, and if a significant percentage of those trades went through London, then the point is made.

Put more bluntly, who cares if the bankers bugger off after a year of that kind of taxation? Maybe then we can go back to making stuff that people want to buy and put a stake through the heart of Thatchers toxic legacy for good.

Bluepillnation

If the Tobin tax on all the world’s transactions raised £250 billion and you want to pay off the deficit with it, then about 40% of all the world’s financial transactions each year have to go through London. Explain to me why so many foreigners should have to pay tax to the UK? Is it fair for a Bangladeshi taking out a mortgage to help pay for your childrens’ education? Or that a Greek investing in some shares for her retirement should be paying British nurses’ wages?

Perhaps it is, perhaps it is a price worth paying because the City is such an efficient place to do business that it’s still cheaper than doing business (and paying the Tobin tax) locally. But you don’t seem like the sort of person who’d think that was fair.

GeorgeV, he might also like to explain why the 40% of the world’s transactions would continue to go through London (if indeed they do) if there was such a tax.

He doesn’t say world bank transactions, he says “banker’s” transactions – i.e. the stuff at the top, not your regular high-street accounts.

They can go Galt as much as they like, but it’ll take ’em a couple of years to turn that around and by then the deficit will be cleared.

But that’s the problem with right libertarians, they seek to preserve the privileges of the wealthy, because they’ve deluded themselves that they might get invited into the club…

Also, the Green Party’s favourite think tank on why “economic growth [is] no longer possible for rich countries”

It seems to me that neither side is actually examining this debate properly.

Remember that recent three part series by Paul Mason at the BBC? In fact he asked the same question.

1. You can’t have growth forever unless it is sustained growth and development. It’s a bit like the deficit – sooner or later you run of out resources and are fucked. That is the state we’re in with the environment right now.

AQll these right whingers think we can run up a resources deficit endlessly without worrying about the consequences are as stupid as those people who think we should return back to feudal England.

2. There are extreme views in every political movement.

3. In this case Soru is actually making a very intelligent point. The guff that Clegg came out today won’t be anywhere in 5 years time. It’ll be exposed as a sham.

4. The deficit will be sorted via a mixture of cuts and growth, but it doesn’t solve the long-term problem: and that real living standards have been falling for significant percentages of the population, and sooner or later they’re not going to buy the neo-liberal economic consensus because it hasn’t worked for them.

38. Richard W

You can’t ‘ pay off ‘ a fiscal deficit. A deficit is a flow not a stock. It would be possible to reduce or eliminate it but not pay it off.

Can we stop this “labour messed up the finances” meme before it starts please

Planeshift, how about these meme: There is no money.

Secondly balancing the budget is only necessary in the long run

It will take most of the next decade to balence the budget, and a generation to get the public finances back to where they were in 1997. Assuming that nothing else goes wrong in the meantime. Which it will. For one thing, there is the pensions crisis coming up.

By the time another government has as much scope to increase spending/ cut taxes as Labour has had, we will all be dead.

40. Richard W

4.’ The deficit will be sorted via a mixture of cuts and growth, but it doesn’t solve the long-term problem: and that real living standards have been falling for significant percentages of the population, ‘

Well average earnings for UK employees were the 2nd highest in the EU, 2007. In the wider European continent context only Switzerland and Norway outside of the EU have higher average earnings. I readily accept that obviously in the UK many people earn below average wages. However, the data clearly contradicts the notion that the UK is a low wage economy.

Average gross earnings of full-time employees in enterprises with 10 or more employees. Earnings are from 2007 and denominated in euros.

http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tps00175&plugin=1%29

Denmark: 53,165.0
United Kingdom: 46,050.5
Luxembourg: 45,284.0
Netherlands: 42,000.0
Germany: 40,200.0
Austria: 37,715.6
Sweden:36,871.4
France: 32,413.4
Spain: 21,890.7
Poland: 8,177.9 (2006)

Nothing is sustainable in the long run. Human existence is predicated on doing naturally insustainable things (there is only meant to be a fes thousand of us on the planet at anyone time on the basis of our place in the food chain and our size).

So our only way to survive is to coordinate switching between different survival and prosperity strategies based on available
resources. Markets do that pretty well. For example, as fossil fuels become scarce, nuclear energy will become relatively less expensive, driving a change in energy production. So long as the state doesn’t stop it.

“You can’t have growth forever unless it is sustained growth and development. ”

We’ll go with you meaning “sustainable” rather than “sustained” there, shall we?

As I’ve desperately tried to point out all over the place, economic growth (that GDP thing) is, by definition, an increase in value added. It is NOT, an increase in resources used….it is continuing to find new and interesting ways to add value. Even very green (even very Green) economists like Herman Daly agree with me here.

“and that real living standards have been falling for significant percentages of the population,”

That is something you have to prove, not assert. I’m entirely happy to agree that “relative” living standards have been falling for some significant sector of the population (this is assuming that we’re talking about the UK, or within country comparisons….when we talk about the globe, humanity, then global inequality has been falling, not rising, in recent decades) but I’m, well, let me put it this way, deeply unconvinced that “absolute” living standards have been falling for any significant sector of the population.

In absolute terms the poor have not been getting poorer….getting richer less fast than the rich I’ll grant (again, within country) but that is not the same as the statement that absolute standards of living have been declining.

Care to try and prove your statement?

there is only meant to be a fes thousand of us on the planet at anyone time on the basis of our place in the food chain and our size

There’s no evidence for this, unless you believe that mass production of agriculture itself is unsustainable.

Markets do that pretty well. For example, as fossil fuels become scarce, nuclear energy will become relatively less expensive, driving a change in energy production. So long as the state doesn’t stop it.

Not necessarily. Markets are prone to massive and systematic failure, are usually biased towards the short term than long term, and frequently don’t pay for the externalities they produce.

The massive failure of BP in ensuring its own safety and that of the environment the pitiful fine it will face after is an example of corporates abusing their power, and colluding with govt to reinforce their power.

In the end, only people power works.

Tim W:
We’ll go with you meaning “sustainable” rather than “sustained” there, shall we?

No, I actually rather like ‘sustainable’.

It is NOT, an increase in resources used….it is continuing to find new and interesting ways to add value

I didn’t say it wasn’t. I’m just pointing out that using up scarce resources – when it’s not unsustainable – in the name of ‘economic development’ is a stupid idea

but that is not the same as the statement that absolute standards of living have been declining.

Ooops, you’re right. I meant relative not real.

“As I’ve desperately tried to point out all over the place, economic growth (that GDP thing) is, by definition, an increase in value added. It is NOT, an increase in resources used….it is continuing to find new and interesting ways to add value. Even very green (even very Green) economists like Herman Daly agree with me here.”

Just to mention this (and I promise to respond to respond at some point to you announcing me as the vanquisher of Keynes soon) but as far as I understand it GDP does not include the value destroyed i.e. and quote basically the economic damage done by Carbon emitted or oil spilt.

When this stuff is included then GDP isn’t as good as it looks. From what I’ve heard, certain parts of China’s phenomenal growth have actually been far from phenomenal (certainly less than the 8% the Chinese state think is necessary for a harmonious society) because of the environmental damage caused.

Interesting http://www.worldwatch.org/node/4626

Etc. http://www.nytimes.com/interactive/2007/08/26/world/asia/choking_on_growth.html

Of course judging the economic value or I suppose value destroyed of reduced biodiversity etc is difficult, but not unimportant. I’m not sure if this green element needs properly incorporated into GDP or if it needs to be discussed merely as something important to consider in total.

Anyway, there’ll be no shock doctrine foe the UK. If the IMF’s proposals for banking taxation are taken up then we’ll see one of the most fundamental shifts in how finance is ruled in decades and it will take place under the Tories and Liberals.

Frankly, I’m beginning to wonder how much the colour of the government really matters. Callaghan abandoned keynesianism, Tories went off gold… Events, dear boy, events!

“i.e. and quote basically”

For fu…

Read: For example and quite basically…

For those who believe that Britain really does have a dire fiscal predicament requiring the highest policy priority, try this recent piece in the Telegraph:

US faces one of biggest budget crunches in world – IMF
http://blogs.telegraph.co.uk/finance/edmundconway/100005702/us-faces-one-of-biggest-budget-crunches-in-western-world-imf/

By comparison, the UK’s predicament looks almost comfortable.

“Not necessarily. Markets are prone to massive and systematic failure, are usually biased towards the short term than long term, and frequently don’t pay for the externalities they produce.”

Same imperfections apply to Government planning as well. The question is which one does better at working out those imperfections. Markets are the ones that tend to do so (there might be a handful of exceptional goods that are best provided by government). I am sure BP will pay a price for its shortermism in this particular case.

Naomi Klein claims another victim!

‘The Shock Doctrine’ was a ridiculously selective reading of recent history, deliberately designed to blot out the older, widely-observed idea that a crisis is used as a cover to increase the power of the state and encroach on the freedoms of individuals, as covered to exhaustion in Robert Higgs’ ‘Crisis and Leviathan’.

Soru:

“There is no real thing called ‘the state’. Outside of the armed forces, and a few extreme circumstances, it is made of nothing but people doing jobs that happen to be paid for by taxation, instead of profit. It’s an economic concept, not a civil or legal one.”

So if I decide I don’t want to purchase the services of the state, and so withhold my taxes, that wouldn’t raise any civil or legal issues? I think Lester Piggott already tried this – must find out how it worked out for him.

49. Luis Enrique

people really need to separate out the idea of economic growth from that of finite resources.

for a start, even if we stop growing and start shrinking, we’d still be screwed if we had a finite resource problem, because resources are a stock and consumption a flow.

For example, say we have 100 units of finite resources left, and immediately start shrinking the economy so consumption patterns look like this:

2010: 40 units consumed
2011: 30 units; those columns in The Guardian are starting to work!
2012: 20 units; we’ve ended the “culture of consumption”!
2013: 10 units; hooray, back to the middle ages!
2014: oh rats, it’s all gone, we’re still screwed.

so if you think we have a finite resources problem, just stopping growth is no real help (it may just prolong things for a while longer).

Moreover, obviously any particular form of economic activity that is based on a finite depletable resource is not sustainable, but that doesn’t mean economic activity is unsustainable, so long as we can switch to other inputs.

In the long-run, clearly the power sources available to us which are long-run sustainable are solar, wind maybe nuclear, and in the long-run the materials available to us are synthetic materials based on plants (bioplastics, carbon fibre etc.) and recycling the finite stock of minerals on the planet (metals etc.) and with trillions of watts of solar energy hitting the planet, there’s no reason to think high levels of economic activity aren’t sustainable for the long-run.

In the meantime we need to ensure: 1. we don’t do any more irreversible damage (climate change, rainforest, coral reef etc. destruction) and 2. we don’t carry on blindly so that we’re suddenly screwed when the finite resources we have been using run out – i.e. we just have to invest in developing substitutes to make the transition painless. (and 3. we start to repair past damage would be nice).

(bluepill, I think that newspaper article just says Stiglitz supported the campaign, and then that the campaign claims £250bn could be raised – trust me, Stig would not be caught dead endorsing a forecast like that. He’s not an idiot.)

@47

“The question is which one does better at working out those imperfections. Markets are the ones that tend to do so”
Proof, please? (Glibertarian blogs do *not* count).

Nationalised rail, electricity, gas and water were all much better value for the consumer -the only benefit to their privatisation 20 years ago was to the already insanely rich bastards who bought them.

“still, I’m less sure than you that the need to cut is a pure political decision, not a financial necessity (although as you say, where to cut is …. Trident etc.). I think that if we don’t take action cut the deficit, the economy will not grow quickly enough to balance the budget over the long-run”

Well over the long run, yes the budget needs to be balanced (which isn’t the same thing as saying spending needs to be cut), and I’d argue needs to go into surplus to start re-paying debt. But the decisions on how to do this, and when to do this are crucial – as you are well aware cutting the wrong things at the wrong time puts the recovery at risk. Furthermore both cutting spending and raising revenue are not as simple as many seem to suggest, cutting spending in one area (say crime prevention measures) can sometimes lead to higher future spending in other areas (increased crime in the future leading to more prisons). Similarly raising revenue can be more difficult than simply raising taxes as matters such as laffer curves, elasticity of demand etc hit.

IMO the crucial thing is not spending cuts but cutting unemployment which can only happen through economic growth, welfare reform, and intensive community development work in areas with high unemployement. Yet the latter is going to be the first thing that gets cut.

@bluepillnation (50)

“Nationalised rail, electricity, gas and water were all much better value for the consumer -the only benefit to their privatisation 20 years ago was to the already insanely rich bastards who bought them.”

I thought the discussion was about markets?

In the case of rail and water, there is effectively no market. They used to be publicly owned monopolies, now they are privately owned monopolies – necessarily heavily controlled by regulators, as there is no market to control them.

The situation is only marginally better for electricity and gas – firms are only really competing to handle the paperwork, rather than the actual provision of the thing being purchased.

Conspicuously absent from your list: telecoms! I wonder if you omitted it because (a) it is obviously a thriving marketplace and (b) it is unrecognisably better than it was 30 years ago?

Clearly there are two kinds of nationalised enterprise. There’s the good kind, where there is universal democratic support for the service it provides (a sewage system, a police force) and where it protects the consumer from abuse of a natural monopoly.

Then there’s the bad kind, where there used to be a market but needless government intervention replaced it with a monopoly, and decades later, more often than not, we are all propping up a failing commercial activity.

Obvious example: the British car industry.
Astonishing example: the travel agent Thomas Cook.
Topical example: the Royal Mail. (But then who in their right mind would buy it?)

I left telecoms out because that industry has seen a massive upheaval over the last couple of decades, so it cannot be compared. The British car industry was actually capable of turning out some good products, but was essentially let down by too many chiefs and too few braves (and yes, I still drive a Rover 😉 ).

I believe that in an ideal world markets are bad for everything except consumer goods, as in a market situation, because there’s nothing requiring private industry to play fair and be honest – the free market rewards a lying, cheating SOB, and there’s little or no comeback for those that were swindled (see the recent banking fiasco).

Unfortunately we do not live in an ideal world.

For those who believe that Britain really does have a dire fiscal predicament requiring the highest policy priority, try this recent piece in the Telegraph:

Even if the Americans are worse off than us, that does not make us well off.

You might as well say that because France in 1940 was in a worse position than us, there was no reason to worry about national defence.

@bluepillnation

“I believe that in an ideal world markets are bad for everything except consumer goods, as in a market situation, because there’s nothing requiring private industry to play fair and be honest – the free market rewards a lying, cheating SOB, and there’s little or no comeback for those that were swindled”

In that case I wonder what you mean when you say “market”. To most people it means a situation in which there are many sellers competing for the repeating custom of buyers. It should be pretty straightforward to see how the sellers are dependent for their survival on their reputation – they simply cannot afford to upset their customers.

On the contrary, private companies are almost manically obsessed with pleasing their customers. This of course does not rule out the possibility of some criminals taking advantage of the unwary, but (obviously) there is no system that can completely rule that out. In a big, diverse, pluralistic marketplace the damage that can be done by cheaters is limited by competition, whereas in a centralised, politicised system the scum are able to rise to positions of power, control the flow of information and cause as much damage as they like.

Though I notice you make an exception for “consumer goods”. What does that mean, and why is it different (and what is it different from)?

“(see the recent banking fiasco).”

I’m certainly not going to argue with you on that one. The banks are not (and cannot ever really be) independent commercial entities. They should have been much more closely regulated than they were, because they are covered by effectively limitless government guarantees.

But this is in no way an argument for eradicating the market (or extending limitless government protection or regulation) elsewhere. We need a well-regulated financial sector so we can have free markets wherever possible elsewhere.

“Unfortunately we do not live in an ideal world.”

Quite – that’s why we need markets. They make the best of the situation.

@55

“It should be pretty straightforward to see how the sellers are dependent for their survival on their reputation – they simply cannot afford to upset their customers.

On the contrary, private companies are almost manically obsessed with pleasing their customers.”

Milton Friedman said the same thing, and he was wrong too. We’re in “ideal world” territory again. To free-market libertarians, markets are self-regulating because in theory customers can always switch suppliers. In practice though, things are very different – look at the Wal-Mart situation in the US, where the simple appearance of one in the area will force other businesses to close down because they cannot compete with the prices – or the privatised utilities situation over here, where people can technically switch suppliers, but it can be a pain in the neck to do so, so the default suppliers to an area can still make massive profits from a lousy service. The same applies to the privatised railways and bus operators here.

Essentially, “free markets” aren’t actually free, because the priviate entities with the deepest pockets can and will game the market to their advantage at the expense of the little guy. George Osborne, after pledging help for small businesses has just outlined his plans to cut corporation tax to the CBI – not many members of that organisation count as “small businesses”, yet they will be the recipients of tax cuts worth billions, which they can and will use to shut down smaller competitors because it’s what their shareholders obliquely demand.

@bluepillnation

“To free-market libertarians, markets are self-regulating because in theory customers can always switch suppliers. In practice though, things are very different – look at the Wal-Mart situation in the US, where the simple appearance of one in the area will force other businesses to close down because they cannot compete with the prices”

The other businesses are not directly forced to closed down. What happens is that their former customers decide that they don’t want to pay extra to buy from a store that has a limited range of products. They’d rather buy at a lower price from a massive range of products. From the consumer’s perspective, prices have fallen and choice has broadened. You regard this as a negative; presumably you would see it as an improvement if somehow the small shops could be kept going – but this would mean forcing their customers to be loyal to them, i.e. to remain worse off. How would that be an improvement? How can it be sensible to act to preserve businesses in order to ensure customers are worse off?

You are beating a straw man when you say “in theory customers can always switch suppliers”. It is not hard to identify examples where the range of choice is very limited, and no serious economist would claim that there is always a perfect spread of choice in every situation. If you climb a hill, there may be a small snack shop at the top for tourists, and it may charge a surprising amount for a packet of crisps. But is such egregious market failure justifiable grounds for a revolution in which we discard the market? Of course not. It is remarkable only because it is the exception. Meanwhile you overlook the myriad examples of free choices that you make every day as you spend money, beneficial both to you and your many trading partners, and all due to a basic personal freedom that, if anyone tried to stop you from enjoying it, would cause you to be understandably outraged.

And it’s interesting that after you exempted “consumer goods” (but still decline to define what you mean by that), your first example of something requiring a revolutionary anti-market solution is the growth of Walmart, firmly in the consumer goods category. I wonder if you’ve made up your mind about how far the revolution needs to go?

“– or the privatised utilities situation over here, where people can technically switch suppliers, but it can be a pain in the neck to do so, so the default suppliers to an area can still make massive profits from a lousy service.”

By definition, if I as a consumer can’t even be bothered to switch suppliers, it stands to reason that I’m not really being put through hell by my current supplier. I switched banks quite recently and it was extremely easy. I really can’t see this as a crisis that has to be solved by a revolution in which we replace the market with… who knows what?

“Essentially, “free markets” aren’t actually free, because the priviate entities with the deepest pockets can and will game the market to their advantage at the expense of the little guy.”

It is utterly impossible for them to do that without the assistance of corrupt partners in government. They don’t have to game the market, they simply get the government to distort it for them. This is always and everywhere the problem. Practically every time you hear someone complaining about the perils of free markets, they should be blaming the government for failing to sustain a free market, and the number one failing and corruption of government in relation to businesses is to keep doing special favours for specific businesses. For example, the Internet cable companies have been lobbying for a big injection of government cash for years now, and it looks like they’re going to get a slice of the TV license fee – utterly despicable and criminal.

As Friedman himself put it:

—-
Business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger….Every businessman is in favor of freedom for everybody else, but when it comes to himself that’s a different question. We have to have that tariff to protect us against competition from abroad. We have to have that special provision in the tax code. We have to have that subsidy.
—-

“George Osborne, after pledging help for small businesses has just outlined his plans to cut corporation tax to the CBI – not many members of that organisation count as “small businesses”, yet they will be the recipients of tax cuts worth billions, which they can and will use to shut down smaller competitors because it’s what their shareholders obliquely demand.”

The CBI has about 200,000 member companies, so it is dominated by small businesses. Tax cuts are no more useful in shutting down smaller competitors than any other source of additional wealth. On the contrary, a lower corporation tax regime will attract foreign competitors to the UK, as well as making it more cost effective to grow existing businesses. This will increase demand for employees, causing greater competition to attract employees, forcing employers to offer higher wages.

Make no mistake – businesses argue for corporation tax cuts for their own benefit, of course. But by doing so they just so happen to be arguing for the benefit of the rest of us as well. It’s almost as if, oh, I don’t know, some kind of “invisible hand” was directing them to act in the interest of their fellow man. I must think of a better metaphor than that…

@57

I think we’re never going to persuade each other, so I’m going to leave it after this.

Aside from the fact that Wal-Mart keeps its prices low largely by getting its products in volume from ethically dicey suppliers – when the local store goes out of business, what are the owners and employees of the local store supposed to do for income? They can go and work for the big boys for pennies compared to what they used to earn – but even that’s presuming they’re hiring. Applied across the whole economy, when taken to its logical conclusion this model has a gigantic negative impact on society. I don’t believe that short-term consumer gain is a price worth paying for that.

Here’s where the Friedmanite model falls down – in the short term for most it works, but gradually over the long term the negatives outweigh the positives for all but a lucky few at the top of the executive food chain. It essentially leads to a small super-rich elite and everyone else hovering on the edge of serfdom.

In the business sense it even defeats the “many suppliers will improve quality” argument because it almost inevitably leads to a private monopoly with or without government help. Microsoft famously became a monopoly without any government assistance whatsoever – they piggybacked off the ’70s and ’80s mantra that “no-one ever got fired for buying IBM”, then when the clones started appearing, leveraged the fact that IBM machines ran their software to build up an unassailable position, along with sundry other dodgy, but legal practices.

I guess my position is that human welfare takes precedence over business welfare every time, and while you may believe that the former is achieved best with the latter, I reserve the right to disagree on the evidence of my own eyes.

” when the local store goes out of business, what are the owners and employees of the local store supposed to do for income? They can go and work for the big boys for pennies compared to what they used to earn – but even that’s presuming they’re hiring. Applied across the whole economy, when taken to its logical conclusion this model has a gigantic negative impact on society. I don’t believe that short-term consumer gain is a price worth paying for that.

Here’s where the Friedmanite model falls down – in the short term for most it works, but gradually over the long term the negatives outweigh the positives for all but a lucky few at the top of the executive food chain. It essentially leads to a small super-rich elite and everyone else hovering on the edge of serfdom. ”

This process, or market competition, has been going on since around 1750. That’s about the time that the protected guilds were told to shut up and let people get on with it.

So, 260 years later, are we peons closer or further away from that “edge of serfdom”?

Or is 260 years still the short term in which such a system does work?

@58: “Here’s where the Friedmanite model falls down – in the short term for most it works, but gradually over the long term the negatives outweigh the positives”.

Nonsense alert!

The IMF produced an illuminating obituary on “Monetarism” back in 1996:

” …instability of monetary demand, especially in the context of supply shocks and declines in potential output growth, complicated the task of monetary authorities. As a result, during the 1980s most central banks – with some notable exceptions – either abandoned or downplayed the role of monetary targets.”
IMF World Economic Outlook, October 1996, p.106.

“Friedman himself conceded to the Financial Times in 2003: ‘The use of quantity of money as a target has not been a success. I’m not sure I would as of today push it as hard as I once did.’”
http://utip.gov.utexas.edu/papers/CollapseofMonetarismdelivered.pdf

Sorry, coming to this late, haven’t trawled through all the comments.

It is fair to say that there are two views in my party – some do believe that ‘economic growth’ is unsustainable. I take the other view – that GDP is such a bad measure of anything, that opposing economic growth is rather essentially meaningless.

I personally favour growth in many sectors – the arts, renewable energy, lots of service sectors, manufacturing of goods made with renewable, or re-recyclable resources, etc, etc, etc. I also believe in investment. We don’t just spend money on public services in order to provide a safety net. We do it because our economy requires that we invest in people. Whether that’s making sure they are healthy, that children has the best possible start in life, or that absolutely everyone who wants to go to university is encouraged to do so, the building of a prosperous, fair, sustainable new economy will depend on a skilled, healthy workforce.

And from an environmentalist standpoint, massive investment now is urgently needed – we need to re-build the whole economy into a low carbon one, in the next few years – we can no longer hope that a spluttering market will power those changes with a little regulatory guidance.

So, we need to build a new economy from the ashes of the recession. We can either cut back public spending, hope this doesn’t kick start the spiral of unemployment, and return to the bad old days of inequality and poverty – of Britain as one of the most unequal and poor societies in Northern Europe. Or we can learn from our friends across Northern Europe (OK, not Ireland), invest in people by protecting public services, and in stimulate growth (yes, growth) in those industries which can power us towards that fairer, more sustainable future.

Obviously, ultimately, we’d need higher taxes, particularly on the wealthiest, to pay for this.

Adam

“of Britain as one of the most unequal and poor societies in Northern Europe.”

Britain is right now one of the most unequal societies in N Europe. ……but it’s been some centuries since it was one of the poor countries of N Europe.

You’re confusing, again, relative and absolute poverty.

Look at figures 8 c and 8 d here.

http://www.stateofworkingamerica.org/swa06_ch08_international.pdf

The absolute standard of living of the poorest 10% in the UK is 35% of the median American income. The absolute standard of living of the bottom 10% of Sweden or Finland is 38% of the US median. That in the US is 39% of the US median.

All that redistribution, all that high taxation, leads to no discernable difference in the standard of living of the bottom 10% as opposed to the more Anglo Saxon countries’ bugger the redistribution and let’s have a basic welfare safety net.

All that redistribution leads to a more equal society, yes, but not notably to one with less absolute poverty or even to a rise in the living standards of those who are less relatively poor.

“Or is 260 years still the short term in which such a system does work?”

That’s right, Tim, the last two centuries have been nothing but unfettered, nutritive market competition, all the time, everywhere…

And no-one’s answered the question of what those who lose their jobs when the big boys come to town and consolidate are supposed to do to live on. This is the main thrust of my argument.

Tim W has missed the point in two replies – first implying that we’ve had a laissez-faire system for the last 260 years, when any fule kno that from the postwar years to the end of the 1970s the UK had one of the most unionised workforces in the world at that time (as did the US, thanks in part to the postwar boom and the GI Bill) – I have to concede that it’s possible we went too far too soon in that regard.

Then he goes and builds us a straw man from absolute poverty stats and proceeds to knock it down. The fact is that *any* capitalist system has a degree of unemployment built in, and that’s before you factor in that some adults of working age will be disabled and/or suffering from long-term illness.

“first implying that we’ve had a laissez-faire system for the last 260 years”

No, I’ve implied that we’ve had one of market competition for the last 260 years. Which we have, by and large. Even when the car industry was heavily unionised the car manufacturers were still competing with each other in hte market place, weren’t they? Heck, even the internal divisions of BL competed with each other.

“And no-one’s answered the question of what those who lose their jobs when the big boys come to town and consolidate are supposed to do to live on. This is the main thrust of my argument.”

Something else.

Just as farm labourers did when the new technology of tractors and machines came to the farms, just as manufacturing workers did when the new technologies came to them, those working in the retail trade go off and do something else when the new technology of supermarkets comes along.

This has been at the core of our entire economy since someone first planted a crop to harvest. Greater efficiency in hte use of labour leads to labour being freed up to go and do something else. This is why we have this very thing called civilisation. Because we don’t all have to go hunting to feed ourselves, don’t all have to watch the south end of a mule going north to feed ourselves….we use less labour feeding ourselves now so there is labour available to run hte NHS, build libraries, write books, invent computers….civilisation depends upon the more efficient use of labour.

“The fact is that *any* capitalist system has a degree of unemployment built in,”

No.

Any economic system (note, economic, not capitalist) which allows people to change jobs will have unemployment. For there is often a gap between leaving one employment and starting another. We might call this frictional unemployment (in fact, that might be the technical name for it). This would exist in any system, capitalist, socialist, communitarian, mutually owned, worker owned, whatever, as long as there is that mobility of labour.

If you mean structural unemployment then I’m afraid you’ve been reading too much Marx again. This doesn’t come from the capitalist class grinding the workers down (the reserve army of the unemployed)….it’s a function of the wages desired being higher than the productivity of the labour on offer.

@65
“Heck, even the internal divisions of BL competed with each other.”

At management level yes, at shop floor level less so.

“Something else.

Just as farm labourers did when the new technology of tractors and machines came to the farms, just as manufacturing workers did when the new technologies came to them, those working in the retail trade go off and do something else when the new technology of supermarkets comes along.”

That’s a false equivalence and you know it. Aside from the fact that farming still uses a lot of manual labour today, what we’re talking about these days is a globalised workforce where cheap labour can be imported – or manufacturing exported – to improve the profits of the big umbrella firms. What if the displaced labour force can’t afford to move, or are considered too old for retraining in something else. What if there isn’t anything else they can do? When someone of working age who is willing to work can’t afford to live on what the wealth creators are offering? It’s not “a function of the wages desired being higher than the productivity of the labour on offer”, it’s a function of the wages required *for everyday living* being more than our captains of industry are willing to pay.

“That’s a false equivalence and you know it.”

Nope, a truth, a harsh one, but a truth.

“Aside from the fact that farming still uses a lot of manual labour today, ”

Bollocks it does. 80% of the population worked on the land in 1700. 20% or more in 1920. Today it’s 2% or less.

“What if there isn’t anything else they can do?”

Find something. I’ve had to, several times.

“When someone of working age who is willing to work can’t afford to live on what the wealth creators are offering?”

That’s what the redistribution of the welfare state is for. Your skills, talents, abilities are no longer needed? You’ve been surpassed by a machine, a technology, an import? Here, have the money to live. Now, try to find something else to do.

“it’s a function of the wages required *for everyday living* being more than our captains of industry are willing to pay.”

Well, even Marx managed to get this point right. As long as there is competition for the profits than can be made by employing labour then the price of labour will be (at least) close to its productivity. If the price of everyday living is greater than the amount that can be made by selling labour then the problem is either the cost of living or the productivity of labour: not the greed of the employers.

BTW, I’ve had this argument many times before……but, but, in the 50s people could live on one income.

Yes, so can you now: if you’re prepared to live at a 50s standard of living. 2 up 2 down, coal fires, no central heating, privvy out the back, possibly not even a bath (and certainly not a shower) plumbed in. And the food was shite. And short. Hell, you can live on the dole now like a working family lived in the 50s.

“That’s what the redistribution of the welfare state is for.”

You’re ignoring the fact that a significant number of Friedmanite libertarians would abolish the welfare state if they could, claiming that it breeds indolence in itself, not to mention requiring a sizeable tax intake – anathema to their credo.

“If the price of everyday living is greater than the amount that can be made by selling labour then the problem is either the cost of living or the productivity of labour: not the greed of the employers.”

Sounds fine in theory, but there’s two problems with quoting Marx there. Firstly, his posit presumes that wages are tied to productivity – they’re not. Someone earning minimum wage shifting a certain amount of product will earn exactly the same wage if they shift more. Obtaining a higher wage these days tends to be the result of obtaining a specific qualification, or experience doing the job. Secondly, he wasn’t living in a time where it was possible to fly in cheap labour from abroad, minimise their cost of living by packing them into shared accommodation, then fly them back to their country of origin where the amount they were paid provides a living wage, whereas it wouldn’t in the country in which they were working. Henry Ford was a hard taskmaster and a ruthless businessman, but even he was smart enough to work out that he could only shift his product if people were paid enough to buy them.

@ 58 (bluepillnation)

“I think we’re never going to persuade each other, so I’m going to leave it after this.”

So now we’re never going to persuade each other, but that’s okay because all opinions are valid. Let’s take our opinions away and put them in a dark room where they can recover from all this uncomfortable “analysis” and all these “facts”! 🙂

“Aside from the fact that Wal-Mart keeps its prices low largely by getting its products in volume from ethically dicey suppliers”

Or so you imagine:

http://walmartstores.com/suppliers/

It keeps its prices low through the economy of scale, and through the way it delegates responsibility for pricing to the managers on the shop floor – fascinating podcast about this:

http://www.econtalk.org/archives/2009/06/platt_on_workin.html

“when the local store goes out of business, what are the owners and employees of the local store supposed to do for income? … Applied across the whole economy, when taken to its logical conclusion this model has a gigantic negative impact on society. I don’t believe that short-term consumer gain is a price worth paying for that.”

The problem with your “logical conclusion” is that it is totally contradicted by the evidence. It isn’t a logical conclusion at all. It has a massive mistake in it. I totally understand if you aren’t interested, of course. If so, please feel free to stop reading at any point! 🙂

What we actually observe is that real wages are rising all the time. An oft-quoted statistic from the US is that “household incomes” for ordinary people haven’t risen since the mid-1970s. But this is an outrageous cheat – over the same time period the number of people in each household has fallen greatly. Income per person has risen by about 50% – turns out that the first thing people spend their extra wealth on is a bit of space and privacy to themselves (so much for the popular socialist plan of shared living areas for hundreds of workers). It’s a very similar story elsewhere in the world. There simply are no countries with liberalised economies where “the poor are getting poorer” over the long run. The only countries where that old slogan has ever been true are feudal or socialist countries, many of the most horrifying examples in Africa.

So in fact this “model” as you call it is somehow constantly discovering better ways to employ and enrich the population.

If you really are interested in the truth, rather than retreating into privacy to polish your cherished opinions, the task ahead of you is simple: educate yourself as to how it is that a liberalised economy works like a machine for discovering better ways to do things, and which, despite plentiful short-run examples of failure, in the long run somehow manages to make everyone (even the lowest paid) gradually better and better off.

It is vital to understand how it achieves this, because any replacement “model” for society would be a tragic disaster unless it somehow works better than the present one at helping the lowest paid to get wealthier. Look at the early history of the Soviet Union. Immediately after the 1917 revolution, the plan was to eradicate markets. This plan lasted until 1921, when Lenin was forced to concede that Russia *needed* markets to at least some extent to avoid widespread starvation. So in fact during the 1920s the USSR had a mixed economy with many enterprises privately owned. This continued until Stalin reintroduced collectivisation. The result? Mass starvation, on a terrible scale not matched until Mao Zedong tried the same thing in China a few decades later.

So what is the mistake in your logical reasoning? You are only observing the short-run failure. A single business employing a few people goes under. Those employees are now (in the popular terminology) “thrown on the scrapheap”. In fact, they aren’t. They’re put into the unpleasant, stressful position of having to find a new job, and that’s never going to be fun, but no one is being thrown onto any scrapheap. (It’s like that other popular phrase “This is a slap in the face!” typically applied where some unearned entitlement is being withdrawn).

Meanwhile, look what has happened elsewhere: hundreds of people have employment opportunities at the new store. Hundreds of thousands of people may buy from it, at lower prices. The number of people made better off in the long run is quite staggering. You are admirable for being concerned about the small number of people who were made worse off in the short run, but you are – forgive me – crazy for ignoring the massive number made better off in the long run.

But, you no doubt respond, the jobs at the new store will be low paid. Actually they are often better paid. An extreme version of this happens when Nike opens a factory in a developing country – local businesses are forced to treat their employees better, pay them more, etc. to stop them stampeding off to work at Nike. The rosy picture some people have of a small-scale local economy, with one grocery store, one butcher, one baker, one candle-stick maker, etc., is in fact a picture of exploitation: with no competition, each business is able to exploit both customers and employees, and may get away with it for years. The arrival of globalisation is obviously entirely unwelcome to such exploiters.

(As a postscript: big businesses are very unlikely to ever entirely eliminate small ones. The reason is that a big corporation has to offer a one-size-fits-all solution. This creates a niche for smaller businesses to offer something more personalised.)

“Microsoft famously became a monopoly without any government assistance whatsoever… with sundry other dodgy, but legal practices.”

I’m not a universal defender of Microsoft. I think some of their business practises were “dodgy”.

But consider this: who took Microsoft to court over their much envied “monopoly”? Was it the users of their operating systems? Was it the users of their free web browser? No. It was a number of other big companies who decided to approach political allies to see what could be done with a bit of government muscle.

Netscape was the most high-profile example. They helped to popularise the web browser between 1994-1997. But they never actually had a business model – they called their browser a “Beta” version, with the crazy idea that at some point they would charge for it. But like any other business, they had no God-given right to a stream of income. They needed to find something people would pay for, and they never did. They borrowed tons of money, spent it all, and then went away. A browser is ultimately an implementation of a set of standards; it’s not a particularly fancy thing. Its true value is in offering a static, safe playground in which content providers (web sites) can innovate. So if you want to make a living, a Web browser simply cannot be your core business. Look at the current favourite browser of the anti-Microsoft brigade: Firefox. It’s given away for free – this was apparently a crime when Microsoft did it. But Microsoft were actually pricing their browser accurately. Ultimately, Netscape’s lawsuit was a last ditch desperate attempt to get their hands on some income before they collapsed, as a business with nothing to sell.

So does Microsoft actually have an exploitable monopoly? Note that it’s not enough for a company to have a large market share. Having a large share of one market sector is a very temporary victory, because the existence of an identifiable sector is up for argument; new products come along and create new sectors or damage the significance of old sectors. And even a large share in a currently important sector doesn’t automatically mean anyone is being exploited: are prices rising uncontrollably? It was often claimed that the PC manufacturers were dependent on Microsoft because their machines would be useless without the standard OS. And yet during that “monopoly” period, a new PC would typical cost 10 times as much as a Windows license, and the PC manufacturers would get a huge discount even on top of that. How comes Microsoft couldn’t get away with hiking up the price?

The answer is pretty simple. I’m typing this on a Mac Mini – a very good cheap alternative to a Windows PC. I have a laptop upstairs with Ubuntu on it. I don’t have a single Windows-based computer in my house. The closest I come is that I have a virtual machine with Windows XP on it, using a license I paid about £50 for – eight years ago! Microsoft are apparently finding it quite difficult to exploit me, aren’t they?

The major reason Microsoft had a big market share for so long was that they produced something adequate and cheap. This is what most people want, most of the time. So people chose it, over alternatives like Apple (usually brilliant but expensive – apart from the Mac mini, which is brilliant and affordable). When people decide they want to pay a bit more for something better, it turns out to be no big deal to do so. Most people aren’t that bothered, hence the “bulk supplier” of operating systems is able to keep ticking over.

One of the tell-tale signs of a monopoly is that a company is able to exploit their dominance in one area to “conquer” new territory in other areas. But Microsoft has consistently failed to do this. Their web server is nowhere compared to Apache/Linux. Their programming tools have to fight against Java and Adobe. Oracle rules databases. They tried doing set-top boxes, and gave up. They’ve been soundly beaten on mobile devices by a succession of new companies that have just jumped straight over them from nowhere: Palm, Blackberry, the iPhone. The XBox is doing okay – but it shares the market pretty evenly with Sony.

The saddest thing of all was Microsoft’s early attitude to online networking. They had absolutely no idea the Internet existed until 1996. They were getting ready to “crush” old dial-up services like Compuserve and AOL, totally unable to see that both of those were about to be crushed anyway by the Internet. Microsoft’s most “dodgy” practises concern their attempts to force their own private online service MSN into some kind of marketshare. They utterly failed. But it was a case of two (or more) bald men fighting over a comb.

Another popular example of a “monopoly” in IT is Intel. But there is vicious, constant competition in that market, which is what drove the incredible increases in power and reduction in prices for decades. Today the most popular chips in the world are made by ARM, originally a spin-off from a small UK company, Acorn, who focused on the “niche” of mobile devices that the mighty Intel had overlooked – now mobile devices are taking over. So these “monopolies” are not quite as solid as they might appear in the short run.

Some of your comments in response to others:

“You’re ignoring the fact that a significant number of Friedmanite libertarians would abolish the welfare state if they could, claiming that it breeds indolence in itself, not to mention requiring a sizeable tax intake – anathema to their credo.”

You can certainly find people who want to abolish the welfare state. There are some people who call themselves anarcho-libertarians, who want to abolish government altogether. They note that in Somalia, which due to a constant state of civil war had been left without a government for many years, it is nevertheless possible to get a broadband connection installed within a few days, and there are many other examples of things working better in Somalia than in neighbouring African states. But I for one am not convinced: a half-decent government is better than no government at all – Somalis do tend to emigrate to other countries quite readily, and I certainly didn’t see many anarcho-libertarians moving to Somalia during that time!

I don’t think anyone on this thread has advocated abolishing welfare altogether. I certainly wouldn’t. Nor did Friedman himself – he advocated a simpler version of the safety net that he called “negative income tax”. When your income fell below a certain level, the state would start to pay you this “negative tax” and it would increase the lower your income was. Not sure whether it would be much of an improvement on present systems, but you definitely can’t say he wanted to abolish it all.

“[Marx] wasn’t living in a time where it was possible to fly in cheap labour from abroad, minimise their cost of living by packing them into shared accommodation, then fly them back to their country of origin where the amount they were paid provides a living wage, whereas it wouldn’t in the country in which they were working.”

You’ve somewhat misrepresented the situation there, because you’ve presented it as something controlled entirely by rich interests in the destination country. But this is not slavery: the poor foreign workers jump at the chance to greatly increase their earning power, as is well known.

So how do you solve that problem? You could put up barriers to stop foreign workers from earning in a wealthy country and spending in a poor country. In which case I have to ask: what exactly have you got against foreign poor people? Do you want them to stay poor, or what? Why favour the welfare of the lucky bastards who happen to be born in rich countries?

Immigrants come to wealthy countries voluntarily, to better their own lot. And why shouldn’t they, if they can find someone who wants to employ them? The opportunity for them to do this is created by the relative wealthiness of the UK – and in particular the wealthiness of even the long term unemployed in the UK. It seems absurd to describe the long-term unemployed as “wealthy”, but here’s a couple of brilliant, eye-opening BBC documentaries on this subject, which pretty much speak for themselves:

http://www.youtube.com/watch?v=rOY9SNExKrQ

http://www.youtube.com/watch?v=YOfdCwYGdlk

I find it hard to see that kind of direct evidence and still believe that long term unemployment, in a world where real wages are constantly rising, is problem created by the free market.

To be able to not work for years at a time, and yet still have plenty to eat and a place to live and a constant stream of entertainment, is surely the mark of a wealthy person, not a poor person. In the absence of the welfare state, to not work and yet still have an income was the privilege of the “idle rich” – amongst such rarified social circles it was considered awfully common to have to work, or to be “in trade” (i.e. run a business). To live an idle life in the old days, you needed a pretty big static fortune so you could live off the interest.

Right now, the interest on a savings account is about 2%. So to figure out the “fortune” of someone who isn’t working, you need to multiple their annual income by 50, to find out the amount that would earn that much in interest. There are long-term unemployed families in the UK who have an income equivalent to the interest on a substantial personal fortune.

I am not the kind of person who reads about this kind of thing in the Daily Mail and gets into a huge froth about “scroungers”. I think we need a welfare state.

But if you want to know why we have long term unemployment, it should be pretty easy to figure out that it’s not because we have a liberalised economy, and it’s not because we have immigration.

@69 – I”m off to take a walk in the sunshine now, but a few points

– I’m not going to accept Walmart’s own site as being entirely honest about its suppliers. Big corporations lie, cheat and steal – end of discussion.

– Both you and Worstall say “Get another job” – an echo of Tebbit’s “Get on your bike”. But when you’ve actually run out of jobs with a living wage in the area and you can’t afford to move – what the hell do you do?

– The hundreds of people employed by WalMart are ruthlessly exploited in a way that small businesses would not be able to get away with – while the executive class in that company are among the richest people in the world and get to live the life of the idle wealthy you appear to revere so much. How is that fair, especially as it is likely to end up as static as the old feudal system, as no-one will be able to challenge the big boys’ private monopolies.

– Also, don’t try to paint me with the xenophobia brush – I have no problem with immigration or immigrants – I just believe that it is exploitative of employers to go for the cheapest, rather than the most readily available labour pool.

The fact is that all libertarians are living in a fantasy land, and clearly haven’t grown up with their “betters” in society constantly blaming them for something that’s largely out of their hands.

@ 60 (Bob B)

“Nonsense alert! The IMF produced an illuminating obituary on “Monetarism” back in 1996”

You seem to be confusing Friedman’s work on monetarism (the attempt to control inflation via control over the money supply) with his general promotion of free market ideas. All references to Friedman in this discussion (including those from Bluepillnation who first mentioned him) are using his name somewhat inaccurately as if he was the originator of free market ideas. He was merely one of the greatest promulgators of those ideas that led to their late 20th century resurgence. The fact that monetarism in its simplest form is questionable does not in itself call into question free market economies at all. So those points about monetarism are not actually related to this discussion.

In particular, that speech from Galbraith Jr is a rather bitter tirade from his campaign to restore the reputation of his father, which was mortally wounded by Friedman. Galbraith comes across as an idiot – making appeals for Bernanke to “come over to our side”! Government policy in western countries has made full use of Keynesian ideas for the last few decades, long before the credit crunch came to wider attention: even during the “boom years”, most jobs being created in the UK were state-funded, and public spending in the US grew massively during the Bush era.

Galbraith totally misrepresents the debate as being between those who want the government to intervene and stimulate, versus those who want red-toothed anarchy. Plainly, modern monetarism is as much about stimulus as Keynesianism is. Either way, you react to a recession by making it easier to borrow. It’s mostly just a question of whether you extend the easy credit to private businesses or to government departments, based on which one you believe will create net new wealth (or what you think your voters will thank you for). And in response to the credit crunch, governments worldwide did a bit of both, exactly as the’ve done constantly in the past.

To call this a victory for Keynesianism (as Galbraith does in that speech) is nothing short of hilarious. True Keynesianism is not merely the absence of monetarism. It involves believing that paying people to dig holes and then fill them up again would create net new material wealth! NB. Keynes did not seriously recommend that as policy, but he did argue that it would have the effect of creating net new wealth if it were attempted, and his followers have often acted on this belief. There is still very widespread belief in it today – it certainly wasn’t entirely swept away by a Friedmanite revolution.

@ 70. bluepillnation

“I”m off to take a walk in the sunshine now…”

Yes, you keep stressing how little you take this discussion seriously and you’ve got better things to do. This explains a lot. For example:

“the life of the idle wealthy you appear to revere so much”

What the hell is that? I revere those who work hard – whatever they earn, even if they’re students earning no money but acquiring wealth in the form of knowledge. I have no admiration whatever for the idle wealthy. If you’d actually read what I have to say, instead of skimming through it for sentence fragments that you can misinterpret to confirm your prejudices, you might have figured that out.

“The hundreds of people employed by WalMart are ruthlessly exploited in a way that small businesses would not be able to get away with”

So you didn’t listen to that podcast? Not interested?

“I just believe that it is exploitative of employers to go for the cheapest, rather than the most readily available labour pool.”

Did you watch those documentaries I linked to? They’re not crazy libertarian propaganda. They were on BBC2.

The immigrants in “The Poles Are Coming” were able to earn £2000 a month in totally unskilled work. That’s well over the median UK salary across all jobs and almost the median for full time jobs. And learned a second language in their spare time! And the employers say that hardly any British people even bothered to apply. So explain to me how there is a “readily available” labour pool here? And when you say “it is exploitative”, who is being exploited?

@72

I take the dicsussion reasonably seriously, but it’s too lovely a day to get stuck right into it – also, you know the old (well, kind of) adage about arguing on the internet…

I’ll watch the videos and podcasts when I get some time, though it’s not like BBC2 screens only middle-of-the-road material now though, is it?

Revering those who work hard is fine, but the fact is that the highest earners in our society don’t actually work all that hard – their earnings tend to be tied to name recognition and the access they can provide to wealthy benefactors rather than the amount of effort they put in.

£2000 a month sounds dandy at first, but what you’re not taking into account is that someone who lives in the UK would end up losing half or three quarters of that to rent and bills every month, leaving a few hundred for living costs including food and the like. Imported workforces tend to be put up in shared accommodation so their costs are lower, so for them it’s a much better deal. You cannot assume the reason that British people didn’t apply is down to idleness on their part, it’s likely they just did their sums and found that they couldn’t make it work. There’s also the JSA trap where it stops being paid from the minute you start work, so essentially they’d be expected to live for that first month on practically nothing until their wages started coming in.

One of the things I dislike about the business-centric way of thinking is that a lot of what makes good business sense is actually pretty harsh on a human scale cost-wise. Call me a silly old bleeding heart if you will, but I think there needs to be balance and that’s why I believe in regulation and a degree of reditribution to this day.

“Call me a silly old bleeding heart if you will, but I think there needs to be balance and that’s why I believe in regulation and a degree of reditribution to this day.”

You might, if you try really hard, find perhaps 5 people in the entire country who believe there should be no regulation and no redistribution. Everyone else believes in some degree of both.

The argument then becomes regulation of what, by whom, how much redistribution?

To say that there should be some redistribution and that 90% top income tax rate is redistribution therefore we should have 90% income tax is clearly and obviously nonsense. Similarly nonsensical is the idea that because some regulation by a bureaucracy is at times good then everything should be regulated by a bureaucracy.


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