David Andolfatto recently constructed a model intended to ‘reconcile’ (or I think more accurately to distinguish between) ‘mainstream’ and ‘heterodox’ views of the macroeconomic importance of money and banking. More specifically, he wants to answer the question: does the ability of banks to ‘create money’ when they issue loans give bank lending a greater impact on aggregate demand than other forms of leverage? His conclusion is that in general it does not. I believe his model is wrongly specified to determine this question – it essentially pre-decides by its structure. To demonstrate this, I have identified the features that he omits from his model and attempted to incorporate them within the structure of the model he himself uses. My full response is in the form of a downloadable pdf. Continue reading David Andolfatto on Money and Banking
Donald Trump is coming to Scotland. He claims a special link to this country due to his Lewiswoman mother, Mary Anne Macleod. How should we respond to his visit – is it really an unacceptable violation of our liberal democratic culture for this American President to visit the UK and Scotland in particular? Is it right to think we should protest against him?
Trump is a unique figure among – modern at any rate – US Presidents. He pays no lip-service whatsoever to the norms of civility, respect, presidential communications and policy-making that have generally been accepted by holders of the office in living (and earlier) memory. He is a man with a reputation for dubious moral conduct, shoddy business practices and multiple bankruptcies. In setting up ‘Trump University’ he was guilty of outright fraud, for which he was required to pay a $25 million legal settlement. Continue reading Trump in Scotland – Let’s Protest for Mary
Today Theresa May’s Cabinet are meeting at Chequers (the UK Prime Minister’s out-of-town residence) in an attempt to thrash out a final Brexit negotiating position with the European Union. As they do so, the biggest threat to Brexit seems not to be a realisation of its purposelessness, although that will surely come soon enough, but the process difficulty. This difficulty is entailed by a government reliant for its parliamentary majority on Northern Irish members who as extreme Unionists will not accept any further differentiation between rules and regulations applying between the UK mainland and their own country, as well as on extreme Brexiteers who will not stomach any residual taint of the EU single market and customs union. This sets up an irreconcilable clash with the EU’s shared commitment with its member, Ireland, who are adamantly opposed to any agreed additional barriers between the north and south parts of the island. This opposition is both a matter of historical principle, as well as a practical concern over a reinstated ‘hard’ border being a focus for re-emerging intercommunity violence. Indeed Ireland and the EU both believe, a belief that implicitly is currently shared by the UK government, that the Good Friday Agreement (GFA) of 1998 commits all involved parties to the status quo in regard to the Irish border. Continue reading Brexit Endgames
The Path to Brexit
At the root of the ‘Brexit’ mess is a possibly unprecedented act of self-serving recklessness by the leader of a government in a democracy. It is in large part one which lays bare the sham of the UK’s primary democratic process – its system for electing representatives to its governing Parliament. For some years the electoral prospects and the cohesion of the UK Conservative party have been threatened by a relatively small, but vociferous and unscrupulous cabal of individuals and groups opposed to the idea of mutually beneficial co-operation with other European countries – either because it was a proxy for a mixing of UK (read English) ‘culture’ with that of ‘foreigners’ of different ethnic or religious identity or it was a plutocratic rejection of the co-operation for setting anti-exploitation rules as a basis for national and economic competition, or in quite a few cases – both.
In the winner-takes-all electoral system created by First-Past-the-Post (FPTP) the leaking of Conservative Party support (and even Parliamentary personnel) toward the United Kingdom Independence Party (UKIP) led by Nigel Farage was not an incremental risk but an existential one. The party risked being out of power perhaps indefinitely and even being reduced to a rump of MPs with little compensatory chance of UKIP allies, as the right of centre vote became split, allowing more EU-friendly left of centre parties to dominate. The Conservative Party, having little in the way of clear principles or ideas to bind it, requires the prospect of power and career advancement above all else to unite its members – particularly its Parliamentary contingent. Continue reading The EU, Democracy and Brexit – Part 2
This is the first of three blog posts examining the past, present and future of the UK’s decision to leave the European Union.
The Role and Nature of the European Union
The great divide in politics (and perhaps human affairs in general) is between co-operation and competition – whether between individuals, businesses or countries. The role of co-operation is to pool decision-making for a greater shared benefit, including the benefit of avoiding foreseeable future conflicts. The role of competition is to pit resources, techniques and organisational structures against each other to find the ones that work best. The degree to which one or other is favoured – even to the extent of fetishisation – tends to define political outlooks.
There are two main arguments for the pre-eminence of co-operation, all else equal. Firstly, it is potentially less wasteful – all resources, techniques and structures are focussed on common goals, whereas under competition the losing approaches may have consumed much with little useable output. Secondly any worthwhile competition requires a co-operative base – to determine the winning criteria, and to set the framework of rules that makes the result meaningful. (Note that this latter even applies to the ultimate competitive scenario – that of war; conventions generally exist to avoid the destruction of the civilisations and the planet that are being fought over.) Continue reading The EU, Democracy and Brexit – Part 1
The eminent philosopher Harry Frankfurt has issued a small book comprising parts of two essays written some decades ago (On Equality, 2015, Princeton University Press). The stimulus to this publication is the recent work of Thomas Piketty on economic inequality in the developed countries, and Frankfurt’s view that
It is, I believe, of some considerable importance to get clear about these matters. Appreciating the inherent moral innocence of economic inequality leads to an understanding that it is misguided to endorse economic egalitarianism as an authentic moral ideal. Further, it facilitates recognition of why it may actually be harmful to regard economic equality as being, in itself, a morally important goal.
We will see however, that Frankfurt strips the concept of ‘economic inequality’ so bare as to render it meaningless more or less by definition, and that what he does regard as important inevitably brings us back to economic inequality as a highly significant issue as it manifests in the real world. Continue reading Harry Frankfurt Gets It Wrong On Inequality
Ann Pettifor is a director of Prime Economics, which advocates for a more Keynesian view of macroeconomics, and has been involved in development and environmental economics for many years. In The Production of Money: How to Break the Power of the Bankers (Verso, 2017) she correctly identifies that ‘money enables us to do what we can within our limited natural and human resources’, and so ‘creates economic activity’ rather than being a result of it. It does this by creating the finance needed for productive employment and investment. Bank finance ensures that there is never a ‘shortage of money’ and so we are only limited by humanity’s capacity and the physical ecosystem. Yet when 95% of the money in existence has been created by the commercial banking system, whose aim (quoting Michael Hudson) ‘is not to minimise the cost of roads, electric power, transportation, water or education, but to maximise what can be charged as monopoly rent’, this power must be rigorously regulated. So much should be uncontroversial today and I have written about this here. Continue reading The Production of Money: How to Break the Power of Bankers – by Ann Pettifor
Darren McGarvey’s Poverty Safari (Luath Press, 2017) is a very honest and powerfully written account of growing up and surviving amid poverty, addiction and violence in Glasgow. Darren draws from these experiences to make insightful observations about poverty, social deprivation, their causes and potential solutions. Of particular impact on his life was the addiction and violence of his mother, who died of alcoholism at the age of 36. He has escaped economically, if not emotionally, from these circumstances by turning a talent with words into a career as a writer and rap artist.
Violence both inside and outside the home affected the way he thought and behaved, and Darren outlines the role chronic stress, particularly emotional stress, leads to poor lifestyle choices and behaviours in the seeking of brief emotional reprieve. As he says:
A vulnerable family living in constant economic uncertainty, job insecurity or subject to an inhuman sanctions regime often lacks the capacity to absorb, process and practically address life’s unpredictable adversities.
Why do I consider myself to be of the ‘left’ rather than the ‘right’, despite the tendency for each term to be converted to a straw-man for all the pet hates of those attaching to the opposing label? For me, to be of the left designates a prioritisation of co-operation over competition. It is to believe that human satisfaction and happiness depends more on the former than on the latter and it is to believe that co-operation comes logically and practically before competition. Co-operation should therefore be actively promoted. How much competitive superstructure is to be placed on the co-operative base is then entirely up for debate, much of it empirical in nature.
Free exchange of goods, services and labour is the essence of co-operation, and as such genuinely free markets, which being an expression of ‘the propensity [in human nature] to truck, barter, and exchange one thing for another’ (Adam Smith) are completely compatible with maximum co-operation and thus, I would argue, with any viable conception of socialism. The competition that arises from free exchange, to provide better quality goods at lower cost, is on the face of it, also pure social benefit. This can be misleading, however, if reliance is placed on the abstract economic concept of perfect competition – where all market participants are equal in access and power, fully informed, infinitely lived and have perfect foresight. This concept requires isolation of the market from the human, the social and the physical world. To harness markets for benefit therefore requires a huge degree of co-operation in terms of setting up the infrastructure and regulation of market institutions. Continue reading Socialism, Free Markets, Capitalism and Christopher Snowdon
I found myself reading an alarming article by ‘Red Tory’ Philip Blond recently. The piece was a response to the book ‘The Politics of Virtue’, by John Milbank and Adrian Pabst, two academics who have been associated with the Red Tory/Blue Labour nexus that combines, to a greater or lesser degree depending on flavour, social conservatism with economic collectivism. I haven’t read the book, but I don’t think this is important to the points I raise here.
Blond identifies the purpose of Milbank and Pabst’s book as being ‘to challenge the ascendancy of liberalism and recommend a humane post-liberalism that can succeed it’. He criticises a reviewer of the book for failing to see a ‘link between the social liberalism of the left and the economic liberalism of the right’. Blond quotes approvingly from the book the claim that ‘liberalism brings about…an isolated individual abstracted from all social ties and duties’ and himself states:
Liberalism finds its quintessential form in a market state that enforces individualism. The market state must abolish anything that stands in the way of unconstrained freedom; it must eliminate solidarity or shared associations with other people, places, or things…Social liberalism (left-inspired) was necessary to take apart social solidarity in order to make possible its (right-inspired) economic correlate: economic liberalism.