A Church of England vicar has recently said it’s OK to steal from supermarkets if you’re hungry and desperate. This is against the law. Apart from the 8th commandment do we have any idea why? It’s annoying to be stolen from, certainly, but it’s also unpleasant and dangerous to be poor.
The social, as opposed to the moral, justification for the illegality of theft is that without inviolable property rights no modern transaction-based economy would be possible. Who would exchange anything (for money or otherwise) if they could just take it or fear that the other person might? Who would build a factory and employ workers if they thought the workers could, without penalty, take over its running and obtain all its revenue themselves? Continue reading The Economics of Theft→
There is at present an unprecedented wave of concern about pay disparities. We have the bankers’ bonuses, both main parties promising to limit high salaries in the UK public sector and a vigorous debate in Scotland about the high levels of pay of some Health Board managers.
Last week, the New Economics Foundation (NEF) published a report in which they calculated the benefit to society of various low and high paid workers per £1 of income. Whatever one might say about the rigour of their methods, the report makes a strong case for current income disparities having little basis in social contribution. My view is that as a nation we are at last waking up to two realities of ‘political economy’. Continue reading The Truth of Unequal Pay→
After the banking crisis and the debacle surrounding the collapse of MG Rover, a British car manufacturer, it’s surely time for a rethink of corporate limited liability.
The Phoenix Consortium, an ad-hoc partnership of four businessmen friends led by John Towers, extracted at least £9 million each from MG Rover, thanks to a sum of just under £500 million paid to them by BMW to take the firm off their hands. In May 2000 the Consortium purchased MG Rover through a company, going by the name of ‘Techtronic’, that they set up with £60,000 each of their own money. This holding company profited from interest on BMW’s £500 million while paying none. This profit was transferred to a higher tier holding company, Phoenix Venture Holdings (PVH) of whom the controlling and main beneficiary owners were the Phoenix four.
The four partners failed to find a joint venture partner for Rover, and in April 2005 it went bankrupt owing £1.2 billion to its creditors, including the pension fund of its own workers. For this work and its failure and their investment of £60,000, each of the Phoenix four received the equivalent of over £2 million per annum (excluding the benefits from MGR Capital). Even by current inflated standards of boardroom pay, this would be excessive for success but for failure it is absurd. Continue reading Rover, the ‘Phoenix Four’ and Limited Liability→
I’m interested to see that the Real World Economics Review (an e-journal for heterodox economists) now has a blog. They already have some interesting contributions, and I hope fertile discussion will follow!
(This is a summary of an essay I wrote in 2000!) It still seems relevant. The full document is here (pdf 36.8kb).
By 2050 money in its current form as non-specific value will have been replaced by credits for specific future goods and services. These credits will be traded in a sophisticated barter network. This is the only complete solution to the problems created by money which have plagued the global economy in the 20th century. The partial solutions offered by Marx, Keynes and Friedman have done as much harm as good. Because money represents a claim on future production of goods and services, but these goods and services are not specified in transactions, physical limits to their future availability and use are often not reflected in money prices. This is responsible for the phenomenon of national money supplies growing faster than national production and the asset price inflation seen in many parts of the global economy. The apparently limitless nature of the pool of money in the global economy also means that major distortions in distribution often go unrecognised. The solution of using credits for specific future production is a feasible one using anticipated advances in information and communication technology. Pointers to the future can be seen in the proposed Kyoto emissions trading scheme, and in the expansion of barter networks. Banks, or their equivalents, will continue to offer credit for development but will assess the risks and benefits on a much broader basis than pure profit and loss. The proposed credit system will produce significant improvements in the ability of market mechanisms to value environmental and social aspects of production and supply. Macroeconomic stability will be enhanced by the removal of uncertainty over money effects in future transactions and political responses to economic shocks will be improved by greater public understanding of their real causes and effects.
Banks are returning to profit. The new chief executive of the taxpayer-owned Royal Bank of Scotland complains that
We sometimes feel as if commentators variously want us to go back to over-lending, to operate on a ‘not-for-profit’ basis, to never entertain a client and to offer employment conditions that deter the best and brightest.
All the evidence is that the government is listening to him, and that the banks will soon re-acquire their independent status and carry on pretty much as before. And yet the complaints of Stephen Hester are somewhat undermined by the balance sheet changes that by his own admission are necessary to restore the bank (from its own point of view) to health and safety over the next 3 years. This involves doubling its ratio of the safest-rated assets from 4% to at least 8%, increasing its liquidity reserves from £90bn to £150bn, and reducing its wholesale funding reliance from £343bn to £150bn with a consequent reduction of its loan/deposit ratio from 156% to 100%. According to Hester, ‘those with accountability for past mistakes have gone.’ So the previous appalling state of the balance sheet should be regarded as a natural disaster of which the ‘the new RBS’ need hold no memory. This is clearly nonsense. No other bankers, Hester among them, were queuing up to denounce the Royal Bank’s balance sheet position before the crunch came. Nor would we expect them to do so. The problem with the banks was and is little to do with the errors of individuals. It isn’t much to do with their talent and inspiration either. The problem lies with a complete failure on the part of bankers and the government to understand banking and its social function.
The Conservative Party leader David Cameron has today published in the Guardian the text of a speech in which he outlines a programme of constitutional reform. What he says is interesting, but shouldn’t be taken too seriously. We mustn’t forget that David Cameron is no political thinker. He is and has always been a political operator. He is the type of individual we need less of in Parliament. Still we must make do with what we have, and maybe he can serve an important purpose. Certainly he may have jumped on the right bandwagon. Labour, having promised constitutional reform to appeal to their less tribally-committed supporters over the years, have as far as Westminster is concerned signally failed to deliver. Indeed it is practically (and may effectively turn out to be so) criminal that the government has not transferred many of the systems trialled in the Scottish Parliament and Welsh Assembly (proportional representation, powerful and independent committees, transparent expense arrangements, to name but a few) to Westminster. It is probably too late to claim the initiative back on these issues, and so we have the strange sight of the Conservatives leading on them. Continue reading Welcome to Cameronia!→
The Daily Telegraph and their informant have certainly opened a veritable can of worms! Their publication day after day of new revelations of MPs’ expense claims has certainly boosted their sales, despite the widespread reporting of every detail in other outlets. But if they also have a political agenda, this must be a dangerous game, both for the paper’s chosen champions, David Cameron’s Tories, and for the rest of us. The likely public response to the Telegraph’s uncovering of the somewhat murky operations of the Commons Fees Office is ‘a plague on all their houses’. This will probably encompass all the prominent parties in Westminster: Labour, Conservatives and Liberal Democrats. Many will presumably opt not to vote in the Euro elections on 4th June and perhaps in the General Election which must come within the next 12 months. Some may be persuaded to vote for candidates they would not otherwise have voted for. If they are going to do so let us hope they are clear on exactly the issues at stake. Continue reading A New Politics?→