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.
Launched in 2009, and of wider interest since 2013, the ‘cryptocurrency’ Bitcoin has seen both a rise in its value in relation to existing national and supranational currencies, and in the discussion of its forming a partial or even complete replacement to those currencies. This article outlines the nature of Bitcoin and of traditional currencies and how they differ, and so examines the case for Bitcoin’s future acceptance and valuation.
The urtext of Bitcoin – the so called ‘White Paper’ by Satoshi Nakamoto – focuses on the reversibility of traditional electronic money transfers and how this necessitates banks as trusted third-parties in these transactions. The ‘cryptographic proof’ method of transferring bitcoins was devised initially to lock-in successive electronic transactions as part of a ‘blockchain’ of data, so as to eliminate the role of banks in preventing reversibility and double spending. In essence the collaborative use of computing power is used to verify the chronological order of transactions. The security and anonymity aspects of conducting transactions in this way is not the subject of this piece. The transactions thus carried out and recorded could be actually be denominated in any existing currency. Chains of such transactions would need to be closed by the transfer of that currency (physical or electronic) from the initial donor to the final recipient. Continue reading The Fragility of Bitcoin
Everyone in British politics, right and left, is now talking about inequality and social justice. But there is much confusion and obfuscation. Specificity is required. Social justice has rather different implications depending on whether it comes from the right or the left of the political spectrum. Leaving aside issues of capital ownership, right social justice essentially relies of the economic concept of the ‘marginal productivity of labour’ (MPL). An individual’s share of society’s material rewards should exactly represent his or her individual contribution to the output of society (usually in effect the output of their employer). Continue reading Equality of Voice – An Introduction
Thomas Piketty’s “Capital in the 21st Century”, published in 2014, played an important role in directing attention to the issue of inequality in the developed economies of the 21st century. The book was both praised and criticised from many parts of the political and economic spectrum. Least controversial was his laying out of the evidence that inequality of both income and wealth has increased markedly since the 1970s, particularly in the US and the UK. A little more controversial is the suggestion that this increasing inequality is harmful to the societies of those countries. Most controversial, and more technical, was Piketty’s espousal of a ‘fundamental law of capitalism’ that when the return on capital (r) exceeds the rate of economic growth (g) inequality will increase.
The chart below shows the change in the fraction of total income going to the top 10% of the distribution for 1900 – 2010.
What is it about ideological free marketeers and their shaky relationship with the facts? Everyone likes markets and free exchange is one of the best manifestations of human co-operation there is – so why tell lies about their limitations and the infrastructure required to make them work for our benefit?
Sam Bowman of the Adam Smith Institute is keen to adapt the often pejorative label of ‘neoliberalism’ to his cheery brand of paid-for market propaganda, and promotes it under this banner in an article in the online i newspaper. He defines a neoliberal as
someone who thinks that lightly-regulated markets, free trade and free movement are the best way to create wealth and innovation domestically and globally, but that the state does have a role to play in redistributing some of the proceeds to the least well-off. Continue reading If ‘Neoliberalism’ Is So Great, Why Lie About It?
For most of us, it’s a great boon to live in a world in which travel between even distant parts is relatively cheap and takes hours rather than days, weeks or months. We can visit, explore and learn about places and people we never could have done only 40 years ago. More than that, if things are difficult for us at home this gives us the option to try our fortune elsewhere where resources, attitudes and the style of governance may suit us better.
Is there are approaches which are systematically superior to others then it is entirely to be expected that people finding themselves where these are sub-optimal will, if they are courageous and determined enough, seek to move to those where things are better. In Western Europe and North America we regard ourselves as fortunate in having considerable freedom to say, do and trade what we wish. We think of these as rights to which most global citizens aspire. If we are right about this we must expect the arrival of people from abroad at our ports and airports who would like to live and work in our countries. Continue reading Bad Targets for Policy 2: Immigration
This is the first blog in a two-part series on ‘Bad Targets for Policy’. The second in the series will be on immigration.
We’ve seen a lot of focus on the ‘costing’ of policies in the parties’ manifestos for the forthcoming UK election. But we must remember that money is only a means of keeping account. Accounts are important but they are not reality. An account of debt is important, but it is not a physical reality. When a government has a debt in its own currency which only it (or its institutions) can issue, its obligations are important but not physically binding. They are not even legally binding, since the debt can be devalued virtually to zero by inflation. It follows that the real implications of government debt are not simply consequences of current government spending and taxation and the gap between them. Indeed these may be among the least important causes.
The real consequences of government debt result from the physical burden implied by the future obligation to transfer some control over a portion of real goods and services from the state to holders of the issued debt, either as interest or in repayment of capital. That debt in the nominal quantity of the national currency (the total amount in pounds or dollars say) is only a starting point. Inflation changes the relationship between that number and the obligation in real goods and services; the changing size of the national economy alters the ability to fulfill a fixed obligation. Continue reading Bad Targets for Policy 1: Government Debt