Time for more economics teaching in schools

During a less than complimentary Twitter exchange yesterday about the qualifications needed to be Chancellor of the Exchequer (with the present incumbent providing the context) I made a serious point about the lack of economics teaching in schools, and rather surprisingly got a negative response; it would just mean pupils learning (I paraphrase) more of the neoliberal stuff being spouted by the political class.

I disagree.  I worry when I read that economics is in decline in schools (although there seems to have been a small recovery in the number of A-level candidates in the last few years), and that there are almost no newly-qualified economics teachers: an understanding of economics seems to me to be really important in a democracy in which the key political issues of the day are economic as well.  And I think it is wrong to assume that it must be neoliberal in nature.  Certainly as an A-level student in the late 1970s and as an undergraduate in the early 1980s I ingested a good deal of Keynsianism; but, more importantly, I learned about the fallibility of economics.  Richard Murphy, in The Courageous State, describes eloquently the disillusion that encountering academic economics produced, as he realised that what were being presented as iron laws of the market were actually based on axioms that were really little more than unsupported generalisations about human behaviour.  I had a similar experience; Murphy’s book aroused a strong feeling of sympathy.

Moreover, you do not need to have studied economics at a particularly advanced level to understand the fallibility of many of the economic propositions that neoliberal politicians proclaim as unchallengeable fact.  Much has been made recently of the Reinhart-Rogoff debacle, in which the argument that high deficits lead to reduced growth has been found to rely on dubious assumptions and unchecked spreadsheet data; but there are more obvious questions that need to be asked about markets and about choice.  For example, influential constructs like public choice theory  rest on assumptions that are really open to any non-specialist to challenge.

Most of all, the issue that Keynes raised – about how decisions in economic policy can be influenced by politicians, and that, far from the elegant inevitabilities of the cruder kind of market theory, economic policy is messy and human – need to be exposed.  Politicians get away far less with proclaiming that There Is No Alternative (or its more subtle contemporary variations about deficits and debt) when people understand a bit of basic economics; a well-functioning democracy is one in which no politician could get away with describing the deficit as “maxing out the nation’s credit card”.  People need to understand the basic concepts, in a way that the current business studies curriculum simply doesn’t achieve.  And I’d argue that it’s perfectly possible to grasp those concepts at GCSE level.

It is almost impossible to imagine the current government making an intelligent decision about the school curriculum.  But the point remains that, at its best, economics opens the mind.  It means that, as part of their general education, people are equipped with the tools to challenge what politicians and advocates of big money want to present as fact.  It’s not obvious that increasing taxes means people move abroad, or that cutting the public sector increases confidence; people need the equipment and the confidence to question these sorts of proposition and to understand that the issues are not clear cut, and that the propositions of the neoliberal (or any other) economic consensus often rely on debatable social and psychological assumptions.  And in that sense a proper study of economics is a pretty good foundation for aspects of life going well beyond economic policy.

Abolishing the universal state pension – the new Westminster consensus?

Over the weekend, Ian Duncan Smith made widely reported comments that wealthy pensioners should be prepared to return some of their benefits – notably winter fuel payments and free bus passes.  This morning on the BBC Today programme, Labour DWP spokesman Liam Byrne (unsurprisingly) refused to defend the principle of universality. Nick Clegg and his party have for some time been advocating removing some benefits from wealthier pensioners.  It’s increasingly obvious that there is a Westminster consensus emerging.

It’s not difficult to see the attraction to policy-makers of a neoliberal bent.  It gives the impression of fairness, but also provides the opportunity to get to grip with the fact that spending on pensions and associated benefits represents a far greater proportion of DWP spending than the benefits for the poor (in or out of work) and the disabled that the Coalition has hitherto targeted.

But, as so often when our Westminster parties begin to coalesce around an idea, start picking at it and it falls apart. I’ve blogged before about the advantages of universal benefits – the way in which they are both more efficient and promote social cohesion – and Owen Jones has tackled the social cohesion arguments in a a characteristically powerful piece in the Independent.

But Duncan Smith’s comments raise some fundamental questions – just who are these wealthy pensioners? And how many of them are there?  The problem is that of conflating wealth and income.  There are many older people who have extremely low incomes – especially widows who have not worked or only worked intermittently, and whose tiny basic pension is topped up with pension credit – but who are sitting in houses that, thanks to long-term house price inflation, give the appearance of wealth. Are these people – likely to be hit hardest by rising fuel costs – to hand back their winter heating allowance?  And how on earth do you measure this wealth (as an aside, it’s quite amusing to see how many of the policy initiatives from the right involve the comprehensive post-Council Tax revaluation of property from which successive governments have shrunk in fear)? Everbody knows that the truly wealthy are expert at hiding their wealth, while the processes of deciding who is eligibility will almost inevitability  hit those whose apparent wealth is wholly unrelated to their income.

And there is a longer-term question.  One of the undoubted legacies of the Thatcher era was the belief that private pensions were the way to provide sustainably for old age; but as those who have started to draw pensions after the 2008 crash know to their huge cost, the vagaries of the market can decimate that provision.  The effect of relying on private provision is that old age is inherently less secure, less predictable, less stable.  Universal benefits have a hugely stabilising effect, especially when the market fails to provide.

One of the most dishonest pieces of Labour rhetoric is the claim that its approach to benefits aims to “restore the contributory principle”.  Of course the contributory principle is alive and well – all of us who earn pay National Insurance – and nowhere more so than for provision in old age; to claim otherwise is either dishonesty or gross intellectual confusion (and Liam Byrne’s daily pronouncements show that the two are by no means mutually exclusive).

All in all then, this looks like the Westminster parties lining up to end universal benefits in old age.  It’s not something they could ever propose openly – for a start everybody knows that older people are more likely to vote.  But then nobody proposed the privatisation of the NHS at the 2010 election.  It’s that insidious process of undermining something, dressing that undermining up as fairness and calling for a “debate” about long-term sustainability while making reassuring noises about things being off the agenda until after the next election.  And it’s worth recalling that many of the (in my view) most obnoxious elements of Coalition policy – workfare, outsourcing of health care, the promotion of academies, the privatisation of higher education, the use of ATOS to apply bogus science in the name of getting people off benefits – are really no more than New Labour policies taken to their logical conclusion.

Watch this space.  I predict that whatever the outcome of the 2015 election, the next Government will be looking to abolish the universal pension.  The time to start organising – and to start defending the universal principle is now; and there is no policy more dangerous than assuming that Labour in office will do the decent thing.

 

Welfare and vouchers: the Right’s denial of citizenship attack

There’s an excellent piece by Zoe Williams in today’s Guardian in which she describes the impact of the decision that crisis loans – now administered by local authorities – will be paid by vouchers or card; or in some cases will be given straight to a foodbank charity.  Williams is right to point out that a line has been crossed; that even though this scheme represents a minuscule element of total welfare spending, the belief that benefits should be paid effectively in kind rather than in cash is an important one.  It represents the triumph of an ideology – one that I have blogged about before – that seeks to deprive the poor of full citizenship, and to make citizenship instead dependent on income.

Neoliberalism is an ideology that places choice at its heart.  It is founded on the idea that freedom is based on the ability to make choices; thus to deny people choice about how they spend is, in the Right’s own terms, to turn those people into second-class citizens. I blogged a few days ago about how workfare is the workhouse of the twenty-first century; the mentality behind this voucher system is identical.  You are poor; you have therefore sinned.  You do not have the rights of the virtuous, and you are not deserving.  The humiliation of presenting your card or voucher at the checkout is to steel your character.

And, as Williams mentions, this is all of the piece with the lie of the poor living a life of ease in front of the Sky box and the flat-screen TV; a lie, and one that is fully in the worst traditions of the nastiest propaganda of the twentieth-century, but an essential one in order to ensure that those hit by austerity continue to back it at the ballot box, and one that is legitimised every time a politician from anyhwere in our (appallingly narrow) mainstream polity referes to “hard working families.”

Williams mentions cost, and notes in passing that the original Demos report advocating a welfare card system was sponsored by Mastercard; but does not quite draw the obvious conclusion, that this system will be a milch-cow for the private sector.  The point about cash is that it is free; it does not bring with it specific administration costs other than those – like the costs of minting coins and printing notes, and of handling cash – that are spread across all transactions.  Card transactions bring costs; not least to the merchant.  Who will bear the costs of these cards? The retailers, as in the case of credit and debit card transactions? Taxpayers? Or will there be a service charge added to the items that those on emergency loans buy, adding to the burden that poor people already face in paying more for services? The reason why the railways cost more in public subsidy for a worse service, and why healthcare on the US model is more expensive than the NHS model that will in a few days be abandoned is because of the administration and transaction costs between private entities in a world that is regulated by private contracts. Why would a Government that claims to be motivated by reducing costs create a system of benefit payments that is inherently more expensive?  The answer, quite obviously, is ideology.

It is a reminder that the return to the nineteenth-century vocabulary of pauperism and desert is almost complete. And I make one prediction – that you will not hear a syllable of complaint about this scheme from Liam Byrne and One Nation Labour, because the return to that vocabulary is in the warp and weft of the Westminster ideological consensus.

One Nation Labour and the abandonment of politics

Like many others, I’ve found the concept of One Nation Labour elusive.  The term is deployed in almost every utterance from senior Labour politicians, but its meaning remains obscure.  Like everyone who has studied nineteenth-history politics, I’m familiar with the origin of the phrase One Nation in reference to Tory politics and Disraeli, and it is a phrase that has been used predominantly on the centre-right – usually as a signifier for a more socially-liberal form of Toryism.  In this context it’s worth noting that the phrase originates from a scene in Disraeli’s early novel Coningsby in which an aristocratic  character realises that the gilded world in which he lives is not all there is – and that the poor exist too:  two nations – the rich and the poor.  The use of the phrase “One Nation” was designed to demonstrate that there need not be conflicts of interest between the rich and the poor – and therefore, ironically enough, originates in a denial of what most Labour people have argued for most of that party’s history.

Labour has obviously seen an attraction in seizing this piece of language from the Right as our society becomes more obviously unequal and divided.  Fortunately Jon Cruddas has, in a  widely-trailed speech to the Resolution Foundation, sought to set out a strategic vision for One Nation Labour, answering – if obliquely – the question of what Labour is for.  It’s a fascinating, eloquent read – but frustrating, because of what it does not cover.  It is in those omissions that we perhaps get closest to what One Nation Labour really means.

Cruddas’ paper is entitled Earning and Belonging, and he states at the outset that these two verbs are the building blocks of Labour’s policy review – and that they shine a light on what Labour has lost.  He contrasts them with a Labour policy paper of 2005 which sought to answer the question “what is Labour for” with the verbs earning and owning; a position which puts consumption at the heart of Labour aspiration. Cruddas (in my view rightly) argues that this reductivist view simply does not express the richness of the Labour tradition – it ignores community and the progressive instinct, and points out how the need to recapture a dialogue about community, important though it is, flirts dangerously with the reactionary.  But Cruddas argues eloquently about how Labour’s – I’d go further and say the English left’s – roots lie in mutualism and points out how many of Labour’s salient campaigns today continue to display that mutualistic and communitarian urge.

It is, as I have said, a powerful and attractive narrative.  Implicit in much of this is the need to reach out to an electorate that is disillusioned by process; on the one hand battered by the market, on the other deeply suspicious of what Cruddas describes as state managerialism.

But there are huge omissions.  There is not a syllable about the environment – whether in terms of the big issues of climate change or the more local issues about urban liveability and public space.  There is no real consideration of what the state is for.  And, beyond a couple of platitudinous sentences about the pointlessness of opposing cuts without an alternative,  nothing about the economy.

It is in the latter that One Nation Labour looks most like a tactic of avoidance.  Austerity economics is clearly failing; not only is it destroying living standards, in particular of the most vulnerable – even on its own terms it is simply failing to deliver the objectives of reducing the deficit and promoting economic growth.  Not only is the confidence fairy nowhere to be seen, but Labour is quite explicitly promising more austerity to come; a commitment to keeping the Coalition’s cuts and possibly making more.  Cruddas’ eloquent generalities about earning and belonging are conducted in the shadow of Ed Balls’ great clunking fist.  It’s ironic that if ever there is a figure in Labour’s past who could be seen as emphasising the One Nation tradition it is Keynes – whose writings were inspired by a need to rescue capitalism from the idiocies of its most fervent supporters and to create a stable society in which the benefits of wealth were spread.  Ed Balls seems intent on repeating the errors that Keynes excoriated.

And it seems clear that a deeper consideration of economic priorities is off the agenda.  Austerity, it appears, is assumed – but the narratives surrounding it appear to be falling into disrepute, as the economy continues to tank, living standards fall and the hope that this might be a simple recession preceding a return to business as usual looks increasingly untenable.  There is no recognition that this time it might be different – that, for example, we may be in the throes of a long-term depression like that at the end of the nineteenth-century (with the irony that Labour partly grew out of a realisation that the conventional politics of the time was simply not equipped to deal with that).  In this context, Cruddas’ review of Labour’s traditions is notably incomplete; redistribution and the use of the power of the state to achieve economic policy ends has always been central to Labour’s view of the world.  Everybody knows that the post-war Attlee government founded the NHS; most people know that it nationalised key industries like coal and steel; fewer know that it presided over the most significant redistribution of wealth from rich to poor undertaken in British history, and realise the way in which the experience of total war – in which trade unions and government worked together to provide the means for victory – shaped the debate about economic priorities.  Of course economic priorities and structures have changed – but one does not have to deny that fact to recognise that this very significant piece of Labour history is wholly absent from Cruddas’ survey.  And the time when the failure of market economics (explicitly recognised in Cruddas’ comments about housing) is all too clear, such an omission looks like a major piece of evasion.

As does the failure to ask questions about the boundary between public and private – it is hinted at in Cruddas’ comments about voluntarism, and it’s notable that he recognises the difficulty of this area, but it’s a pity that at a time when other thinkers on the Left are seeking to rediscover the Courageous State,  One Nation Labour appears incapable of moving beyond generalisations about state managerialism.  At one level, the coalition years can be seen as an experiment in the withdrawal of the state – and it is obvious that the consequences are disastrous (not least because the tired rhetoric about the Big Society fails to recognise the extent to which the voluntary sector and the state were already working closely together – it is ironic that the withdrawal of the state has decimated parts of the voluntary sector).  There is a serious debate to be had about the role of the state and the voluntary sector, and how such a relationship can be made more democratic and accountable.  On the basis of Cruddas’ comments that is not really a debate that One Nation Labour appears to want.

And alongside that sit crucial economic issues – the question of whether that collapse in living standards and growth in inequality is arising out of the pursuit of paper growth, and the way in which we fail to ask questions about the purpose of economics and the relationship between growth and prosperity when we continue to deplete the world’s resources at a wholly disproportionate rate  (a reminder here too that the traditional internationalism of the Left appears to have little place in this dialogue.

These omissions are important, and drive one towards the conclusion that One Nation Labour is not so much a slogan (although it is undoubtedly that) as a catalogue of omissions; a refusal to join a debate about the most important economic issues of the day.  Politics is about the big issues, or it is nothing – and policy reviews, important as they are, deal with the detail of implementing a larger political vision. Labour once sought to debate big issues of capital, of wealth, of distribution and of economic structure – indeed, as a Party it grew out of a recognition more than a hundred years ago that the polity of the day did not provide the framework for such a debate.  It is perhaps ironic that One Nation Labour seems to be represent a recreation 0f that political failure.

The pseudo-science behind the political war on the disabled

It has been a bad week for those on benefits, with George Osborne announcing in his Autumn Statement that benefits will be uprated by less than inflation – in other words, cut in real terms.  Labour is promising to fight these cuts but the pronouncements of both Labour DWP spokesman Liam Byrne and Labour leader Ed Miliband do not exactly fill one with optimism.

People with disabilities have been in the forefront of the attack, and that attack has been reinforced by a narrative that unites all the mainstream players in Westminster politics.  If the cruelty and destructiveness of Coalition policy on benefits is to be exposed and combatted, it is essential that the story is understood.

There’s a detailed and referenced account of that narrative on the Disabled People Against Cuts website.  In summary, the piece indicates how the current approach, using a bio-psychosocial model of disability, is flawed and unsupported by evidence, but, encouraged by private sector organisations that see the potential for profit in carrying out bio-psychosocial assessments of those claiming benefits, has become a de facto orthodoxy.

The authors point out that the approach to disability has shifted from a social approach – one that emphasises to environment and context and sees society’s response to disability as the issue to be addressed – to a so-called bio-psychosocial approach that focuses on the individual and their reaction to the environment.  As the piece points out, it is an approach that can have value in dealing with individuals. But it’s all too obvious how such an approach can be picked up and abused by neoliberals.

Put briefly, the root of the ideological justification comes from the American sociologist Talcott Parsons’ concept of the sick role, which argues that sickness is in essence a form of social deviance, which needs to be policed by medical and other professions.  This is associated with the idea that work is essential to well-being (which is true in the sense that those denied the opportunity for meaningful work suffer mental and physical symptoms); it becomes very easy for neoliberals to conflate these into a doctrine in which you can argue that denying disabled people the ability to live without work is therapeutic (you can also use it to justify the idea of workfare in which benefits are contingent on unpaid work), and of course fits well with populist narratives of workshyness and scrounging.  The scarcity of meaningful jobs in long-term economic depression is not considered by this model).

Into this environment march private companies like ATOS and Unum, with experience of developing assessment regimes with a simple aim – that of reducing the number of people on benefits.  And add to this the recruitment of amateurs like banker Lord Freud, recruited to advise Gordon Brown on benefit reforms and now a Minister in David Cameron’s government; the potential for these companies to present a ready-made pseudo-scientific model to politicians and advisers in need of a quick result; and you have the current mess.  A policy that is obviously failing, but which has the appearance of scientific credibility and which flatters the ideological preconceptions and prejudices of those in power.  It is a subsititution of privately-generated pseudo-evidence – flatpack policy-making, as it were – for real evidence that is all too familiar to observers of how this coalition government conducts itself.

And as the authors of the DPAC piece make clear – this is pseudo-science, in which the work of the academics whose work underpinned the bio-psychosocial model has been misrepresented and distorted for profit by organizations who provide a convenient and potentially popular post-hoc rationalisation for what is the central policy goal – to reduce the amount paid in benefits to the disabled.  Political and media rhetoric, playing to the fears and prejudices of the ignorant, has done an astonishing job of destroying compassion and empathy in modern Britain, but one suspects that even for Tories and Liberal Democrats, stating openly that you want to cut the living standards of the disabled is a step too far.  It is one of the defining characteristics of the neoliberal project that it needs to subvert democracy, because open neoliberalism does not win elections; pseudo-science, like pseudo-economics, is what allows neoliberals to bridge that gap. And it allows the devaluaing of conflicting “expert” opinion.

The point about all of this is that none of it is surprising.  The devaluation of evidence is at the heart of coalition policy; evidence-based policy making is subordinate to ideology and profit.  But the point here is that this is not just a coalition policy; this kind of thinking was becoming mainstream under Labour government and underpinned Labour policy.  It quite obviously informs every pronouncement of Labour’s DWP spokesman Liam Byrne.  And it is one reason why I, for one, am deeply sceptical of Labour’s apparent change of heart on benefits – because I see no evidence that Labour’s underlying rationality has changed.

Railways, renationalisation and political risk

Recent announcements that rail fares will rise by up to 11% have produced a significant political reaction.  Formerly supine Tory MPs for commuting constituencies have been making subversive noises; on the left, the call for renationalisation has been strong.

It’s difficult to argue with renationalisation in principle.  Privatisation has resulted in a hugely inefficient structure based on a vastly complex system of contractual arrangements, from which private companies cream off profit while fares and subsidies soar and service standards fall.  Significant investment – which the privatisers would come from the entrepreneurial spirit of the private sector – comes from the public purse, with the benefits accruing to private shareholders.  Managing the contractual interfaces between providers becomes a vast, expensive task overseen by a bureaucracy of regulators.  The whole system is a mess, and it is clear that it is the structure designed to allow the private sector to run rail for profit that has done this.

Moreover, Network Rail is close to being a nationalised industry; it is a not-for-profit company without shareholders entirely dependent on Government-backed debt and Government subsidy.

So in principle the case for nationalisation is obvious.  But the practicalities of nationalisation are a nightmare for a number of reasons.   For a start, the law would have to be substantially rewritten; even if you allow franchises to lapse and Government decides not to let them again, the basic structure that creates the lunatic inefficiency of the current system would still be in place and would need to be repealed and replaced. It’s difficult to see anything other than a large and complex piece of legislation that would occupy a lot of Parliamentary time and effort.

And there would be huge financial implications.  Most franchises are being let for 15 years, and decisions would need to be taken on whether to allow those franchises to continue – with no possibility of renewal, thus incentivising operators to run down services and grab as much profit as they can, while perpetuating the costly inefficiencies of the current structure; or to buy them out at huge costs.  There is the problem of what to do with the rolling stock companies.  And of course all existing contracts are likely to have change-of-law clauses under which the nationalisation legislation would probably trigger large payments.  All of this implies huge costs.

None of which is to say that renationalisation could not or should not be done; simply that it would be a hugely complex and expensive undertaking, which would probably involve an incoming Chancellor being prepared to sink huge amounts of up-front funding to secure benefits that might not be apparent for years, with no PFI to squirrel the capital costs off the books (and if that incoming Chancellor were for example Ed Balls with a commitment not to reverse Tory cuts, it is difficult to see these decisions being taken).  It would be a massive and risky political investment  which would need a clear political commitment and a clear mandate.

One important point of this is how it relates to other privatisations.  The railways are important, but they are used by a minority of people – millions never go near a train – and  still represent a relatively small part of overall public expenditure.

Consider then the remnants of the NHS, farmed out by Condem ideologues to a range of private service providers, the legislative framework for state provision dismantled, and facing all the same issues of bloated costs and poor integration of the railways, but providing services that everyone uses, with vastly greater overall costs (and potential for profits), and for the first time subject to the constraint of EU procurement law.  How do you get that particular genie back into the bottle?  The costs and risks would be enormous.

Back in the 1970′s, when Margaret Thatcher and Keith Joseph were reclaiming the Tory Party for neoliberalism, there was a phrase that one used to hear all the time – “the ratchet effect of socialism”.  What this meant was that once the state expanded into an area of activity it was impossible to roll it back, because of the electoral popularity of state provision.  The genius of the neoliberals in the Westminster political mainstream has been to make state provision unpopular and to ensure that the media are indifferent – witness the BBC’s complete failure to report the full implications of the recent NHS reforms.  We now have a different effect – whereby even within the lifetime of a single Parliament, privatisation can become so structurally embedded that it becomes politically and economically hugely ambitious to reverse it.

And that assumes that opposition parties have that ambition.  Labour, as I’ve argued here many times before, is part of that neoliberal consensus; it showed itself quite content in Government to outsource and in opposition its leaders have simply not grasped the need for an alternative to a neoliberal narrative.  Ed Balls has said in terms that cuts will not be reversed and there is no ambition to look beyond austerity economics – even when there is ample evidence that it would be hugely popular to do so.  The spirit that established the NHS in the face of a far weaker economic position than we face today is singularly lacking in Labour’s leadership.

Renationalisation of any privatised service is difficult, costly, risky and in those circumstances requires a clear political commitment and mandate.  Where will that come from in Con Dem Britain?

The triumph of the commons: why Elinor Ostrom matters

The death of Elinor Ostrom, economist, radical and first woman to win the Nobel Economics Prize, seems to have passed largely unnoticed in the Anglo-Saxon world; a look at the #ostrom hashtag on Twitter in the hours following the announcement of her passing showed tributes in many languages, for once English not in the majority.  Yet Ostrom’s work remains an inspiration to those on the Green left and, I’d argue, is supremely important in developing a counter-narrative as the failure of the Anglo-Saxon model of free market economics becomes clearer by the day.

Why does Ostrom matter?  To answer this, you need to go back to one of the most influential texts of free market economics – Garrett Hardin’s The Tragedy of the Commons, published in 1968.  The heart of Hardin’s argument can be found in these paragraphs:

The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy.

As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, “What is the utility to me of adding one more animal to my herd?” This utility has one negative and one positive component.

1) The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly +1.

2) The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision-making herdsman is only a fraction of -1.

Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another…. But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit–in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.

In other words, Hardin argues that collective control of a resource is impossible.  The answer to this tragedy – private ownership (Hardin goes on to compare the use of commons to bank robbery). It is a hugely influential text, one that has been used over and again to argue that common ownership is impossible.  Hardin argues that common ownership will lead to environmental degradation; ultimately he concludes that the answer lies in preventing the populace from breeding.  It’s important to note that, not only is this argument fundamentally anti-democratic, but it is firmly rooted in the social Darwinism that informs so much American socio-political discourse (the irony that this unsupportable bastard offspring of Darwinism holds sway in a society in which millions reject the central, scientifically-supported tenets of evolution is of course vast and obvious).

The failures in the metaphor are obvious.  Most obviously, Hardin offers no evidence at all that the commons are doomed to fail; the actual historical evidence shows that in many societies at many periods, land has been managed as a commons, sustainably and to the benefit of all, according to common rules.   Hardin argues that private ownership will do better; he offers no evidence to support this claim.  Also, the image of the rational being painted by Hardin is clearly one-dimensional; the rational actor is the one who seeks immediate gratification without thought to the collective consequence.  But it’s a straw man; while those attributes look very much like the actor in models of market economics, the simple fact is that not only do people do not necessarily think like that, but in almost all the interactions of life we actually do completely the opposite.  These are ideologically-based assumptions that pay no heed to the empirical world.  I refute Hardin’s psychological assumptions every time I put my scraps on my compost heap. The use of pseudo-mathematics in Hardin’s example is really just a form of obfuscation.

Most importantly, in spite of all these flaws, this unsupported concept of humanity provides a ready rationale for the appropriation and privatisation of common assets – or, more generally, of natural resources.  It’s actually a deep expression of pessimism about the human race – a set of assumptions that Hobbes would have recognised.

The importance of Elinor Ostrom’s work is that it provides a refutation of this world view.  And significantly – at a time when academic economics has retreated increasingly into the refining of mathematical models, leaving the relationship of economic theory to the real world increasingly unexamined, Ostrom was a thinker who worked in the field; her work was informed by a range of projects looking at issues as diverse as water associations in Los Angeles, police departments in Indiana and irrigation in Nepal.  It’s an economics that is grounded in experience. She drew on history and empirical research to show that in reality people are not just selfish actors, but do consider the wider consequences of their actions for those around them and the environment in which those actions are carried out.

At the heart of Ostrom’s contribution is a set of rules for the commons:

1. Clearly defined boundaries (effective exclusion of external un-entitled parties);
2. Rules regarding the appropriation and provision of common resources that are adapted to local conditions;
3. Collective-choice arrangements that allow most resource appropriators to participate in the decision-making process;
4. Effective monitoring by monitors who are part of or accountable to the appropriators;
5. A scale of graduated sanctions for resource appropriators who violate community rules;
6. Mechanisms of conflict resolution that are cheap and of easy access;
7. Self-determination of the community recognized by higher-level authorities;
8. In the case of larger common-pool resources,organization in the form of multiple layers of nested enterprises, with small local units at the base level.

These are of course high-level principles – there is no magic wand being waved here; governing the commons, like any democratic exercise, may well in practice be messy and difficult – and involve a lot of activity that those who only measure achievement in terms of cash output will regard as wasteful and bureaucratic – but the fact is that it can be done, and done democratically and sustainably.  In that it contrasts powerfully with  the central conceit of market economics that there is, in Margaret Thatcher’s phrase, no alternative.  Market economics posits a set of pseudo-psychological statements about how individuals behave – of which Hardin’s comment is one; Ostrom’s work on the commons shows that human activity is far richer and more diverse than the market theorists would allow, and is above all democratic – it’s a basis for how equal human beings can resolve key issues about the management of resources without the coercion of ownership, or, crucially, the appropriation of resources

What does Ostrom tell us about the current world financial crisis?

Ostrom’s theory of the commons can be seen as providing a powerful alternative to the conceits and fallacies at the heart of the current world economic crisis.  The current crisis looks in many ways very much like Marx’s crisis of capital accumulation – corporate interests hoarding vast cash piles, while demand slumps, in the face of the capital’s need to accumulate to survive.  It’s a scenario that moved Keynes – whose mission was always to save capitalism from the idiocies of its practitioners – to formulate the need to stimulate demand, to kick-start the normal process that kept capitalism working (and, one might add with the hindsight of today,  to escape the cycle of crises that increasingly appears to characterise raw unregulated capitalism).

Commons thinking addresses two key elements of the way in which capital has continued to accumulate.  The first is through accumulation and price inflation of assets like land – the latest crisis, like every financial crisis since 1973, was precipitated by the collapse of a property bubble.  The second is through the monetisation and effective privatisation of assets held in common but which have sat outside the traditional purview of exchange.  This includes such things as the appropriation and exploitation of land belonging to indigenous people (or colonialism, as we used to call it) and the turning of subsistence economies into cash-based suppliers for the wealthier parts of the world; it also includes the monetisation of natural resources like air and water or even  life itself (for example in the case of the appraisal mechanisms for new roads, where the safety benefits of new roads are calculated on the basis of a “value of life” number generated through stated preference techniques);  exchanges that have traditionally been free acquire a cash value that can be factored into GDP numbers that feed capital’s voracious need for compound growth.  It means that economic activity – and increasingly what we would traditionally think of as non-economic activity – is carried on according to structures of value dictated by capital’s need for voracious expansion.  And many would argue that it is that expansion, based on paper values of intangible assets rather than the needs and aspirations of the majority, that is at the root of the current crisis.  Moreover, the inexorable pressure of capital accumulation – especially in times of crisis – is towards short-term gain; an economy which is based on the short-term realisation of paper gain in relation to monetised assets is the very opposite of sustainable.

Commons thinking offers us a way to counteract this. It challenges the belief that the only measure of wealth is the generation of asset numbers on paper; it reminds us that real wealth often has little or nothing to do with economic activity, and it places democratic decision-making at the heart of the generation of real value (it actually means that we decide democratically what has value, rather than leaving that decision to owners of capital and their tame accountants, or to politicians in a representative democracy in which those who do not share the prevailing ideology have little or no voice).  It’s a challenge to the fatalism of market economics – notably to the belief that millions of people are not permitted to have a view on what matters.  It emphatically does not offer easy solutions – in that sense it is way more honest than the neoliberal view that suggests we just have to make markets work more efficiently to ensure prosperity for all.  It recognises the messiness of life, the fact that the world is full of conflicting interests that have to be resolved, far more effectively than a system based on the single imperative of maximising paper asset value in the long-term.

In summary: the commons, and Ostrom’s work, offer a starting-point for an economic and political discourse that is more humane, nuanced, grounded and sustainable than the dominant neoliberal ideology.  At a time when neoliberalism is failing and the reaction to that appears increasingly to be an abandonment of democratic principles, the work of Elinor Ostrom is desperately important.

The Budget Blame Game

Writing on his blog, Tory MP Douglas Carswell has claimed that unpopular measures in the Budget resulted from civil servants rather than Ministers taking decisions on issues like the so-called Pasty Tax on hot takeaway food and tax changes for pensioners. It’s a view that has been widely reported – Carswell appears to be arguing that Ministers need to get a grip on the Budget to make bold proposals.

It seems to me, as a former Civil Servant actively involved in a number of Budgets before my retirement last year, that this is likely to be excuse-mongering of a strange and low kind. If it’s true, though, the implications are pretty significant.

Yes, it’s undoubtedly true that officials – both in the Treasury and in other Departments – have measures that they have long advocated, usually for  good reasons (I can certainly see how the VAT purists in the Treasury might have been gravely offended by the messy situation on tax on takeaway food, a mess that itself looks like the outcome of a political compromise).  It is routine for Departmental Ministers to write to Treasury Ministers with their list of budget proposals – a process that itself sits at the peak of routine discussions between Departmental and Treasury officials.  Many of these are rejected, for a variety of reasons.  Space in the Finance Bill is always limited – there are always measures, often quite technical and uncontroversial, which Ministers and officials regard as desirable but are ruled out of the Bill on the grounds of space.  Measures were constantly reviewed and may be changed or dropped at any stage in the process.  Ministers frequently asked for work, often at very short notice, to evaluate different options.  Draft clauses – and notes on clauses – for the Finance Bill were drafted and scrutinised. The Budget and Finance Bill was always intense and exhausting – and my involvement was not normally with headline proposals.

But the point about the Budget process is that, certainly in my experience, it has always been intensely political.  Ministers and Special Advisers have always taken the lead on shaping the Budget, with officials often exploring combinations and ranges of options up until the weekend before the Budget announcement.  The idea that Civil Servants’ pet schemes could slip through without Ministers noticing is – or was – absolutely inconceivable.

Unless, of course, things have changed and the process in which I participated under Gordon Brown and Alastair Darling has been largely dismantled – and for such a thing to have happened would have been as a result of Ministerial rather than official action. The Budget and Finance Bill culture is too deeply ingrained in Whitehall for there to be any other explanation.  Essentially, for Carswell’s explanation to be accurate, it would mean that Coalition Ministers had taken their collective eyes off the ball and to have withdrawn from active participation in the process in a way that is, frankly, inconceivable.

So what is the substance of Carswell’s claim? The implication appears to be that, if this is more than excuse-mongering, Coalition Ministers have lost their grip on the Budget process to an astonishing extent.  I have no inside knowledge of what this year’s Budget round was like, but the idea that high-profile tax changes could be made without serious Ministerial scrutiny suggests that Ministers have abandoned even the most basic disciplines of Government.

Although excuse-mongering still looks like the most plausible reason for Carswell’s comments, the alternative – that Treasury Ministers have lost their grip and are badly out of their depth – seems all too plausible.  Not just on the basis of almost every interview that Danny Alexander gives, but because repeatedly this Government, having sacked enormous numbers of experienced civil servants, has shown time and again that it just cannot do the basics of government.  I’ve posted examples before – for example here and here – and remain convinced that this is a Government that is more interested in ideology and politics than governing, a government that values ideological narrative above empirical reality and is simply not interested in the serious business of evidence-based policy-making.

If Carswell’s comments are a piece of political excuse-mongering, it’s a piece of low politics that probably doesn’t matter very much.  Kicking decent public officials who can’t answer back is cheap and cowardly, but that’s Tories and Liberal Democrats for you.  If it’s actually an honest view of what went on in Whitehall before the Budget, it’s an astonishing insight into the sheer incompetence of Osborne and his Ministers.

50p tax rate and Tory triumphalism

Widely-circulated predictions that George Osborne is about to announce the end of the 50p top income tax rate for those earning more than £150,000 have attracted much comment.  The obvious one is fury at the naked unfairness – here is a handout to the wealthiest in society that comes at the same time that those on the lowest incomes are seeing their living standards cut (for example the estimated 900,000 people on low incomes who will lose nearly £4000 per year due to changes in tax credits in April).

Then there are also concerns about the economic justification. There’s no real evidence that this will do anything to stimulate the economy; this looks like a case for the confidence fairy if ever there was one.  Moreover, macroeconomic theory suggests that increasing the incomes of the poorest is much more likely to stimulate the economy, as they spend all (or nearly all) their income; cutting tax for the lowest-paid, or increasing public expenditure is a far more effective stimulus.  And there’s  the Treasury spinning of the figures  - in the absense of any hard numbers for tax take, claiming that the 50p tax rate is raising “hundreds of millions rather than billions” despite predicting that it would raise £3 billion per year (with tax expert Richard Murphy arguing convincingly that the take could be as high as £6 billion - the TUC paper to which that article links is essential reading).  At a time when benefits and services for the poorest and most vulnerable are being slashed in the name of deficit reduction, it’s an astonishing policy – a naked, obvious wealth grab on behalf of the wealthiest paid for by the poor and those on middle income, at a time when Coalition rhetoric still claims that we are “all in it together”.

And it’s a sign of Tory self-confidence and triumphalism.  I wonder whether the the events of last weekend’s Liberal Democrat conference were on Osborne’s mind as he contemplated the policy – a conference voting in two different ways on the NHS as their MPs and Peers prepared to trip happily through the Parliamentary division lobbies in support of a bill that effectively breaks up our National Health Service.  Perhaps he was reading the opinion polls, which showed that even when presiding over economic policies that have eviscerated the living standards of the vulnerable, hit Middle-England hard and enriched the 1%, or when presiding over the effective privatisation of Britain’s once-beloved NHS, the Tories are only a few percentage points behind Labour (with the added advantage that boundary changes and the deserved collapse of Liberal Democrat support will, in terms of seats in the House of Commons, greatly benefit the Tories).  Or perhaps the decisive moment was when Ed Balls signalled the raising of the white flag on economic policy, implicitly accepting the neoliberal economic agenda by effectively backing tax cuts.

Every one of these represents a Westminster political culture in which the Tories are utterly dominant.  Of course there is opposition outside the political class – all the evidence suggests that Coalition policies on health, on tax, on public expenditure are widely unpopular, although one of the most sordid aspects of the Coalition’s tenure has been its casual demonisation of the disabled, the sick and the vulnerable who depend on benefits.  But that is outside the Westminster bubble – and one can hardly avoid the conclusion that nearly all the most obnoxious aspects of Coalition policy – NHS privatisation, benefit cuts, workfare, tuition fees, the privatisation of public space – are simply the policies that Labour followed in office taken to their logical conclusion.  Ed Miliband wrote the 2010 Labour manifesto in which many of these policies – in a softer, cuddlier form – were advocated;  New Labour luminaries like Liam Byrne continue to trash the legacy of Beveridge and the welfare state.  No wonder Labour has been so utterly useless in opposition.  The Liberal Democrats, allegedly a moderating influence on the Tories (which they were never going to be – read the Orange Book), are in disarray.  The best they have to offer in response to the abolition 50p tax rate is Clegg arguing for raising tax thresholds at the bottom – which of course will ensure that the rich benefit twice – or a possible commitment to a Mansion Tax. In principle.  In the long term.  If it’s workable.  ”All in this together” is a slogan that accurately describes the position of the British political class.

It’s been sad to read some of the comments on Twitter to the effect that the Tories really have blown it this time.  They are not stupid – they are resurgent.  All they have learned from the events of the last two years in Government – helped along of course by their yellow-tied useful idiots, and assisted by Labour’s refusal to argue for a real alternative  - is how easily they can get away with it.

Why I’m backing Brighton and Hove’s Green administration

Last Thursday evening, Labour and Tories in Brighton collaborated to pass amendments to the Green administration’s proposed Budget that froze Council Tax – in contrast to the Green proposal for a 3.5% increase – and to make corresponding cuts.  Following the vote in favour of the amendments, the Green group on the council – with one exception – voted to accept the amended budget.

It has been a matter of real controversy within the Green Party, both in Brighton and nationally – fortuitously the vote took place the day before the Green Party conference opened in Liverpool, and a motion critical of the Brighton and Hove Group was not debated in a move that has apparently deepened the controversy and led to resignations from the Party.

My immediate gut instinct was to side with those who argued that the Green group in Brighton could not continue in office having lost the Budget vote.  It’s worth considering the background – the administration had embarked on one of the most comprehensive consultation exercises ever seen on a local authority budget, against the background of swingeing, ideologically-motivated cuts in central Government funding for local authorities.  Moreover, the Green decision to support a modest Council Tax increase was taken against the background of what was effectively a bribe from central Government – get extra cash this year if you freeze council tax, but commit to funding cuts in the longer term.

Labour and Tories proposed near-identical amendments to the Budget (while denying collaboration, although if they didn’t the draft speaks eloquent volumes about the closeness of thinking between Labour and Tories in Brighton) and the Labour amendments were passed.  Most of the Green group then voted for the amended Budget.

As I said, my gut feeling was that the Green administration could not carry on.  But I now realise, on reflection, that their actions were right for the Party and right for the people of Brighton and Hove.

Had the Green group tried to vote against the amended Budget, their moral authority as an administration would have been finished.  Every measure they proposed, every aspiration, would have been torn apart by Labour and the Tories and their friends in Brighton’s local media on the grounds that the administration had voted against giving itself the means to do so.  It would have become a lame duck administration, its authority shot to pieces.

So why continue in administraion?  If the Green administration resigned, the Tories would come to office.  Brighton and Hove Tories:

• want every school in Brighton to become an academy;
• would overturn the city’s commitment to a living wage;
• support the privatisation of all Brighton’s care homes;
• would eviscerate the innovative Green proposals to improve Brighton’s public realm and make the city a liveable place;

and during the course of the debate

• supported  nursery closures while attacking the decision of the Green administration to sell the Mayor’s personalised number plate;
• repeated the racist lie that the city is “awash with travellers” – an inflammatory fiction that Tory MPs and Councillors continue to push, in contrast to the adminstration’s aim to produce a long-term solution to the traveller issue;
• complained that the Green group contained too many incomers to the city (see previous bullet point);
• backed an illegal proposal to remove facility time from the Council’s unions (a measure which of course provides a consultative route that makes the council more efficient and saves money)

I am wondering quite why some critics in the wider Green Party – including those proposing motions at the Green Party conference – see the installation of an administration believing these things as the best way in which Green councillors could discharge their obligations to their electors.  Of course, one can understand that none of them have had the experience of administration and the wider responsibilities that that brings; but they need to get beyond the belief that this is a theoretical debate. Like it or not, Brighton Greens took on the administration of the city in the full knowledge that they would be a minority administration facing years of cuts.  The idea that you could walk away now on a point of principle and that the electorate would continue to have faith in you seems to me to be utterly misguided.

Could a minority Tory administration do all those things?  Possibly not, but the chaos of trying to do so is not something that should be lightly dismissed.  Moreover, how could we be sure that Labour would not back them?  As I’ve written elsewhere (scroll down to comments) the really interesting thing about Labour in Brighton is the way that its rhetoric and politics  has developed in a way that aligns them so closely with the Tory position on how local government is financed – indeed on what local government is for.

Those on low incomes are hit hard by cuts in services – while a coucil tax freeze favours the better-off.  It’s a simple economic fact.  In other words, Labour still claims to speak for the poor and vulnerable but in general is advocating policies that have precisely the opposite effect. And it appears to have bought into precisely the sort of low-tax rhetoric that Pickles uses to justify his assault on local authority power. One would like to think that Labour would know better – but recent history suggests otherwise (students of urban development will realise that Labour’s urban legacy in Government will be the erosion of local democracy, the privatisation of public space, the gated estate, the private mall and the CCTV camera – in the essentials of urban policy, as in so much else, Labour and Tory are increasingly indistinguishable).

So why the inconsistencies? It is difficult to escape the conclusion that Labour in Brighton is still fighting the 2010 General Election, and still smarting at the fact that, having taken for granted that it would get the progressive vote in this city, it lost to a candidate who outflanked it on the left and continues to provide real opposition to the coalition in a way that the national Labour leadership just doesn’t appear to have the stomach for. It’s now indulding in toddler politics – still smarting over its defeat and throwing a toddler hissy fit that must be giving Brighton’s Tories quite a lot of quiet satisfaction. It looks very much like a group that has lost the will to argue for change and is content with throwing its toys around instead; and one that will do almost anything in its power to discredit the Greens.  Labour may once have been a party that knew the difference between statesmanship and an emotional spasm but pronouncements from its leaders suggest that it’s really quite comfortable with a neoliberal tax and spending agenda and that attacking the Greens counts for far more than defending the vulnerable.

It seems to me that not the least of Labour’s offences – especially through its denial of collusion with the Tories – is to treat the electors of Brighton as if they were stupid.  It contrasts very powerfully with the Green administration’s commitment to real consultation.

In this situation, it seems to me that however painful the decision to vote for the amended Budget – and it would not have been easy – and to carry on in administration, it was the right one and the one that does most to protect the interests and aspirations of the people who put their faith in the Party at last year’s Elections.  To have walked away would have condemned the Party as a home of people who have nice fluffy ideas but run a mile when the going gets tough – and would seriously have undermined Caroline Lucas’ position as the only MP and Party Leader who is standing out against the three-party neoliberal consensus.  I have every respect for the people within the Green Party who argue that the Group should have resigned, but I am very proud indeed of our Green Councillors in Brighton and Hove for continuing the fight for the values that I and thousands of others across our city voted for last May.