Saturday, 29 December 2012

Everything Must Go

One of the enduring habits of the news media is giving staff time off at Christmas. This is achieved mainly by padding out space with seasonal filler. Some of this is prepared weeks in advance, such as end-of-year lists and guff about new year resolutions. Some of it is artificial news, such as the honours list, which also produces more guff in turn (Q: what does Sir Wiggo say about us as a nation? A: bugger all). The shift of the start of the sales from January the 1st to Boxing Day has been a godsend in this regard, allowing the dead days of Winterval to be bloated with photos of naked greed at Harrods against a background of retail jeopardy: will shops sell enough reduced-priced goods to drag the economy over the finishing line?

In today's Guardian, Deborah Orr has got into the seasonal spirit by suggesting that capitalism make a new year's resolution to be better at providing jobs, security and fairness. Though generally an astute observer, this reveals her weakness for the sort of liberal sentimentality that lets capitalism off the hook. She claims: "After decades during which we have all been told that we must allow the market to decide, the market is making a pro-social and humane decision. It is choosing to sacrifice profits in order to save itself. This is what the sales are all about – companies slashing their profits in order to keep ticking over, providing jobs, maintaining a presence".

This sort of analysis credits capitalism, the "market", with moral agency: the making of a humane decision. Of course, no such thing is happening, nor could it ever happen. The market does not have a mind, not even in the pop-bollocks sense of a hive-mind. To believe it does is to accept the ideological premise of a supernatural force that we must accommodate: the "invisible hand" of Adam Smith's metaphor which has subsequently been apotheosised into the Old Testament deity of free enterprise. There is no reasoning with capitalism. Both worship and propitiation (the sacrifices of the "strivers") fall on deaf ears. Actually, there aren't any ears - that's just me lapsing into anthropomorphism. Some businesses will take a hit to profits if they think it will grow or maintain market share, and thereby deliver fatter profits later, but others will quite happily asset-strip or lay-off staff now if they think that will be in their best interests. The free-market ideologue may deify the profit motive, but at least he doesn't claim that businesses are primarily driven by ethical considerations. What need of the CSR fig-leaf if every decision you make is ethically-based?

Orr continues: "You could even argue that the recession is teaching businesses that people really are more important than profit (or at least that if people don't have jobs then they don't have customers). The rich are realising that they can't keep getting richer if the poor keep getting poorer". At this time of year we oscillate between extreme perspectives. Thus the Queen will habitually bore on about Christmas being a time for family but also a time for remembering those less fortunate than ourselves (that's everybody, in her case). Orr's focus on the decimation of the high street, and in particular the mismanagement of pubs by the big chains, is a paean to the "local" in all the senses of that word, but this makes her temporarily blind to a fundamental truth of capitalism: there are always more customers, always new markets, elsewhere. Starbucks have not yet exhausted the UK market but are already opening up in India. The growing global middle-class will ensure steadily increasing demand for coffee-as-lifestyle for years to come. The rich know they can keep on getting richer, even as the poor of developed nations get poorer, so long as there are populations in developing countries whose new spending power can grow the overall market.

Orr's optimism, the belief that growing poverty is ultimately bad for the rich, is based on the zero-sum fallacy. While it is true that eventually every population, from Aberdeen to Amazonia, will be incorporated into the market, thus precluding further customer growth (i.e. opening up new territories), this simply shifts the balance of activity towards technological growth. The poor of the world can see absolute growth in terms of material advancement, while experiencing relative decline in terms of the share of wealth. It's all about how the pie is shared out. As it grows, the rich are positioned to appropriate a disproportionate share of that growth, just as they have done over the last 30 years.

New year resolutions are rarely effective as they tend to focus on the aspirational rather than the achievable: losing weight or quitting smoking rather than painting the bedroom or visiting relatives. Asking for a capitalism that "promotes fairness" is just delusional. Unfairness is its very essence and there is no natural limit to its appetite.

Thursday, 20 December 2012

Living in the Ghetto

The news that an immigrant is going to receive over £2,600 in housing benefits a week has elicited little media comment beyond wry sympathy at his inability to relocate his family to the more select parts of London. Despite the real estate challenge, Mark Carney, the new Governor of the Bank of England, will have little difficulty acclimatising to a city dominated by the global executive elite, and as an English-speaking Canadian he is already as integrated as you can be short of being born and bred in Midsomer.

For those without Carney's advantages, Ed Milliband recently proposed that steps should be taken to ensure that every Briton speaks English. This is an orthodox progressive position, arguing that integration, and therefore the life chances of immigrants themselves, would be helped by actively developing language skills. It's a win-win. In fact, it's an example of passive-aggressive intolerance. Exactly the same argument was once deployed against the public use of Welsh and Gaelic. It also gives quiet encouragement to natives who don't like the gabble of foreign tongues, but without pandering to overt racism. But the real motivation for this intervention has less to do with intolerance or prejudice, which I'm sure Milliband is largely free of, and more to do with economic utility. His plea also implies the neoliberal belief that the state should take measures to better train workers for the benefit of capital. Suggesting that immigrants should speak English is anodyne because no one is suggesting that they shouldn't, least of all immigrants themselves. You might as well advocate breathing.

Jackie Ashley supported Milliband's initiative and even broadened it to talk about the undesirability of ghettoes, that is places where English may not be spoken routinely: "But ghetto communities are always bad news. They increase suspicion on both sides. They gnaw away at common citizenship. If we've learned one thing from the politics of the last century in Europe, surely it's that". This is bad history. Ashley's implied reference is to the Jewish ghettoes of Eastern Europe, with their long experience of pogroms and legalised discrimination. But that is simply not a relevant parallel for Britain. Our ghettoes have been built by economic circumstance, both in terms of available housing and the proximity of work, not by walls and curfews. Imagine if she had claimed that the traditional Irish Catholic areas of Glasgow and Liverpool were "always bad news". This anti-ghetto rhetoric, this intolerance, is sadly reminiscent of New Labour's appallingly stupid policy of dispersing asylum seekers around the country in the early 00s.

In the modern world, ghettoes (as distinct from the housing of the poor) are essentially transient communities providing induction support and access to social and economic networks, not unlike a global corporation's relocation function. Every Polish shop is a mini-job centre and a mini-Citizen's Advice Bureau. The ghetto functions as a decompression chamber, where immigrants can be acclimatised in a hybrid milieu, like fish and chip shops on the Costa del Sol using olive oil instead of lard. Once they find their feet, they push on into the interior in waves of further and deeper integration, like the Jews of Whitechapel moving out to Gants Hill and Golders Green. In ending up in Hampstead, rather than Peckham, Ed Milliband's parents were following a well-trodden path to a particularly genteel ghetto. Of course, we don't tend to classify an area as a ghetto (other than ironically) unless there is visible poverty, or at least lots of fried chicken shops.

Ghettoes are overwhelmingly successful in their job. They do not trap people. The point about the "escape the ghetto" trope is that escape is routine. Consider how Italian-Americans migrated from the Lower East Side of New York, out to New Jersey and Connecticut, leaving "the old neighbourhood" to more recent immigrants from elsewhere. It is ghettoes, and not government diktats about language skills, that are the chief facilitators of integration. But government tends to be suspicious of them, largely because they are autonomous, and is impatient for their dissolution: don't stand out, blend in and be quick about it. Today's planning battles over mosques echo earlier conflicts over synagogues and Catholic churches. Milliband didn't use the G-word, but the negative connotations are implicit in his comments about "slum housing" and "segregated workplaces". Instead, he drew a contrast between assimilation (bad because you lose your cultural identity) and separation (bad because you retain it). Integration is the happy medium where the immigrant can operate like a true Brit (in public) while retaining the solace of her cultural heritage (in private). Diversity then becomes a set of sentimental commodities, to be put on and taken off like your football team's colours.

What is rarely acknowledged by politicians is that the specifics of integration, the "points of non-negotiable conformity", are almost wholly to do with economic utility rather than culture. This reveals the too-often elided truth that immigration policy is deliberate and well-planned, not the series of mistakes and bungles that the press paint it as. Tories berating the incompetence of the Border Agency, like Labour confessing that "we got it wrong", are both simple misdirections. All parties are quite open in their insistence on an immigration policy that facilitates the importation of skilled workers at the request of business, while simultaneously pandering to tabloid prejudices about benefit tourists and hate-preachers. Immigrants are neatly divided into good (Mark Carney) and bad (Abu Qatada). It is naive to believe that had the Tories been in power during the 00s, the influx of cheap Eastern European workers would not have occurred. It was what business wanted at the time, which is why it happened.

Insisting on a proficiency in English is an argument about the economic value of the individual, not a plea for more community singing. The reality is that the vast majority of immigrants are only too keen to learn or improve their English because they anticipate the economic benefits. It is a myth that immigrants come here determined not to learn the language. After all, an ability to read and write English would be most helpful for a career in benefit fraud. Perhaps Milliband should worry less about immigrants who can't speak English and more about an immigrant who appears to think the bankers' gravy-train is still running.

Tuesday, 18 December 2012

Shotguns and Weddings

To tolerate something means putting up with it, enduring it. It's an act of forbearance. It does not mean acknowledging or liking something, but essentially ignoring it. It's a refusal to take sides, a "don't know" in pollster-speak. But in political discourse the word is often used to imply a positive act of engagement and acknowledgement, even of limited sanction. If intolerance is a dislike, then tolerance is treated as a qualified like.

An example of this is gay marriage, which is regularly presented in binary terms as something one must either be for or against. As Chris Dillow has noted, the debate is framed as one of equality and therefore something that affects us all, though in reality most people are either wholly indifferent or in the "I don't see why they shouldn't" camp. The Catholic writer Timothy Radcliffe recently provided a good example of how tolerance can be used to defend prejudice: "Many Christians oppose gay marriage not because we are homophobic or reject the equal dignity of gay people, but because 'gay marriage' ultimately, we believe, demeans gay people by forcing them to conform to the straight world". He goes on: "Tolerance means, literally, to engage with other people who are different. It implies an attention to the particularity of the other person, a savouring of how he or she is unlike me, in their faith, their ethnicity, their sexual orientation. A society that flees difference and pretends we are all just the same may have outlawed intolerance in one form, and yet instituted it in other ways". The argument deployed here against gay marriage is not that it is a theological impossibility (something that we cannot tolerate, even if we wished to), or a moral abomination (something that we choose not to tolerate), but that its toleration would obliterate the separateness that gays insist upon. Such sophistry makes you wonder if Father Radcliffe deserves a transfer from the Dominicans to the Jesuits.

An example of the word being used correctly is Barack Obama's insistence, in response to the Sandy Hook Elementary shootings, that: "We can't tolerate this any more. These tragedies must end. And to end them, we must change". In other words, the US can't go on ignoring the consequences of liberal gun laws. "We cannot accept events like this as routine. Are we really prepared to say we are powerless in the face of such carnage? That the violence visited on our children year after year is the price of our freedom?" Obama has already been criticised for not explicitly mentioning "guns" in his speech, as if anybody could honestly infer that he is arguing for teachers to be armed to the teeth, while others have upbraided him for his hypocrisy in tolerating the death of children as the collateral damage of drone strikes, though it is hard to see how a charge of double standards (however legitimate the charge may be) is anything other than a distraction in relation to US gun control. If Obama is open to criticism, it is that he avoided all mention of guns during the presidential election, though you can probably see the tactical logic from his perspective. In other words, he displayed tolerance of the carnage, as a relative political priority, on the hustings.

For that reason, it is doubtful that the current tragedy will lead to major reform unless there is a clear shift in the mood of the US public. For a variety of reasons, excellently outlined by Jill Lepore in the New Yorker back in April, this is likely to be a gradual change, not an overnight conversion. The roots of the gun control debate lie in the 1960s push for civil rights. The conservative reaction to this in the 1970s, the focus on liberty over equality, recast the constitutional requirement to maintain armed states militias as a right of the individual to carry a gun. Pro-gun became a badge of identification for conservatives. Though gun ownership has actually been steadily declining since then, the gun-owning minority have become fiercer in defence of their right because of its political symbolism. The recent post-election predictions of demographic irrelevance for angry white men are likely to make them even more embattled.

Gay marriage will become legal because the majority of the population simply aren't fussed, while those that are passionately in favour have strong arguments (equality, fairness) and those that are passionately against have weak arguments (theology and a too-obvious obsession with sex). The basis of our tolerance is disinterest. In contrast, US gun control is likely to inch forward at best, despite a growing majority in favour of tighter regulation. The emotion over Sandy Hook will dissipate, just as it did after Columbine and similar shootings. Occasional tragedies will be tolerated until gun-ownership goes out of fashion as an identifier of personal liberty. Given how embedded the idea is in American popular culture, and how much spadework the pro-gun lobby groups have put in over the last 40 years, that won't happen on Obama's watch.

Sunday, 16 December 2012

Ten Year Tenure Tips

The headlines greeting the decennial 2011 census have focused on changes in country of origin and religious affiliation, but these simply reflect continuing trends that are either worrying (foreign neighbours!) or thrilling (better restaurants!) depending on your general outlook on life. The ethnic mix is a feature of a world in which labour mobility and international education are increasingly common. What should worry those parts of the UK that remain overwhelmingly white is that their exclusivity is a sign of economic poverty. As for religion, the census figures have always been misleading as they reflect emotional allegiance rather than participation (do the Jedi Knights actually have harvest festivals?), which is why they will continue to gradually but inexorably decline.

The more significant news, I'd suggest, is the change in housing tenure. Even here, most media commentators have focused on the decline in home ownership as the corollary of increased renting, which is hardly news. The huge sums diverted before the 2008 unpleasantness into buy-to-let properties were not a sign that the bottom was falling out of the rental market, while the continuing under-supply of affordable housing has been conscious policy for decades. What is news is that we reached an inflexion point in home ownership ten years ago, round about the time of the last census in 2001. As the HomeOwners Alliance lobby group put it:

The decline in homeownership started well before the financial collapse and housing market crash – it started in the easy credit boom years in London in 2000, and the rest of the country followed. Homeownership levels across the UK have been declining since 2002, five years before the credit crunch of 2007. But the decline has been notably accelerated by the drying up of mortgage credit, as well as rising unemployment, with homeownership levels currently dropping by almost 1% a year.

Parallel to this decline, the number that now own their home outright has increased. Homes owned with a mortgage or loan dropped from 8.4 million (39% of all households) in 2001 to 7.6 million (33%) in 2011. Homes owned outright increased over the same period from 6.4 million (29%) to 7.2 million (31%). Some housing market experts now anticipate that non-mortgaged owners will exceed the mortgaged as soon as 2014. That date will probably also see the number of private renters exceed the number of social renters (i.e. renting from the council or a housing association). The former have increased from 1.9 million homes (9%) in 2001 to 3.6 million homes (15%) in 2011. The next couple of years will therefore witness a watershed in terms of housing tenure composition.

Does this matter? I think it does, for two reasons. First, outside of the super-rich, people who own their homes outright tend to be less willing to sell and trade on. This is largely a factor of age, i.e. that they pay off their mortgage in their 50s or early 60s. After a couple of decades of trading up (in most cases), they're probably happy to sit still once the music stops, certainly since Spanish villas went out of fashion. The problem is that these properties are then less likely to return to the market. Even on death (or when they need funds for a care home), there is now a good chance that the property will be occupied by an inheritor (the destiny of many a baby-boomer's child who could not otherwise afford a mortgage), even where the inheritance is split across multiple children (I suspect open market selling will be a third option after an inter-sibling sale of shares or an agreement to let the property and divide the rental income). In other words, such properties are likely to stay within the family. The second reason is that buy-to-let properties are less likely to to be converted to owner-occupied homes as their revenue stream is a hedge against both inflation and a potential property price crash. Baby-boomers, or even those in their 40s who were able to invest before 2008, have long seen buy-to-let as a pension fund. They are probably going to sweat their assets.

What this means is that, short of a massive housebuilding programme, the supply of properties on the open market for purchase by owner-occupiers via mortgages will remain constrained. The drop in house sale volumes since 2007 is not likely to reverse any time soon. This will keep property prices high, which will please builders (they prefer high margins to high volumes), existing homeowners, and (by extension) certain political parties. It will further limit social mobility and will reinforce the trend towards a rentier mentality. The ideological opposition to higher inheritance or property taxes is likely to grow further on the right, leading to calls for outright reduction or abolition (the freeze on council tax revaluation is a de facto real-terms reduction for the upper bands). The popularity of the mansion tax among LibDems is based on the assumption that it won't catch the majority of homeowners, just rich oligarchs in Kensington and Chipping Norton.

The more I look at the current political establishment, and its knowing acquiescence in this dynamic, the more I see a childish nostalgia for the Edwardian era (Cameron, Clegg, Osborne and Johnson could be transplanted with zero adjustment - Gove would be shown the tradesmens' entrance). The popular resonance of Downton Abbey is perhaps less about the upstairs-downstairs class boundaries and cultural snobbery and more about the attraction of unearned income. The census implies we are losing our faith in religion, but not our faith in property.

Friday, 14 December 2012

Dark Factory

No, not a Joy Division retrospective, but the latest installment of the rise of the machines ...

The techno-pessimism meme has come in for some polite pooh-poohing of late, despite the best efforts of the usual suspects to insist that we've run out of ideas and no longer value innovation. What's prompted this has been two separate observations. First, the rise of the robots has now been given credibility by Apple's announcement that it plans to join the growing band of companies who intend to repatriate some manufacturing (onshore is the new offshore). Details are few, but the suspicion is that this means replacing labour in the Far East with even more advanced fabrication technology in the US, so it certainly doesn't promise an increase in manufacturing jobs outside of a small number of high-wage machine-minders. The second observation is the trend that sees the division of GDP between profit and wages (i.e. capital and labour) shifting in favour of the former. The link between the two is capital-biased technological change - i.e. investment is going on machines, which increase productivity and profit margins, rather than on better-educated workers (skill-biased technological change), which would increase wages.

The profit/wages split is a murky area, partly because it is affected by the other elements of GDP, such as tax and rents, and by the balance of trade. There is also the problem that the categorisation of certain economic activities is questionable and can change over time. For example, bankers' bonuses count as wages while hedge fund managers' bonuses count as profit. Similarly, the income of a contract IT bod, who works through a personal services company, is counted as profit as it is taken in the form of dividends. The rise of the PSC since the 80s has undoubtedly contributed to the growing share of GDP attributed to profit, and, by virtue of this "tax dodge" being biased towards higher-paid workers, has probably also helped depress average wages. A further problem is that an aggregate shift may simply reflect economic activity migrating from sectors with low profit margins to those with higher profit margins, such as (for most of the last 30 years) the financial sector. Even if those sectors have higher than average wages, if the comparative wage advantage is smaller than the comparative profit advantage, then profit will grow relative to wages over all.

Economists traditionally divided production into three factors: capital, labour and land. Capital here is constant capital, that is plant and equipment funded out of profit, plus finance capital, i.e. credit that can be used to create more constant capital. Land represents unimproved natural resources, aka raw materials. Rent, as a production cost, is a charge levied for access to those resources. In the twentieth century, entrepreneurship was separated out as a fourth factor, though it's worth emphasising that in this context a better word would be innovation, i.e. the ability to achieve greater production through better use of the other three factors. This extends from more efficient management techniques through to technological invention. The use of the word "innovation" in respect of financial instruments in recent decades is not mere pretension. In this context, CDOs were genuinely innovative because they allowed for the creation of more credit. The problem was that this was then spunked on existing houses rather than the expansion of production.

Though capital has had the edge over labour since the 80s, the returns to constant capital have actually been in relative decline (this in part explains the attraction of the finance sector before 2008 - i.e. too much capital chasing high yields caused a bubble in high profit debt). The chief reason for the decline is that the cost of technology has plummeted while its impact on production efficiency has been enormous (think of containerisation and ICT). Paradoxically, this fails to expand profits because it makes competition easier - i.e. the cost of entry to an industry is much lower and maintaining a de facto monopoly is that much more difficult. Offshoring can be seen as a defensive move by capital, harnessing the very technology that is driving down prices to maintain profit through wage repression.

As wages rise in China and other developing nations, profit margins are eroded once more. Onshoring is not about "bringing jobs back" but the next stage in the redundancy of labour. It's about dark factories, i.e. production facilities with little or no direct human involvement. If labour is a small factor in your production cost, then it makes sense to site your production as close to your customers as possible, as this reduces transport and storage costs. The eventual logic of this trend is the Star Trek replicator, a universal production facility in every home. Consumption then becomes a transaction in which a royalty is paid for the creation of an object. Capitalists (intellectual capitalists, if you prefer) are then people who own patents rather than the means of production. The creation of profit through competition is replaced by the extraction of rents through monopoly.

The suspicion that monopoly may already account for some of the shift between profit and wages is gaining ground, while the habitual abuse of monopoly power is now taken for granted. It is worth noting that Google and Amazon have declined to follow Starbucks's lead in "making a contribution" in respect of dodged tax. Starbucks operate in a competitive market, while the other two are near-as-damn-it monopolists and presumably feel they have little to fear from Margaret Hodge "putting away" her Kindle (not binning it, you'll note) or trying another search engine. Calling for a boycott is simply a demand that a particular company behave better; it is not an attack on monopoly power. Antitrust initiatives, such as the EU's long-running case against Microsoft, have proved to be little more than an inconvenience. The implicit acceptance of monopoly appears to have reached a watershed with the "new economy" of the last 15 years, in which a single business secures the degree of dominance that a century ago led to the forcible breakup of Standard Oil. Notable too is how often this monopoly is based on intermediation (funny how the Web was once thought to herald disintermediation), such as that of Google, Facebook and Amazon. It seems almost redundant to point out that the advocates of "open" are delivering "closed".

In the modern economy big capital struggles to find enough opportunities to invest in making stuff. Though profit margins can be maintained through automation and offshoring, turnover declines as commodities become cheaper and product cycles briefer (the impending disappearance of the Kindle will solve Margaret Hodge's ethical dilemma). Capital is then increasingly diverted to non-productive but high-yield sectors, such as finance and property, and into the service sector. Labour-intensive services are attractive precisely because they offer scope to repeat the automation and offshoring that have been almost exhausted in manufacturing, hence the neoliberal push to privatise health and education. In those sectors where automation is already high, further productivity gains become more challenging. This encourages a shift towards rent-seeking, which means that land (i.e. natural resources) becomes more dominant as a factor of production. Consider the growing significance of rare-earth metals in discussions about the price of manufactured goods. The geopolitical ramifications of the grab for agricultural land, water, energy and minerals are obvious, but the local implications are just as notable, from the ideological opposition to property, inheritance and land value taxes to disputes over wind turbines.

In such an economy, innovation becomes a more significant factor as well, not simply because it is then the only game in town as far as productivity growth is concerned, but because the patenting of techniques and inventions creates a form of resource that is equivalent to land - i.e. it produces a rent and is a tradable and inheritable asset. Recent years have seen the patenting of things we'd never previously have thought of as inventions, such as gene sequences, and now no one bats an eyelid when Apple seeks to patent a basic geometric shape. The parallel growth of the "patent troll" industry is less an issue of parasitism and more a reflection of the hospitality of the host, i.e. patent law. The recent "smartphone wars" between Apple, Google and Samsung are significant because they show both the speed at which technological advances are adopted by competitors and the determination to enforce patents and thus preserve monopoly power.

The conclusion one can draw from these trends is that labour is becoming less valued. Even if we were not suffering austerity and low growth, we would need less labour year-on-year to maintain production, so high unemployment is here to stay. Though our remaining labour needs will require increasing skills at the top-end of the income scale, the growth of educated labour forces in developing countries means that the wages premium commanded by a college degree in developed countries will erode due to global competition (this, together with increasing fees and large student debts, will return further education to being the preserve of the rich). At the bottom-end, the growing pool of the unemployed, and the erosion of the welfare state, means that wages will fall in real terms.

The winners in such a scenario will be those that already own assets and those that can secure access to rent-extracting jobs, such as government and the law. For a while, this latter camp will include the supernumeraries that occupy the corporate ecosystem, such as accountants and HR types, who are in effect extracting a form of rent as "management overhead", but sooner rather than later they will find their own roles under threat as capital moves from corporations that manage people to trusts that manage assets, and as technology continues to automate labour everywhere. We don't need Star Trek replicators to envisage a future in which HR and Accounts no longer exist. There will be little role for them in dark factories, and those are already being built.

Thursday, 13 December 2012

Our Night of Shame

What do Man United, Man City, Spurs and Liverpool have in common? That's right, they all failed to make it to the last eight of the League Cup. Despite this, it is Arsenal's failure to beat Bradford City in Tuesday's quarter-final that has provoked contempt in the media and angst among fans. Bradford's captain, who I suspect isn't a secret Gooner, even went so far as to belittle his own team's performance by claiming that Torquay United were tougher opponents. The fact that Arsenal had 63% possession and managed 28 shots, 12 on target, would indicate that Torquay should be romping away as leaders of Division Two, though strangely they are currently languishing in 11th. The Gunners problem was, not for the first time, wayward finishing, capped by 3 penalty misses. There was no lack of bottle, as shown by the team's attacking intent at a packed away ground and their fighting back to secure an 88th minute equaliser. What was lacking was goals.

I have always kept an eye on goal difference, as this often indicates where a team's league position may be misleading, which is useful data if you're having a bet or just picking a fantasy team. The final positions do not strictly accord with the order of the GD column, but they do roughly correspond. Man City finished last season with a GD of 64 versus United's 56. This season, they are one behind, 16 versus 17, but that obscures a much better goals-against figure of 14 versus 23. United have the edge because they have scored 40 as opposed to City's 30, but for that reason I suspect the blue half of Manchester should be the better bet for the title, particularly if they now stick with Tevez and Aguero up front. United look the more vulnerable, given that Rooney has never been a consistent scorer and van Persie is overdue an injury, not to mention their generous defence (23 conceded puts them joint 10th with Newcastle and Villa). Goal difference at the end of the season will usually throw up the odd anomaly, which can be an indicator for the season to come. For example, Newcastle finished in fifth position last season but on only a GD of 5, which would normally place them about eighth or ninth. Their relatively poor start this season was predictable.

The current anomaly in the league is our very own Arsenal. A current GD of 10 would place them comfortably in fourth, which as I've pointed out before is where their means as a club would logically put them come season's end. The reason we're in seventh is because our goals scored, 26, is only joint sixth best. In the seven games since thumping Spurs 5-2, we have scored seven goals in total during normal time, and conceded six. The defence has frequently been criticised, but their tally of 16 goals against after 16 games is bettered only by Man City on 14. Taken together with qualification for the Champions' League knockout rounds, and even reaching the League Cup last eight, the hard data does not indicate a team in terminal decline, despite that having become the media's ruling narrative. Thus the Bradford "night of shame" has led to the usual nonsense that "the fans deserve better", "the club lacks ambition", and "Wenger's lost it". You can expect every setback from here till May to trigger exactly the same claims, along with shit-stirring about the relationship between Wenger and Bould and the bizarre claim that Sagna may leave because he doesn't think his game is being improved any longer. Bacary Sagna turns 30 in February. Hmmm. If he goes, I suspect it may have more to do with improving his pension fund.

Interestingly, our goals scored at home is a decent 18, which is third best after City on 21 and United on 19. The problem is that we've only scored 8 away from home, which is mid-table form. Even QPR have scored 8 on their travels, which highlights the entertainment value of a league where the average number of goals a game so far this season has been 2.8. This is consistent with the last three seasons, which marks an all-time high in the Premier League, and a significant increase on the historic average of 2.6 since 1992-3. Including the old First Division, the long-run historic average is fractionally under 3.0, though this is obviously boosted by high-scoring seasons in the early years before centre-backs and substitutes were invented. The lowest scoring season was 1970-1, with an average of 2.36 goals per game. Arsenal (them again) won the league with 71 goals in 42 matches, an average of only 1.69. It was the 25 clean sheets that ensured ultimate victory, with only 29 goals conceded in total. The average goals scored by Arsenal per game so far this season is 1.63, and we've kept 6 clean-sheets over 16 games (which is joint second best after Stoke on 8).

Of course, all of this hard data evaporates when you are confronted by another horrendous Gervinho miss, though to be fair to the loon, Podolski and Cazorla seem to be trying hard to top the Ivorian's efforts. There is nothing to be embarrassed about in this, let alone ashamed of. Every footballer occasionally slices the ball or kicks fresh air. Those who think that failure is shameful in all circumstances need to get a life. Arsenal's strikers just need to get some composure in front of goal.

Friday, 7 December 2012

The Road Not Taken

The real message of the budget is that the UK is now willingly embarked on a "lost decade", much as Ray Milland willingly embarked on a massive drunk in The Lost Weekend. The phrase was first used to describe Japan in the 1990s, when the economy grew by only 11.9% over 10 years. The UK's growth between 2008 and 2017 looks like it will be only 8.7%, and that assumes the persistently over-optimistic OBR have got their predictions for the next 5 years right. It would be easy to charge the Tories with incompetence, for having failed to meet their own targets for deficit reduction and growth, or even to accuse them of heartlessness, for using austerity as a cloak to further their dismantling of the welfare state, but I think there is a more depressing explanation for what they are doing. Ultimately, a budget reflects the government's assumptions about both the current condition of the economy and its desired future state. The latter looks ugly.

The changes to income tax continue the strategy marked out during this parliament of growing both the bottom tranche of the "tax free" and increasing the number paying the higher rate. The first of these increases the population whose right to have an opinion on fiscal policy is gradually undermined, while the second grows the constituency in favour of cutting the top rate of tax. Both measures erode tax morale. Together with the "strivers" rhetoric and the persistent pressure on benefits, the impression grows that not only are we not all in it together but that there is a deliberate intent to turn the nation into two antagonistic camps. The unnecessary vote on future benefits is less an attempt to get Labour to defend the "skivers" and more an attempt to neutralise their "one nation" pitch. Osborne's calculation is that privilege is best defended by those with very little against the threat of those with nothing, hence the iconic scrapping of the petrol duty rise. The climate can go hang if it delivers the white van vote.

The cut in the rate of corporation tax, together with the continuing failure to aggressively pursue tax avoiders (and acceptance of taxpayer discretion, a la Starbucks), indicates that the UK remains not merely "open for business" but open to multinationals seeking a low tax jurisdiction. In effect, the Tory strategy for tackling tax avoidance is to push rates so low that international businesses will willingly headquarter in the UK. The Laffer Curve nonsense, the idea that tax cuts are self-financing, shows no sign of going out of fashion on the right, despite the ample evidence that the only tax rate that will ultimately be acceptable to the rich is a flat rate of zero. Together with the refusal to countenance any form of property tax, this indicates that London is now in direct competition with Luxembourg.

The extra £5.5 billion of capital spending on roads, houses and schools is paltry, and largely funded by cuts to public spending elsewhere - i.e. this is not a net stimulus. The portion earmarked for housebuilding support will add only 50,000 new houses at a time when housing experts reckon we need 233,000 new homes a year. The infrastructure projects are heavily biased towards London and the South East, notably upgrades to the M25 and an extension of the Northern Line to Battersea to service the new yuppie flats to be built around the old Power Station. The upgrade of the A30 will probably benefit second home-owners in Devon and Cornwall more than the locals.

The insulation of the South East from the worst impacts of the lost decade will continue, leading to a return of the 80s-style contempt for the poor and the northern. Over the two years of the coalition government,  there has been no serious attempt to redress the regional imbalance or to make Finance less proud. If anything, the energy of the government and Bank of England has been focused on tenderly nursing Finance's wounds through cheap money and QE. The occasional photo-op in a high-end manufacturing clean-room simply reinforces the point that we cannot create millions of jobs servicing Formula 1 racing cars. The Tories have long since decided that the UK's future lies in accelerating the existing trends: making London the low-tax "offshore gateway" of Europe, and transforming the rest of the country into a low-wage reservoir of labour, able to compete on price with Slovakia and Korea.

In truth, this has been a long time coming. In both the 80s and the 90s there were windows of opportunity when the economy could have been rebalanced and the industrial base transformed. On both occasions we opted for the easier road, the get-rich-quick schemes of property speculation and financial services. This was in keeping with the chronic under-investment in industry that held the UK back in the 60s and 70s. Conservative administrations have repeatedly done what suited The City, which usually damaged industry's long-term prospects, while Labour administrations have repeatedly attempted amelioration, through nationalisation and tax-and-spend, without sufficiently radical structural reform. Osborne's claim that we are on a "hard road" is wrong. Once more we have taken the easier path. Property prices in London will be maintained, Finance will be coddled back to health, and while many will suffer as austerity continues, enough will not.

Wednesday, 5 December 2012

Another Baby on Benefits

Simon Jenkins, the living embodiment of Whiggery, came up with a couple of corkers today in his reception of the news of the royal sprog-to-be. None of your blather about morning sickness or how Kate has found her role. Instead, Jenkins' gives his Olympian approval to the hereditary principle: "Inheritance is a security against monarchical power, since its indefensibility ensures the powerlessness of the head of state. By being random in age, merit or inclination, it detaches the head of state from all claim to influence." You have to admire his chutzpah: the defence of monarchy is its indefensibility. "Despite the paranoia of the left, the monarch has no constitutional potency. The power-grasping Stuarts brought Britain to rebellion, civil war and chaos. The power-averse Hanoverians buried themselves in their cards and their mistresses. Parliamentary freedom flourished as a result." Of course, that there left are not in the least bit paranoid about the monarchy. What they are suspicious of is the way that politicians abuse crown prerogative in return for the Royals extracting a huge rent from the public exchequer.

The left really don't think Philip is secretly pulling the strings of government, or that Charles moonlights as a Telegraph leader writer. That sort of fantasy is found on the right, usually keeping company with paranoia about Freemasons and Jews. I personally credit the two old gits with no more "potency" (in Jenkins' revealing term) or intelligence than any other pub bore. As the recent revelations over Charles's letter-writing shows, their influence appears to be largely imaginary. Indeed, you get the sense they are cut from the same cloth as those fantasists that attribute real power to the Royal Family, not least because of their interest in UFOs and homoeopathy.

Jenkins' take on history is hilariously wrong, though it was still just about clinging on as popular orthodoxy when he was in school. Fortunately, the small matter of scholarship has subsequently revealed it to be a romantic fiction. As any fule now kno', the story of the 17th century is of the inexorable wresting of power away from the monarchy by Parliament, and away from aristocratic landowners by the new gentry. The Glorious Revolution did not restore the monarchy to its Tudor position. The Stuart plot to turn free-born Englishmen into papist, frenchified slaves was an ideological invention, despite the dim-witted willingness of the Crown to play its part in the revels. Similarly, Parliamentary freedom did not flourish as a result of those nice Hanoverians deciding to be hands-off. The Germans were hired by Parliament precisely because they were willing to accept a limited role, just as Good King Billy did before them.

One of the peculiarities of the British monarchy is that from such modest beginnings, in the 18th century, it failed to evolve into a bicycling monarchy in the style of the Dutch and Scandinavians. The explanation is that the monarchy was professionalised during the 19th century as the embodiment of British prestige and the ideological icon of empire. The family's use of the term "the firm" to refer to itself is not ironic. Jenkins bemoans the expansion of the ceremonial role beyond the monarch to the wider family: "But one error, made under PR advice back in the 1960s, was to elevate the "royal family" to significance, its members adorning ceremonial and public occasions, however trivial, and drawing on a civil list in consequence. This confused the empty concept of "being in line to the throne" with actual headship of state. It set apart a collection of individuals, who could not do proper jobs and often irritated the public by their behaviour, in a cocoon of costly protection." Seduced by his Whig history, Jenkins fails to understand that the bloating of the Civil List is what the game is all about. The sprog-to-be is just another mouth to feed.

Monday, 3 December 2012

Danny Alexander Taxes Patience

The Commons Public Accounts Committee is reported as suggesting that companies that avoid tax should be named and shamed. Danny Alexander has ruled this out on the grounds that it would breach taxpayer confidentiality. The PAC are long-standing critics of HMRC, and in particular the way that the lack of transparency over dispute settlements can mean both that certain companies are getting away with tax dodging and that HMRC are getting away with incompetence. As they said last year, in the wake of the Vodafone scandal: "We are particularly uneasy about the blanket confidentiality applied to cases raising governance concerns or where mistakes were made in reaching settlements, because we are unable to scrutinise what went wrong in these cases. Details of some of these cases only came to our attention because they appeared in the media. It is deplorable that we received more information from the media and from a whistleblower than from the Department itself".

Alexander's defence is only possible because taxpayer confidentiality is taken as read. Earlier this year, on the back of revelations about Bob Diamond's tax bill and questions about whether Tory ministers were personally benefiting from the cut in the top rate of income tax, there was some debate about the desirability of making everyone's tax returns public. The predictable backlash conflated this with an invasion of privacy, as if detailed bank statements were being posted online, while perhaps the most damning criticism was that this was the sort of thing they do in Scandinavia, so can safely be ignored by grown-ups.

Whether you agree with it or not, the point is that taxpayer confidentiality was always meant to protect the privacy of individuals. Alexander's use of it to defend the unscrupulous tax-planning of Starbucks and Amazon is part of a wider problem, the neoliberal tendency to demand that corporations should enjoy the rights of personhood (i.e. freedoms in the public sphere) but without the obligations of citizenship (e.g. multinationals by definition are not constrained by nationality). Tax has come to be seen as a contractual matter for large companies - something that they can freely negotiate with government beyond public scrutiny. The fact that HMRC have so internalised this attitude that they feel emboldened to defy a committee of the House of Commons is telling.

Comparing an individual's tax return with that of a company, and therefore the arguments for publication, is misleading. I'm personally not fussed about being able to see the tax returns of individuals, in part because the data would be pretty meaningless without a fuller context, which could not be provided short of a real invasion of privacy. That said, I think there would be a case for publishing a single number for total income tax and NICs, if only to allow us to spot the hypocrites who loudly criticise public expenditure as taxpayers while paying little or no direct tax themselves.

The issue with companies is less to do with how much Corporation Tax is paid, as there will be legitimate reasons for the quantum to vary (prior year losses, capital allowances etc), and you would expect HMRC to be tight on abuse in these areas, just as they are with VAT. What really matters is where revenue is generated and tax is paid. In other words, tax transparency is really an issue about multinationals who use transfer pricing and regulatory arbitrage. What we should do is insist that all company accounts provide a country breakdown of revenue, costs and tax paid. To be fair to the PAC, their review only referred to "naming and shaming" in the context of successful prosecutions for evasion (which is illegal, after all). It looks like Danny Alexander has conveniently decided that this presents a threat to taxpayer confidentiality more generally.

Saturday, 1 December 2012

The Mouse that didn't Roar

As expected, Leveson has produced a timid judgement. The hyper-ventilating about press freedom and the dismay at Cameron's apparent disregard for the victims have both diverted attention from the fundamental issue of ownership, which was conspicuous by its near absence in the voluminous report. The combination of an apparent issue of principle on which the press can "campaign" and the human interest of disappointed celebrities (including those who have had unsolicited celebrity thrust upon them, such as the Dowlers) is a classic example of the brew that newspapers serve up most days: confected outrage and faux-sympathy.

To be fair to Leveson, the circumscribed nature of the inquiry meant that drawing any damning conclusions about the relationship of the press with the political class and the police was going to be difficult. The deals struck between press barons and politicians are never written down or even informally articulated. They are "understandings", after all. No one will ever find an IOU for Thatcher's decision not to block Murdoch's takeover of The Times. Similarly, Jeremy Hunt no doubt sincerely believes he was being impartial in respect of the BSkyB bid, just as he sincerely believes that what is good for News International is ultimately good for Britain. Seeking evidence of a formal conspiracy was pointless when it was clear from the evidence (all those chummy texts) that mutual self-interest had already been internalised. Likewise, the inquiry was never going to uncover evidence of a conspiracy between the Met and the press, because there isn't one. What there is instead is a long-standing ecosystem of mutual back-scratching and payments for information, which isn't going to disappear any time soon. There is a market for information because there is a market for newspapers.

The pronouncements of the Tories, as mouthpieces for the press barons, have been hysterical and often nonsensical, notably Cameron's claim that "The issue of principle is that for the first time we would have crossed the rubicon of writing elements of press regulation into the law of the land". This comes immediately after the previous cobblers about a return to 1695, when press regulation was the law of the land. Crossing the Rubicon is meant to imply both defiance and irrevocability, though it is not clear who Cameron thinks would be defied (Murdoch, perhaps?), while 1695 showed that press regulation can easily be revoked. In reality, Leveson's proposal for the statutory basis of an independent press complaints body is little different to the arrangements that already exist for other media, notably television. It is not a radical prescription.

Another form of distraction has been the bleating about the impracticality of extending press regulation to the Internet. In other words, because some knobhead with 2 followers can tweet a libel, The Daily Mail should not be subject to ethical scrutiny by an independent body guaranteed by law. This ignores the obvious truth that what distinguishes the Internet from the printing press is less to do with technology and more to do with accessibility, i.e. low barriers to entry. But while this undermines the traditional cartel of print, it does not create a level playing field. An online version of a newspaper is an extension of that brand's power to reach a mass audience. The fact that they can't make any money out of it is irrelevant. In contrast, a blog or a tweet is just grafitti. What we need protection from is abuse of that corporate power to reach a mass audience, not the ranting of individuals.

The end result will be a fudge. The press know they must deliver a complaints and review body with sufficient independence and activism to satisfy public demand, regardless of whether it is underpinned by statute or not, while the politicians are not keen on challenging the press barons' liberty. What newspaper would give a fair hearing to a party that advocated limits on ownership or insisted on owners being UK-resident taxpayers? The best they can hope for is greater support for cross-media plurality - i.e. it will be a while before News International feels sufficiently emboldened to increase their slice of the cake again.