The departure of Scott Forstall from Apple, and the expansion of Jonathan Ive's interface design remit from hardware to software, is being interpreted as the defeat of skeuomorphism, which is the tendency to retain redundant functional features as ornamentation, something that is particularly prevalent in the area of the "human computer interface". Examples are making a contacts application look like a Rolodex, or having an animated "note" crumple itself when you delete it. The fundamental argument in favour of skeuomorphism is that it makes it easy for new users to get to grips with an application as they will be familiar with the functionality. The chief argument against is that this limits the ability of the application to take full advantage of new technology.
The boundary of the skeuomorphic is hazy as it blends into the semiotic, the use of signs and symbols that imply functionality rather than replicate it, such as the use of a wastebasket icon for the recycle bin on a computer desktop. This in turn blends into metaphors that both cue and govern our expectations, thus "desktop", "recycle", "page", "scroll" etc. A variant form of skeuomorphism is where the retained feature is still functional, rather than wholly ornamental, but it has become sub-optimal due to the change in the underlying technology and its use.
Perhaps the most significant example of this in recent years was the use of the 12-button keypad on digital phones. Digital switches and software dialers meant that a keypad was not strictly necessary in offices with PBXs. The continued use of keypads in the workplace reflected the limitations of home phones, and thus user familiarity. This functional preference migrated to mobile phones, but the growth in texting meant that the 12-button keypad became increasingly clumsy, hence the development of predictive texting and Blackberry's preference for a qwerty keypad. The arrival of the touch-screen spelled the end for the 12-button keypad on mobiles. It will linger on in home phones, but as these are gradually replaced by mobiles and broadband devices, it will become as consciously antique as rotary dialers.
As Antonio Gramsci said is a slightly different context: "The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear". I always thought the Blackberry "fat boy" keyboard was an unhealthy sign, and not just because of its popularity among corporate low-life.
There's a general air of "morbid symptoms" in technology at the moment, from Apple's comically-inept Maps application to criticism of the hybrid state of Windows 8, with the Windows 7 interface available under the cover (this echoes similar observations about Windows 95's retention of the MS-DOS core, which did it no harm). Perhaps the most interesting is the buzz around the Live Tiles feature of Windows Phone 8, which would allow dynamic information on a smartphone lock-screen, such as social media feeds, not a current capability of the iPhone. When patent infringement claims start appearing, it's usually a sign that you're onto a winner. The defenestrations at Apple may indicate a determination to accelerate a response to Windows 8 and it's multi-front assault via PCs, tablets and smartphones.
In retrospect, the revolutionary impact of the iPhone touchscreen was perhaps an example of lingering skeuomorphism, in that it radically changed the functionality but kept the paradigm of a passive interface that you prodded into action. Dynamic, autonomous data now seems like the obvious evolution for a two-way communication device.
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Wednesday, 31 October 2012
Monday, 29 October 2012
Small is beautiful
One of the key myths of neoliberalism is the all-round wonderfulness of the small business. It is held up as the engine of innovation and job-creation, the founders as wealth-creators and entrepreneurs. The reality is that most small businesses are doomed to failure due to a lack of innovation and basic business competence. Even if it survives the initial baby turtle rush to the sea, the odds are that a small business will stagnate under a surfeit of egomania, delusion and complacency, and little more than a quarter will actually produce any employment beyond the founders themselves. In part this unjustified praise is just misdirection away from the practices of large corporates, but it also satisfies a sincere yearning for a more organic and human-scale economy. There was a good example of this, and the way it has infected thinking within the Labour Party, by Jackie Ashley in today's Guardian. There is an element of "good cop, bad cop" about the article, as she contrasts an almost comically-Blairite paper from Progress with a more "left" analysis from the IPPR. What's depressing is that both assume that encouraging small businesses can be the key to social justice.
The Progress paper is a mish-mash that tries to tie pro-growth (what it terms "pro-jobs") policies together with public service reform (i.e. cuts) and better targeting of tax and benefits (i.e. more cuts). What caught my eye was its advocacy of reductions in employers' national insurance contributions - a long-standing demand of the CBI and their ilk. National Insurance is routinely criticised as a "tax on jobs", and particularly as a disincentive to small businesses that want to grow, though it is no more so than corporation tax or income tax. What makes it unpopular is that it is difficult to avoid. Profit can be artificially depressed or transferred to lower tax jurisdictions, while income can be disguised through share options or payments in kind. NI isn't perfect, notably because the upper limit means that a high-profit hedge fund can end up paying no more than a break-even small firm, but it does generally correlate with turnover. It is a tax on jobs in the narrow sense that it is an incentive to automation, however this benefit is dwarfed by the savings on salaries, so it has a weak role at best. NICs are also a small consideration when deciding whether to employ another worker. You'll only expand production if you're confident of generating turnover way ahead of the increment in the cost base, as you'll need sufficient slack to cover the risk of a downturn in demand. NICs are too small to influence this calculation. If they become an issue, then your investment is already too marginal and you should back off.
The paper's proposed reforms to tax and benefits focus on restoring the contributory principle in order to discriminate between the deserving and the undeserving (i.e. the workshy). This takes the form of channelling benefits to those who have worked or have a reasonable expectation of working again (e.g. "funding an expansion of childcare by holding down increases in benefits to families" and "increasing maternity and paternity leave for those who have worked prior to having children"). The reform of welfare is predicated on the usual demographic scare stories, which provide justification for the pro-jobs strategy, i.e. we must boost employment and expand tax revenues to pay for elderly care. This in turn justifies the trade-off of lower tax credits for improved childcare, as well as freezing child benefit and means-testing pensioner benefits.
If you take a step back, it should be obvious that these policy proposals are pure neoliberalism, despite some gestures towards wealth taxes to fund social care. They aim at using the state's resources to maximise labour productivity for the benefit of business. Thus state-funded childcare frees up women to enter the labour market and benefits are biased towards the "employable" unemployed. While the conservatives worry about a tiny platoon of the feckless poor breeding, social democrats seek to add whole divisions to the reserve army of labour. What the authors fail to acknowledge is that the increase of women in the workforce since the 70s has merely served to ameliorate stagnating male wages, and there is no reason to believe that this dynamic will change as the pay gap between the genders continues. If anything, the recent evidence on the increase in part-time roles and the number of working families dependent on benefits means that the proposed trade-off is a mirage.
The IPPR paper is better insofar as it proceeds from an analysis of the real world, rather than popular prejudice, specifically the relative ineffectiveness of a New Deal-style stimulus (dismissed as "vulgar Keynesianism"), the economically damaging practices of high finance, and the deleterious impact of inequality on growth and debt. It makes a key observation: "In all major economies in the world, the most important, wealth-creating innovations have come increasingly to be concentrated in advanced sectors of the economy and among wealthy elites". The problem is that it then veers off into the land of popular myth when it comes to solutions: "The key goal of a reinvented industrial policy should be to expand the scope and reach of the vanguard sectors. Its chief target should be the small and medium-sized businesses that in every major economy in the world represent the chief sources of jobs and output."
SMEs do not provide the chief source of jobs or output. In the UK there are 4.8 million businesses, but 3.6 million of these have zero employees - i.e. they are sole traders, partnerships, or personal services companies. These 3.6 million "firms" account for 3.9 million workers out of the total of 23.9 million private sector employees. There are 1 million micro-businesses (1-9 employees) accounting for 3.8 million workers; 177,950 small businesses (10-49 employees) accounting for 3.5 million workers; 29,750 medium-sized businesses (50-249 employees) accounting for 2.9 million workers; and 6,455 large businesses (250+) accounting for 9.8 million workers. In terms of turnover, large businesses account for £1.6 trillion, while the micro-businesses account for about a quarter of this at £416 billion. The total turnover for the private sector is £3.1 trillion, so large businesses account for slightly over 50% on a basis of 41% of employees. If you include medium-sized businesses, i.e. all firms with 50 or more employees, this accounts for 53% of all private sector workers and 66% of total turnover (see this BIS report from October 2012 for the stats).
In summary, excluding firms with zero employees, small businesses (i.e. 1-49 staff) account for 37% of employed private sector workers and 30% of turnover; medium-sized firms account for 14% of workers and 15% of turnover; and large businesses account for 49% of workers and 55% of turnover.
As the ratio of employee share to turnover share shows, larger companies are more efficient than smaller ones, which is what you would expect given economies of scale and market power. This is important to bear in mind, as a growth in small businesses at the expense of large ones (i.e. net employment remains the same) would result in a reduction in GDP. It should also be borne in mind that many of these firms are business-to-business, i.e. they are specialist providers in a supply-chain. In other words, many of the smaller firms are dependent on the eco-system created by a larger firm, so a growth in small firms independent of large ones is improbable. It is possible for export-focused SMEs to coat-tail on foreign growth, at a time when domestic large firms are not expanding, but these are obviously a minority (it is estimated that only about a quarter of all businesses, excluding zero-employee ones, do some exporting, though the number whose turnover is predominantly export-led will be much lower).
Significant domestic jobs growth is usually the result of primary growth in big domestic firms (e.g. opening a new plant), which is then amplified among smaller suppliers, particularly in the locale. As an example, a new plant or office will almost always result in new sandwich shops opening nearby. Micro-business startups have a much smaller impact, even in aggregate, because they tend to minimise their needs as a cost-saving strategy (take sarnies to work) and are more likely to rely on favours from friends and families (go round your mum's for lunch). Of course, some small firms today are the large businesses of tomorrow, but it's worth emphasising what an exceptional minority they are. Most small businesses go bust within 5 years, and many that survive are essentially lifestyle companies that have no appetite for major expansion or risk-taking. The evolution of the personal services company as a tax avoidance vehicle has been the single largest driver of the growth in the number of UK businesses since the 80s. In contrast, the number of medium-sized businesses has remained at roughly 30,000 for a decade, which means negligible net employment growth over the period among this cohort.
This belief in the magical properties of small firms leads Ashley to some wishful thinking: "The founders of socialism dreamed of an economy in which workers had a sense of ownership and creative involvement. We may be a long way away from the world of Robert Owen or the Chartists, but we are also moving towards an economy less dominated by corporate giants. There is now widespread agreement that an economy of niche companies, constantly innovating, is the way forward for smaller western countries. And it's in smaller companies of skilled people working together – architectural practices, computer start-ups, specialist retailers, high-end engineers – that you tend to find the greatest effective workplace democracy."
The idea that we are moving towards an economy "less dominated by corporate giants" is nonsense. Even in Germany, the paragon of an economy with a healthy, export-oriented SME sector, the Mittelstand (firms of up to 500 employees) may account for 70% of jobs but it produces only 50% of GDP. Globalisation has accentuated the ability of businesses to super-size, including large German firms like Volkswagen, Allianz, Daimler, Siemens etc. A local example of this is that 31% of private sector employees in London now work for an ultra-large firm (employing more than 2,500 in the UK). That's not even counting those working for global multinationals with a small UK footprint, such as the HQs of businesses that have offshored production. The combined figure for employees of large (250+) private sector and public sector organisations is 60% of all London workers (see this GLA report from 2008).
The giveaway in Ashley's panegyric is the namecheck of middle-class jobs, not to mention the buzzword bingo of "niche", "constantly innovating" and "skilled people". The use of the adjective "effective" in respect of workplace democracy might appear redundant at first sight, but I think it's meant to imply that this is not a plea for the more vulgar forms of democracy or even (heaven forfend) workers' control - i.e. the traditional trades union activity or general bolshiness found in larger firms. Workplace democracy is clearly something that only the middle classes can be trusted with. This is a vision of liberal orthodoxy in a pleasant working environment. Perhaps a Soho loft or a converted barn in Sussex. I bet they even let you wear jeans. The bottom line then is a continuation of Labour's policy during the Blair-Brown years: a benefits system geared to producing a compliant labour supply for an increasingly low-wage economy, with the consolation of permanent dressdown Fridays and social media for the employment elite.
The Progress paper is a mish-mash that tries to tie pro-growth (what it terms "pro-jobs") policies together with public service reform (i.e. cuts) and better targeting of tax and benefits (i.e. more cuts). What caught my eye was its advocacy of reductions in employers' national insurance contributions - a long-standing demand of the CBI and their ilk. National Insurance is routinely criticised as a "tax on jobs", and particularly as a disincentive to small businesses that want to grow, though it is no more so than corporation tax or income tax. What makes it unpopular is that it is difficult to avoid. Profit can be artificially depressed or transferred to lower tax jurisdictions, while income can be disguised through share options or payments in kind. NI isn't perfect, notably because the upper limit means that a high-profit hedge fund can end up paying no more than a break-even small firm, but it does generally correlate with turnover. It is a tax on jobs in the narrow sense that it is an incentive to automation, however this benefit is dwarfed by the savings on salaries, so it has a weak role at best. NICs are also a small consideration when deciding whether to employ another worker. You'll only expand production if you're confident of generating turnover way ahead of the increment in the cost base, as you'll need sufficient slack to cover the risk of a downturn in demand. NICs are too small to influence this calculation. If they become an issue, then your investment is already too marginal and you should back off.
The paper's proposed reforms to tax and benefits focus on restoring the contributory principle in order to discriminate between the deserving and the undeserving (i.e. the workshy). This takes the form of channelling benefits to those who have worked or have a reasonable expectation of working again (e.g. "funding an expansion of childcare by holding down increases in benefits to families" and "increasing maternity and paternity leave for those who have worked prior to having children"). The reform of welfare is predicated on the usual demographic scare stories, which provide justification for the pro-jobs strategy, i.e. we must boost employment and expand tax revenues to pay for elderly care. This in turn justifies the trade-off of lower tax credits for improved childcare, as well as freezing child benefit and means-testing pensioner benefits.
If you take a step back, it should be obvious that these policy proposals are pure neoliberalism, despite some gestures towards wealth taxes to fund social care. They aim at using the state's resources to maximise labour productivity for the benefit of business. Thus state-funded childcare frees up women to enter the labour market and benefits are biased towards the "employable" unemployed. While the conservatives worry about a tiny platoon of the feckless poor breeding, social democrats seek to add whole divisions to the reserve army of labour. What the authors fail to acknowledge is that the increase of women in the workforce since the 70s has merely served to ameliorate stagnating male wages, and there is no reason to believe that this dynamic will change as the pay gap between the genders continues. If anything, the recent evidence on the increase in part-time roles and the number of working families dependent on benefits means that the proposed trade-off is a mirage.
The IPPR paper is better insofar as it proceeds from an analysis of the real world, rather than popular prejudice, specifically the relative ineffectiveness of a New Deal-style stimulus (dismissed as "vulgar Keynesianism"), the economically damaging practices of high finance, and the deleterious impact of inequality on growth and debt. It makes a key observation: "In all major economies in the world, the most important, wealth-creating innovations have come increasingly to be concentrated in advanced sectors of the economy and among wealthy elites". The problem is that it then veers off into the land of popular myth when it comes to solutions: "The key goal of a reinvented industrial policy should be to expand the scope and reach of the vanguard sectors. Its chief target should be the small and medium-sized businesses that in every major economy in the world represent the chief sources of jobs and output."
SMEs do not provide the chief source of jobs or output. In the UK there are 4.8 million businesses, but 3.6 million of these have zero employees - i.e. they are sole traders, partnerships, or personal services companies. These 3.6 million "firms" account for 3.9 million workers out of the total of 23.9 million private sector employees. There are 1 million micro-businesses (1-9 employees) accounting for 3.8 million workers; 177,950 small businesses (10-49 employees) accounting for 3.5 million workers; 29,750 medium-sized businesses (50-249 employees) accounting for 2.9 million workers; and 6,455 large businesses (250+) accounting for 9.8 million workers. In terms of turnover, large businesses account for £1.6 trillion, while the micro-businesses account for about a quarter of this at £416 billion. The total turnover for the private sector is £3.1 trillion, so large businesses account for slightly over 50% on a basis of 41% of employees. If you include medium-sized businesses, i.e. all firms with 50 or more employees, this accounts for 53% of all private sector workers and 66% of total turnover (see this BIS report from October 2012 for the stats).
In summary, excluding firms with zero employees, small businesses (i.e. 1-49 staff) account for 37% of employed private sector workers and 30% of turnover; medium-sized firms account for 14% of workers and 15% of turnover; and large businesses account for 49% of workers and 55% of turnover.
As the ratio of employee share to turnover share shows, larger companies are more efficient than smaller ones, which is what you would expect given economies of scale and market power. This is important to bear in mind, as a growth in small businesses at the expense of large ones (i.e. net employment remains the same) would result in a reduction in GDP. It should also be borne in mind that many of these firms are business-to-business, i.e. they are specialist providers in a supply-chain. In other words, many of the smaller firms are dependent on the eco-system created by a larger firm, so a growth in small firms independent of large ones is improbable. It is possible for export-focused SMEs to coat-tail on foreign growth, at a time when domestic large firms are not expanding, but these are obviously a minority (it is estimated that only about a quarter of all businesses, excluding zero-employee ones, do some exporting, though the number whose turnover is predominantly export-led will be much lower).
Significant domestic jobs growth is usually the result of primary growth in big domestic firms (e.g. opening a new plant), which is then amplified among smaller suppliers, particularly in the locale. As an example, a new plant or office will almost always result in new sandwich shops opening nearby. Micro-business startups have a much smaller impact, even in aggregate, because they tend to minimise their needs as a cost-saving strategy (take sarnies to work) and are more likely to rely on favours from friends and families (go round your mum's for lunch). Of course, some small firms today are the large businesses of tomorrow, but it's worth emphasising what an exceptional minority they are. Most small businesses go bust within 5 years, and many that survive are essentially lifestyle companies that have no appetite for major expansion or risk-taking. The evolution of the personal services company as a tax avoidance vehicle has been the single largest driver of the growth in the number of UK businesses since the 80s. In contrast, the number of medium-sized businesses has remained at roughly 30,000 for a decade, which means negligible net employment growth over the period among this cohort.
This belief in the magical properties of small firms leads Ashley to some wishful thinking: "The founders of socialism dreamed of an economy in which workers had a sense of ownership and creative involvement. We may be a long way away from the world of Robert Owen or the Chartists, but we are also moving towards an economy less dominated by corporate giants. There is now widespread agreement that an economy of niche companies, constantly innovating, is the way forward for smaller western countries. And it's in smaller companies of skilled people working together – architectural practices, computer start-ups, specialist retailers, high-end engineers – that you tend to find the greatest effective workplace democracy."
The idea that we are moving towards an economy "less dominated by corporate giants" is nonsense. Even in Germany, the paragon of an economy with a healthy, export-oriented SME sector, the Mittelstand (firms of up to 500 employees) may account for 70% of jobs but it produces only 50% of GDP. Globalisation has accentuated the ability of businesses to super-size, including large German firms like Volkswagen, Allianz, Daimler, Siemens etc. A local example of this is that 31% of private sector employees in London now work for an ultra-large firm (employing more than 2,500 in the UK). That's not even counting those working for global multinationals with a small UK footprint, such as the HQs of businesses that have offshored production. The combined figure for employees of large (250+) private sector and public sector organisations is 60% of all London workers (see this GLA report from 2008).
The giveaway in Ashley's panegyric is the namecheck of middle-class jobs, not to mention the buzzword bingo of "niche", "constantly innovating" and "skilled people". The use of the adjective "effective" in respect of workplace democracy might appear redundant at first sight, but I think it's meant to imply that this is not a plea for the more vulgar forms of democracy or even (heaven forfend) workers' control - i.e. the traditional trades union activity or general bolshiness found in larger firms. Workplace democracy is clearly something that only the middle classes can be trusted with. This is a vision of liberal orthodoxy in a pleasant working environment. Perhaps a Soho loft or a converted barn in Sussex. I bet they even let you wear jeans. The bottom line then is a continuation of Labour's policy during the Blair-Brown years: a benefits system geared to producing a compliant labour supply for an increasingly low-wage economy, with the consolation of permanent dressdown Fridays and social media for the employment elite.
Wednesday, 24 October 2012
The Theatre of the Absurd
A rational, evidence-based criminal justice system would always prioritise rehabilitation. Over and above the moral imperative to "save" the individual from a self-destructive pattern of behaviour (most criminals are fuckups, not careerists), a pragmatic calculation is that you can most effectively cut crime by reducing re-offending rates, as the majority of crimes are committed by repeat criminals. However, the justice system tends towards the punitive because it remains at heart a pillory, a means by which we collectively identify and deplore bad behaviour, though "we" in this context inevitably biases towards the attitudes and interests of the powerful. This explains why a rather ineffectual protest by a hipster dilettante against the Boat Race will land you 6 months in jail, while an assault on Chris Kirkland by a convicted hooligan will only get you 16 weeks. Chris is not yet a national treasure, hence the lower tariff.
Back in the day of the death penalty, the public spectacle of punitive justice tended to focus on personal morality and the well-crafted dramas of human fallibility. Ruth Ellis died not simply because she was convicted of murder but because she was "that sort of woman". It's perhaps not entirely coincidental that the end of capital punishment (suspended in 1965 and abolished in 1969) occurred shortly after a shift in attitudes towards personal morality, marked by the Profumo affair in 1963.
Today, the punitive spectacle of the law is more likely to focus on group behaviour, despite the best efforts of the tabloids to demonise individuals (witness the current Savile-related headhunt). The draconian sentences handed down after the 2011 riots were an example of this desire to punish "the lot of them". The decision of an Italian court to sentence scientific experts to jail for failing to correctly forecast the L'Aquila earthquake is an extreme form of public retribution. Some of the scientists have drawn self-glorifying parallels with Galileo, but the real echo is of the Roman's sacred respect for auspices. Predicting the future well-being of the people is a serious business and has no place for the nuances of probability or uncertainty (a worrying thought for economists). Given the theatrical nature of Italian law (the real verdict and punishment is always decided after appeal), the auto da fe is likely to be downgraded to a slap on the wrist. Italian politicians will not want the scientific community, or experts generally, to go on strike.
It is in this theatrical light that we should view David Cameron's recent speech on punishment. The core of it is a commitment to rehabilitation, partly for the utilitarian reasons outlined above and partly to provide a priori justification for cuts in spending. Neoliberalism sees prisoners as a wasted asset that imposes a financial cost on the state. While the dream of making prisoners pay remains attractive, the reality is that keeping them out of prison, and part of the reserve army of labour, is the most efficient strategy. The problem, for a politician, is squaring this with the demand for retribution. The solution is to simultaneously claim that prisoners have a cushy life and demand that they are made to suffer, hence such tokenistic gestures as opposing votes for them.
Perhaps the most bizarre spectacle proposed by Cameron is the upgrading of tagging to the use of GPS, which will allow "offenders to be tracked by satellite 24-hours a day". This is the constant surveillance, leading to self-repression, of the Panopticon and Big Brother. It's also an update on the old TV detector van nonsense, in which no one appears to be able to distinguish between a transmitter and a receiver. TVs, as receivers, do not transmit a signal, so they cannot be detected. All the inspectors do is cross-check the database of licence addresses against houses, on the assumption that almost everyone has a TV. The old tagging technology is similarly a triumph of theatre over reality. The tag is a passive device that must be held against a transponder that is in turn activated via the offender's home phone line (yep, an analog modem is involved). Anecdotal evidence is that the monitoring is infrequent. You might only get one call in an evening, after which you could happily go down the pub. In addition, the transponder could easily be "accidentally" broken or unplugged. This might produce an alert, but that wouldn't be evidence of a breach and wouldn't justify sending out a squad car.
GPS is similar, insofar as satellites don't track anything (spy satellites take high-resolution photos, which is another kettle of fish). A GPS device can calculate it's own geo-location by polling the transmission of three satellites, assuming you're not underground or your line of sight isn't obscured by tall buildings. Or trees. Or hills. To enable monitoring, the device must then transmit a signal to a central receiver, which it would probably do via a cell network, which means it helps if you live in town. 24-hour monitoring will also require a pretty decent battery, which you the offender must remember to regularly recharge. In other words, we're talking about equipping offenders with something that has most of the capabilities of a smart phone (cushy) but doesn't do voice calls or text (punishment).
Back in the day of the death penalty, the public spectacle of punitive justice tended to focus on personal morality and the well-crafted dramas of human fallibility. Ruth Ellis died not simply because she was convicted of murder but because she was "that sort of woman". It's perhaps not entirely coincidental that the end of capital punishment (suspended in 1965 and abolished in 1969) occurred shortly after a shift in attitudes towards personal morality, marked by the Profumo affair in 1963.
Today, the punitive spectacle of the law is more likely to focus on group behaviour, despite the best efforts of the tabloids to demonise individuals (witness the current Savile-related headhunt). The draconian sentences handed down after the 2011 riots were an example of this desire to punish "the lot of them". The decision of an Italian court to sentence scientific experts to jail for failing to correctly forecast the L'Aquila earthquake is an extreme form of public retribution. Some of the scientists have drawn self-glorifying parallels with Galileo, but the real echo is of the Roman's sacred respect for auspices. Predicting the future well-being of the people is a serious business and has no place for the nuances of probability or uncertainty (a worrying thought for economists). Given the theatrical nature of Italian law (the real verdict and punishment is always decided after appeal), the auto da fe is likely to be downgraded to a slap on the wrist. Italian politicians will not want the scientific community, or experts generally, to go on strike.
It is in this theatrical light that we should view David Cameron's recent speech on punishment. The core of it is a commitment to rehabilitation, partly for the utilitarian reasons outlined above and partly to provide a priori justification for cuts in spending. Neoliberalism sees prisoners as a wasted asset that imposes a financial cost on the state. While the dream of making prisoners pay remains attractive, the reality is that keeping them out of prison, and part of the reserve army of labour, is the most efficient strategy. The problem, for a politician, is squaring this with the demand for retribution. The solution is to simultaneously claim that prisoners have a cushy life and demand that they are made to suffer, hence such tokenistic gestures as opposing votes for them.
Perhaps the most bizarre spectacle proposed by Cameron is the upgrading of tagging to the use of GPS, which will allow "offenders to be tracked by satellite 24-hours a day". This is the constant surveillance, leading to self-repression, of the Panopticon and Big Brother. It's also an update on the old TV detector van nonsense, in which no one appears to be able to distinguish between a transmitter and a receiver. TVs, as receivers, do not transmit a signal, so they cannot be detected. All the inspectors do is cross-check the database of licence addresses against houses, on the assumption that almost everyone has a TV. The old tagging technology is similarly a triumph of theatre over reality. The tag is a passive device that must be held against a transponder that is in turn activated via the offender's home phone line (yep, an analog modem is involved). Anecdotal evidence is that the monitoring is infrequent. You might only get one call in an evening, after which you could happily go down the pub. In addition, the transponder could easily be "accidentally" broken or unplugged. This might produce an alert, but that wouldn't be evidence of a breach and wouldn't justify sending out a squad car.
GPS is similar, insofar as satellites don't track anything (spy satellites take high-resolution photos, which is another kettle of fish). A GPS device can calculate it's own geo-location by polling the transmission of three satellites, assuming you're not underground or your line of sight isn't obscured by tall buildings. Or trees. Or hills. To enable monitoring, the device must then transmit a signal to a central receiver, which it would probably do via a cell network, which means it helps if you live in town. 24-hour monitoring will also require a pretty decent battery, which you the offender must remember to regularly recharge. In other words, we're talking about equipping offenders with something that has most of the capabilities of a smart phone (cushy) but doesn't do voice calls or text (punishment).
Monday, 22 October 2012
Has the countdown for tax cuts started?
Recent debate on the economy has centred on the fiscal multiplier and the IMF's estimate that austerity may be sucking more out of GDP than is saved in public spending. This has understandably led to a rash of "told you so" comments by the anti-austerian camp, however they should be cautious about the implications. Showing that austerity is self-defeating does not automatically leave us with a better policy response. Larry Elliott in the Guardian summarises the current options: a government-led fiscal stimulus, along the lines of the Roosevelt New Deal in America during the 1930s; or continued loose monetary policy, guaranteeing low interest rates and pumping liquidity into the banking sector through such mechanisms as quantitative easing and the funding for lending scheme.
The Tory government is flatly opposed to direct intervention and public investment, even though this would be the quickest route to getting unemployed youth into work. There are cogent arguments to be made that the New Deal was ameliorative at best, and that the recovery from depression was mainly due to war, but amelioration would still be a good thing both economically and socially. The return on investment, both in terms of infrastructure and human capital, might take at least a decade, but there would be a return. Unfortunately, this is beyond the horizon for any party calculus, which is why it probably isn't going to happen. It would also require a major volte-face, by all those hitherto committed to the neoliberal orthodoxy, to challenge the entrenched power of corporations in creaming off public funds. When Virgin, a voracious brand that has enjoyed recent success in using the law to impose on government, decides to challenge Birmingham Council for having the temerity to invest in their own broadband network, you know that an effective New Deal would require nothing short of the criminalisation of much of modern corporate behaviour. In practice, our political representatives are collectively so ineffectual that we can't even get multinationals to pay a proper rate of tax.
Cheap money will remain the default option for now, even though almost everyone accepts this is already suffering the law of diminishing returns. The casting about for additional monetary policies is bringing some strange creatures of the deep to the surface, including calls for the abolition of fractional reserve banking (the ability of banks to create credit ex nihilo), while a return to the gold standard has once more crept in from the loony fringe. In this company, a straightforward debt jubilee looks like the acme of responsibility.
If monetary policy runs out steam, and the real economy does not perk up beyond the fillip provided by the Olympics, then Milton Friedman's "helicopter drop" may be considered, i.e. additional money could be created by the government and introduced to the economy via consumers rather than banks. This could mean tax cuts, though for political reasons (the run-up to the 2015 election) these would probably be targeted at median-income "strivers" rather than top-rate payers, helping the increasing number who rely on housing benefits to make up for low wages and offsetting the effects of increases in the costs of utilities, food and fuel.
Just as the multiplier in respect of spending cuts may be greater than 1, so the government may be able to argue that the multiplier in respect of tax cuts is greater than 1 as well (much as they argued that the reduction in the top rate of tax would produce greater tax receipts in aggregate). This is actually dubious in the case of a benefit for the rich, as they tend to either save the money or spend it on (often imported) luxury goods, but there is strong evidence that money in the hands of the poorest does quickly and overwhelmingly spread into the local economy. Of course, if political bias resulted in the bulk of the benefit going to the Tories' middle class constituency, through a cut in the basic rate of income tax, then the desire to pay down personal debt or save the money in the expectation of future mortgage interest rate rises might erode the multiplier. That's why I suspect that either a cut in VAT or another increase in the tax-free allowance are more likely, though this time the Tories would presumably wrest the political credit for it from the LibDems.
A victory for Romney in the US might even embolden Osborne, giving him some grounds to believe that faced with sluggish growth the electorate may be open to the idea of tax cuts, however much that may appear to flout his own insistence that reducing public debt is paramount. The circle can be squared if the "undeserving" are further isolated as the drag holding back both debt-reduction and growth. The recent ideological out-rider by the Tory Britannia Unchained group, claiming that Britons simply don't work hard enough and that we're in a zero-sum race with developing nations, may be a foretaste of what is to come.
The Tory government is flatly opposed to direct intervention and public investment, even though this would be the quickest route to getting unemployed youth into work. There are cogent arguments to be made that the New Deal was ameliorative at best, and that the recovery from depression was mainly due to war, but amelioration would still be a good thing both economically and socially. The return on investment, both in terms of infrastructure and human capital, might take at least a decade, but there would be a return. Unfortunately, this is beyond the horizon for any party calculus, which is why it probably isn't going to happen. It would also require a major volte-face, by all those hitherto committed to the neoliberal orthodoxy, to challenge the entrenched power of corporations in creaming off public funds. When Virgin, a voracious brand that has enjoyed recent success in using the law to impose on government, decides to challenge Birmingham Council for having the temerity to invest in their own broadband network, you know that an effective New Deal would require nothing short of the criminalisation of much of modern corporate behaviour. In practice, our political representatives are collectively so ineffectual that we can't even get multinationals to pay a proper rate of tax.
Cheap money will remain the default option for now, even though almost everyone accepts this is already suffering the law of diminishing returns. The casting about for additional monetary policies is bringing some strange creatures of the deep to the surface, including calls for the abolition of fractional reserve banking (the ability of banks to create credit ex nihilo), while a return to the gold standard has once more crept in from the loony fringe. In this company, a straightforward debt jubilee looks like the acme of responsibility.
If monetary policy runs out steam, and the real economy does not perk up beyond the fillip provided by the Olympics, then Milton Friedman's "helicopter drop" may be considered, i.e. additional money could be created by the government and introduced to the economy via consumers rather than banks. This could mean tax cuts, though for political reasons (the run-up to the 2015 election) these would probably be targeted at median-income "strivers" rather than top-rate payers, helping the increasing number who rely on housing benefits to make up for low wages and offsetting the effects of increases in the costs of utilities, food and fuel.
Just as the multiplier in respect of spending cuts may be greater than 1, so the government may be able to argue that the multiplier in respect of tax cuts is greater than 1 as well (much as they argued that the reduction in the top rate of tax would produce greater tax receipts in aggregate). This is actually dubious in the case of a benefit for the rich, as they tend to either save the money or spend it on (often imported) luxury goods, but there is strong evidence that money in the hands of the poorest does quickly and overwhelmingly spread into the local economy. Of course, if political bias resulted in the bulk of the benefit going to the Tories' middle class constituency, through a cut in the basic rate of income tax, then the desire to pay down personal debt or save the money in the expectation of future mortgage interest rate rises might erode the multiplier. That's why I suspect that either a cut in VAT or another increase in the tax-free allowance are more likely, though this time the Tories would presumably wrest the political credit for it from the LibDems.
A victory for Romney in the US might even embolden Osborne, giving him some grounds to believe that faced with sluggish growth the electorate may be open to the idea of tax cuts, however much that may appear to flout his own insistence that reducing public debt is paramount. The circle can be squared if the "undeserving" are further isolated as the drag holding back both debt-reduction and growth. The recent ideological out-rider by the Tory Britannia Unchained group, claiming that Britons simply don't work hard enough and that we're in a zero-sum race with developing nations, may be a foretaste of what is to come.
Wednesday, 17 October 2012
Learning to live with failure
I was living in a top-floor flat on Camberwell Road when the Great Storm of 1987 hit town. Not being one for breakfast television or the radio, I didn't realise what had happened until I got to work at Marble Arch. The litter-strewn streets and trashed bus shelters didn't look very different, while the trees denuded of leaves were sufficiently autumnal not to tickle my fuzzy synapses. I may have had a hangover. The 25th anniversary of Michael Fish's failure to correctly forecast the storm has coincided with a couple of high-profile admissions of forecasting error, first by the IMF in respect of the impact of austerity (which they under-estimated) and then by the OBR in respect of economic growth (which they over-estimated).
It's obviously unfair on Fishy that he has always taken sole blame for this, given that the actual forecast was the work of others, but without it he wouldn't command the sort of after-dinner speaking fees he collects today. In truth, we have always known the weatherman was innocent, but we vicariously enjoyed his discomfort at having been proved wrong. Partly this is just schadenfreude at others making mistakes, but partly it reflects the collective distaste for hubris, the over-confidence of the predictor. Fish's real crime was the condescending dismissal of the "woman who rang the BBC" asking if it were true that a hurricane was on the way.
A prediction is not just a best-guess at a future outcome, like a football score or a horse racing result, but a reflection of a particular worldview. This is rationalised as "form", though it is often little more than wish-fulfillment or lazy prejudice. Perhaps the the finest example of this, which is also cynically accurate in the success of its predictions, is the principle known as "yesterday's weather". What this means is that you are statistically more likely to be right than wrong if you assume that tomorrow's weather will be the same as today's. This may not be as accurate as a meteorological forecast, but it beats seaweed or groundhogs hands down.
The failure of the IMF to predict the extent that fiscal austerity would impact on growth reflects two features of its history. Though originally formed after WW2 to provide short-term assistance for individual countries facing financial crises, it morphed during the 70s and 80s into a cheerleader for neoliberalism, insisting on privatisation, open capital markets and deregulation in return for its help. It became a lever for globalisation, which meant it developed an ideological aversion to public spending and government debt.
But the second, perhaps more profound, feature was that it focused largely on isolated crises in the developed world (famously the UK in the late 70s) and regional crises in the developing world (Mexico, South East Asia and Russia in the 90s). This meant it tended to underplay the systemic impact of the policies it advocated, notably the effect on trade and global growth. It is now blindingly obvious to all that if austerity is pursued simultaneously across the majority of EU nations, at a time when other parts of the global economy are struggling to achieve growth (the US and Japan) or seeing a decline in growth rates (China), then the result will be an aggregate fall in demand. No amount of public spending cuts will stimulate a private sector boom in such conditions.
Unlike the IMF, the newly-minted OBR does not have a long track record or any institutional memory to explain its forecast bias. It's brief is to provide an independent technical analysis of the government's fiscal programme, though it remains ultimately under political control. An early failure in its forecasting will not necessarily be fatal to its credibility, as we all recognise, like Michael Fish, that some forecasts are bound to be wrong, but there will be an erosion of trust if the bias of the forecasting is obviously supportive of the government's worldview and if that worldview is shown by events to be wilfully misguided. Unfortunately, as I've previously noted in respect of the OBR's forecasts for health costs, the results in some cases may not be in for years, by which time the damage of wrong-headed policy will be done.
The IMF admission has gone a little way to restore the credibility of that organisation, though a more cynical interpretation is that under Christine Lagarde it is simply reflecting the growing "austerity with a human face" approach of Francois Hollande. The OBR's credibility is a little damaged, though their culpability is limited. Their brief means they can only analyse the government's actual plans, so they cannot be drawn on the relative merits of any plan B. With the Tories making it clear that they aren't going to consider any alternative, the OBR's next report may simply be more cautious, i.e. pessimistic. For Michael Fish, it's all too late. Hauling Bill Giles in front of a truth and reconciliation committee will not alter that miscarriage of justice.
It's obviously unfair on Fishy that he has always taken sole blame for this, given that the actual forecast was the work of others, but without it he wouldn't command the sort of after-dinner speaking fees he collects today. In truth, we have always known the weatherman was innocent, but we vicariously enjoyed his discomfort at having been proved wrong. Partly this is just schadenfreude at others making mistakes, but partly it reflects the collective distaste for hubris, the over-confidence of the predictor. Fish's real crime was the condescending dismissal of the "woman who rang the BBC" asking if it were true that a hurricane was on the way.
A prediction is not just a best-guess at a future outcome, like a football score or a horse racing result, but a reflection of a particular worldview. This is rationalised as "form", though it is often little more than wish-fulfillment or lazy prejudice. Perhaps the the finest example of this, which is also cynically accurate in the success of its predictions, is the principle known as "yesterday's weather". What this means is that you are statistically more likely to be right than wrong if you assume that tomorrow's weather will be the same as today's. This may not be as accurate as a meteorological forecast, but it beats seaweed or groundhogs hands down.
The failure of the IMF to predict the extent that fiscal austerity would impact on growth reflects two features of its history. Though originally formed after WW2 to provide short-term assistance for individual countries facing financial crises, it morphed during the 70s and 80s into a cheerleader for neoliberalism, insisting on privatisation, open capital markets and deregulation in return for its help. It became a lever for globalisation, which meant it developed an ideological aversion to public spending and government debt.
But the second, perhaps more profound, feature was that it focused largely on isolated crises in the developed world (famously the UK in the late 70s) and regional crises in the developing world (Mexico, South East Asia and Russia in the 90s). This meant it tended to underplay the systemic impact of the policies it advocated, notably the effect on trade and global growth. It is now blindingly obvious to all that if austerity is pursued simultaneously across the majority of EU nations, at a time when other parts of the global economy are struggling to achieve growth (the US and Japan) or seeing a decline in growth rates (China), then the result will be an aggregate fall in demand. No amount of public spending cuts will stimulate a private sector boom in such conditions.
Unlike the IMF, the newly-minted OBR does not have a long track record or any institutional memory to explain its forecast bias. It's brief is to provide an independent technical analysis of the government's fiscal programme, though it remains ultimately under political control. An early failure in its forecasting will not necessarily be fatal to its credibility, as we all recognise, like Michael Fish, that some forecasts are bound to be wrong, but there will be an erosion of trust if the bias of the forecasting is obviously supportive of the government's worldview and if that worldview is shown by events to be wilfully misguided. Unfortunately, as I've previously noted in respect of the OBR's forecasts for health costs, the results in some cases may not be in for years, by which time the damage of wrong-headed policy will be done.
The IMF admission has gone a little way to restore the credibility of that organisation, though a more cynical interpretation is that under Christine Lagarde it is simply reflecting the growing "austerity with a human face" approach of Francois Hollande. The OBR's credibility is a little damaged, though their culpability is limited. Their brief means they can only analyse the government's actual plans, so they cannot be drawn on the relative merits of any plan B. With the Tories making it clear that they aren't going to consider any alternative, the OBR's next report may simply be more cautious, i.e. pessimistic. For Michael Fish, it's all too late. Hauling Bill Giles in front of a truth and reconciliation committee will not alter that miscarriage of justice.
Monday, 15 October 2012
Drugs, Guns and Abusive Sex
Watching Ridley Scott's American Gangster recently, I was struck by the moral compartmentalisation practiced by the two leading characters. Denzel Washington's crime boss advocates a black consciousness as he immiserates his own community through heroin and kills fellow black rivals, while Russell Crowe's detective is sexually incontinent while standing up for integrity against corrupt cops and shooting the crap out of drug dealers. This is not a complaint about inconsistency. The film is only tenuously based on reality and functions best as a polished riff on gangster and cop tropes. What struck me was the assumption that there are different and isolated scales of values for drugs, guns and sex. The thought resurfaced this week.
The slow move towards the decriminalisation of drugs has received another nudge with today's report on a 6 year study by various eminent worthies from the fields of science, policing and academia. They conclude that current policy is ineffective and inefficient, and that drugs should be treated primarily as a public health matter. Despite the emphasis on the monetary waste entailed in the unwinnable "war on drugs", estimated at £3 billion a year, this is unlikely to stimulate enthusiasm in a government whose Home Secretary subscribes to the belief that cannabis is a "gateway drug", a claim that has been assiduously promoted by the Daily Mail in recent years. Public spending on the war on drugs, like the war in Afghanistan, is currently off-limits, which means the burden of austerity must fall on the feckless who are even now exchanging their benefit money for skunk.
The whole "one thing leads to another" idea is cobblers, of course. You'll not hear Theresa May advocating the banning of shotguns on the grounds that they are a gateway to AK-47s or RPGs, even though a rigorously conducted empirical study would no doubt show that current gun owners are more likely to buy additional and more powerful guns than non-owners. Even within the sphere of drugs, the gateway logic is simultaneously rejected. Surely cigarettes are the gateway to cannabis? How many impressionable teens would even consider toking a spliff if they hadn't already learnt how to smoke? If we really want to crack down hard on the wacky-baccy, shouldn't we just ban rolling tobacco and cigarette papers altogether?
The biggest drug, by level of use and the cost to society, is alcohol, but the idea that a liking for beer will inevitably and inexorably lead to a liking for first wine and then spirits is patently absurd. I like both beer and wine but I've never developed a taste for spirits. I have bottles of whiskey and rum in the house, received as gifts over the years, that already have the dusty look of heirlooms. My appreciation of real ale has never led to a taste for strong lager, and my wine drinking has not gradually hardened into an exclusive focus on port. Maybe I'm doing it wrong. How do you freebase a pint of bitter?
The political difficulty in advocating drug decriminalisation in the UK is mirrored by the similar sensitivity of the issue of gun-control in the US, which has been notable by its absence from the presidential election debates. You might have thought my use of the gun analogy earlier was stretching a point, but there are parallels. In the UK, guns are almost illegal outside of controlled environments such as gun clubs, grouse moors and one-off affairs like the impending badger apocalypse. Some farmers still keep a shotgun for wild pests and small game, as much as a homage to a disappearing lifestyle as a practical tool, but personal weaponry is not a feature of modern agri-business. Though this is very different to the prevalence of guns in the US, both countries have in effect a framework based on selective decriminalisation, it's just that the US is a lot more liberal in its attitudes, i.e. in the literal sense of imposing fewer constraints.
One of the classic arguments in favour of gun ownership is the idea that "guns don't kill people, people kill people". This serves to distract from the systemic and focus on moral agency. It's the fault of individual people, and because these people exist, but their identity is unpredictable, everyone else should have the right to defend themselves. This is logically incoherent because if we ensured that everyone had a gun, thus maximising self-protection, we would not be surprised to see the number of gun-related deaths increase, despite there being no change in aggregate morality.
The pro-gun lobby gets round this by making gun ownership a mark of virtue, hence the appeals to patriotism and the constitution. Good people should be allowed access to guns, bad people should be denied access. Even the anti-gun lobby accepts this tactically, advocating tighter background checks for gun buyers. The irony is that if self-protection really were the objective, then criminals should be allowed easier access, as they are more vulnerable to attack by their peers than the average citizen. Of course, the reason they don't get preferential treatment is the fear that they will attack non-criminals, even though such "stranger crime" is statistically rare. This is where the systemic reality is revealed, i.e. we make judgements about particular classes of society based on prejudice as much as fact.
With drugs, the gradual move towards decriminalisation is the result of a similar calculation. The public health tack is recognition that drugs kill people, or more accurately, that badly-cut or overly pure drugs lead to avoidable deaths and that drug users are not moral cripples who will their own destruction. This increased empathy arises because drugs have become more middle class and simultaneously less popular. The classic gateway to cannabis use is further education, with magic mushrooms also on the menu; clubbing has gradually raised its price point, with ecstasy the crossover hit; cocaine has long been the young professional's drug of choice, though its popularity among bankers has tarnished the brand; while the use of "heavy shit" like heroin and crack is in slow decline. The drop in overall popularity is a little misleading as it includes leakage out of the illegal category. The drug choice of the poor has shifted to the legal highs of cheap booze and the lows of prescription pills. Perversely, the demand for a minimum price for alcohol may reverse this trend, which highlights the class basis of establishment concerns. What offends is the sight of plebeian indulgence.
One the features of the currently developing Savile affair is the sudden groundswell of long-suppressed complaint, not just over a specific man's abuses, but over institutional sexism and bullying more generally. Many women who worked in the media are aghast that they tolerated such behaviour for so long, while men who connived in the abusive atmosphere sheepishly duck for cover. You get the sense that this may be a watershed moment. The decriminalisation of drugs is likely to require something similar: a moment when we look nonplussed at each other and ask "why didn't we do this years ago?"
The slow move towards the decriminalisation of drugs has received another nudge with today's report on a 6 year study by various eminent worthies from the fields of science, policing and academia. They conclude that current policy is ineffective and inefficient, and that drugs should be treated primarily as a public health matter. Despite the emphasis on the monetary waste entailed in the unwinnable "war on drugs", estimated at £3 billion a year, this is unlikely to stimulate enthusiasm in a government whose Home Secretary subscribes to the belief that cannabis is a "gateway drug", a claim that has been assiduously promoted by the Daily Mail in recent years. Public spending on the war on drugs, like the war in Afghanistan, is currently off-limits, which means the burden of austerity must fall on the feckless who are even now exchanging their benefit money for skunk.
The whole "one thing leads to another" idea is cobblers, of course. You'll not hear Theresa May advocating the banning of shotguns on the grounds that they are a gateway to AK-47s or RPGs, even though a rigorously conducted empirical study would no doubt show that current gun owners are more likely to buy additional and more powerful guns than non-owners. Even within the sphere of drugs, the gateway logic is simultaneously rejected. Surely cigarettes are the gateway to cannabis? How many impressionable teens would even consider toking a spliff if they hadn't already learnt how to smoke? If we really want to crack down hard on the wacky-baccy, shouldn't we just ban rolling tobacco and cigarette papers altogether?
The biggest drug, by level of use and the cost to society, is alcohol, but the idea that a liking for beer will inevitably and inexorably lead to a liking for first wine and then spirits is patently absurd. I like both beer and wine but I've never developed a taste for spirits. I have bottles of whiskey and rum in the house, received as gifts over the years, that already have the dusty look of heirlooms. My appreciation of real ale has never led to a taste for strong lager, and my wine drinking has not gradually hardened into an exclusive focus on port. Maybe I'm doing it wrong. How do you freebase a pint of bitter?
The political difficulty in advocating drug decriminalisation in the UK is mirrored by the similar sensitivity of the issue of gun-control in the US, which has been notable by its absence from the presidential election debates. You might have thought my use of the gun analogy earlier was stretching a point, but there are parallels. In the UK, guns are almost illegal outside of controlled environments such as gun clubs, grouse moors and one-off affairs like the impending badger apocalypse. Some farmers still keep a shotgun for wild pests and small game, as much as a homage to a disappearing lifestyle as a practical tool, but personal weaponry is not a feature of modern agri-business. Though this is very different to the prevalence of guns in the US, both countries have in effect a framework based on selective decriminalisation, it's just that the US is a lot more liberal in its attitudes, i.e. in the literal sense of imposing fewer constraints.
One of the classic arguments in favour of gun ownership is the idea that "guns don't kill people, people kill people". This serves to distract from the systemic and focus on moral agency. It's the fault of individual people, and because these people exist, but their identity is unpredictable, everyone else should have the right to defend themselves. This is logically incoherent because if we ensured that everyone had a gun, thus maximising self-protection, we would not be surprised to see the number of gun-related deaths increase, despite there being no change in aggregate morality.
The pro-gun lobby gets round this by making gun ownership a mark of virtue, hence the appeals to patriotism and the constitution. Good people should be allowed access to guns, bad people should be denied access. Even the anti-gun lobby accepts this tactically, advocating tighter background checks for gun buyers. The irony is that if self-protection really were the objective, then criminals should be allowed easier access, as they are more vulnerable to attack by their peers than the average citizen. Of course, the reason they don't get preferential treatment is the fear that they will attack non-criminals, even though such "stranger crime" is statistically rare. This is where the systemic reality is revealed, i.e. we make judgements about particular classes of society based on prejudice as much as fact.
With drugs, the gradual move towards decriminalisation is the result of a similar calculation. The public health tack is recognition that drugs kill people, or more accurately, that badly-cut or overly pure drugs lead to avoidable deaths and that drug users are not moral cripples who will their own destruction. This increased empathy arises because drugs have become more middle class and simultaneously less popular. The classic gateway to cannabis use is further education, with magic mushrooms also on the menu; clubbing has gradually raised its price point, with ecstasy the crossover hit; cocaine has long been the young professional's drug of choice, though its popularity among bankers has tarnished the brand; while the use of "heavy shit" like heroin and crack is in slow decline. The drop in overall popularity is a little misleading as it includes leakage out of the illegal category. The drug choice of the poor has shifted to the legal highs of cheap booze and the lows of prescription pills. Perversely, the demand for a minimum price for alcohol may reverse this trend, which highlights the class basis of establishment concerns. What offends is the sight of plebeian indulgence.
One the features of the currently developing Savile affair is the sudden groundswell of long-suppressed complaint, not just over a specific man's abuses, but over institutional sexism and bullying more generally. Many women who worked in the media are aghast that they tolerated such behaviour for so long, while men who connived in the abusive atmosphere sheepishly duck for cover. You get the sense that this may be a watershed moment. The decriminalisation of drugs is likely to require something similar: a moment when we look nonplussed at each other and ask "why didn't we do this years ago?"
Tuesday, 9 October 2012
The Cult of Boris
When a political party starts to lose it sense of common purpose, attention shifts to sectional interests and various social policy hobby-horses, plus the cult of personality is indulged. I think we can see this happening with the Conservative party today. From the 1970s onwards, the party remodelled itself along neoliberal lines as the champion of enterprise against corporatism. "Choice" may have been the ideological lodestone, underpinning council house sales, utility privatisation and the bias towards deregulation, but the sub-text was always that Britain Plc would flourish once government stepped back and the private sector was allowed the whip-hand.
In the event, the first Thatcher administration led to a 30% reduction in productive capacity through the creative destruction of monetarism, and it was only the strategic errors of General Galtieri (and the SDP Gang of Four) that allowed the Tories to stay in power. The Lawson boom of the late 80s saw output increase, but from the perspective of today we can see that this was over-dependent on burgeoning financial services and North Sea oil exports, with too much capital being diverted to property instead of industry. By the time of the 1992 election victory under Major, growth had been marginally better than other European nations but public expenditure and tax revenues had barely changed since 1979 - i.e. spending cuts were offset by higher unemployment costs, and income tax cuts were offset by VAT rises. The "tax bombshell" charge against Labour took some chutzpah.
From the late 80s, the Tories were increasingly diverted by sectional interests, notably on Europe, and mad schemes, notably the Poll Tax. The cult of personality was already over-ripe when Heseltine did a von Stauffenberg over Westland in 1986. If John Major was the antidote to that, he was also fortunate in fighting the 1992 election on the back of another successful conflict (the First Gulf War) and before Black Wednesday and the ERM debacle showed up the party's economic incompetence. Major's "back to basics" initiative was both ephemeral and quickly undermined by sleaze, while Europe became a festering sore. Though leaving the ERM helped the economy, the coming Blair/Brown boom owed as much to the global spurt in productivity brought about by new technology, the first waves of globalisation, and the opening up of trade following the collapse of the Soviet system and Deng Xiaoping's reforms in China.
The Conservative Party's return to power in 2010 owed everything to the premise that they could manage the economy better. You didn't have to believe that the fiscal deficit was the result of Labour profligacy, rather than bailing out the banks, to think that the Tories might make a better fist of stimulating growth through enterprise. However, what has been obvious over the last two years is their timidity and complete lack of imagination when it comes both to stimulus and expenditure cuts. I'm not advocating that they should be cutting what they are, or cutting more, but the criticism from the right that it's happening too slowly is not without foundation. This is a long drawn out process of strangulation. The charge that Osborne is on work experience is funny because it rings true: blaming the Eurozone crisis for extending the deficit target is like claiming the dog ate your homework. In contrast, demonising families on benefits for having an extra child is just cowardly. It won't save much, it further frays social cohesion, and it sounds hypocritical to penalise childbirth and simultaneously advocate making abortion more difficult. A brave neoliberal would encourage abortion: you keep more young women in the labour market, and you lessen the eventual burden on the state as late abortions tend to involve foetuses with abnormalities or incapable mothers. The fact that the Tories aren't pushing that line shows the degree to which they are once more in thrall to sectional interests such as the anti-abortion lobby.
The best George Osborne was able to manage in the way of stimulus this week is a capital gains tax avoidance scheme. This is dressed up for public consumption as the bizarre hybrid of "owner-employee", with shares in exchange for surrendered employment rights (nothing makes you feel more like an owner than knowing you could be sacked at the drop of a hat). It is also being spun, for the feral right, as a makeover of Adrian Beecroft's bonkers plan to trash employment legislation across the board. Again, this will affect a tiny number of people. The average worker will hear no more about it, while private equity firms will be working out how they can organise shell businesses to take maximum advantage. Meanwhile Michael Gove and Eric Pickles indulge in union-bashing, Chris Grayling advocates rights for vigilantes, and David Cameron tries to put the European ferret back in its sack. It is at this point that the cult of personality rears its hirsute head in the form of Boris Johnson, who pledges loyalty on everything bar an extra runway at Heathrow, and perhaps the top rate of tax, and who thinks the government should do more for well-off families, and ought to bash the unions even more vigorously. That's how loyalty works: united they stand.
Johnson (I refuse to get chummy and call him Boris) has long modelled himself on that other great opportunist, Winston Churchill. In recent years, this has approached the level of a tribute act. Consider the self-aggrandising journalism and cavalier attitude to the truth (e.g. Hillsborough), the media-whore compulsions (Johnson coat-tailing drug busts is just the modern version of Churchill turning up at the siege of Sidney Street), the self-indulgent oratory and schoolboy wit (which usually serves to distract from his policy incoherence), the close relations with newspaper owners (from Beaverbrook to Murdoch), the economic pliability (Johnson is the City’s man, as Churchill was – disastrously – over the gold standard) etc.
Churchill's period "in the wilderness" in the 1930s is retrospectively cast as public service in the form of warnings about the rise of Nazism and the need for rearmament, but initially he was louder in his denunciations of Indian independence, when not praising Mussolini as a bulwark against communism. For Johnson, the London mayoralty has fulfilled much the same function. The job, essentially that of a combined transport and police commissioner, is clearly of little interest to him. The real value is the media platform it provides, much like that which Beaverbrook and Rothermere gave Churchill, which includes claiming credit for the ideas of others (the bike scheme, the Olympics) and indulging in daily photo opportunities. Not being Vladimir Putin, he is happy to act the buffoon and dangle from a zip-wire, rather than wrestle a drugged tiger. There's no such thing as bad publicity.
Johnson's flagship cause, the grandiose and irresponsible scheme for an airport in the Thames Estuary, is just a modern-day Dardanelles campaign, though hopefully without that unfortunate business at Gallipoli. As has been recently confirmed, the additional infrastructure costs would be enormous, which means the project would only be viable if Heathrow was closed down, crippling the economy of West London and much of the Thames Valley. Johnson doesn't give a shit because he knows the scheme won't, to coin a phrase, get off the ground. He has achieved his goal, which was to get it branded as "Boris Island" and be acclaimed as the author of a plan that has been on (and failed to get off) the drawing board since the 1940s.
As he prepares his inevitable bid for leadership of the Tory party, Johnson is now keen to position himself marginally to the right of Cameron and press a few hot buttons among the faithful. Having a pop at the unions has clear echoes of Churchill’s belligerence in relation to the Tonypandy riots and later the General Strike. The irony is that Churchill advanced the cause of trade unionism with his support for the Trade Disputes Act 1906, and later through his support for war socialism. He was also notoriously amenable to meeting union demands in his final stint as PM in 1951-55, just as London's mayor was happy to buy off the RMT for the Olympics. Like all opportunists, Johnson is nothing if not pragmatic. He believes in a flexible labour market, particularly for one job.
In the event, the first Thatcher administration led to a 30% reduction in productive capacity through the creative destruction of monetarism, and it was only the strategic errors of General Galtieri (and the SDP Gang of Four) that allowed the Tories to stay in power. The Lawson boom of the late 80s saw output increase, but from the perspective of today we can see that this was over-dependent on burgeoning financial services and North Sea oil exports, with too much capital being diverted to property instead of industry. By the time of the 1992 election victory under Major, growth had been marginally better than other European nations but public expenditure and tax revenues had barely changed since 1979 - i.e. spending cuts were offset by higher unemployment costs, and income tax cuts were offset by VAT rises. The "tax bombshell" charge against Labour took some chutzpah.
From the late 80s, the Tories were increasingly diverted by sectional interests, notably on Europe, and mad schemes, notably the Poll Tax. The cult of personality was already over-ripe when Heseltine did a von Stauffenberg over Westland in 1986. If John Major was the antidote to that, he was also fortunate in fighting the 1992 election on the back of another successful conflict (the First Gulf War) and before Black Wednesday and the ERM debacle showed up the party's economic incompetence. Major's "back to basics" initiative was both ephemeral and quickly undermined by sleaze, while Europe became a festering sore. Though leaving the ERM helped the economy, the coming Blair/Brown boom owed as much to the global spurt in productivity brought about by new technology, the first waves of globalisation, and the opening up of trade following the collapse of the Soviet system and Deng Xiaoping's reforms in China.
The Conservative Party's return to power in 2010 owed everything to the premise that they could manage the economy better. You didn't have to believe that the fiscal deficit was the result of Labour profligacy, rather than bailing out the banks, to think that the Tories might make a better fist of stimulating growth through enterprise. However, what has been obvious over the last two years is their timidity and complete lack of imagination when it comes both to stimulus and expenditure cuts. I'm not advocating that they should be cutting what they are, or cutting more, but the criticism from the right that it's happening too slowly is not without foundation. This is a long drawn out process of strangulation. The charge that Osborne is on work experience is funny because it rings true: blaming the Eurozone crisis for extending the deficit target is like claiming the dog ate your homework. In contrast, demonising families on benefits for having an extra child is just cowardly. It won't save much, it further frays social cohesion, and it sounds hypocritical to penalise childbirth and simultaneously advocate making abortion more difficult. A brave neoliberal would encourage abortion: you keep more young women in the labour market, and you lessen the eventual burden on the state as late abortions tend to involve foetuses with abnormalities or incapable mothers. The fact that the Tories aren't pushing that line shows the degree to which they are once more in thrall to sectional interests such as the anti-abortion lobby.
The best George Osborne was able to manage in the way of stimulus this week is a capital gains tax avoidance scheme. This is dressed up for public consumption as the bizarre hybrid of "owner-employee", with shares in exchange for surrendered employment rights (nothing makes you feel more like an owner than knowing you could be sacked at the drop of a hat). It is also being spun, for the feral right, as a makeover of Adrian Beecroft's bonkers plan to trash employment legislation across the board. Again, this will affect a tiny number of people. The average worker will hear no more about it, while private equity firms will be working out how they can organise shell businesses to take maximum advantage. Meanwhile Michael Gove and Eric Pickles indulge in union-bashing, Chris Grayling advocates rights for vigilantes, and David Cameron tries to put the European ferret back in its sack. It is at this point that the cult of personality rears its hirsute head in the form of Boris Johnson, who pledges loyalty on everything bar an extra runway at Heathrow, and perhaps the top rate of tax, and who thinks the government should do more for well-off families, and ought to bash the unions even more vigorously. That's how loyalty works: united they stand.
Johnson (I refuse to get chummy and call him Boris) has long modelled himself on that other great opportunist, Winston Churchill. In recent years, this has approached the level of a tribute act. Consider the self-aggrandising journalism and cavalier attitude to the truth (e.g. Hillsborough), the media-whore compulsions (Johnson coat-tailing drug busts is just the modern version of Churchill turning up at the siege of Sidney Street), the self-indulgent oratory and schoolboy wit (which usually serves to distract from his policy incoherence), the close relations with newspaper owners (from Beaverbrook to Murdoch), the economic pliability (Johnson is the City’s man, as Churchill was – disastrously – over the gold standard) etc.
Churchill's period "in the wilderness" in the 1930s is retrospectively cast as public service in the form of warnings about the rise of Nazism and the need for rearmament, but initially he was louder in his denunciations of Indian independence, when not praising Mussolini as a bulwark against communism. For Johnson, the London mayoralty has fulfilled much the same function. The job, essentially that of a combined transport and police commissioner, is clearly of little interest to him. The real value is the media platform it provides, much like that which Beaverbrook and Rothermere gave Churchill, which includes claiming credit for the ideas of others (the bike scheme, the Olympics) and indulging in daily photo opportunities. Not being Vladimir Putin, he is happy to act the buffoon and dangle from a zip-wire, rather than wrestle a drugged tiger. There's no such thing as bad publicity.
Johnson's flagship cause, the grandiose and irresponsible scheme for an airport in the Thames Estuary, is just a modern-day Dardanelles campaign, though hopefully without that unfortunate business at Gallipoli. As has been recently confirmed, the additional infrastructure costs would be enormous, which means the project would only be viable if Heathrow was closed down, crippling the economy of West London and much of the Thames Valley. Johnson doesn't give a shit because he knows the scheme won't, to coin a phrase, get off the ground. He has achieved his goal, which was to get it branded as "Boris Island" and be acclaimed as the author of a plan that has been on (and failed to get off) the drawing board since the 1940s.
As he prepares his inevitable bid for leadership of the Tory party, Johnson is now keen to position himself marginally to the right of Cameron and press a few hot buttons among the faithful. Having a pop at the unions has clear echoes of Churchill’s belligerence in relation to the Tonypandy riots and later the General Strike. The irony is that Churchill advanced the cause of trade unionism with his support for the Trade Disputes Act 1906, and later through his support for war socialism. He was also notoriously amenable to meeting union demands in his final stint as PM in 1951-55, just as London's mayor was happy to buy off the RMT for the Olympics. Like all opportunists, Johnson is nothing if not pragmatic. He believes in a flexible labour market, particularly for one job.
Thursday, 4 October 2012
One Nation. Same old Groove
Set-piece speeches and televised debates are about style not substance, aimed at reinforcing the morale of your supporters rather than converting your opponents or persuading the undecided. If you want an inkling as to policy, you'd do better to look at the margins. On the day that Ed Miliband attempted to re-mint the vapid "one nation" phrase, Yvette Cooper announced that a future Labour government would abolish the Independent Police Complaints Commission and replace it with a more "robust" Police Standards Authority. The justification for this upgrade was to address the IPCC's multiple failures in respect of Hillsborough, Ian Tomlinson and phone-hacking. Only a pedant (like me) would note that the IPCC was only established a decade ago, so can't really be held accountable for the Hillsborough cover-up, or that reform of the police might be more appropriate than turbo-charging the watchdog.
Coincidentally, we also heard the Government's admission of failure in respect of the West Coat rail franchise bid. The Tory response to this is an independent inquiry to be conducted by three business "leaders". Perhaps they'll recommend higher pay for civil servants, as advocated by Gus O'Donnell, former civil servant number one, or maybe a further hollowing-out with PwC taking over procurement. I know which one my money's on. Margaret Hodge, chair of the Commons Public Accounts Committee, made an interesting comment when she said: "People came into the civil service in the past because they were interested in policy, they wanted to devise policy. Today, the job of a civil servant is much more about delivering programmes, and that requires a different set of skills." You can just about hear the peevishness of a politician towards Sir Humphrey, balanced with admiration for the public service ethos, in the first sentence, but the second is pure neoliberalism. "Delivering programmes" in this context means acting as middlemen between government and business. It appears to have escaped Margaret's notice that civil servants had extensive experience of delivering programmes back in the days of British Rail. Perhaps she missed the recent documentary on the highly-successful Intercity 125, or perhaps she just blanked it out due to the heavy presence of a gurning Jimmy Saville, assuring us that this was the age of the train.
Privatisation has resulted in the role of many parts of the Civil Service being reduced to procurement and regulatory oversight (i.e. supplier management with knobs on). The former has led to the revolving door with corporate suppliers, which is the root of O'Donnell's bleat about pay (buying a former civil servant responsible for procurement is a very cheap way of de-risking your bid). It has also made the service vulnerable to corruption, not just in the sense of bribes to favour some suppliers, but in the equally pernicious sense of finagling the bid process to achieve a pre-determined outcome. As anyone who has been involved in a commercial bid knows, it is rare that soft criteria and risks can't be engineered to produce the desired result. This is not necessarily a bad thing, as there are intangibles and factors, like relationships and intellectual capital, that cannot easily be priced (things that money can't buy, as Michael Sandel would say). The suspicion is that the Department for Transport had taken against Beardy, though the briefing that this was a prejudice on the part of civil servants alone, and that the politicians were entirely blameless, strains credibility.
Both Labour and the Tories have bought into the neoliberal notion of the regulatory state: a core of business-savvy public servants, under the watchful eye of ministers, doling out public money to private contractors. For Labour the state can be a powerful agent on behalf of the buying public, ensuring best value and insisting on ethical practice. For the Tories the state, particularly in the narrow form of the Civil Service, is a necessary evil that exists to ensure propriety in the negotiations between large corporate concerns and the holders of the public purse. The one a go-between, the other a chaperone. In practice, the two roles tend to merge, as they are simply two facets of the same neoliberal construct, hence Hodge's easy substitution of the public service ethos by technocratic management. Leaving aside the vanity of small differences, it indicates that Labour has yet to seriously challenge the shibboleth of privatisation, even in respect of a natural monopoly.
Meanwhile, back in Manchester, Labour propose to fund the growing costs of social care through means-testing, which shows that the incremental retreat from universal benefits has momentum yet. Just as corporate interests won't be challenged too hard, beyond crowd-pleasing insults about "predatory capitalism", so wealth (property and unearned income) won't be taxed too hard. It's pretty obvious that wealth taxes of some sort are coming, not just because of the short-term needs of deficit reduction but because of the longer-term decline of labour versus capital in national income. Some commentators are sceptical as to whether this decline is real, pointing to the increasing practice of recategorising wage income as capital (e.g. personal services companies, share options and the whole private equity scam), however the criticism is misplaced. The point is not whether the income is correctly categorised by economists, but whether it is optimally taxed by governments. One of the features of neoliberalism has been the privileging of investment income, such as capital gains and dividends, over wage income in terms of lower tax rates. This has tended to be obscured by the headline-grabbing shift from direct income tax to indirect taxes such as VAT. As top income tax rates have progressively dropped to noisy fanfares, effective tax rates on unearned income have quietly dropped as well.
There are sound arguments as to why capital should be taxed less than income, but they assume virtuous investors and productive investments. The reality is that these taxes overwhelmingly benefit unproductive assets, such as housing (a house is consumption, a factory is production), and financial engineering, including asset-stripping, leveraged buyouts and hedge funds. One can argue that the neoliberal hegemony was brought about by the extension of capital into the majority of people's lives through mortgages, privatisation (facilitated by the myth of popular share ownership), and private pensions (dependent on shares and annuities). This in turn has wedded us to the idea that growth, and therefore capital accumulation and asset appreciation, is necessary come hell or high water.
The political challenge is that cutting public expenditure will not be sufficient to meet future needs. The famous "demographic timebomb" not only means more oldies to pay for, it means proportionately fewer people paying income tax, regardless of the level of unemployment. Even unchecked immigration won't make up the balance. The bottom line is that tax revenues have to shift from labour income towards wealth in the near future, which is why all parties are now testing the water. Some forms of wealth tax will remain politically toxic, such as revaluing council tax to reflect high property prices, and we will no doubt be distracted by tokenistic nonsense such as the mansion tax. Dividends are unlikely to be touched as this would produce too many stories in the media about old ladies surviving on the thin gruel of some long-held shares, though there is a sound argument for introducing a dividend super-tax for old ladies such as Michael Green's missus. On a positive note, the time of the land value tax may well have come, judging by the growing consensus across the party spectrum.
The one area I think all the parties will be cautious over is capital gains tax. This is the key tax break of neoliberalism. Huge amounts of wealth have been diverted to the corporate class through the favourable treatment of share options and CGT, incidentally feeding the boom in IPOs, management buyouts, and M&A that powered the City since the 1980s. It also led to a shift in shareholder expectations from dividend income to share gains, which in turn meant a weakening of corporate governance as investors became increasingly short-term and management increasingly under pressure to deliver share price growth. The coalition government has talked about bringing CGT in line with income tax rates, though with exemptions for "entrepreneurs", but sounds windy about applying this to second homes and buy-to-let properties.
In fact, there is no sound argument as to why primary homes should be exempt from CGT, as they are today. Given that these gains are "unearned", i.e. they're due to house price inflation, not your exquisite taste in decorating, there is a moral as well as an economic argument that they should be taxed at a high rate. The chief argument against taxing land or property is illiquidity, i.e. you may own the asset but you may not have ready cash to pay an annual tax bill (though an LVT is likely to be relatively small beer for house-holders as they own a tiny amount of land compared to, say, the Prince of Wales), but this argument disappears for a tax that is only levied on realised gains when you sell a house. The political problem is that thirty years of propaganda about the virtues of property ownership, and the increasing dependence on property values in lieu of pensions, mean that no party would want to take credit for bringing about such a change. Ironically, the best time to introduce CGT on primary homes would be immediately after a price crash, so an opportunity may yet arise.
Coincidentally, we also heard the Government's admission of failure in respect of the West Coat rail franchise bid. The Tory response to this is an independent inquiry to be conducted by three business "leaders". Perhaps they'll recommend higher pay for civil servants, as advocated by Gus O'Donnell, former civil servant number one, or maybe a further hollowing-out with PwC taking over procurement. I know which one my money's on. Margaret Hodge, chair of the Commons Public Accounts Committee, made an interesting comment when she said: "People came into the civil service in the past because they were interested in policy, they wanted to devise policy. Today, the job of a civil servant is much more about delivering programmes, and that requires a different set of skills." You can just about hear the peevishness of a politician towards Sir Humphrey, balanced with admiration for the public service ethos, in the first sentence, but the second is pure neoliberalism. "Delivering programmes" in this context means acting as middlemen between government and business. It appears to have escaped Margaret's notice that civil servants had extensive experience of delivering programmes back in the days of British Rail. Perhaps she missed the recent documentary on the highly-successful Intercity 125, or perhaps she just blanked it out due to the heavy presence of a gurning Jimmy Saville, assuring us that this was the age of the train.
Privatisation has resulted in the role of many parts of the Civil Service being reduced to procurement and regulatory oversight (i.e. supplier management with knobs on). The former has led to the revolving door with corporate suppliers, which is the root of O'Donnell's bleat about pay (buying a former civil servant responsible for procurement is a very cheap way of de-risking your bid). It has also made the service vulnerable to corruption, not just in the sense of bribes to favour some suppliers, but in the equally pernicious sense of finagling the bid process to achieve a pre-determined outcome. As anyone who has been involved in a commercial bid knows, it is rare that soft criteria and risks can't be engineered to produce the desired result. This is not necessarily a bad thing, as there are intangibles and factors, like relationships and intellectual capital, that cannot easily be priced (things that money can't buy, as Michael Sandel would say). The suspicion is that the Department for Transport had taken against Beardy, though the briefing that this was a prejudice on the part of civil servants alone, and that the politicians were entirely blameless, strains credibility.
Both Labour and the Tories have bought into the neoliberal notion of the regulatory state: a core of business-savvy public servants, under the watchful eye of ministers, doling out public money to private contractors. For Labour the state can be a powerful agent on behalf of the buying public, ensuring best value and insisting on ethical practice. For the Tories the state, particularly in the narrow form of the Civil Service, is a necessary evil that exists to ensure propriety in the negotiations between large corporate concerns and the holders of the public purse. The one a go-between, the other a chaperone. In practice, the two roles tend to merge, as they are simply two facets of the same neoliberal construct, hence Hodge's easy substitution of the public service ethos by technocratic management. Leaving aside the vanity of small differences, it indicates that Labour has yet to seriously challenge the shibboleth of privatisation, even in respect of a natural monopoly.
Meanwhile, back in Manchester, Labour propose to fund the growing costs of social care through means-testing, which shows that the incremental retreat from universal benefits has momentum yet. Just as corporate interests won't be challenged too hard, beyond crowd-pleasing insults about "predatory capitalism", so wealth (property and unearned income) won't be taxed too hard. It's pretty obvious that wealth taxes of some sort are coming, not just because of the short-term needs of deficit reduction but because of the longer-term decline of labour versus capital in national income. Some commentators are sceptical as to whether this decline is real, pointing to the increasing practice of recategorising wage income as capital (e.g. personal services companies, share options and the whole private equity scam), however the criticism is misplaced. The point is not whether the income is correctly categorised by economists, but whether it is optimally taxed by governments. One of the features of neoliberalism has been the privileging of investment income, such as capital gains and dividends, over wage income in terms of lower tax rates. This has tended to be obscured by the headline-grabbing shift from direct income tax to indirect taxes such as VAT. As top income tax rates have progressively dropped to noisy fanfares, effective tax rates on unearned income have quietly dropped as well.
There are sound arguments as to why capital should be taxed less than income, but they assume virtuous investors and productive investments. The reality is that these taxes overwhelmingly benefit unproductive assets, such as housing (a house is consumption, a factory is production), and financial engineering, including asset-stripping, leveraged buyouts and hedge funds. One can argue that the neoliberal hegemony was brought about by the extension of capital into the majority of people's lives through mortgages, privatisation (facilitated by the myth of popular share ownership), and private pensions (dependent on shares and annuities). This in turn has wedded us to the idea that growth, and therefore capital accumulation and asset appreciation, is necessary come hell or high water.
The political challenge is that cutting public expenditure will not be sufficient to meet future needs. The famous "demographic timebomb" not only means more oldies to pay for, it means proportionately fewer people paying income tax, regardless of the level of unemployment. Even unchecked immigration won't make up the balance. The bottom line is that tax revenues have to shift from labour income towards wealth in the near future, which is why all parties are now testing the water. Some forms of wealth tax will remain politically toxic, such as revaluing council tax to reflect high property prices, and we will no doubt be distracted by tokenistic nonsense such as the mansion tax. Dividends are unlikely to be touched as this would produce too many stories in the media about old ladies surviving on the thin gruel of some long-held shares, though there is a sound argument for introducing a dividend super-tax for old ladies such as Michael Green's missus. On a positive note, the time of the land value tax may well have come, judging by the growing consensus across the party spectrum.
The one area I think all the parties will be cautious over is capital gains tax. This is the key tax break of neoliberalism. Huge amounts of wealth have been diverted to the corporate class through the favourable treatment of share options and CGT, incidentally feeding the boom in IPOs, management buyouts, and M&A that powered the City since the 1980s. It also led to a shift in shareholder expectations from dividend income to share gains, which in turn meant a weakening of corporate governance as investors became increasingly short-term and management increasingly under pressure to deliver share price growth. The coalition government has talked about bringing CGT in line with income tax rates, though with exemptions for "entrepreneurs", but sounds windy about applying this to second homes and buy-to-let properties.
In fact, there is no sound argument as to why primary homes should be exempt from CGT, as they are today. Given that these gains are "unearned", i.e. they're due to house price inflation, not your exquisite taste in decorating, there is a moral as well as an economic argument that they should be taxed at a high rate. The chief argument against taxing land or property is illiquidity, i.e. you may own the asset but you may not have ready cash to pay an annual tax bill (though an LVT is likely to be relatively small beer for house-holders as they own a tiny amount of land compared to, say, the Prince of Wales), but this argument disappears for a tax that is only levied on realised gains when you sell a house. The political problem is that thirty years of propaganda about the virtues of property ownership, and the increasing dependence on property values in lieu of pensions, mean that no party would want to take credit for bringing about such a change. Ironically, the best time to introduce CGT on primary homes would be immediately after a price crash, so an opportunity may yet arise.
Tuesday, 2 October 2012
TV Personality Hid Dirty Secret
It turns out Eric Hobsbawm was a member of the Communist Party. Who'da thunk it? The death of the cuddly historian coincided with Stephanie Flanders' TV think-piece on Marx, following her earlier musings on Keynes and Hayek. The common theme is the vexed issue of Marxism, which has enjoyed something of an intellectual resurgence since the financial crisis, though one that has been building since the contrarian starting pistol was fired in 1989.
Hobsbawm the historian is a relatively poor subject for a critique of Marxism as the bulk of his work is firmly in the English tradition of Macaulay, Trevelyan and AJP Taylor: panoptic, well-written, essentially Enlightenment Whig. His Age of ... tetralogy is an excellent survey, but his more interesting work is to be found in The Invention of Tradition and the studies of marginal, working class communities, which he and EP Thompson pioneered in the 1960s. The critique therefore focuses on his long membership of the CPGB, notably after the Hungarian Rising of 1956 when many other members quit, and his statements to the effect that he did not regret his commitment. Some of this was simple truculence, a refusal to condemn his own past, some a rather callous mischief. He is dead now, so he isn't going to apologise, any more than Jimmy Saville is. Of course, that won't stop the debate about how he got away with it, or whether he was justified at all. Hobsbawm I mean, not Saville. The "outing" of the latter as an abuser has prompted many erstwhile colleagues to admit his behaviour was well known. Much the same happened when Jonathan King got nicked, I recall. While we shouldn't succumb to crass stereotypes, I can't have been the only teenager watching TOTP in the 70s thinking "that bloke looks well dodgy". I mean both Saville and King.
The Flanders series has been rather frustrating. The producers presumably fear that a programme about ideas will be boring if it has too many ideas, so we get the usual sequence of pointless location shots and human interest marginalia. If Keynes hadn't been an economist, we wouldn't be interested in his involvement with the Bloomsbury Group or his chairmanship of the Arts Council, so why burden us with it now? Hayek was a trickier TV subject, because the man was so personally boring and spent most of his life doing very little outside academia. A quick shufty at his collection of gongs, and a dull letter from Margaret Thatcher, made up the highlights. Marx, by contrast, was a dream gig, allowing Flanders to open with contemporaneous comments about the arrival on British shores of the most dangerous man in Europe, a sort of reverse Abu Hamza. We got the usual tropes of student excess, luxuriant facial hair, meetings in London pubs, retirement to Hampstead respectability, and Tankies singing the Internationale in Highgate Cemetery.
As others have already noted, Flanders skipped a lot of the interesting ideas in Marx and misinterpreted others, focusing on simplistic class antagonism and wages (i.e. demand management). There was one shot, presumably from a Soviet propaganda film, of a frock-coated, top-hatted plutocrat wielding a whip and carrying a sub-machinegun. What larks. At one point, brandishing a bundle of sticks, it looked like she was about to broach the theory of surplus value, but she copped out with (something like) "if you really want to know, you can plough through hundreds of pages yourself". The writings of Keynes, which are more technical and challenging, did not get this high-handed treatment. I began to get the sense that the BBC were worried they might be criticised for giving airtime to "the most dangerous man in Europe". This probably explained their choice of various right-wing polemicists, like Madsen Pirie, who added nothing to an understanding of Marx's ideas, but meant they were inside the tent pissing out. She even got Peter Hitchens on to demonstrate hegemony: he thought an alternative to capitalism was as conceivable as an alternative to weather.
Despite some self-mockery, in the form of a skit on the Marxist Broadcasting Corporation (which probably shot the Daily Mail's fox), the programme devoted a lot of time to linking Marx and the gulags, while insisting that there was of course no such direct link. We got tours of East German jails, footage of marches in Red Square, and the storming of the Winter Palace. Capital was published 3 years before Lenin was born. You'd think they'd give it a rest. After all, no one blames Hobsbawm's The Forward March of Labour Halted for Tony Blair and Iraq, though you might find it easier to make the case. I don't recall Hayek's visit to Chile and his supportive words for the murderous Pinochet regime being similarly foregrounded by Flanders, though I may have blinked.
The whole Masters of Money series was oddly lacking because it tried to fillet the three thinkers' ideas in terms of their usefulness in understanding the current crisis. This inevitably gave Keynes the edge, but that in turn meant there was no real discussion as to why the proponents of austerity were in power, or why neoliberalism remains hegemonic. It also failed to address the yawning gap between free markets and capitalism, and the conflicts between corporations and spontaneous order, which is where Hayek might have been useful, and it didn't get to the nub of Marx's point that capitalism is insatiable. The externality of environmental damage was conspicuous by its absence. This unstable dynamic is ultimately the product of human nature: curious, enterprising, footloose, hedonic. Without it we'd still be sitting under trees eating raw meat. But this is also what makes capitalism prone to crisis, and equally capable of overcoming crisis through change and reinvention, until the next crisis. The centrality of equilibrium as a concept in capitalist thought, and its elevation to a quasi-spiritual role (the invisible hand as Holy Ghost), is testament to the fear of crisis as a manifestation of a lack of control. The conclusion of the series appears to be that we must manage capitalism better: "there is no alternative". Sound familiar?
Hobsbawm the historian is a relatively poor subject for a critique of Marxism as the bulk of his work is firmly in the English tradition of Macaulay, Trevelyan and AJP Taylor: panoptic, well-written, essentially Enlightenment Whig. His Age of ... tetralogy is an excellent survey, but his more interesting work is to be found in The Invention of Tradition and the studies of marginal, working class communities, which he and EP Thompson pioneered in the 1960s. The critique therefore focuses on his long membership of the CPGB, notably after the Hungarian Rising of 1956 when many other members quit, and his statements to the effect that he did not regret his commitment. Some of this was simple truculence, a refusal to condemn his own past, some a rather callous mischief. He is dead now, so he isn't going to apologise, any more than Jimmy Saville is. Of course, that won't stop the debate about how he got away with it, or whether he was justified at all. Hobsbawm I mean, not Saville. The "outing" of the latter as an abuser has prompted many erstwhile colleagues to admit his behaviour was well known. Much the same happened when Jonathan King got nicked, I recall. While we shouldn't succumb to crass stereotypes, I can't have been the only teenager watching TOTP in the 70s thinking "that bloke looks well dodgy". I mean both Saville and King.
The Flanders series has been rather frustrating. The producers presumably fear that a programme about ideas will be boring if it has too many ideas, so we get the usual sequence of pointless location shots and human interest marginalia. If Keynes hadn't been an economist, we wouldn't be interested in his involvement with the Bloomsbury Group or his chairmanship of the Arts Council, so why burden us with it now? Hayek was a trickier TV subject, because the man was so personally boring and spent most of his life doing very little outside academia. A quick shufty at his collection of gongs, and a dull letter from Margaret Thatcher, made up the highlights. Marx, by contrast, was a dream gig, allowing Flanders to open with contemporaneous comments about the arrival on British shores of the most dangerous man in Europe, a sort of reverse Abu Hamza. We got the usual tropes of student excess, luxuriant facial hair, meetings in London pubs, retirement to Hampstead respectability, and Tankies singing the Internationale in Highgate Cemetery.
As others have already noted, Flanders skipped a lot of the interesting ideas in Marx and misinterpreted others, focusing on simplistic class antagonism and wages (i.e. demand management). There was one shot, presumably from a Soviet propaganda film, of a frock-coated, top-hatted plutocrat wielding a whip and carrying a sub-machinegun. What larks. At one point, brandishing a bundle of sticks, it looked like she was about to broach the theory of surplus value, but she copped out with (something like) "if you really want to know, you can plough through hundreds of pages yourself". The writings of Keynes, which are more technical and challenging, did not get this high-handed treatment. I began to get the sense that the BBC were worried they might be criticised for giving airtime to "the most dangerous man in Europe". This probably explained their choice of various right-wing polemicists, like Madsen Pirie, who added nothing to an understanding of Marx's ideas, but meant they were inside the tent pissing out. She even got Peter Hitchens on to demonstrate hegemony: he thought an alternative to capitalism was as conceivable as an alternative to weather.
Despite some self-mockery, in the form of a skit on the Marxist Broadcasting Corporation (which probably shot the Daily Mail's fox), the programme devoted a lot of time to linking Marx and the gulags, while insisting that there was of course no such direct link. We got tours of East German jails, footage of marches in Red Square, and the storming of the Winter Palace. Capital was published 3 years before Lenin was born. You'd think they'd give it a rest. After all, no one blames Hobsbawm's The Forward March of Labour Halted for Tony Blair and Iraq, though you might find it easier to make the case. I don't recall Hayek's visit to Chile and his supportive words for the murderous Pinochet regime being similarly foregrounded by Flanders, though I may have blinked.
The whole Masters of Money series was oddly lacking because it tried to fillet the three thinkers' ideas in terms of their usefulness in understanding the current crisis. This inevitably gave Keynes the edge, but that in turn meant there was no real discussion as to why the proponents of austerity were in power, or why neoliberalism remains hegemonic. It also failed to address the yawning gap between free markets and capitalism, and the conflicts between corporations and spontaneous order, which is where Hayek might have been useful, and it didn't get to the nub of Marx's point that capitalism is insatiable. The externality of environmental damage was conspicuous by its absence. This unstable dynamic is ultimately the product of human nature: curious, enterprising, footloose, hedonic. Without it we'd still be sitting under trees eating raw meat. But this is also what makes capitalism prone to crisis, and equally capable of overcoming crisis through change and reinvention, until the next crisis. The centrality of equilibrium as a concept in capitalist thought, and its elevation to a quasi-spiritual role (the invisible hand as Holy Ghost), is testament to the fear of crisis as a manifestation of a lack of control. The conclusion of the series appears to be that we must manage capitalism better: "there is no alternative". Sound familiar?