The Economics of Flooding

The central narrative of the recent floods in Ireland and Britain is based on the severe weather. In fact a number of changes have happened that have contributed to the failure of flood defences.


1. Failure to Dredge.

The European Water Framework Directive in 2000 has stopped virtually stopped dredging of rivers and made disposal of spoils extremely expensive by reclassifying it as hazardous waste. The blog of the right-wing think-tank, the Adam Smith Institute, discussed this problem on the 29th. They cite this:

But all this changed with the creation of the Environment Agency in 1997 and when we adopted the European Water Framework Directive in 2000. No longer were the authorities charged with a duty to prevent flooding. Instead, the emphasis shifted, in an astonishing reversal of policy, to a primary obligation to achieve ‘good ecological status’ for our national rivers. This is defined as being as close as possible to ‘undisturbed natural conditions’.

‘Heavily modified waters’, which include rivers dredged or embanked to prevent flooding, cannot, by definition, ever satisfy the terms of the directive.

So, in order to comply with the obligations imposed on us by the EU we had to stop dredging and embanking and allow rivers to ‘re-connect with their floodplains’, as the currently fashionable jargon has it.

The upshot is that rivers now hold less water because they are shallower. This drastically increases the risk of flooding. The failure to dredge is not a new issue.

2. Clearing of Watersheds

The burning and draining of grouse moors upstream from towns in Yorkshire including York and Hebden Bridge. This issue was explored by George Monbiot in the Guardian Newspaper.

In 2002 Walshaw Moor, a 6,500-acre grouse shooting estate upstream of Hebden Bridge, was bought by the retail tycoon Richard Bannister. Satellite images before and after [right] show a transformation of the land: a great intensification of burning and draining. These activities raise the number of grouse, which in turns raises the amount (running into thousands per person per day) people will pay to shoot them.

When one destroys the vegetation on the moors and at the same time improves the drainage, any rain that falls rapidly makes it's way into the major water ways. With the kind of heavy rain that we have been experiencing in the last two weeks this means flash floods as the banks of the rivers are over-topped.

It appears that the government has collaborated in this, or at least not acted to prevent it.

For several years campaigners in Hebden Bridge have been begging the government to stop the drainage and burning of the grouse moors upstream. 

3. Cuts to spending on the construction of flood defences.

Finally as left-wing commentator Owen Jones explains, also in the Guardian, that the government has cut spending on flood defences in order to contribute to "living within our means" as the Chancellor puts it.

As official documents now show, the government’s own advisory board recently pointed out that a lack of funds would leave northern communities at risk of floods. One £180m floods defence project was scrapped in Leeds, for example.

By failing to improve flood defences the government has allowed this crisis to happen. Instead of spending the money on prevention they are now spending it on mitigation. And if they can find it now, then why could they not find it before? Part of the reason is that it shifts the risk to the public sector.

Also the government gets no credit for getting it right. If flood defences work there is no news story. Disasters make the news, disasters averted do not. Thus, rather cynically, the government gets more credit for flood relief than for flood defence, and most of the costs of the disaster are born by insurance companies, whereas only the government contributes to flood defence. Unfortunately people who were flooded last year are now unable to get insurance. So who pays for the damage?

Jones segues into a more general critique of the government's response to climate change. They have cancelled subsidies for green alternatives to energy production and let the contract for building a nuclear power station to the Chinese rather than investing in local businesses.


Conclusion

So yes, we are having extreme weather at the moment. But the government has not taken appropriate action to prevent flooding, indeed it has been negligent and recalcitrant in taking the actions necessary to prevent exactly the kind of disasters that have wrecked this Christmas for many people in the North.

This is the problem with ideologically driven policy. It ignores reality and legislates on the basis of a fantasy world. It's important that we place the blame for the failure of flood defences where it lies - squarely with the government. The previous government are certainly complicit, but the current government have made things considerably worse.


UPDATE 3 Jan 2016

For an alternate view on the best approach to flooding see this article in today's Independent (via @Sciamanoinglese). The approach of a town called Pickering, North Yorkshire adopted an approach to flooding that slowed rain's passage from surface to waterways using a series of "leaky" dams.

They built 167 leaky dams of logs and branches – which let normal flows through but restrict and slow down high ones – in the becks above the town; added 187 lesser obstructions, made of bales of heather and fulfilling the same purpose, in smaller drains and gullies; and planted 29 hectares of woodland. And, after much bureaucratic tangling, they built a bund, to store up to 120,000 cubic metres of floodwater, releasing it slowly through a culvert. 

Note however that the second point above the clearing of grouse moors is still problematic. Pickering partly alleviated their problem by planting vegetation. On the grouse moors the drains are designed to rapidly deliver rain to the larger waterways. Pickering took the opposite approach with their leaky dams, slowing the progress of water so that they avoided the flash floods than inundated other towns in Yorkshire.

What is interesting about this is that it is a much cheaper that modern flood defences which are often in the form of solid barriers, which work well up the point of failure and then fail catastrophically. The system used in Pickering could fail more graciously because less was riding on any one structure - distributing the flood defences upstream rather than focussing efforts on the flood plane itself demonstrates an important principle when it comes to defending against natural processes.

A nuanced discussion of the pros and cons and applicability on a larger scale follow. A rare case of some well researched and presented journalism.

Moralising Tories Exposed as Racists

Interesting to see the news this morning about secret cabinet documents revealing deeply racist attitudes in the Thatcher government.

Oliver Letwin: Minister apologises after newly-released papers reveal 'racist' attitude towards black rioters. Independent.

I'm not sure why the Inde has placed racist in scare quotes. The attitude in the memo is straightforwardly racist.

That the Tories blame everything on "bad character" rather than, say, the effects of colonialism or slavery or just the prejudice and hatred that immigrants experienced in Britain is also telling.

On one hand its an example of the Attribution Fallacy that blames bad behaviour on bad intention or character. Something that social psychologists showed was wrong decades ago. This is part of the baleful legacy of Freud and his Romantic view of humanity - that we are all driven only by internal urges and that our environment does not shape us. This is totally wrong. Environment is at least as important as intention in shaping behaviour. Western Buddhists are also deeply affected by Freud's fallacy, sometimes more so since they seem to gel with our own preoccupations with self (though of course we paradoxically deny the existence of the object of our obsession).

It is also a classic aspect of conservative morality to see the poor and people of colour as basically immoral - no matter that the conservatives helped to make them poor (both now and in the past). That poor people of colour are lower down the scale of the conservative's (1985) value system doesn't really tell us anything new, I suppose, but it does nicely punctuate the point I was making last week about colonialism and attitudes to the colonised and enslaved. Letwin seemed to be saying that at least the poor white English people knew their place and stoically accepted the harsh conditions imposed on them, whereas by fighting back the black residents of London were doing something terrible. The class system requires that the oppressed stay oppressed, that everyone knows their place. And that is one of the major problems with immigrants - they don't understand the class system and so they don't stay in their place. Similarly trades unions were upsetting the balance of power and had to be put back in their place.

The question is, have things really changed in the intervening 30 years? On the surface the politicians seem to have changed their tune, but many of the social problems caused by poverty, lack of affordable housing, jobs and opportunities etc remain, suggesting that they have not been addressed.

The fact that Britain and Europe seem to be leaning to the political right these days is not an encouraging sign of a bright future ahead.

Household Debt is Soaring

The Indepedent is today reporting figures from the Office for Budget Responsibility.

The OBR statistics showed households spent £68.9bn less than they earned in 2009-10. The figure fell to £67bn in 2010-11, £35.7bn in 2011-12 and £27bn in 2012-13. The following year Britain’s families went into the red to the tune of £12.4bn, rising to £29.4bn in 2014-15.

The OBR projects that households will spend £40bn more than they earn this year (2015-16), increasing to £40.4bn in 2016-17, £43.9bn in 2017-18, £48.6bn in 2018-19 and £49.5bn in 2019-20. Total household borrowing is set to reach £222bn over the lifetime of this parliament.

And what this tells us is that present level of GDP growth is unsustainable. We are heading for another balance sheet recession as explained so eloquently by Richard Koo (see video below). What will happen is that at some point consumer spending is going to slow drastically as households switch from spending borrowed money to focussing on paying down debt.

When consumers stop spending then retail will slow drastically. The dominoes will begin to fall. The government is committed to not preventing this. In fact by helping to inflate asset prices, particularly housing, they are contributing to the problem. 

George Osborne's Use of Non-linear Warfare

A pattern has emerged in how the Chancellor announces policy. First he seeds the media with stories of massive changes, usually cuts in spending. An uproar erupts in the media. Then key policies he announces on the day are different from those he first talked about. As this video outlines, the way politics is being run these days draws on ideas from the conceptual art world in order to confuse the electorate into inactivity.

Adam Curtis on Charlie Brooker's 2014 Wipe.

What George Osborne seems to be doing is drawing on a concept, outlined in the video, invented by one of Vladimir Putin's advisors, and known as non-linear war. By feeding contradictory information to the media Osborne not only keeps his opposition off guard but be confuses analysts. So for example in the recent budget statement he forced through massive cuts in government spending on local services and welfare, but the media were focussed on small increases in spending for the NHS and Police where cuts had been flagged.

This can work partly because of a pattern in how the media reports politics. Firstly the government put out a press release about a forthcoming announcement, often with the full text of what will be said. This is duly reported in the form "the Chancellor will say...". Then they report on the day  "Today, the Chancellor said..." . And finally the next day they report it in retrospect usually with some commentary.

This works fine if the three instances are all saying the same thing. But Osborne plays the system by shifting his position.

• Tomorrow I will make swinging cuts so the government can live within its means.
• Today I am making some cuts though less than announced and some increases
• Yesterday I increased government spending based on projected revenue increases. 

In point of fact the Autumn Statement contained some of the largest cuts in government spending in history. Local governments will be slashing budgets for libraries and other local services. We've already seen David Cameron lobbying his local Council against cutting services despite shrinking budgets. The basic amenities will begin to collapse over the next few years.

If we are to live within our means, as Mr Osborne argues that we should, then the time to announce spending increases would be after government revenues had actually gone up, not on the basis of predictions that are wrong more often than not. However, he is able to leverage these predictions to produce wildly conflicting statements and thus wrong foot any critics of the government. Now he can meet accusations of the negative impact of cuts by saying "what cuts?". In any case the idea that the national economy is like a household budget is another piece of misinformation.

Another feature of the government's use of non-linear warfare is their repeated misuse of statistics, which I have logged here: Conservatives caught making up statistics. Flooding the media with misinformation helps to maintain confusion - the focus goes to the accuracy of the figures rather than the policies. That is if the media bother to follow up on the misinformation at all. A lot of the time the UK media simply reproduce government press releases with no effort to check facts. 

Throughout the last government we saw the Tories repeating the statement that Labour grossly overspent and caused the financial crisis - this meme is repeated endlessly in the comments sections of the UK's online newspapers. On the left-wing papers there is a constant stream of right-wing trolls repeating this and other government propaganda. What we get from the Tories is lies and more lies.

In fact the Labour government did what George Osborne did this week - they spent projected rises in income, based on projections and 20 years of almost uninterrupted GDP growth because of the massive boost to GDP from deregulating the finance industry. Unfortunately, not only did that income not materialise, but the world's banking system started to collapse and required propping up. It was the latter than accounted for the bulk of increased government spending right at the end of Labour's time in office. But Labour themselves were totally ineffective at communicating this and remain so. It boggles the mind that Labour have simply conceded the field when it comes to economy and allow the Tories to make all the plays. It seems like even Labour belief the Tory propaganda about the economy!

The end result of all this conflicting information is that we are confused about the facts, bewildered by the stories in the media, and unable to make good decisions about what the government is doing. The information we get is deliberately confusing because that leaves George Osborne in power as we are unable to be decisive. This is the man who desires to be Prime Minister after David Cameron, who has already admitted that he will not contest the next election. 

The government is at war with the electorate - a non-linear war that leaves them free to arrange the country to suit them and their cronies. Middle-England is convinced that this is the best of all possible worlds even though they are losing all their local services in the process. Poor England know it is not good because they seem to be paying for the bulk of the cuts. And all the while the 1% are getting wealthier. CEO salaries continue to buck the trend and rise. Those local council cuts will almost certainly not affect executive salaries. It's a kind of class war, but not coming from the proletariat, but from the plutocrats aided and organised by middle-managers.

Conservatives caught making up statistics

Ministerial Code of Conduct: 1.2.c.
It is of paramount importance that Ministers give accurate and truthful information to Parliament, correcting any inadvertent error at the earliest opportunity. Ministers who knowingly mislead Parliament will be expected to offer their resignation to the Prime Minister;

Once again our Prime Minister is in the news for using dodgy statistics. This is a regular story in the British press, but no one ever seems to connect up the stories. So, what follows is the beginnings of a list of news stories about the Conservative (and Labour) leaders being caught out lying and using dodgy statistics. Just for the record.

Nov 2015

David Cameron, there aren't 70,000 moderate fighters in Syria - and whoever heard of a moderate with a Kalashnikov, anyway? "Telling the House of Commons about the 70,000 “moderate” fighters deployed in Syria was not just lying in the sense that Tony Blair lied – because Blair persuaded himself to believe in his own dishonesty – but something approaching burlesque. It was whimsy – ridiculous, comic, grotesque, ludicrous. It came close to a unique form of tragic pantomime. " The Independent.

David Cameron's 'Unofficial' Migration Stats On EU Migrants Rubbished By Experts. Huffington Post

Oct 2015

David Cameron REFUSES to answer if he lied about Lord Ashcroft’s ‘nom dom’ tax status. Vox Political 

Jeremy Hunt could be SACKED for 'misleading' public over weekend hospital deaths. DAVID CAMERON could be forced to sack Jeremy Hunt after the health secretary allegedly misled Parliament - and the public - over weekend hospital death figures. The Tory minister has continually said 11,000 extra deaths occurred in 2013-2014 as a result of admission to hospital over the weekend - but has omitted the next part of the research report he is quoting which says "to assume they are avoidable would be rash and misleading". Express

Mar 2015

David Cameron's numbers problem: From NHS spending to immigration caps – how the Tories can't get their figures straight. Five stats that show you shouldn't always take the Conservatives at face value - Independent.

Oct 2014

Cameron 'rebuked' over debt claims. David Cameron has been handed another thinly-veiled rebuke by the statistics watchdog for claiming that Britain has been "paying down its debts".

Labour lodged a complaint about the Prime Minister's loose use of language after he used his Tory conference speech to hail progress in turning round the country's finances. - Daily Mail

Sep 2014

David Cameron strongly rebuked for making false claims about immigration. In July, the Prime Minister wrote in a newspaper that “while most new jobs used to go to foreign workers, in the past year more than three-quarters have gone to British workers”. Newspaper watchdog the Press Complaints Commission ruled his claim was “baseless”. It added: “The statistics to which the PM referred had been significantly misrepresented.” Mirror

Aug 2014

David Cameron has been rebuked for claiming that the majority of new jobs created last year were taken by UK nationals when figures for new jobs are not collected by the official statistics body. - Guardian

Feb 2014

Coalition rebuked again by UK Statistics Authority- this time on flood defence spending
Statistics head Andrew Dilnot says a Treasury graph on infrastructure left readers with "a false impression of the relative size of investment between sectors". - New Statesman

George Osborne rebuked for boasting he halved £1.7bn EU surcharge. Treasury committee stops short of saying chancellor misled parliament by claiming he won the bill reduction when the surcharge was halved by the UK’s automatic rebate. Guardian

June 2013

Senior Conservative ministers have been rebuked for attempting to cover up Government statistics showing one of their key housing policies is not working. - Independent

May 2013

Duncan Smith rebuked by ONS for misuse of benefit statistics. The claim that 8,000 people moved into work as a result of the benefit cap is "unsupported by the official statistics", says the UK Statistics Authority. - New Statesman. Also "Lies, damned lies and Iain Duncan Smith" examines the pattern of lying. - Guardian

"Grant Shapps rebuked by UK Statistics Authority for misrepresenting benefit figures. Yet another Conservative politician is caught making it up." - New Statesman.

Apr 2013

Iain Duncan Smith "Around 1 million people have been stuck on a working-age benefit for at least three out of the past four years, despite being judged capable of preparing or looking for work."

"As The Guardian, and separately, Full Fact, explain here, that claim relies on an extreme sleight of hand." - The Economist

Feb 2013:

“David Cameron has received a reprimand from the official statistics watchdog over his claim that the government was "paying down Britain's debts". - Guardian

Dec 2012

Osborne “The good news is that we are in government after 13 years of a disastrous Labour administration that brought our country to the brink of bankruptcy.” - Conservative Party website

The UK was never at risk of bankruptcy. Office for Budget Responsibility chief Robert Chote dismisses the “danger of insolvency”. New Statesman.

"The UK Statistics Authority upheld a complaint by Labour about government claims the NHS budget had increased in real-terms in the past two years. The watchdog found the best-available Treasury data suggested real-terms health spending was lower in 2011-12 than in 2009-10 " - BBC

Oct 2012

“David Cameron has been corrected by the Treasury’s own forecaster over claims that cuts in public spending are not reducing economic growth. The Office for Budget Responsibility told the Prime Minister that it does believe that cutting public spending will reduce economic growth in the short term” - Huffington Post

Andrew Dilnot, Chair of the UK Statistics Authority, has today expressed ‘concern’ about claims made by the Department for Education (DfE) on the UK’s supposed slump in international school achievement league tables. - Full Fact

Apr 2012

The home secretary [Theresa May] is under fire for failing to comply with a high court order to bring an asylum seeker who is in hiding in Azerbaijan back to Britain. The Border Agency forcibly removed the man, a Turkish national, from the UK in March despite a court order being issued before he boarded the plane preventing officials from deporting him. - Guardian

Jan 2012

Iain Duncan Smith and the Department of Work and Pensions have been accused of publishing misleading immigration figures that were "highly vulnerable to misinterpretation". - Huffington Post 

Feb 2010

The chair of the UK Statistics Authority has told shadow home secretary Chris Grayling he "must take issue" with claims made by the Tories. 

He warned they were "likely to mislead the public" if they compared two sets of statistics without explaining they were collected in different ways. - Sky News

See also the UK Statistics Authority list of correspondence with the govt. http://www.statisticsauthority.gov.uk/reports---correspondence/correspondence/index.html

Treating the Economy Like a Household Budget

Funny, we have exactly the same problem in the UK...

Why Do The Poor Not Revolt?

The question of why the poor don't do something about rising inequality in the UK came up on Twitter today. To my mind the comedian Simon Evans got to the heart of the matter when he responded to Russell Brand's call to revolution. So I've been posting this clip. Many a true word was said in jest.

How Money is Created

One of the things that seems to be very difficult for people to grasp is the idea of how money is created. So I noted that we see a lot of German people complaining that their tax euros have been lent to Greece. But that money lent to Greece does not come from tax dollars, or savings, or Germany's wealth. The loans create entirely new money. And when the loan is repaid that money ceases to exist.

The Bank of England was one of the first central banks to create money in this way - from the time it was created in the 17th century. Staff from the  Bank’s Monetary Analysis Directorate have prepared a paper explaining this form of money creation. They note:

"Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money."

 It is vitally important that we understand this. Part of the problem in 2007 was that banks had made too many loans and created too much money. When the sub-prime mortgage scam erupted what happened was that many people defaulted on their loans at once. It was not capital that was wiped out in this situation, it was the revenue stream of the rent that people were paying for the loan. We call this "interest" but it is a form of rent, especially in relation to the other products of the factors of production: wages from labour; and profit from capital. Rent is what is paid for use of a resource. And banks certainly see the loans they make as assets. So some companies, such as Lehman's brothers found their revenue stream curtailed. This meant that although Lehman's had many assets (loans) they did not have enough money coming in (rent) in order to pay their own creditors. So they went bankrupt. But that meant that rent the bank was paying also suddenly stopped.

The other reason it's important to understand the creation of money is that it is the rationale behind the idea of the Debt Jubilee. If the money of a bank loan was simply created out of nothing, and will return to nothing when it's paid off, then forgiving such a debt costs nobody anything. Except that the revenue stream gets cut off or reduced. Since a default amounts to the same thing, but creates all kind of illwill and political tension it is better to get ahead of it and arrange debt relief. This has happened many times in Europe.

You would think that any creditor with half a brain would be happier with some repayment than none. So a deal to repay less or slower would be preferable to a default in which there is no repayment. But this is not what we are seeing happening in Greece. The ECB and EU are demanding all or nothing. And if nothing they plan to force Greece out of the Eurozone (which as far as I can tell is illegal, because there is no provision for it in the treaty establishing the EZ).

But this view of money creation helps to explain why Greece's creditors don't have much to lose any more. They have been using the last five years to ensure that their income stream from rents on imaginary money is securely coming from elsewhere. So that when Greece defaults it won't cause a contagion of the kind that happened in the USA in 2007. Had they been concerned about the loss of revenue from Greece any more they would be more willing to negotiate. They literally have nothing to lose. And they also know that if they renegotiate the repayment schedule with Greece other nations, where their revenue streams come from, might also want to renegotiate. And there are a lot of countries overburdened with debt and implementing austerity programs that were the condition for the loans.

Understanding how money is created is a basic piece of information for intelligent participation in civil life. Lack of understanding is currently being preyed upon by Neoliberal governments to create narratives that promote their interests over the interests of the citizenry. We're being lied to on a regular basis.

OXI!

The Greek people voted resoundingly against the imposition of yet more austerity today. A great day for democracy.

Neoliberal governments are creating and exploiting systematic misrepresentations of the economics to gain leverage over citizens. For example. A lot of people keep talking about German tax payers bailing out Greece as though their taxes are being sent to Greece. They are not. The German taxpayers have not spent a single cent on Greece. Indeed they have profited from the crisis through interest payments on the outrageous loans foisted on Greece. The money going to keep Greece afloat has been printed by the ECB. It was created especially for this purpose. And in fact 90% of the money loaned to Greece so far has gone directly to French and German banks. So what is happening is that the ECB is using Greece as a proxy to bail out it's own banks. And blaming the Greeks for being lazy or recalcitrant. Not only a lie, but a mendacious conspiracy to deceive and defraud.

All of last week the ECB and the head of the IMF were illegally campaigning for the removal of the rebelling but honest government, in the hope that they could get the dishonest but compliant government back.

But Syriza have turned this around and the new IMF report backs them up. I am gladdened to see Neoliberalism lose a major battle (since they don't seem to acknowledge things like global economic meltdown as a problem). A victory for the people.

Now bring on debt relief for Greece. And for the poor everywhere!

Greece vs the Neoliberals.

The struggle over the economy of Greece, with the elected government on one hand, and the powerful unelected Neoliberal organisations, the European Central Bank, the International Monetary Fund on the other, along with the quasi democratic European Commission, is gripping stuff. I so want to see the Greeks take back control - even though this will not provide a miracle cure. I so want to see the tide of Neoliberalism turn!

Greece's finance minister at  London Conference of 1953
signing a treaty agreeing to cancel 50% of Germany's debt 

There have been some excellent articles on Greece and Europe recently. Amongst my favs are

• Frances Coppola. (3.7.2015) The Road To Grexit. Forbes.
• Frances Coppola. (29.6.2015) The Day The Euro Died. Forbes.
• Alex Andreou JUNE 30, 2015. Where is My European Union? Sturdy Blog
• Alex Andreou. (03 July 2015) How Europe Played Greece. Byline. 

The Alternative To Neoliberalism

Steve Keen on the problems of Neoliberalism and some ideas that the political left need to adopt to counteract the standard Neoliberal economic narratives. 

The Ten Commandments of Neoliberalism

1. liberalize trade; 
2. privatize public services; 
3. deregulate business and finance; 
4. shrink big government; 
5. reduce taxes on business; 
6. encourage foreign investment; 
7. constrain unions; 
8. expand exports; 
9. minimize inflation; 
10. enforce property rights. 

It replaces "love they neighbour" as the Golden Rule, with "See yourself as an enterprise and your neighbour as the competition."

Derived from What is Neoliberalism?

Europe is a Net Deflation Exporter

via @IDEAeconomics

More Lies...

Tory HQ are tweeting like mad in the run up to the election. I don't subscribe, but the economists I do read often retweet with succinct rebuttals. The main theme of the tweets seems to be that Labour mismanaged the economy. I've never really understood why Labour were unable to counter this with the obvious truth that the Tories are in denial about: that in 2008 the world underwent a Global Financial Crisis that saw banks going bust and many institutions, like my local city council, losing their savings. Labour seem incapable of using their handling of the GFC as a contextualising event for their economic decisions.

By most accounts Brown managed the crisis well. Of course had the UK had proper regulation and oversight of the financial sector this crisis might not have affected us so badly - since other countries were doing much the same I doubt we could have avoided it completely.

Today the Tories tweeted that we should remember that unemployment was rising when they took office. The simple answer to this is to show the ONS figures on unemployment.

And this gives the lie to the Tory claim. Under Labour unemployment rose because of the GFC and then stabilised as recovery began. It rose after the coalition govt came into power and began to cut spending and stalled the recovery. It began to fall only after they eased up on austerity and much of the change is a result of zero-hours contracts and other measures that have seen the working poor reliant on food banks in many places (they were already dependent on Housing Benefit to pay rent in a grossly over-inflated housing market after successive governments have refused to build affordable housing). Another example of how austerity negatively impacted the economy and slowed recovery. There are plenty of examples of this happening.

Why are Labour unable to capitalise on simple lies like this? Why do they continue to allow the Tories to keep them on the economic ropes? Why do they feel compelled to opt for Neoliberal-lite instead of a proper alternative? Why is it only the SNP that are actively against this ideologically drive austerity?

At the moment we can only hope that the SNP do indeed end up holding the balance of power in the UK. They are the only party within reach of power that is offering a credible alternative.

It's a lie...

The Times published/tweeted this today - as a teaser to entice new people to buy a subscription to their website

The comments on the Tweet prove that most people have an extremely skewed view of the recent history of the economy. Most seem to have bought the Tory propaganda and parrot it.

And this is perhaps why the Labour party economic policy has been dictated by the Tories rather than by Labour voters.

The Tories as New Puritans

I dipped into Michel Foucault's essay, The Political Technology of Individuals again recently. In this essay reinforces the idea that moderns have indirectly defined themselves in terms of exclusion of some other, particular criminals and the mad.

Tories have emphasised another defining/dividing line in their current term in office: work. Cameron and his cronies have repeated "hard working families" time and again. They identify with those who "work hard". Never mind that those who work for a living have seen a steady decline in their wages over the course of the Tory-coalition parliament. Never mind that at the same time capitalists have continued to become more wealthy, and their captains--the CEOs--have seen massive pay rises and record bonuses.

Taxes are the way that the people pay for things collectively. We use taxes to see to the defence of the nation; to the education of our young people; to the care of the sick and elderly; and to the provision of national infrastructure which benefits everyone, such as roads, railways, utilities. Neoliberalism has seen these tax-payer funded resources privatised and sold off to the highest bidder. In some cases this has been very successful, for example the phone system has improved greatly, and in other cases less so, the rail system is beset with problems of capacity and high fares.

Still the government have proposed to build new rail infrastructure with tax money because it has another purpose - money that the government spends on large projects is an investment. The money that it spends comes back as taxes and non tax income such as rail fares. Neoliberalism has tended to try to drastically limit how much non-tax income the government can make, because it believes on ideological terms that government is always inefficient at managing wealth and resources on behalf of the people.

Tax avoidance means that there is less money available to spend on the public good. It is effectively stealing from the pot that pays for education, health, retirement, defence, and infrastructure.

Work/Non-Work.

One of the distinctions we see is that if a non-working person defrauds the government of tens of thousands of pounds (which happens a few times a year) that is seen as a heinous crime. They are pilloried in the media, often their name and photograph (if not their address) is published. They are usually fined heavily and often sent to prison. And yet when a business-man defrauds the government of millions of pounds of taxes this is viewed with tolerance and even complacency. A bank that manipulates world interest rates is given a fine, but no actual people are held to be responsible for what we know was a premeditated and calculated scheme to rob the whole world.

The distinction here is between non-productive and productive members of society. The Tories have made it clear that they consider non-working members of society to be morally evil. Those claiming support on the basis of an inability to work have been subjected to mental torture through a system of interrogation that defies many human rights: one is compelled to undergo physical examination by strangers and a level of intrusive scrutiny that well people find shocking. It all done with the threat that failure to comply for any reason will result in the withdrawal of support. The purpose of scrutiny is to trick the sick person into revealing a hidden capacity for work. The assumption is that even severe and crippling illness ought not keep a person from working. Many people have died soon after being assessed fit for work. The propaganda that accompanied the introduction of this draconian system trumpeted that two-thirds of people on benefits were fit for work. In reality the figure was more like 20% of people signed off were found fit. And the stories of the unfairness of the system even made it into the mainstream media despite their broad support for the system. Whether those 20% ever got jobs is not recorded, but they are paid a lot less and are under much greater threat of sanction than they were.

All this has been implemented during the worst recession in modern times, comparable only to the Great Depression which was characterised not by harassing the unemployed, but by job creation schemes. Something has fundamentally shifted in the intervening years.

Merchantilism.

However some of the themes have not changed. The attitude to poor people is centuries old. Feudal Lords who wanted to make peasants work hard, made it much harder for them to make a living than it needed to be. It was thought undesirable for peasants to have leisure time. So wages were held at subsistence level and peasants had to work all the hours of the day to make ends meet. This attitude carried over into the Merchantilism, the philosophical background to the British Empire. It was partly informed by Protestantism which saw idleness as a sin and hard work as a virtue. Puritans sought to embody these Protestant virtues, and when they tried to impose their views on others we called them puritanical.

Formalised in philosophy the values of the merchant class in Britain became Utilitarianism - the idea that anything only has value to the extent that we can derive utility from it, i.e. we can use it to our benefit. This applies as much to people as to things. So the value of a member of the public to the nation is only to the extent that the person provides utility through their labour. From this it is easy to rationalise, for example, the withdrawal of labour as evil and put measures in place to prevent it from happening by breaking up the power of labour unions and dividing workers through contracts that disempower them. The present government frequently sought to argue that votes were not representative because not enough of the potential voters to make a quorum. Meanwhile local government election participation fell to record lows with turnouts as small as 15% and no one challenged these results.

If the value of a member of society is limited to the work they do then by not working they show themselves to be worthless. Retirement is only justified on the basis of a lifetime of work. Meanwhile people who get rich by exploiting inequalities in Britain continue to retire earlier and earlier.

New Puritans

The Tories, with their emphasis on commerce, on hard work, and the punitive attitudes to the poor and the unproductive are very much like the Puritans. Cameron has sought to portray himself as a moral leader on a number of occasions. He is a evangelical Puritan in a mercantile habit. And the Tory government has been puritanical in it's approach to work and welfare. On the other hand they have a Laissez-faire attitude to business people and their criminal activities. Tax dodging is not something the government has put much effort or resources into. The amount of tax money the government has allowed itself to be robbed of is staggering: hundreds of millions of pounds every year. But the people with wealth are by definition good in this newly Puritanical milieu, so why would we punish the good. It is far more important to punish the unproductive than the productive, even if the impact of the former is many orders of magnitude less than the latter. The logic is deeply flawed, because the actions are based on the Neoliberal version of the Merchantilist ideology.

The modern worldview is often called Neoliberalism. It is based on the idea that absolute liberalism ought to be extended to the abstract market - the freer the market the fairer the society. Liberalism aimed at freeing human beings from unnecessary intervention in their lives by the powerful. It enacted laws giving basic rights and protections to all people. It aimed to give every child a basic education and so on. The new liberalism is in fact socially conservative. It has coincided with erosion of personal liberty, and an increase in invasive surveillance by the state - all electronic communications are routinely intercepted as we know because a few brave whistle blowers spoke out. At the same time education beyond secondary level has become a commodity. We are now seeing the universities being commodified at a much deeper level, with casualised teaching staff employed by a third party organisation (at Warwick University).

Alongside this anti-liberal tendency in Neoliberalism at a social level we have to put the fact that every experiment in freeing up markets has been an abject failure. If the global financial collapse has taught us nothing else, it is that unregulated finance is a disaster. Businesses without rules and effective oversight will work to the detriment of society and the enrichment of a very few businessmen who make comparatively little contribution to society since their wealth is held in tax havens. Centuries of general philanthropy amongst the wealthy seem to be at a end as a new spirit of greed comes over them. But where the World Bank and IMF have had a free reign they have impoverished and virtually enslaved nations through imposing massive government debts on them. Often the oversight is so minimal that government officials steal the loan money leaving peasants to pay back loans, facing generations of poverty as a result.

Tweet

From @AnnPettifor

Repeat after me (& Prof @ndrea_terzi ) Savings not a source of finance. Savings do not fund investment. Savings r consequence of investment.
— Ann Pettifor (@AnnPettifor) April 11, 2015

And this today

1. When people save in the form of a real commodity (eg corn) decision to save is a fully personal matter

2. In a monetary economy, saving is an act that reflects on others in the form of a financial claim

3. This means when we discuss financial savings we are also discussing debt: every penny saved is someone else's liability

4. In a monetary (as opposed to s non-monetary) economy each penny saved must correspond to a debt of equal size

5. In a monetary economy savings do not fund: they need to be funded

 - Andrea Terzi.

Profit From Misery

The Jubilee Debt Campaign website has a timely reminder that IMF loans are not handouts and that banks are not welfare institutions.

"Ahead of the payment of €462 million by Greece to the IMF on Thursday 9 April, figures released by the Jubilee Debt Campaign show that the IMF has made €2.5 billion of profit out of its loans to Greece since 2010."

This is why banks list loans as assets. They charge rent on the money that they lend out. And remember that the money lent is not someone's real asset or savings. That money did not exist before it was loaned to Greece.

Also the interest payments on the loan are now sucking the life out of the Greek economy. The previous Greek government committed to give their future earnings for decades to come to the IMF in exchange for this loan. They have mined their future to the extent where they hardly have one. And they were effectively bullied into this by the Europeans and the IMF. This is the biggest sub-prime mortgage scam in the world.

What's more the IMF is generating massive profits through this method. The same source says "Out of its lending to all countries in debt crisis between 2010 and 2014 the IMF has made a total profit of €8.4 billion". All those billions are coming from the poorest countries in the world. And how much do they get in aid every year? We cripple these countries and then make them dependent on aid. It's horrific.

Jubilee Debt Campaign point out that the interest rate being charged to Greece is 3.6% which is outrageous. IMF costs would be covered by just 0.9% interest.

Deleveraging is over

Anyone familiar with heterodox economics knows that, outside the mainstream, private sector debt is one of the biggest concerns. Inside the mainstream it's never talked about. Today's ONS figures on household debt make salutary reading:

For the six years of the recession households were paying down debts and increasing their debt to income ratios (deleveraging) which can not have been easy since incomes were falling with respect to prices. But in 2014 this turned around. We can see from the blue line that the debt to income ration climbed from 1998-2010 from ca. 110% to about 170%. Then for six years it dropped back to about 145%. Now the blue line is rising again, not by a huge amount, but rising.

No doubt rising housing costs have had something to do with this. The government's strategy for prosperity has been to inflate asset prices (particularly housing). CPI inflation is currently 0% while house price inflation is currently over 8%.

The problem with rising debt, which is ignored in the mainstream, is that the repayments soak up disposable income. When disposable income is no longer disposable the demand for commodities slows. Growth fuelled by rising debt is bad for the reason that we saw in 2008.

On the other hand, if the mainstream politicians want us to believe that the nation's finances should be run like a household and spending beyond our means is a disaster, then this is problematic by that criteria as well. Household debt/income is currently double government debt/GDP. The mainstream argument is that at 80% debt/GDP we need to cut spending and "live within our means" then why is the message so different for households? How can the rise in debt, caused by inflating house-prices, be a good thing if it creates an increasing household balance of payment deficit?

From whatever angle we look at it the level of household debt is extremely worrying.

Tying the Hands of Europe's Politicians.

The IDEA Economics website just tweeted Steve Keen's summary analysis of the Maastricht Treaty which covers what's wrong with the Euro-zone. It's an extreme free-market economic experiment that has gone wrong. According to Steve, the Maastricht Treaty did three things:

1. It eliminated the possibility of having an exchange rate policy, by having one currency across the entire continent.
2. It eliminated monetary policy, by handing it over to the European Central Bank, which was as inflation-obsessive as the Bundesbank used to be
3. And it eliminated fiscal policy, by saying that you couldn't have a deficit larger than 3% of GDP.

"And they thought that would end up in the best of all possible worlds because government could no longer do anything to affect the market economy. The market economy would operate perfectly. We would have continuous equilibrium and harmony in the future." - Steve Keen.

In other words the Maastricht Treaty tied the hands of all European governments, taking economic policy out of the hands of elected representatives and placing it in the hands of the hypothetical market.  Except that we know that business people are rampantly manipulating the market for their own ends, using the advantage they gain by excluding government from the discussion about how commerce operates to encourage increasing wealth inequality. It's Kafkaesque. 

How many more failed experiments do we need for mainstream economists & politicians to admit that free-market policies simply do not lead to stable, prosperous economies? 

Party Time

The 2015 UK elections are approaching and people are trying to decide who they'll vote for. One way to find out which party represents our ideas is to do a quiz. One which looks quite comprehensive is The Political Compass. The Political Compass profile of the various political parties (in several countries now) gives us a pretty good idea of where they stand.

Their research confirms my intuitions of what's happened in the UK over the last few decades. The whole country had drifted to the right and towards authoritarianism. Indeed the major parties in the last election all contested the same political-economic quadrant as this diagram of the 2010 Election shows:

For the 2015 election they show the parties present positions as these:

The LibDems have drifted back into their original lower-right quadrant. Tories are towards the right of their usual territory (probably influenced by UKIP who are the most right party - note the comparison with the BNP who are centrist-authoritarian).

The author of this blog is to the left of and on the same vertical level as the Greens. Take the Political Compass test.

Whatever Happened to the Long Boom?

Back in 1997, hip culture-tech magazine Wired (5.07) wrote an editorial piece "The Long Boom: A History of the Future, 1980 - 2020". The strapline was "We're facing 25 years of prosperity, freedom, and a better environment for the whole world. You got a problem with that?"

The article repeated the usual Neolibertarian bullshit, a lot of which can be traced back to former Goldman Sachs exec and then Secretary of the Treasury Alan Greenspan. As bullshit goes it was very persuasive and taken up and spread around by most mainstream politicians and economists.

Just 10 years later Lehman Bros collapsed because their debtors were defaulting at such a rate that their cash flow was insufficient to pay their own debt commitments. This initiated a cascade of events that led to the worst economic recession in history (arguably) which we now call the Global Financial Collapse. A few prescient economists pointed out that the high levels of personal and business debt, and the rate at which that indebtedness was increasing, would inevitably lead to disaster. But no one listened to them then and hardly anyone listens now.

If you keep borrowing, there comes a point when paying off debts soaks up all of your disposable income. And if you have a sudden need, or there is an interest rate fluctuation, or you lose your income, then you can no longer service your debts and go bankrupt. When you income is rent paid on borrowed money, as it is for all banks, and many debtors default on payments at once, then this can cause serious problems. When you over-lend to thousands of people who cannot afford to service their debts, then disaster is inevitable.

When we borrow heavily (as on average people and businesses did and are doing) then the future becomes impoverished. As individuals we can only stave off that impoverished future by tightening our belts or borrowing more, but more borrowing only undermines the future more and eventually it must collapse. Businesses can borrow and invest in growth and trade their way out of trouble as long as there is sufficient demand. But when the consumers have maxed-out their credit cards and their disposable income is paying off the interest, then cannot spend to create demand for products. This was the fatal flaw in the thinking of the Wired editorial and of all mainstream thinking about economics in the 1990s and 2000s. This still is the fatal flaw of the idea of the Long Boom - the length of it was determined by how much we could undermine our own future and have not collapse on us.  The mainstream has yet to really admit that this is what went wrong.

Governments on the other hand operate differently. Our UK government has convinced more or less everyone that the government is like an individual household, that investing is not an option and that belt tightening is the only way to balance the budget. And that balancing the budget is the only way to prosperity. Spending increases are only for the purposes of buying votes in elections (as we have seen this week). But every £ the government spends is an investment - it returns a dividend to the government in taxes (presuming the government is competent and willing to collect them). The government that builds a house provides jobs for builders (better employment figures), who spend money in shops (better retail figures) and shops buy from wholesalers and manufacturers (better manufacturing figures) and tax is extracted from each transaction. The house is sold (another wodge of tax) or rented (generating taxable income over the long term) and people living their pay for utilities. But they are also comfortably housed and create relationships with neighbours - an indefinable good. The returns for the government and by extension for society, are long term and positive. And a government can borrow the money to build the house at 0% interest over a very long term, and thus both pay off the debt and make a profit in a way that no business can do.

Our present government is systematically misrepresenting the nature of a national economy to hide ideological commitment to minimal government in the service of promoting unlimited profit making. As we have seen quite clearly in the last five years, only the wealthy benefit from this.

Looking back to the 1990s and before we were all seduced by the idea that debt was a good thing. The story of that seduction has yet, I think, to be told. My parents generation grew up knowing that debt was a bad thing. One borrowed for a house, and perhaps to invest in growing a business, but one would never borrow money for consumer goods. One saved up or went without. And this is both rational and sensible and we need to get back to this as a personal ethos. On the other hand it is madness for a government to operate this way and they need to get back to judicious investment in the economy when the private sector is unable to. The Long Boom was a Big Lie. The boom was created on the back of personal indebtedness and collapsed as the weight of debt broke our backs.

Our present government is still encouraging, still relying on, citizens to undermine their own future by borrowing to spend, in order to further enrich the wealthy. And yet, without any sense of irony, they mock the Labour Party as the party of borrow and spend. Of all the many reasons to mock the Labour Party (and there are many) it is ironic that the Tories should harp on this one.

Debt is methamphetamine. 

Banks are cooks. 

Governments are "Better call Saul".

Debt is like Meth

Debt is like methamphetamine. We can spend a lot more than we normally would, but after days of not sleeping we have to crash. Debt allows us to mine the future for wealth, to spend what we have yet to earn. Just like amphetamine allows us to continue to burn energy long after we would normally need to rest. But at some point the debt repayments soak up all of our disposable income  - either because we have too much debt or because the interest rates go up. The latter is one of the reasons that central banks around the first world are holding their interest rates at or near zero. A rise now, when households are once again accumulating debt, could precipitate another recession as people diverted spending into debt repayment. As we are accumulating debt again we'll reach this stage in any case.

Ironically governments are far better equipped for this - they borrow at very low interest rates and can print money. The government is in a reciprocal relationship with the rest of the economy. If the government tries to run a budget surplus then the rest of the economy must run a deficit to pay for it (in excess taxes). Whatever the theory, the facts is that this is how the economy works.

Debt is methamphetamine. Banks are cooks. Governments are "Better call Saul".

In this scenario the banks are drug dealers. They make money from interest payments. And as we see without external limits they will just keep on pushing debt onto anyone and everyone with no thought for the consequences. They will lie and cheat in order to keep making more money. The banks have broken bad and started cooking meth.

Banks and governments are run by the same people. The secretary of the US treasury is almost inevitably a former big finance executive (often from Goldman Sachs) and treasury execs end up working in finance where their connections make it easy for them to lobby. So the legislators and the beneficiaries of the legislation are the same execs. This means that the regulatory branch of government is hobbled. Despite massive malfeasance in the subprime mortgage scam, something that came out in the Senate investigations, the Goldman employees had magically not broken any laws. Similarly here in the UK the major banks had been manipulating world interest rates for profit for years and no one was held accountable - the firms were fined, but the people who engineered this fraud were not.

Successive governments from both left and right had removed constraints and oversight from the debt pushers to allow them to make profits unfettered. The idea was that it would make everyone wealthier. But what happens is that the top layer take their cut and don't pay any tax, and they ensure below inflation pay rises for the lower layers. So only the top layers benefit. Government ministers present and former are very much part of this layer.

Please Take This Opportunity to Vote Against the Government

Putting two and two together

On Twitter today the Office for National Statistics made two announcements with accompanying graph.

Recovery in #GDP driven largely by strong household spending http://ow.ly/JUpoP  

Close to 60% of full time employees experienced a pay cut in 2010/2011 http://ow.ly/JUoIb  

And what do these two pictures tell us? That despite falling wages, households are spending more and driving an increase in GDP. That the people benefitting from the increase in GDP are only the top 10% of earners.

So this is a clear example of a transfer of wealth from the poor to the rich. 

Something is deeply wrong with the structure of the economy of the UK (and most other places too). Households are earning less but spending more. They can only do this in two ways: by spending their savings or by increasing their debts. Neither is good for the poor. And virtually all of the economic benefit is going to those whose remuneration has consistently out-stripped inflation and all other sectors, the top 10% of earners.

The trouble we have in the UK is that no mainstream political party is against this wealth transfer any longer. Labour used to be, but New Labour embraced economic Neoliberalism and the present crop of Labour politicians have no intention of doing anything different. The left have no one to vote for anymore.

UPDATE. For those who bought the Institute for Fiscal Studies line that living standards had returned to pre-crisis levels, look at Notayesmanseconomics's Blog today

UK living-standards are not back to pre-crisis levels

Another cartoon

Cartoons

There have been some really good cartoons doing the rounds on Twitter lately.

Why the Wealthy Escape UK Tax in One Graphic

Via @simonbarrow

Tax evading criminals

stealing from the NHS 

stealing from schools 

stealing from pensioners

Merchantilism and the Vilification of the Poor

This article "Merchantilism Six Centuries of Vilifying the Poor" strikes me as extraordinarily important in understanding the attitudes of Neoliberals. I hope I will be forgiven for quoting a big chunk of the author's text.

"Mercantilism states that a country will grow richer by increasing its net exports. To achieve this goal, the original mercantilist writers recommended that wages be kept at the subsistence level, not just to minimise the direct cost of labour, but also to maximise the pressure on workers to work. They believed that workers were lazy and had to be coerced to work... It was observed that as wages increased above the subsistence level workers tended to reduce their work hours and to lower their productivity... Subsistence wages not only helped to make the workforce more productive but also helped to maintain peace and order in society. Thomas Mun’s view, written in 1664, that “penury and want do make a people wise and industrious” summed up the prevailing attitude of his day." - David Spencer 

This highlighting of the attitudes towards the poor helps to make sense of the attitudes on display on our current government. To be poor is definitely equated with being lazy in their eyes. Never mind that they have relied on inherited wealth and privileged access to get where they are; never mind that the wealth of the UK's plutocrats all traces back to exploitation of the colonies and slavery; never mind that low paid jobs often leave the worker dependent on government handouts in order to afford their rent (effectively landlords are subsidised by the government to keep rents high). Never mind that working people's jobs keep getting made redundant and that the demand for manual skill is continuing to drop leaving poor people facing mindless drudgery.

One trick that the Victorians did not have was cheap food laden with fat, sugar and salt that means that the poor are often fat and unable to think clearly. Nor did they have the ability to manipulate sources of information in the way that the media do today. The constant sense of danger and outrage cultivated by "news" outlets helps to create a sense that we need the authorities to protect us, even when it is them that oppress us. No, we don't live under Stalin or the Stasi, but the velvet collar is still a collar.

Debt Jubilee in Croatia.

The government of Croatia has stepped into help an estimated 60,000 of Croatia's poorest people. They have decided to forgive debts that have led to more than 300,000 bank accounts being blocked for non-repayment. In other words they are having a debt jubilee. The scheme has criteria:

"Their debt must be lower than 35,000 kuna ($5,100), and their monthly income should not be higher than 1,250 kuna ($138). Those applying for the scheme are not allowed to own any property or have any savings." Independent. 

 The debts are not just owed to banks, but also to utilities and other companies. In a country of 4.4 million people the targeted debt amounts to an estimated $4.11 billion.

The Inde quotes one economist as saying that businesses will think twice before lending to poor people again. And he says it as though it is a bad thing. But of course poor people are nuts to borrow money. The debt repayments become an intolerable burden and causes them on-going hardship. Making it more difficult to borrow is a good thing. So many of the recent economic problems have been caused by lending money to people (and countries) who could not afford it to service the debts.

Debt is a way of mining the future 

for wealth. But it means that 

eventually we have no future. 

The relief from debt will free up money in poor households. Instead of a large proportion of their income going to lenders, it will start going back to shops. The poor spend most of their income. The boost in retail will have a ripple effect, increasing profits, and tax revenues. As an economic stimulus package this is quite a sensible move. The effect might be quite small, but it ought to make a difference.

Greece and the Money Lie

"The German chancellor Angela Merkel has ruled out debt cuts for Greece, saying Athens had already been forgiven billions of euros by private creditors and banks." So go the headlines. The Germans are acting like they stand to lose money if Greek debts are forgiven. This is a big lie. The money loaned to Greece was created out of thin air by banks. They charge rent on that thin air, which is the only real money that changes hands.

What those banks stand to lose is not money, but a revenue stream. The Banks themselves have been bailed out to the tune of trillions of pounds resulting from massive losses caused by malpractice and malfeasance. They don't pay tax on the rent they earn and they aren't lending to local business, so none of the rent goes back into the European economy.

The whole thing is a farce. Greece is on track to become a third world country. Merkel fiddles while Europe burns. The Germans are not prudent, they are stupid. We've seen Germans blindly following an ideology before, you'd think they'd have learned their lesson. We can only hope that the new government holds its nerve and tells Merkel to get stuffed.

UPDATE. An article by Francis Coppola reinforces the point. So Whose Problem Is Greek Debt, Anyway? She says "all but about 11% of the bailout money went straight back to the holders of Greek debt by one route or another"

So the money loaned to Greece to help with its debt problem, went straight back to the lending institutions. Almost none of it went to improving the situation in Greece.

However Coppola believes that the problem is not so much the debt as the austerity requirements which make it impossible for the Greeks to pay back the loan. She also thinks that Greek debt is everyone's problem, that the new Greek government is in a much stronger position than people seem to realise, because were they to default on loan payments and exit the Euro, it would signal the end of the Euro. 

Govt Surplus

I'm reading Steve Keen in Forbes. One of the points seems to be that running a sustained government surplus means the government taking more from the public than it gives back in services. This is not even sensible Neoliberalism!

If the government sector is running a surplus then the private sector will have to operate with a deficit, either by running down sayings, or running up debt or some combination of both.

See also Savings, Debt and the Deficit.

1971 - The Beginning of the End.

I've pointed out that 1971 is the year that Nixon pulled the USA out of the Bretton Woods Agreement, marking the end of Western governments basing the economic policies on the world of Maynard Keynes, and opening the door for the rise of economic Monetarism. That year the Lewis Powell Memo outlined the Neoconservative response to the liberalisation of society during the 1960s. While it wasn't the end of liberal government in the UK and America it was the beginning of a new period of politics in which conservatives set the political tone and dominated the political debate.

One of the most vicious anti-liberal policies in the world, America's War on Drugs, was also introduced in the 1971. Our old friend Richard Nixon first used the phrase "war on drugs" in a press conference on June 18, 1971. Minimum mandatory sentences soon followed. The effect on the prison population in the US is evident in this graph that's doing the rounds on Twitter:

In the same period the population has increased from 207.7 million to 316.1 million.

The War on Drugs is estimated to cost US$51 billion per year and probably ruins more lives than drugs themselves. Just as we desperately need rational economic policies, we also need rational social policies.

I think we'll look back and see that 1971 marked the end of liberalism and the rise of Neolibertarianism - the mass of contradictions that wants markets to be free and drug users in jail.