Category Archives: Economics
I attended the Gandhi Foundation’s annual lecture 2017 given by the wonderful Satish Kumar who exuded light.
Satish began his talk by describing the Gandhian ideal of service. This ideal had persuaded him to leave his Jain monastery at the age of 18 and come into the world because Gandhi taught that spirituality is not found in rituals but in service. We can make our work spiritual by adopting an attitude of service e.g. a teacher serving his pupils, a doctor serving her patients, a politician serving his constituents. In this way we bring together our profession and our vocation. Earning money and making a living is fine, but if we make our work an act of service then it becomes a spiritual practice. Gandhi showed how politics can be spiritual.
The irony is that if we are just trying to looking after ourselves then we will feel miserable, whereas if we try to serve others then we will experience joy. [To quote another spiritual teacher, “if you want to be selfish be wisely selfish”]. The best way we can help ourselves is to help others.
Whereas other political ideologies such as socialism or utilitarianism just think in terms of improving human society and “the greatest good for the greatest number”, Gandhi proposed the ideal of Sarvodaya meaning ‘the upliftment of the whole’. The ‘whole’ includes all species, and all people – we need to benefit all, not just the majority.
We need to benefit all species: elephants, lions, snakes, earthworms. Satish spoke movingly about the work that earthworms perform (without wages, holidays, or going on strike!) of turning the earth, making it soft and friable. Apparently each earthworm turns 6 tons of soil in its lifetime. When Satish sees an earthworm in his garden he thanks it.
We need an economy that is based on valuing work, on growing food, on community, on crafts, on arts. The prefix ‘eco’ in economy and ecology comes from the Greek word ‘ecos’ meaning ‘house’, and their real ‘eco’ meaning is about building and respecting our abode, the earth. However, our current economic system does not do this, instead it is a ‘moneyconomy’, all about increasing the amount of money without regard for the creation of actual value. Activities such as prostitution, and police responses to terrorism all add up in the moneyconomy but they do not really add value to our abode. The true economy should measure welfare, and there is potentially no limit to this because it is a function of the human soul, individually and communally. There is no real separation between individual and community: “I am because you are”.
Most men, even in this comparatively free country, through mere ignorance and mistake, are so occupied with the factitious cares and superfluously coarse labors of life that its finer fruits cannot be plucked by them. Their fingers, from excessive toil, are too clumsy and tremble too much for that. Actually, the laboring man has not leisure for a true integrity day by day; he cannot afford to sustain the manliest relations to men; his labor would be depreciated in the market. He has no time to be anything but a machine. How can he remember well his ignorance — which his growth requires — who has so often to use his knowledge? We should feed and clothe him gratuitously sometimes, and recruit him with our cordials, before we judge of him. The finest qualities of our nature, like the bloom on fruits, can be preserved only by the most delicate handling. Yet we do not treat ourselves nor one another thus tenderly. Some of you, we all know, are poor, find it hard to live, are sometimes, as it were, gasping for breath.
Henry Thoreau, ‘Walden’
Regarding public good vs business good, Anna Minton’s book ‘Ground Control’ describes how the urban planning process has been distorted in recent years in favour of business and against the public interest. Large sections of our cities (e.g. Liverpool 1) have now been privatised in order to provide lucrative shopping environments. Undesirables (e.g. young people, old people, homeless people) are excluded through various means, such as the ASBO.
The fetishisation of the private sector knows no bounds. The current Neoliberal Party government is being warned that withdrawing investment from the public sector too quickly will deepen the recession, because the private sector is not ready to take up the slack. One reason for this is because the banks are failing to lend. The proposed solution is more ‘quantitative easing’ – increasing the money supply so that the banks have more money to lend. But the evidence so far shows that banks use any additional money in the system to fatten their own balance sheets and pay bonuses, not to lend, no matter how many times Vince Cable ticks them off.
Wouldn’t it make more sense to miss out the middle-man? If the Bank of England has money to pump into the system, the best way to bring us out of recession is to invest directly in public infrastructure projects such as schools, hospitals, and public transport. The banks don’t need to stand in the middle, taking a cut through interest payments. This model of investment is different from PFI, the Neoliberal Party’s preferred mode of infrastructure ‘investment’ since the time of John Major, but why should the private sector sit in the middle of transactions between the government and the people, syphoning off our wealth and adding no value? The banking system in this country is just an organised form of corruption, and the government is entirely complicit.
Opposition to neo-liberalism can be summarised under the heading ‘the moral economy’. In a moral economy, human beings accept moral responsibility for what happens in the economy. We stop pretending that if everyone pursues their own selfish interest an ‘invisible hand’ is going to magically bring about our collective good.
Accepting moral responsibility does not entail taking control of every aspect of the economy. We can accept that, in some areas, properly regulated markets work reasonably well. However, the provision of universal public services should not be left to the market but should be performed by the public sector. Natural resources such as oil and metals belong to us all, and should not be left to small cabals to exploit and profiteer. We need to consume only as much oil as we need to create new renewable energy systems – the rest should be left in the ground if we want to have a future.
In a moral economy we should not be afraid to make qualitative as well as quantitative judgments: just because gambling and pornography are lucrative doesn’t mean they are useful parts of the economy. There needs to be clear understanding of the relationship between business good and public good: there are areas where they overlap and areas where they are mutually exclusive. Where business goes against the public interest it should be discouraged through regulation and taxation, and in some cases banned.
Manipulative technologies such as genetic modification are too dangerous to be left in the private sector. The trivial profit motive should not be involved in decisions which affect thousands of future generations. Harvesting and enclosing genes through patents is something that the public can have no truck with – how can it ever be in our interest? Amartya Sen’s research shows that small-scale farming by peasants is the most productive use of land and resources. We can feed the world with land reform, micro-finance and education. Genetic modification is an unnecessary, greedy innovation.
Neo-liberalism is an ideological blind faith in markets. Like all dogmas or pseudo-sciences, its adherents continue to grasp at it, regardless of how many facts and events prove that markets do not work. They endlessly chant the mantra “public bad, private good”.
As Derek Wall discusses in his book ‘Beyond Babylon’ there is a range of alternatives to neo-liberalism, ranging through Keynesian, regulatory, localist, eco-feminist, socialist and anarchist approaches, to name a few. They all have positive contributions to make, and all of us need to unite to slay the neo-liberal dragon.
I watched Ken Loach debate with Michael Heseltine on Newsnight last night. Loach attacked the Thatcher government’s record on unemployment and Hezza retorted that unemployment had also been high under Labour. Loach said that he should not be associated with the Blair and Brown government, but the exchange showed how the current political system hinges on the pretence that different factions within the Neoliberal Party offer genuine choice. The message is that once you have tried another faction (to no effect) you may as well lie back and let the Tories shaft you – which is where the British public is currently at.
Unless the Greens clearly articulate the message that we oppose the single Neoliberal Party with its blue, orange and red livery we will always be squeezed at general elections. Last time the political establishment was able to trick the voters that the orange faction offered some change, next time it will be the red faction etc etc ad infinitum (but Babylon must fall!).
How can we distinguish between fatal and liberating choices? That was the question posed this week by Sheikh Aly N’Daw, head of the International Sufi School. He was speaking at his book launch in Westminster, which was hosted by Ian Stewart MP, chair of the All-Party Parliamentary Friends of Islam group. Aly N’Daw is from the Mouride school of Sufism founded by the Senegalese saint Amadou Bamba (1850-1927) who emphasised service to others as the path to God. Sheikh Aly encourages his students to study the lives of great men and women who have bridged the gap between politics and spirituality, and have demonstrated how peace within leads to peace in the world.
Sheikh Aly asked us to consider the choice that Martin Luther King made when he decided not to opt for a comfortable lifestyle in Chicago, but to take his ministry to the South and confront the spectre of racial discrimination. On the surface, it appears that Dr. King made a fatal choice, because his ministry ended with his assasination. However, in reality he made a liberating choice, because he could have suffered spiritual death by taking the easy option of remaining in Chicago, and his sacrifice contributed to the political and social liberation of millions of African-Americans.
Next we were asked to consider Muhammad Yunus, pioneer of micro-credit and founder of the Grameen Bank in Bangladesh. A professor of economics, he became disillusioned with academic life and went to live with a group of peasants. Many people would consider this a fatal choice, at least professionally, but for Muhammad Yunus it was liberating because it showed him how small sums of money loaned on trust could yield massive results if targetted at the right people, particularly women. By 2008 the Grameen Bank had loaned US$7.8 billion to the poor.
Ian Stewart MP talked about his own difficult choice, to vote for the invasion of Iraq in 2003. He explained that his motivation had been to help the Kurds and the Marsh Arabs, but now that hundreds of thousands of people had died as a result of the war, he could not be sure if he had been right. He described the whirl of conventional political life and how politicians, caught in the maelstrom, are on auto-pilot, without time or space to connect with the spiritual dimension of life. As he is not standing in the forthcoming general election, he expressed the hope that he would now have time to learn more about what Sufism describes as the spiritual heart.
The first two books in Sheikh Aly N’Daw’s series are ‘The Initiatory Way To Peace’ and ‘Liberation Therapy’. If you would like to buy a copy, please email: firstname.lastname@example.org . The International Sufi School’s next event is a conference in Edinburgh in May entitled ‘Nonviolence Within: Peace For All’ (http://www.nonviolence-edinburgh.com/)
According to Lord Griffiths, the Conservative peer and Vice-Chairman of investment bank Goldman Sachs “we have to accept that inequality is a way of achieving greater opportunity and prosperity for all”. Has he hit on a clever, counter-intuitive truth? No, he is just plain wrong.
In their book The Spirit Level, Richard Wilkinson and Kate Pickett show that practically all the problems of modern societies, from child mortality to drug addiction, mental illness to obesity, murder rates to environmental pollution, have the same root cause – inequality.
“It became clear,” according to Wilkinson, “that countries such as the US, the UK and Portugal, where the top 20% earn seven, eight or nine times more than the lowest 20%, scored noticeably higher on all social problems at every level of society than in countries such as Sweden and Japan, where the differential is only two or three times higher at the top.”
We all know that the endless pursuit of economic growth is crazy, that higher GDP is a meaningless quest that does nothing to increase our collective happiness or well-being. What Wilkinson and Pickett show is that we must measure our society’s success in terms of increasing equality, because this is the only reliable recipe for “greater opportunity and prosperity for all”.
Gandhi famously said:
“I will give you a talisman. Whenever you are in doubt, or when the self becomes too much with you, apply the following test. Recall the face of the poorest and the weakest man whom you may have seen and ask yourself if the step you contemplate is going to be of any use to him. Will he gain anything by it? Will it restore him to a control over his own life and destiny? In other words, will it lead to swaraj for the hungry and spiritually starving millions? Then you will find your doubts and your self melt away.”
Tackling poverty is essential if we are to achieve an equal and just society. So is confronting greed. Although the Labour government has taken certain steps towards reducing poverty, such as introducing family tax credits, they have done nothing to restrain the rapacious behaviour of the economic elites. Peter (now Lord) Mandelson said in 1998 “we are intensely relaxed about people getting filthy rich”. We now see the damage that this laissez-faire attitude has caused, and is still causing.
So what is the answer, redistribution of wealth? In fact the first thing we need to do is STOP redistributing wealth. The current system is set up to redistribute wealth from the poor to the rich. We see this clearly in the bailout of the banking system, where we have all dug deep into our pockets to keep the bonus culture afloat. We see it evidently in the various forms of privatisation, taking property that previously belonged to us all, and handing it to a small section of the population. We see the government choose to fund public infrastructure through expensive private finance, when it could borrow the money itself at much lower rates of interest. All of this is designed to make the taxpayer fund the profits of private corporations. It is not sour grapes to say “enough is enough”, it is a sane recognition that for as long as the ever-widening gulf of inequality in our society is allowed to grow, we will become sicker, fatter, and more likely fall victim to crime and violence.
With financial meltdown seemingly averted, eyes are now turning to the ‘real’ economy, and the question of how deep will be the global recession precipitated by the abrupt ending of cheap credit. (We should have no doubt that cheap credit is over. Banks and hedge funds are now desperately trying to ‘de-leverage’, which means holding onto all the cash they can, while unwinding their ‘positions’ funded through borrowing. Cash is king, queen, and the whole royal family.)
What exactly is the ‘real’ economy? Can we say it is the economy where we work, the economy of production, the economy of fundamentals? As discussed previously, the global financial markets are largely divorced from the real economy insofar as 80% of trades are purely ‘technical’ (e.g. arbitrage, currency speculation) while only 20% are concerned with actual ‘investment’. This is one of the reasons why Susan Strange said that money has gone “mad”.
The world’s richest and most famous fundamental investor, Warren Buffett, has also warned against the madness of a market obsessed with prices and technicalities. Following his friend Ben Graham, Buffett characterizes the market as a fellow named Mr. Market:
Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his. Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market’s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest on him. Mr. Market has another endearing characteristic: he doesn’t mind being ignored. If his quotation is uninteresting to you today he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you. (The Essays of Warren Buffett, p64)
Rather than focus on the ‘technical’ factors of market behavior, Buffett prefers to focus on the fundamental characteristics of the businesses in which he owns a stake. He wants to intimately understand their products, accounts, business models, and management. In this he follows the example of John Maynard Keynes, whom Buffett praises, quoting a letter that Keynes wrote in 1934:
As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence . . . . One’s knowledge and experience are limited and there are seldom more than two or three enterprises at any given time in which I personally feel myself entitled to put full confidence. (Essays of Warren Buffett, p82)
Although the investment philosophy of Warren Buffett compares favorably with the madness prevalent in the market, there are nevertheless many important ‘fundamentals’ which he overlooks. For example, Buffett describes Coca-Cola as a “wonderful” business (ibid. p30). This remark is very revealing about the ‘real’ economy, because the ‘real’ economy makes no distinction between those companies whose products and practices are harmful and those whose are helpful. Instead the focus is purely on the bottom line, profit and loss.
I would like to propose that we divide the ‘real’ economy into two broad categories: the productive and destructive economies. The job of investors, consumers, workers and governments should be to look beyond mere profit and loss at the actual effects which companies and their activities have on the world. We should support those which are productive, and boycott those which are destructive.
There are some companies which fall clearly into one or other of these categories, and some which are more ambiguous. Clearly we should all boycott weapons and tobacco companies, although unfortunately the British and American governments provide enormous public subsidies to weapons companies.
One ‘industry’ which is clearly destructive is gambling, yet its revenues — a frightening £55bn in the UK last year — are included in Britain’s GDP. Surely this figure should be subtracted, not added! However, the Department of Culture has gone so far as to say that it “sponsors” the gambling industry.
Government sponsorship indeed seems to be the effect of the Gambling Act 2005, which loosened the regulations applied to gambling, despite the fact that there were already 300,000 gambling addicts in this country (of whom 40% have suicidal tendencies). The act was passed in the face of a report by Professor Griffiths, professor of gambling studies at Nottingham Trent University that the effect of the bill would be to increase the number of addicts by between two and four times. As we move into recession we are likely to see gambling become more of a problem: a recent survey shows a link between gambling and urban deprivation.
The point is that notions of the ‘real’ economy are meaningless if considered in isolation from physical and mental well-being. No matter how profitable a company, if its effect is to damage well-being then its revenues and profits should not be counted as part of our national ‘product’. Instead, attempts should be made to warn people away through taxation, advertising bans, publicity compaigns, clear labelling, denial of premises and so on. This is the strategy which is now, belatedly, being pursued in the UK with regard to cigarettes. Better late than never.
After a hard day’s forage
Two bears sat together in silence
On a beautiful vista
Watching the sun go down
And feeling deeply grateful
Though after a while
A thought-provoking conversation began
Which turned to the topic of
Then one bear said,
“Did you hear about Rustam?
He has become famous
And travels from city to city
In a golden cage;
He performs to hundreds of people
Who laugh and applaud
The other bear thought for
A few seconds
Then started weeping.
(‘Two Bears’ by Hafiz, trans. Daniel Ladinsky)
To whom will we bow tomorrow? I lived in England from 2003 till 2007. During that time Iceland changed a lot. In a society that used to be almost without any class distinction, all of a sudden there was a group of extremely rich people. Private jets, Elton John and 50cent at birthday parties and so forth.
It seemed half of the population wanted to work in banks (that was the great gold cage everyone wanted to get into). I found it amazing that very few seemed to ever consider whether it was a good thing to go after as much money as you could possibly get your hands on. The people who followed that maxim were hailed as heroes, courageous vikings. I think oligarchs is the modern term.
Of course not everyone thought in this way.
What has happened now is a combination of many things. A government that hasn’t been doing its job of looking after the citizens, a lack of regulation of financial businesses, naiveity and greed. Greed is probably the biggest factor.
Many people have been warning that this might happen for some time now, both in Iceland and England. It looks as if they were hushed up (at least some reports were) so the party could go on for as long as possible. Who’s responsible for this hush up? The ones that gained from it. The 20 people or so that now are hiding outside of the country. Hanging on to their golden cages. As well as the politicians who wanted to enjoy the good times as well.
“We acted as if there was no tomorrow, so now there isn’t going to be one”
as my friend Kurt Vonnegut said when talking about the state of the planet.
The group of 20 or so people (oligarchs) who owned the lot, seem to have left the building, taking with them as much as they can save of their billions, or trillions. Sorry I’m getting quite confused with these big numbers.
This is a very sad situation. The consequences are not yet fully known. It looks very serious. It will ruin the foundations of our society and enslave future generations to a huge debt.
You have to remember there are only about 300,000 people here to pay this bill. And this bill is huge. The bank owners had set up branches all over Europe and the Icelandic government (i.e. Icelandic tax payers) is responsible for paying the deposits back to the people of these countries. That includes England.
A lot of people in Iceland have lost all their savings, including my sister, thousands of regular folks have. Old people and young who were convinced by the bankers to put their money in bonds and funds that were perfectly safe!
We have the problem with our currency as well. You can’t buy any currency now unless you’ve got a flight ticket. Icelanders abroad can’t cash any money through foreign banks. All imports have, or are about to, come to a halt. Icelandic businesses around the world have lost all credibility and have to pay cash in all transactions.
The krona has fallen to I don’t know where — no one knows now I think.
The government is desperately trying to get a huge loan from Russia. Iceland will then probably support their efforts of gaining control of the North pole and its resources. Well, I guess we will ‘support’ them on every matter and every whim. Maybe Canada would take us under its wing. Then we will of course ‘support’ them in all their actions and policies.
There is also the problem with Mr. Gordon Brown. He has used anti-terrorist legislation to freeze the assets of Icelandic banks. He declares the Icelandic state as bankrupt and so forth. Some people claim that with his remarks and actions he has ruined Kaupthing, the only bank which was still standing in Iceland. Kaupthing was the biggest Icelandic company and the loss because of this is tremendous.
The politicians all try to save their faces and keep themselves and their party number one. It’s so important to stay in power, to hold on to fame and the golden cage. The Icelandic PM and the British PM point their fingers and say to their people “Look at those islanders and see how they are treating you. But don’t worry, I’ll play tough and look after you. Just remember to vote for me in the next election.”
Our reputation has been ruined. That hurts all Icelanders deeply. Honor, reputation and independence is very important to this nation. I’m not sure if it affects the oligarchs though, they might have slightly different priorities.
I feel very sad and sick to my stomach about the way people behave. I feel for the people who are without any security now, and I feel for the people who are managing to hold on to their golden cages.
You could say that in a sense the Icelandic society has been shot right between the eyes.
It is in no way extreme to say that our independence is at stake in this situation. We might not be able to afford such a luxury any more. That breaks my heart.
I’m quite fortunate in a sense not to have any property and never to have had any. I’m also very fortunate to live among farmers and people up north who have always lived on modest means and know how to survive in this country.
This is a very basic description of the situation. The nation is in a state of shock. No one knows what will happen next. Will we have our health care, our education system and so forth?
Will we have to bow to the East or West in the future?
In her book ‘Casino Capitalism’ (1986) the respected political economist Susan Strange wrote:
“The great difference between an ordinary casino which you can go into or stay away from, and the global casino of high finance, is that in the latter we are all involuntarily engaged in the day’s play. A currency change can halve the value of a farmer’s crop before he harvests it, or drive an exporter out of business. A rise in interest rates can fatally inflate the costs of holding stocks for the shop-keeper. A takeover dictated by financial considerations can rob the factory worker of his job. From school-leavers to pensioners, what goes on in the casino in the office blocks of the big financial centres is apt to have sudden, unpredictable and unavoidable consequences for individual lives. The financial casino has everyone playing the game of Snakes and Ladders.”
Since the 1980’s, in the name of the so-called “free market”, governments around the world have made it easier for high-rollers to play in the global casino of high finance. In doing so they have argued that they are respecting the fundamental human ‘right’ to make millions, and they have claimed that the market is a force for innovation.
What we clearly understand is that there is always a trade-off between different peoples’ rights. As Susan Strange implies, the ‘right’ of certain people to play at the casino can severely impact the right of other people to eat, to afford healthcare, or to send their children to school.
There is a need to evaluate the relative importance of different people’s rights. If politics were healthy this evaluation would be performed on the basis of whose ‘right’ is more fundamental, and clearly the rights of those who wish to eat, study and get well should be considered more fundamental than the rights of those who wish to become multi-millionaires through unproductive speculation.
Unfortunately the political systems of the western democracies are not healthy. They are plagued by lobby groups representing ‘special interests’, including the financial industry which has put all of our futures in peril. They will seek to preserve their right to gamble, jeopardizing the rest of the world’s right to produce, plan, save, etc. We need to use the democratic tools at our disposal to prevent this.
The argument that deregulated financial markets are a force for innovation has been shown to be false. Their only ‘innovation’ is the creation of ever more complex financial products and derivatives, which even those who buy them fail to understand. Actual innovation, in terms of the productive ‘real’ economy, is severely stunted by these inveterate gamblers.