Tuesday, 30 June 2015

The BBC is under threat because its success challenges market ideology

Polly Toynbee in The Guardian

'The cuts are so severe that they risk sending the BBC into a downward spiral.' Illustration by Joe Magee

Groping for British emblems to bind together an ever more diverse and fissiparous society, politicians struggle to find cultural and emotional social glue. Make your own list from the Queen to Glastonbury, but overwhelmingly people put the NHS and the BBC right up there near the top, deep-dyed into British DNA.

But not this government. Whatever Conservatism once meant, it’s no longer about conserving precious things. The NHS staggers under the fragmenting Lansley act and the BBC is under more severe assault than ever before,threatened with licence fee cuts – and perilous charter renewal ahead. Is it payback time for Rupert Murdoch’s election support? According to BBC political editor Nick Robinson, Cameron on his battle-bus said of the BBC: “I’m going to close them down.” Joke or threat, it’s too close to what many in his party want to be laughed off. Many of the newer Tory MPs, Thatcher’s children, detest the very existence of the BBC – its phenomenal success an affront to market ideology.

Threats come thick and fast. John Whittingdale, newly promoted culture secretary, called the £145 licence fee “worse than the poll tax” in his former role as head of the culture select committee. Sajid Javid, the business secretary,complained this month that the licence fee was “a large amount for many families” and “needs looking at”. Other Tories shed crocodile tears for the poor who can’t afford the TV licence, calling for non-payment to be decriminalised – a compassion not shown to twice as many prosecuted for not paying council tax.

Decriminalisation would lose the BBC an estimated £200m a year – and that’s deliberate. The BBC may lose £600m if forced to carry the Department for Work and Pensions’ cost of exempting over-75s from the licence fee. And there’s a proposed five more static years to add to the current seven-year licence fee freeze.

The risk is that these become seen as “moderate” cuts, a “compromise” with the factions that want the BBC killed off. Yet they are so severe that they risk sending the BBC into a downward spiral, where fewer good programmes mean weakened public support, allowing yet more cuts. The loss of the Olympics to Eurosport from 2022, for an unaffordable £920m, is exactly what the BBC’s head of sport warned recently: as BBC income shrivels it can’t compete – and the licence fee looks less good value.

Barely a day goes by without the Mail, Telegraph and Rupert Murdoch’s papers attacking the BBC. This week’s Sunday Times had a full page of gleeful, barely veiled encouragement to the young not to pay their licence fee if they only watch catch-up TV on iPads or smartphones. It reported 150,000 more households in the past three months abandoned traditional TV and the licence fee, claiming not to watch it live. Everyone admits there’s a growing problem with attaching the licence fee to a TV set – but that’s easily fixed with a household fee or by bringing iPlayer under the licence.

Murdoch bullies ceaselessly for a subscription system, to shrink the BBC to the tiny size of America’s PBS. His paper’s poll shows apparent “waning” public support, with only 48% saying the licence fee is value for money, slightly more preferring funding by advertising. Left out was the inconvenient answer to one poll question which found only 9% want it funded by subscription. The BBC quotes 11 other polls showing that support for the licence fee at 42% is higher than for any other form of funding. What’s astonishing is that 96% of people use the BBC every week, spending an average of 18.5 hours watching, listening or online.

This week BBC Radio 4 launched its new season with a special celebration. With strong emphasis, its director general, Tony Hall, warned in a speech: “It’s something none of us should take for granted – there’s nothing else like it in the world.” He’s right, the station is the soundtrack to the nation, a never-ending conversation of remarkable intelligence and pleasure, reaching deep among Sun and Mirror readers, defying accusations that it’s a middle-class silo. By rights, this Reithian relic should have died out long ago: instead its listeners keep growing – up from 9 million a decade ago to 11 million now.

In the kitchen, in the car or out jogging with an iPod, I can’t imagine life without it. On a desert island, isn’t the entire back catalogue what you’d choose? The Now Show, More or Less, Neil Macgregor’s History of the World in a 100 Objects – only God and gardening have me reaching for the off button. Now here comes a whole day of poetry. Even the awfulness of the Archer family has me gripped.

Those 11 million Radio 4 adherents listen for an average of 12 hours a week – and each shining hour costs just 1.4p per listener. Nothing was ever such good value. The entire BBC has half the budget of Sky and a quarter of BT’s – which offer a fraction of the quantity or quality.

Choice busts out of every new provider – Amazon, Netflix and many more to come – yet the BBC, at £12 a month, dominates the British airwaves, while Sky charges an average £47.

The other line of attack will be on BBC governance – even though its every move is already over-policed by governors, trust and all the acronyms: Ofcom, NAO,PAC, DCLG, plus many parliamentary committees. From millions of BBC words, blunders and scandals are relatively few.

The BBC’s success infuriates its enemies because it defies Hayekian laws of gravity; the market ought to offer better value but it doesn’t. Attacks on BBC “bias” rain down: James Harding, head of BBC News, protested at the “hell on wheels” “ferocity” of attacks during the election – a little faux-naive, perhaps, from a former Murdoch editor who knows the agenda from the other side.

The BBC has a near impossible task in finding unbiased truths in an ideological world – and sometimes it splits the difference to stay on the safe side when forced to choose between sense and nonsense. The establishment leans heavily, the weight of an 85% Tory and europhobic press breathes hard to push it off its foothold. There is too often a blandifying of essential arguments when intimidation by bullies drains life out of reporting on the NHS, benefits, austerity or Europe.

Pinko bias is an illusion of the right – and voters gave Cameron his win. Before wielding axes, Tory MPs should think hard about constituents who spend 18.5 hours a week with the BBC – and of its place in national life as an unmatched cultural treasure.

Teaching the poor to behave

G Sampath in The Hindu

By shifting the burden of poverty alleviation from the state onto the poor themselves, behavioural economists are ignoring the structural causes of poverty. They are also erasing the behaviour of the owners of capital from the poverty debate

The World Bank’s World Development Report (WDR) 2014 was about ‘Risk and Opportunity’. The 2013 WDR is simply named ‘Jobs’. The 2012 WDR is titled ‘Gender Equality and Development’.

Other WDR themes in the recent past include ‘Agriculture for Development’ (2008), ‘Equity and Development’ (2006), and ‘Building Institutions for Markets’ (2002). They all have an overt economic dimension. Naturally — for it’s a bank, after all. But the World Bank’s 2015 WDR is titled ‘Mind, Society and Behaviour’. That’s right. Now, what would a bank — or, if you prefer, a multilateral development finance institution — want with mind, society and behaviour?

There is a two-word answer to this question: behavioural economics. In its 2015 WDR, the World Bank makes a strong pitch to governments for applying behavioural economics to development policy.

As the report notes in its opening chapter, “The analytical foundations of public policy have traditionally come from standard economic theory.” Standard economic theory assumes that individuals are rational economic agents acting in their best self-interest.

But in the real world, people often behave irrationally, and not always in their own best economic interest. For instance, they might splurge when they could save, or give excessive weight to the immediate present as opposed to the distant future.

Is poverty a mindset?

Behavioural economics uses insights from psychology, anthropology, sociology and the cognitive sciences to come up with more realistic models of how people think and make decisions. Where these decisions tend to be flawed from an economic point of view, governments can intervene with policies aimed at ‘nudging’ the targeted citizens towards the right decision.

All this seems fairly unobjectionable. However, things change when behavioural economists focus their attention exclusively on the behaviour of the poor. Till date, there is no evidence that monitoring and ‘nudging’ the behaviour of the world’s poor is a better route to alleviate poverty than, say, monitoring and ‘nudging’ the behaviour of the financial elite. Surely the latter cannot be deemed as altogether rational economic agents — not after the 2008 crisis?

The second assumption of behavioural economics — presented as a new ‘finding’ based on research, and regurgitated wholesale by the 2015 WDR — is that the poor are less intelligent than the rich. It is an obnoxious idea, and also politically incorrect. Of course, this is not stated in as many words.

The correct way to say it, then, is to state that “the context of poverty” depletes a person’s “bandwidth” — the mental resources necessary to think properly — as a result of which he or she is, well, a poor decision-maker, especially compared to those who are not in “the context of poverty”, such as the rich and the middle classes.

Lest anyone misunderstand, the authors of the report hasten to add that it’s not just the poor but anyone — even the wealthy — who, when placed in a “context” of poverty, would make wrong decisions. (For the record, it must be noted that the poor are — all else being equal — more likely to be in “the context of poverty” than the rich.)

To support these assumptions, a number of research studies are trotted out. One such study, mentioned in the report, was conducted on Indian sugarcane farmers, who typically receive their income once a year, at the time of harvest.

It was found that the farmers’ IQ was ten points lower before they received their harvest income than afterward (when they were flush with cash and were comparatively richer). So ideally, they should not take major financial decisions before harvest time. Such an insight into how poverty affects behaviour could have policy implications for, say, cash transfers — which can be timed, or made conditional, on displaying certain behaviours pre-determined by the state as ‘rational’.

The report states in all earnestness that poverty “shapes mindsets”. From here, it is a hop, skip, and jump to holding, as the leading behavioural economists of the day do, that the poor are poor because their poverty prevents them from thinking and acting in ways that can take them out of poverty.

Thus the focus as well as the burden/responsibility of poverty-alleviation would shift from the state — from macroeconomic policy, from having to provide employment, health and education — to changing the behaviour of the poor. The structural causes of poverty — rising inequality and unemployment — as well as the behaviour of the owners of capital are evicted from the poverty debate, and no longer need be the focus of public policy.

Behavioural economics

In this context, it might be pertinent to note that the rise of behavioural economics as a discipline parallels the rise of neoliberalism, starting from the 1980s and rapidly gaining respectability and funding from the 1990s. All the leading lights of the field such as Daniel Kahneman, Amos Tversky, Robert Shiller, Senthil Mullainathan, Richard Thaler and Cass Sunstein made their mark in this period, and are heavily referenced in this report.

A fundamental principle of neoliberal thought is to find market-led solutions to socio-economic problems. No matter that poverty is often a symptom of market failure. Free market ideologues attribute poverty and all socio-economic ills to market distortions caused by state interference. The economists who get to shape the World Bank’s WDRs are chosen for their ability to toe this line.

On the odd occasion that the lead author of a WDR made a bid for intellectual independence, he had to make an untimely exit. For the 2000-01 WDR, titled ‘Attacking Poverty’, the original draft prepared by the distinguished development economist Ravi Kanbur — incidentally brought in by Joseph Stiglitz — spoke of the need to build effective safety nets for the poor before the introduction of free market reforms.

Both Mr. Kanbur and Mr. Stiglitz were out of the World Bank before the report was. As the economist Robert Wade points out in an essay on this episode, titled ‘Showdown at the World Bank’, the version eventually published no longer spoke of creating prior safety nets for the poor. It instead called for putting them in place “simultaneously with labour-shedding reforms”.

The point of this detour into WDR history is that — to borrow the jargon of behavioural economics — the overarching necessity to conform to free market ideology may be said to impose a ‘cognitive tax’ on World Bank economists, as a result of which their ‘mental models’ do not permit the ‘framing’ of poverty in ways that may contradict this ideology.

The Keynesian formula of safety nets from the free market may well be permanently banished from the policy agenda. But that still leaves unresolved the problem of how to manage the social and political consequences of the widening income gap between the 1 per cent and the 99 per cent. This is critical because growing discontent could lead to political instability. After all, in order for markets to function, and commodities to flow freely and predictably, the excluded masses must be taught to behave. This is where behavioural economics comes in.

Action and behaviour

In order to change the behaviour of the poor, one must first understand it. It is this understanding that behavioural economics promises to codify into knowledge. To be sure, the WDR readily acknowledges that even the rich, the economists, and the World Bank staff themselves, might be subject to cognitive biases.

But nowhere in its 230-odd pages does the report present an instance, or even a hypothetical example, of a behavioural economics-inspired policy intervention whose target is, say, a class of billionaire investors, despite the fact that today, compared to the poor, this is a group that wields far more influence, per capita, on a nation’s economic destiny. Changing their behaviour — for instance, manipulating them into deploying their billions on productive rather than speculative investments — could generate more beneficial, and more effective, outcomes than micro-manipulating the financial decisions of a poor peasant.

A major confusion that dogs this report is the conflation of ‘action’ and ‘behaviour’. The term ‘behaviour’ comes with the baggage of the empirical sciences. It is typically used with reference to animals and objects under scientific observation. Behaviours can be studied for patterns. To the extent that human beings are also animals, they can also be said to exhibit behaviours. But what makes them human is precisely their capacity to transcend behaviour patterns — in other words, to act.

The political theorist Hannah Arendt, in The Human Condition, speaks of three kinds of human activity: labour, work and action. Of the three, what distinguishes action is its political nature. When behaviourist economics speaks of poverty as a “cognitive tax”, it writes ‘action’ — the political agency of the poor — out of the equation.

As democratic nation states reorient themselves to being accountable to global financial markets, non-democratic bodies such as the World Trade Organization, and trade agreements such as General Agreement on Tariffs and Trade and Trade in Services Agreement , they will necessarily become less responsive to the aspirations of their own citizens. With overt repression not always the most felicitous or cost-effective policy option, it has become imperative to find ways and means to ideologically tame the economically excluded. Hence the new focus on the minds and behaviour of the poor.

Behavioural economics, insofar as it is concerned with the behaviour of people in poverty — and it is this stream which dominates this year’s WDR — is simply the latest addition to the neo-liberal toolkit of political management.

Sunday, 28 June 2015

The moral crusade against Greece must be opposed

Zoe Williams in The Guardian

‘Greece is being sacrificed to maintain a set of delusions that enfeebles us all.’ Illustration by Robert G Fresson

‘This is our political alternative to neoliberalism and to the neoliberal process of European integration: democracy, more democracy and even deeper democracy,” said Alexis Tsipras on 18 January 2014 in a debate organised by the Dutch Socialist party in Amersfoort. Now the moment of deepest democracy looms, as the Greek people go to the polls on Sunday to vote for or against the next round of austerity.

Unfortunately, Sunday’s choice will be between endless austerity and immediate chaos. As comfortable as it is to argue from the sidelines that maybe Grexit in the medium term won’t hurt as much as 30 years’ drag on GDP from swingeing repayments, no sane person wants either. The vision that Syriza swept to power on was that if you spoke truth to the troika plainly and in broad daylight, they would have to acknowledge that austerity was suffocating Greece. 

They have acknowledged no such thing. Whatever else one could say about the handling of the crisis, and whatever becomes of the euro, Sunday will be the moment that unstoppable democracy meets immovable supra-democracy. The Eurogroup has already won: the Greek people can vote any way they like – but what they want, they cannot have.

On Saturday the Eurogroup broke with its tradition of unanimity, issuing a petulant statement “supported by all members except the Greek member”. Yanis Varoufakis, the Greek finance minister, sought legal advice on whether the group was allowed to exclude him, and received the extraordinary reply: “The Eurogroup is an informal group. Thus it is not bound by treaties or written regulations. While unanimity is conventionally adhered to, the Eurogroup president is not bound to explicit rules.” Or, to put it another way: “We never had any accountability in the first place, sucker.”

More striking still is this line of the statement: “The Eurogroup has been open until the very last moment to further support the Greek people through a continued growth-oriented programme.” The measures enforced by the troika have created an economic contraction akin to that caused by war. With unemployment at 25% and youth unemployment at nearly half, 40% of children now live below the poverty line. The latest offer to Greece promises more of the same. The idea that any of this is oriented towards growth is demonstrably false. The Eurogroup president, Jeroen Dijsselbloem, has started to assert that black is white.

And that brings us to the crux of the troika’s programme: what is the point of reducing this country to rubble? The stated intention at the start of the austerity package was to restore order: allow Greece to take a short hit to its GDP in the interests of building a stronger, more balanced economy in the long run. As it became clear that growth was not restored and that even on its own terms – the creditor must come first – the plan was failing, the line changed. It became a moral crusade, a collective punishment of the Greeks.

In 2012 the head of the IMF, Christine Lagarde, said in an interview with this newspaper, “Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax. And I think they should also help themselves collectively.” How? “By all paying their tax.” At the time, it sounded strange: how, in a country of cripplingly high unemployment, with whole families living off the depleted income of one pensioner, was the answer going to come from tax?

She was offering not a solution but a narrative: the Greeks were in this situation because they were bad people. They wanted a beneficent state, but they didn’t want to pool their resources to create one. The IMF was merely the instrument of a discipline they dearly needed. This line has broadly held – the debtors are presented as morally weaker than the creditors. To give them any concessions would be to reward their laziness and selfishness. The fact that debt is a two-way street – that the returns on debt exist because of the risk that the money might be lost, and creditors have their own moral duty to accept losses when they arise – is erased by this telling of the events.

Also airbrushed out of that story is what the late economist Wynne Godley called (in 1992!) the “lacuna in the Maastricht programme”: that while its single-currency proposal made provision for a central bank, it had nothing to say on the matter of what would replace the democratic institutions – the national governments whose power, once they had no control over their own currency, would be limited. Now we have our answer: the strongest takes control. At the moment, Germany knows best. How do we know they know best? Because they are the richest. The euro was founded on the idea that the control of currency was apolitical. It has destroyed that myth, and taken democracy down with it.

These talks did not fail by accident. The Greeks have to be humiliated, because the alternative – of treating them as equal parties or “adults”, as Lagarde wished them to be – would lead to a debate about the Eurogroup: what its foundations are, what accountability would look like, and what its democratic levers are – if indeed it has any. Solidarity with Greece means everyone, in and outside the single currency, forcing this conversation: the country is being sacrificed to maintain a set of delusions that enfeebles us all.

Greece crisis could be a Sarajevo moment for the eurozone

Franz Ferdinand Archduke of Austria and his wife Sophie, Duchess of Hohenberg moments before they were assassinated in Sarajevo on 28 June 1914. Photograph: Design Pics Inc/Rex/Design Pics Inc/Rex

Larry Elliott in The Guardian

Sunday 28 June 2015 19.15 BST

 A hundred and one years ago on Sunday, gun shots rang out in a city in southern Europe. Few at the time paid much heed to the assassination of Archduke Franz Ferdinand and his wife as they drove through the streets of Sarajevo. Within six weeks, however, Europe was at war.

Make no mistake, the decision by Alexis Tsipras to hold a referendum on the bailout terms being demanded of his country has the potential to be a Sarajevo moment. The crisis is not just about whether there is soon to be a bank run in Greece, although there is certainly the threat of one. It is not just about whether the creditors overplayed their hand in the negotiations, although they did. It is about the future of the euro itself.

Greek banks to stay closed on Monday

There will be much talk in the next few days about how Greece can be quarantined. The three people who have been leading the negotiations for the troika - Christine Lagarde of the International Monetary Fund, Jean-Claude Juncker of the European commission and Mario Draghi of the European Central Bank - can still cling to the hope that Tsipras will lose the referendum next Sunday.

In those circumstances, the Syriza-led coalition would have little choice but to hold an election. The return of a government headed by, for example, the centre-right New Democracy, would open up the possibility that Athens would sue for peace on the terms demanded by the troika.

There is, however, no guarantee of this. The troika was certain last week that Tsipras would fold when presented with a final take-it-or-leave-it offer. They were wrong. The Fund, the ECB and the European commission made a fatal misjudgement and have now lost control of events.

The immediate decision for the ECB was whether to cut off emergency funding before the country’s bailout programme formally ends on Tuesday. Wisely, it has chosen not to make matters worse.

In recent weeks, the Greek banks have only been able to stay open because Draghi has provided funds to compensate for capital flight. Sunday night’s announcement of an emergency bank holiday and capital controls demonstrates just how critical the situation has become.

Germany strongly supports the immediate end to emergency liquidity assistance (ELA), arguing that taxpayers in the rest of Europe should not be further exposed to the risk of a Greek exit from the single currency. The ECB, however, has always been reluctant to take what would clearly be a political decision to escalate the pressure on the Greek banks, and has announced that it will continue providing funding at last week’s level.

Greece crisis: a disaster for Athens and a colossal failure for the EU

Even so, Greece now faces a week of turmoil. Tsipras bowed what seemed to be inevitable on Sunday by announcing controls to try to prevent Northern Rock-style queues outside the banks and - just as importantly - money leaving the country.

The Greek government will also be making contingency plans for exit from the single currency. Tsipras and Yannis Varoufakis, his finance minister, say that is not their wish or intention, but if the result of the referendum backs the government’s stance it is hard to see any alternative. Cyprus stayed in the euro after introducing capital controls, but it was done with the approval of other single currency members and involved knuckling down under an austerity programme.

In the meantime, the blame game has begun. The creditors say they offered Greece a deal that would have secured future financing in return for reforms and budget savings which would have hastened the country’s economic recovery. Lagarde has said there is now nothing on the table and that Greece should not expect the same terms to be available after the referendum.

Tsipras said the troika was proposing an “extortionate ultimatum” of “strict and humiliating austerity without end”. A spokesman for Varoufakis said the referendum meant the end to five years of “waterboarding”.

The stance taken by the troika has been wrong-headed but inevitable. Greece has seen its economy shrink by 25% in the past five years. A quarter of its population is unemployed. It has suffered a slump of Great Depression proportions, yet the troika has been demanding fresh tax increases that will suck demand from the economy, stifle growth and add to Greece’s debt burden.

If Greece were outside the euro, IMF advice would be different. The fund would be telling Greece to devalue its currency. It would be telling the country’s creditors that they would have to take a “haircut” in order to make Greece’s debts sustainable. It would then justify domestic austerity on the grounds that the benefits of the devaluation should not be frittered away in higher inflation.

The Greeks for whom all the talk means nothing – because they have nothing

This option, though, has not been made available to Greece. It is unable to devalue and European governments are resistant to the idea of a debt write-down. So the only way Greece can make itself more competitive is to cut costs, by reducing wages and pensions.

A fully fledged monetary union has the means to transfer resources from one region to another. This is what happens in the US or the UK, for example, with higher taxes in areas that are doing well being redistributed to areas with slower growth and higher unemployment.

The euro, however, was constructed along different lines. Countries were allowed to join even though it was clear they would struggle to compete with the better performing nations such as Germany. A stability and growth pact designed to ensure a common set of budget controls was a poor substitute for fiscal union. From the start, it was obvious that the only mechanism for a country that ran into severe difficulties would be harsh austerity. Greece is the result of what happens when politics is allowed to override economics.

If Greece leaves, the idea that the euro is irrevocable is broken. Any government that runs into difficulties in the future will have the Greek option of devaluation as an alternative to endless austerity. Just as importantly, the financial markets will know that, and will pile pressure on countries that look vulnerable. That’s why Greece represents an existential crisis for the eurozone.

It will be said in response that Greece is a small, insignificant country and that the single currency has much better defences than it had at the last moment of acute trouble in the summer of 2012. Diplomats in Europe’s capitals took very much the same view in late June 1914.