The economists have had another terrible year. It's time for a complete re-think

Jeremy Warner in The Telegraph


This may or may not be a good time for democracy, but one thing is certain about the past year of political upsets; it’s heaped further humiliations on the economics profession.

A substantial majority of economists thought the mere act of voting for Brexit would pole-axe the economy. Not only did voters ignore these warnings, but so far the “experts” have proved almost wholly wrong.
Internationally, the story is much the same. The profound shock to global confidence anticipated by the International Monetary Fund, the OECD , Uncle Tom Cobley and all, failed to materialise; Brexit had no discernible impact on the world economy. Having cried wolf over the short term consequences, the profession should not be surprised if rather more credible warnings of pain delayed are widely disbelieved.

Similarly with Donald Trump, where the widely expected economic and market mayhem his election would supposedly unleash has so far been conspicuously absent. This collective misreading has been widely attributed to the perils of “groupthink” – where opinion hugs the consensus for fear of derision - or more conspiratorially, to vested interest and deliberately misleading intent.

But there is in fact a more prosaic explanation; that as a discipline, the dismal science has quite simply lost the plot. All over the shop, economics seems incapable of answering the great questions of our time. Are we heading for deflation or inflation? Are we locked in secular stagnation or have we finally put the financial crisis behind us?

The conceit of modern economics is that it sees itself as an evidence-based science, yet if it could ever be such a thing, it is today no nearer its goal than when Adam Smith penned the Wealth of Nations, and in some respects, a good deal less so.

In a devastating recent analysis, the American economist Paul Romer asserted that macro-economics has been going backwards for more than three decades, with economic modelling succumbing to what he has called “mathiness”, an obsession with mathematic laws and equations which bear very little relation to the real world, ignore the lessons of other disciplines and are frequently out of touch with the inherently unpredictable nature of human behaviour.

When he wrote his treatise, Adam Smith was not an economist at all, but a professor of moral philosophy, yet many economists have come to believe that they should be as divorced from moral judgement as scientists – that economics should be a technical discipline free of ethical concerns. In the battle between moralism and mechanism, mechanism won. Unlike science, however, it doesn’t appear to have delivered anything remotely useful.

Few of the profession’s more recent failings should have come as any great surprise, for they merely follow the monumental breakdown in economic analysis exposed by the financial crisis. The Queen’s faux naïve question of economists at the time – “how come nobody saw this coming” – has yet to be answered.

As Andy Haldane, chief economist at the Bank of England, pointed out in a recent lecture, economic models provided an exceptionally poor guide to economic dynamics at the time of the financial crisis. Even after the crisis erupted, the profession seemed oblivious to its likely consequences. Virtually all the economic forecasts produced in the final quarter of 2007 – that’s after the collapse of Northern Rock - were not just mildly wrong about the coming year, but spectacularly so. Few saw any possibility even of a downturn, let alone the worst recession since the 1930s.

Mainstream economic modelling failed spectacularly during the financial crisis and has largely failed since

This failing has been explained by the Nobel prize winning economist Robert Lucas thus: “The simulations were not presented as assurances that no crisis would occur, but as a forecast of what could be expected to occur conditional on a crisis not occurring”. Thanks for nothing.

A somewhat similar excuse is proffered by HM Treasury for its ill judged analysis of the short term consequences of a vote for Brexit. This was not a prediction, but a “scenario”, it is claimed, based on two assumptions that turned out to be wrong – that Article 50 would be immediately triggered, and that there would be no countervailing monetary action by the Bank of England. Yet in truth, it was always obvious both that Article 50 would not be immediately triggered, and that the Bank of England would indeed take action to support the economy.

A stone when dropped will always fall to the ground. Human behaviour is by contrast far less certain, the result of a complex series of interactions which will always be inherently unpredictable, or what Mervyn King, former Governor of the Bank of England, has called “radical uncertainty”. The trouble with much modern economic modelling is that it assumes the laws of physics can indeed be applied to economics, or that behaviour will always respond to given inputs in a particular way. Time and again this has been proved incorrect.

The risks of this serial inability to diagnose what’s happening in the economy lie not just in the social costs of extreme events, or in wrong-headed policy response to them. It has also made mainstream macro-economics the object of political derision, which is in turn undermining public trust in key aspects of institutional and policy orthodoxy, including central bank independence and inflation targeting, which by and large have served us well.

Already we see some of this backlash in Trumponomics, where established norms, evidence and constraints are rejected in favour of policy based on instinct and narrowly perceived American self interest, including protectionism. These cranky alternatives threaten even worse outcomes than the faulty economics of the past.

Mr Haldane sees some reason for hope in reformed modelling, and in particular in so-called “Agency Based Models”, which take account not just of the observable environment, but also the behaviour of other agents which interact with it. Big Data promises to give these models even better predictive qualities.

Long applied to air traffic control, disease prevention, pharmaceutical drug trials and many other practical fields, use of ABMs in macro-economics is still very recent and far from commonplace. We can but hope they represent the great leap forward proponents claim.

One notable sceptic is the economist Paul Krugman, who claims that the old models didn’t fail, or rather that his own relatively simplistic Keynesian modelling predicted almost exactly the failure in post-crisis macro-economic policy. Ah, the path not taken. The beauty of this line of argument is that we’ll never know whether a different approach would have worked better.

Whatever the answer, economists need to be far more circumspect about prediction, as well as the uses their work are put to by the political class, where there is a growing tendency to cite the “experts” who seem to support the party line as true visionaries and dismiss the ones who don’t as useless propagandists. Pick your poison.

But let’s not entirely despair; undeterred by the low regard in which the discipline is held, there are apparently more students applying to do economics at university than ever. Economics may have lost its mojo, but plainly not yet its fascination.

Is vegetarianism and veganism about animal welfare or moral superiority?

Leslie Cannold for the Ethics Centre in The Guardian

‘There is more than one way to fulfil our obligations to eliminate the unnecessary suffering of animals.’ Photograph: Wong Maye-E/AP




The western obsession with rights makes it difficult to see their limitations. We speak about rights as if they were the only moral value with meaning, ignoring other important moral values like responsibilities or duties. In fact, responsibilities are the counterparts to rights – you can’t have one without the other.

Philosopher Carl Cohen writes that, “If animals have any rights, they must have the right not to be killed to advance the interest of others.” Another way of putting this is that those who assert the rights of animals are in effect asserting – first and foremost – a right to life for all animals.

But for an animal to realise its right to life, farmers, hunters and researchers must collectively accept a duty not to kill them. Similarly, citizens, consumers and patients must refuse to eat, wear or use food, clothes and medicine that require an animal to die.

As I’ll be arguing in the IQ2 debate “Animal rights should trump human interests” in Sydney on Tuesday night, the assertion of an animal right to life is non-sensical. It would require us – just as one example – to stop animals from hunting one another, just like we stop humans from killing one another. But more importantly, it is unnecessary to achieve what is required to improve the lot of animals.

Even Peter Singer, one of the intellectual fathers of the animal rights movement, doesn’t believe animals have a right to life. In his seminal text Animal Liberation he says we must refuse to contribute to – and act to stop – the unnecessary suffering of animals.

But he does not contend that animals have a right to life or that they suffer by having their life taken from them.

Instead, what he claims is that intensively farmed animals suffer because of the cruel and tortuous ways they are made to live and are slaughtered. We have a duty to do what we can to stop this by boycotting businesses that treat animals cruelly.

Having done that, we have a choice. We can go without wearing make-up and without eating or wearing animal flesh that required the torture of animals, or we can source and buy cruelty-free cosmetics and eat and wear ethically-farmed and slaughtered animal products.

In other words, while it might have been true that when Animal Liberation was written in the 1970s, the result of a boycott was a vegetarian or vegan lifestyle, this is no longer the case. Today, there is more than one way to fulfil our obligations to eliminate the unnecessary suffering of animals.

Indeed, given clear, cross-cultural evidence that only around 1.5% of people are willing to try or stick with a vegan or vegetarian lifestyle – figures that have not changed over time – the promotion of an ethically carnivorous life is likely to be a far more effective way to reduce the suffering of animals.

To me, this is so obvious that I have to ask why in 2016 animal rights groups continue to advance vegetarian and veganism as the only legitimate way to end animal suffering. A 2014 study funded by Voiceless, found that 70% of Australians agreed that “human beings have an obligation to avoid harming all animals”. This sort of sentiment had led “substantial proportions” to buy “free range” meat and dairy and cruelty-free products. Despite this, the Humane Research Council – authors of the study – advised animal rights advocates that while they ought capitalise on “widespread support for incremental improvements” they must also continue to press people to “abstain from animal products entirely.”

Why not press people who have chosen to make a difference through buying cruelty-free products to buy more of them more often? Or to buy them exclusively? Is it possible that vegetarianism and veganism continues to be promoted as the sole way of meeting our obligations to animals not because it is, but because it makes the promoters feel morally superior?

If it were, it wouldn’t be the first time the eco-left stymied mass behaviour change with unpalatable prescriptions delivered in self-righteous tones.

Analysis has revealed that mass communications around climate change provoked feelings of powerlessness rather than a desire to act in many people. Often the wrong moral note was struck, too. Environmental activist and philosopher Sarah Bachelard wrote at the time, “There can be a tone of self-righteousness ... a kind of shrill moral indignation ... We know that we are on the side of the angels, and in our own way we can fail to do justice to the complex reality of most human action and motivation. We get something out of ‘being right’ ... (and) satisfaction from making those who do not agree with us wrong.”

The truth is that an ethically carnivorous life is possible so long as we ensure the animals we consume have lived and died without unnecessary suffering.

Do animal rights trump human interests? Not if the animal right we are talking about is a right to life, and the human interest at stake is health. But I join with most people in believing we do have an obligation to stop animal cruelty and to fulfill this duty through the choices we make about what we eat, wear and do every day.

Where Cruelty Is Kindness

Those who promoted laissez-faire economics required an explanation when the magic of the markets failed to deliver their promised utopia. Malthus gave them the answer they needed.

GEORGE MONBIOT in Outlook India

Kindness is cruelty; cruelty is kindness: this is the core belief of compassionate conservatism. If the state makes excessive provision for the poor, it traps them in a culture of dependency, destroying their self-respect, locking them into unemployment. Cuts and coercion are a moral duty, to be pursued with the holy fervour of Inquisitors overseeing an auto da fé.

This belief persists despite reams of countervailing evidence, showing that severity does nothing to cure the structural causes of unemployment. In Britain it is used to justify a £12 billion reduction of a social security system already so harsh that it drives some recipients to suicide. The belief arises from a deep and dearly-held fallacy, that has persisted for over 200 years.

Poverty was once widely understood as a social condition: it described the fate of those who did not possess property. England's Old Poor Law, introduced in 1597 and 1601, had its own cruelties, some of which were extreme. But as the US academics Fred Block and Margaret Somers explain in their fascinating book The Power of Market Fundamentalism, those who implemented it seemed to recognise that occasional unemployment was an intrinsic feature of working life.

But in 1786, as economic crises threw rising numbers onto the mercy of their parishes, the clergyman Joseph Townsend sought to recast poverty as a moral or even biological condition. "The poor know little of the motives which stimulate the higher ranks to action — pride, honour, and ambition", he argued in his Dissertation on the Poor Laws. "In general it is only hunger which can spur and goad them onto labour; yet our laws have said, they shall never hunger."

Thomas Malthus expands on this theme in his Essay on the Principle of Population, published in 1798. Poor relief, he maintained, causes poverty. It destroys the work ethic, reducing productivity. It also creates an incentive to reproduce, as payments rise with every family member. The higher the population, the hungrier the poor became: kindness resulted in cruelty.

Poverty, he argued, should be tackled through shame ("dependent poverty ought to be held disgraceful") and the withdrawal of assistance from all able-bodied workers. Nature should be allowed to take its course: if people were left to starve to death, the balance between population and food supply would be restored. Malthus ignored the means by which people limit their reproduction or increase their food supply, characterising the poor, in effect, as unthinking beasts.

His argument was highly controversial, but support grew rapidly among the propertied classes. In 1832, the franchise was extended to include more property owners: in other words, those who paid the poor rate. The poor, of course, were not entitled to vote. In the same year, the government launched a Royal Commission into the Operation of the Poor Laws.

Like Malthus, the commissioners blamed the problems of the rural poor not on structural factors but on immorality, improvidence and low productivity, all caused by the system of poor relief, which had "educated a new generation in idleness, ignorance and dishonesty". It called for the abolition of "outdoor relief" for able-bodied people. Help should be offered only in circumstances so shameful, degrading and punitive that anyone would seek to avoid them: namely the workhouse. The government responded with the 1834 Poor Law Amendment Act, which instituted, for the sake of the poor, a regime of the utmost cruelty. Destitute families were broken up and, in effect, imprisoned.

The commission was a fraud. It began with fixed conclusions and sought evidence to support them. Its interviews were conducted with like-minded members of the propertied classes, who were helped towards the right replies with leading questions. Anecdote took the place of data.

In reality, poverty in the countryside had risen as a result of structural forces over which the poor had no control. After the Napoleonic wars, the price of wheat slumped, triggering the collapse of rural banks and a severe credit crunch. Swayed by the arguments of David Ricardo, the government re-established the gold standard, that locked in austerity and aggravated hardship, much as George Osborne's legal enforcement of a permanent budget surplus will do. Threshing machines reduced the need for labour in the autumn and winter, when employment was most precarious. Cottage industries were undercut by urban factories, while enclosure prevented the poor from producing their own food.

Far from undermining employment, poor relief sustained rural workers during the winter months, ensuring that they remained available for hire when they were needed by farms in the spring and summer. By contrast to the loss of agricultural productivity that Malthus predicted and the commission reported, between 1790 and 1834 wheat production more than doubled.

As Block and Somers point out, the rise in unemployment and extreme poverty in the 1820s and 1830s represented the first great failure of Ricardian, laissez-faire economics. But Malthus's doctrines allowed this failure to be imputed to something quite different: the turpitude of the poor. Macroeconomic policy mistakes were blamed on the victims. Does that sound familiar?

This helps to explain the persistence of the fallacy. Those who promoted laissez-faire economics required an explanation when the magic of the markets failed to deliver their promised utopia. Malthus gave them the answer they needed.

And still does. People are poor and unemployed, George Osborne and Iain Duncan Smith claimed in this week's Sunday Times, because of "the damaging culture of welfare dependency". Earlier this month, Duncan Smith, in a burst of Malthusiasm, sought to restrict child benefit to two children per family, to discourage the poor from reproducing. A new analysis by the Wellcome Trust suggests that the government, which is about to place 350 psychologists in job centres, now treats unemployment as a mental health disorder.

The media's campaign of vilification associates social security with disgrace, and proposes even more humiliation, exhortation, intrusion, bullying and sanctions. This Thursday, the new household income figures are likely to show a sharp rise in child poverty, after sustained reductions under the Labour government. Doubtless the poor will be blamed for improvidence and feckless procreation, and urged to overcome their moral failings through aspiration.

For 230 years, this convenient myth has resisted all falsification. Expect that to persist.

Please, FBI, investigate the 1966 World Cup – if only to shut up Greg Dyke

Marina Hyde in The Guardian


 

‘There is a huge section of fans – and, clearly, administrators – with absolutely no idea how much England is detested within world football, nor any idea as to why.’ Illustration: Andrzej Krauze

You know when World Cups started being corrupt? 1970. And anything up to and including 1962. Between those dates, there was a brief and ineffably beautiful interregnum in the chicanery, which thereafter was never allowed to happen again. Why? Well, there was a global sense, really, that the sainted custodians of both tournament and trophy during that time were simply too exquisitely mannered, too morally faultless, too humble, too generous-spirited, too brilliant at football ever to be permitted to shame the rest of the world in this manner again.

Did you enjoy that story? If so, you may be Greg Dyke, or have suffered a recent head trauma. Either way, please seek help immediately.

The Fifa scandal erupted a mere 10 days ago, and it took barely two of those for England to make it all about itself. Ooh, you’ve no idea how they treated us during the bid process. Ooh, the main thing about this is that we should be given one of the disputed World Cups. The scale of the FBI takedown of Fifa is vast. England is like a diner in one of the ground-floor restaurants of the Towering Inferno building, wondering how what’s going on upstairs is going to affect its drinks order. Odd how they underplay the fact that England’s bid team gave the wives of the executive committee – their wives! – Mulberry handbags. This isn’t being “above” bribery. It’s being unable to get out of the group stages of bribery.

Already, culture secretary John Whittingdale has announced that England is ready to host the 2022 World Cup, should Qatar be stripped of it. Newsflash, buddy: at their current rate of acquisition of English landmarks, Qatar will already own all our major stadiums and half our infrastructure by 2022, so that’ll be just the sort of pyrrhic two-fingers in which we specialise. Yes, Qatar, you’ll know we’ve really beaten you when England lose to Paraguay in the opening match of the tournament at Liverpool’s Qatar Airways stadium (when you go down the tunnel on to the pitch there’s a spine-tingling sign that reads “THIS IS DOHA”.)

I say “we”, but there is no longer a “we” as far as the Fifa exposé goes. We had a good innings, being all in it together. People who don’t even care for football were remarking how watchable footballing arrests were. The utter insufferability of Sepp Blatter was something we could all get behind, while his victory last Friday was an election result on which we could all agree, so soon after our own one, on which we couldn’t.

But the point-missing parochialism was always in the post, and its arrival marks the end of the cross-party, cross-club, cross-everything love-in that has characterised the Fifa story.

From phone-ins to frontbenches, you now cannot move for Little Englanders telescoping world football down to their concerns. At their notional helm is FA chairman Greg Dyke, who did such a bang-up job dealing with the Hutton inquiry that he’s decided to come and bring that same grasp of nuance to what he presumably imagines to be his moment on the global stage. I suppose the best you can say is that there’s less left to damage with English football than there was with the BBC. But really, there hasn’t been a managerial double whammy like it since André Villas-Boas swept from Chelsea to Tottenham.

Historically, there have been few statements less guaranteed to fill you with confidence than “this is a matter for the FA”. Unless you count something like “this is a matter for the Jockey Club”, whose two-legged overlords were traditionally intellectually outclassed by their four-legged underlings. The competition to be the worst-run British sporting body is always hard fought, but the FA has won the title more than any of the others.

And they look to have another in the bag with their reflexive prejudging of corruption allegations, ill-advised speculation about the FBI investigation, and jingoistic bleats about how unfair it all is. It’s just a marginally more self-regarding version of throwing cafeteria furniture across a city square in a Sun-issue Tommy hat. They are naturally supported by said newspaper, whose Pooterish idea that Sepp Blatter was paying attention to what was in their leader column saw it declare in 2010: “Today the Sun makes this plea to Mr Blatter and Fifa. Don’t be put off by the BBC rehashing ancient history. Despite BBC muck-raking, the Sun trusts Fifa to put football first.”

Even our football-loving prime minister is just another Englishman whose criticism of Fifa is based solely on self-interest, as opposed to principle, and whose pettiness only serves to underscore the global perception that our position on everything is based on sour grapes. Back in 2010, he too criticised the British media for daring to investigate Fifa, while the bid team called it “unpatriotic”. Cameron has spent the past week falsifying his anti-Blatter history while failing to disguise his belief that nicking the 2018 World Cup hosting rights would be the perfect money-shot to his prime ministership.

England ready to host 2022 World Cup in place of Qatar, culture secretary says



Consider these powers the perfect spiritual leaders for a tribe whose analogue is probably those Americans who genuinely hadn’t a clue they were even disliked before 9/11. There is a huge section of fans – and, clearly, administrators – with absolutely no idea how much England is detested within world football, nor any idea as to why. And no interest in getting one.

Ideally, each and every one of them would be forced to attend a six-week residential course in which a series of instructors prepared detailed presentations on the matter, which concluded with the rhetorical inquiry: “Do you now understand why everyone thinks we’re just absolutely massive arses?”

Unfortunately, I am told that given the numbers involved this is not a scaleable solution. In which case, just for the merriment, please, please let the FBI open an investigation into how hosting rights for the 1966 World Cup were won. I don’t even care about international law any more, or the increasingly bonkers mission creep which has seen the US announce additional probes into the 2010 and 2014 World Cups, as well the 2018 and 2022 vote, and which will now clearly end in this being the US’s legal equivalent of Nam. I just want someone – anyone – to bring home the realisation that we really are the Ukip of international football. And, increasingly, of international life.

It’s divorce day – let’s bust some marriage myths

The conservative narrative baffles: how can tying the knot be both a moral choice and an insurance policy?

• 
• • Zoe Williams
  • The Guardian, Monday 5 January 2015

‘There’s nothing moral about making a promise, the moral part is in keeping it.’ Illustration by Mitch Blunt

It’s “divorce day”, the first working Monday after Christmas, customarily the busiest time of the year for family lawyers. In this age of constant contact, there’s been a modest surge in people seeking advice between Christmas and New Year, but for most, Twelfth Nisi is today (a half-pun for those who have already begun their divorce). If you’re married, there is a one in five chance you’re considering a split (according to a survey by legal firm Irwin Mitchell); it sounds improbably large, but there it is. If it’s not you, it’s probably him; check his phone, that’s how all the best divorces start.

Sir Paul Coleridge, a former high court judge, runs the Marriage Foundation, a charity that encourages getting and staying married. He told the Sunday Times, as part of a marriage-promotion drive in the lead-up to D-Day, of a case he’d seen: “She was the long-term girlfriend of a very high-profile celebrity person by whom she had had no fewer than four children. It was looking as if it was going to come unstuck, and she wanted to talk to me informally about what her position was. She said, ‘We’ll no doubt need an hour or two.’ I said, ‘We’ll need a minute or two because the answer is very simple: you have no rights.’”

Many people – in the 18-34 age group, almost half – believe that “common law” marriage actually comes with rights attached; that cohabiting couples with children have the same access to each other’s incomes, in the event of a split, as married ones do. This is untrue, though the “no ring, no rights” rallying cry of the marriage lobby is a bit of an overstatement (maintenance obligations obviously exist for the non-resident parent, whether previously married or not). This can prove disastrous for the main carer, who is unlikely to be the higher earner and, labouring under an illusion of legal protection, may have made no attempt to shield their finances from the hit of parenthood.

Family lawyers are divided on the answer – some would like to see new legislation that brings the common law into the purview of the actual law. Others, like Coleridge, see this as totally illogical; marriage, being limitless in both time and liability, is about the most profound contract a person can enter into. You can’t just slide into it, via cohabitation and parenthood; you have to enter into it willingly. His view is that marriage must be taught in schools (as a good idea, that is; I believe children already broadly know that it exists), and he’s supported in this by the Centre for Social Justice (CSJ), among others. There is something touchingly absurd about the amount of store people set by telling children things in schools – as if, when you want to alter behaviour, you simply insert a lesson and make it so. It doesn’t even work with oral hygiene.

Conservative belief in the institution of marriage runs like this: making a commitment to one another is what moral people do, and this makes marriage the most stable of all known relationships. Since stability is good for children, marriage is good for children (this mantra is given by the CSJ, especially, as something akin to gravity in its self-evidence).

Then, finally, if it all goes Pete Tong, you have the protection of the law, without which the weaker party may well end up dependent on the state. (The Sunday Times article was illustrated rather vividly by the story of a woman who, while waiting two and a half years for her husband to pay maintenance, said: “I’m pretty sure I cost the government around £400,000.”)

Few of these suppositions make much sense. There’s nothing moral about making a promise, the moral part is in keeping it, which 42% of married people don’t. Arguably, cohabiting couples are more moral than married ones, never making the promise in the first place that, most people agree and 42% prove, is rather unrealistic. In many cases, the so-called stability conferred by marriage is indistinguishable from that bestowed by wealth, which has itself become a major determinant of people’s decision to get married. But the critical contradiction, the bit I really cannot compute, is the idea of marriage as at once a moral choice and an insurance policy. It’s one or the other, surely? The abnegation of the self in the search for true togetherness, or a bid for your spouse’s income: how can it be both?

A conservative would see no contradiction, here: to have taken out the insurance policy of marriage is to have assured one’s self-sufficiency, thus protecting the state from its otherwise 400k liability (that figure does seem improbably high, but let’s go with it). Self-sufficiency is a moral act, to a conservative. In practical terms, this is nonsense; you may have left a copper-bottomed marriage, but if you weren’t rich to begin with, it is highly unlikely that your family earnings will expand to cover two households. Forty-two per cent of single parents live in poverty, 63% have no savings, 71% of all those renting are on housing benefit; so “self-sufficiency” is a byword for affluence, which then has moral superiority conferred upon it.

This is a recurring motif in the political mood music, cropping up in discussions from marriage to poverty to growth. The view from the right is that the ultimate in respectability is to need nothing from anyone: to which the left generally answers, self-sufficiency is about systems, and in the current system, it is very hard to be self-sufficient, however hard you work. But perhaps the question should be: what’s so wrong with needing one another in the first place?

Thomas Piketty's real challenge was to the FT's Rolex types

If the FT's attack on the radical economist's 'rising inequality' thesis is right, then all the gross designer bling in its How To Spend It section can be morally justified

• 
• • Paul Mason
  • The Guardian, Monday 26 May 2014 20.00 BST

The adverts in the FT and other reputable papers – mainly for large watches, first-class air travel, portable fine art etc – should be collectively retitled How To Hide It

Thomas Piketty's Capital was still No 3 on the Amazon bestseller list when the Financial Times dropped its front-page bombshell. By picking through the spreadsheets the "rock-star French economist" had placed online, the FT concluded that his key data appeared to be "constructed out of thin air".

Piketty's claim that inequality in the west has risen since the 1970s is wrong, says the FT's Chris Giles. And on this basis, Piketty's view that rising inequality is the central contradiction of capitalism, and will get worse, is also wrong.

It is always right to trawl through data. There is so much grossing and smoothing in economics, and so little of the realtime peer review that happens in science, that data should always be challengable. But the gleeful response to Piketty's "errors" on the rightwing Twittersphere did not happen because some FT pointy-heads discovered a few fat-finger inputs. It happened because, if Giles is right, then all the gross designer bling advertised in the FT's How To Spend It can be morally justified: it is evidence of rising social wealth in general, not the excess of a few Rolex types.

But the attack does not quite come off. For Sweden and France, the FT's conclusions barely diverge from Piketty's. For Britain and the US they do: the official figures capture the general curve of inequality downwards in the mid-20th century, but shatter into incoherence after 1970, failing to match Piketty's claim that wealth inequalities have increased.

There is an obvious reason for this: since time immemorial the rich have been averse to declaring their wealth. But after 1979 capitalism was restructured to promote wealth accumulation, ending the "euthanasia of the rentier" Keynes had designed into the postwar system.

Unlike income, which has been vigorously taxed since the mid-19th century and therefore recorded, personal wealth was, after 1979, the subject of a half-hearted cat-and-mouse game in which the cat and the mouse were wont to share yachting trips to the Aegean on a regular basis. That's why the work of Piketty and his collaborators had to be based on a mixture of inheritance tax data and surveys, plus a large amount of calculation.

Piketty's figures show a clear upward trend to inequality in the UK since the 70s; the FT's preferred official data dissolves into a series of squiggles that show nothing conclusive. And let's be clear why: the HMRC currently estimates that the top 10% of the population own 70% of the wealth, while the Office for National Statistics thinks they own just 44%. The discrepancy occurs because, of course, there is neither requirement nor desire to record actual market wealth at all. There are only inheritance tax returns on estates big enough to pay it.

The old Inland Revenue figures for UK wealth were so wonky that they abandoned efforts to calculate them: but in their last attempt (2005) they said that on top of £3.4tn "identified" wealth in the UK, a further £1.7tn had to be assumed that was either not declared or belonged to people who slipped through the net.

For this reason one of Piketty's key demands is the automatic sharing of bank information between states and banks. The principle is simple, he writes: "National tax authorities should receive all the information they need to calculate the net wealth of every citizen." Why that might be needed is understood if you flick through the wealth management magazines produced by the FT and other reputable papers. The adverts – mainly for large watches, first-class air travel, portable fine art, tax haven accountants and capacious luggage – deliver a clear subliminal message. They should be collectively retitled "How To Hide It".

In the end, Piketty did not claim there had been a vast increase in wealth disparities since the 1970s. Piketty's prediction is that the moderate rise in inequality under neoliberalism is set to gather pace in the 21st century, taking us back to Victorian levels by 2050. His prediction is based on simple maths: if growth is low, and the bargaining power of labour low, and the returns on capital high, then it is more logical to sit on assets and speculate rather than accumulate wealth by work, invention or entrepreneurial risk.

Piketty asks the question that mainstream economics doesn't want to answer: do we want a society based on work and ingenuity or on rent?

It's not an academic question. Figures from Lloyds Private Bank show UK asset wealth grew from £4.7tn to £7.8tn in the decade to 2013, with most of that generated by the rising value of financial portfolios, and all wealth growing faster than incomes and inflation. If Piketty's figures are wrong, the probable cause – beyond the odd transcription error – is a mild overestimation of a clear trend, generated in an attempt to uncover modern capitalism's guilty secret. If the FT's figures are wrong, it is because they rely on those of governments that have become – as Peter Mandelson once put it – "intensely relaxed about people becoming filthy rich".

But the most important question is the future: if Piketty is right then we have to "euthanase" the rentier class all over again. Only taxes on current wealth – and an end to opaque "wealth management" trails that end up in Switzerland or Cyprus – will prevent capitalism generating levels of social inequality that destroy it.

Paul Mason is economics editor at Channel 4 News and the author of Why It's Kicking Off Everywhere.

If anything's amoral in our education system, it's the state of private school elitism

Chloe Hamilton in The Independent

As a loud and proud state school alumnus, I was left in open-mouthed horror after reading the comments made by the chairman of the Independent Schools Association, which claimed state educated children leave school without a moral compass.

Apparently, my poor, harangued teachers were simply too busy teaching me, and I quote, “the basics” (we’re not too sharp, us state school kids) to spend time lecturing me on right and wrong.

Chairman Richard Walden says the sports teams and debating societies much loved by private school students ensure they leave education well-rounded individuals.

State schools, which seemingly don’t provide extra-curricular activities, are too preoccupied by league tables to provide children with the rounded and enriching education that will give them the moral compass they need for life.

There is so much wrong with Walden’s comments that I won’t spend too much time pointing out the school backgrounds of the current cabinet show state schools certainly have no cartel on the production of amoral people.

But it’s worth remembering David Cameron, Nick Clegg, George Osborne and Jeremy Hunt, to name but a few, all went through the private sector. I’ll leave you to dwell on that.

Firstly, I take issue with Walden’s suggestion that privately educated children leave school well-rounded individuals. How can a student who interacts only with people of his own class and tax bracket be considered a balanced individual?

A system which thrives on elitism cannot be relied upon to teach sound morals. State schools, populated as they are with children from every background imaginable, teach tolerance and understanding. As a result, a state school student is more likely to graduate with a proper understanding of the world around them than someone who spends years debating with fellow Tarquins and Beatrices.

Also, and this is coming from someone who studied ethics at degree level, I’m dubious about whether morals can be taught in the classroom. Morality is, in some respects, learned behaviour, picked up from parents and peers, as well as from teachers.

The day I first walked through the gates of my state primary school, I knew that pushing someone over in the playground was mean and helping someone who had been pushed over was kind. My parents, like many others before them, had instilled in me the basic principles of right and wrong before I started school.

Morals are not tangible things that can be acquired simply through study. They require practice and experience, both inside and beyond the school gates.  

But my main issue with Walden is not that he’s incorrect, but that he implies morals are things that can be bought; that students whose parents can’t afford to purchase a gold-plated moral compass for upwards of £30,000 a year will leave education amoral beasts, sent out into the world with no concept of what is right and wrong.

Just as I believe education cannot, and should not, be bought, I think putting a price on a child’s morality contradicts every decent principle we try teach them.

Private schools do not have a monopoly on morality and the notion that everything has a monetary value is what makes the sector itself so defunct of morals. 

Tony Benn knew the rules but would not play the game

His lifelong belief in socialism inspired several generations of socialists and radicals, and infuriated the establishment

• 
• • Gary Younge
  • The Guardian, Friday 14 March 2014 18.05 GMT

Tony Benn: ‘What is the final corruption in politics? Earlier, it was to get into cabinet, before that, to be popular, but later on, the final corruption is this kindly, harmless old gentleman …' Photograph: Nick Rogers/Rex

The conductor was striding through the early train from Paddington to Penzance apologising as we shuddered to a halt just east of the Tamar. "I'm sorry for the delay," he told Tony Benn, sitting opposite me. "There was a lightning strike on the line ahead."

"Lightning strike!" said Benn, assuming industrial action. "What's it about?"

"It's about God, sir," said the guard, referring to the harsh weather of the previous night, and the two men smiled at each other.

That night I stayed in Cornwall. The prospect of spending nine hours on a train in one day was too draining. Benn came straight back, arriving in Paddington around 11pm so he could be up at 6am the next day to drive to Burford to address a Levellers rally. Around the time I was ordering my second round of sandwiches from the buffet car on my way back from Cornwall, he was heading back to London from Burford to speak to a pro-Palestinian demonstration, when his car exploded on the motorway. I was 33; he was 77.

When I next saw him I suggested, in jest, that he slow down, if only to stop me looking bad. He laughed and said he planned to work right up to the end. "The last entry in my diary will be: 'St Thomas's hospital: I'm not feeling very well today'," he said. He even had plans for his gravestone. "I'd like it to say: 'Tony Benn – he encouraged us.'"

The two things that stood out, watching him both from afar from an early age and up close over those few weeks, were his optimism and his persistence. He believed that people were inherently decent and that they could work together make the world a better place – and he was prepared to join them in that work wherever they were.

This alone made him remarkable in late 20th-century British politics. He believed in something. For some this was enough: they were desperate for some ideological authenticity, for someone for whom politics was rooted not merely in a series of calculations about what was possible in any given moment but in a set of principles guiding what was necessary and desirable. Criticisms that he was divisive ring hollow unless the critics address what the divisions in question were, and how the struggle to address them panned out.

Benn stood against Labour's growing moral vacuity and a political class that was losing touch with the people it purported to represent. The escalating economic inequalities, the increasing privatisation of the National Health Service, the Iraq war and the deregulation of the finance industry that led to the economic crisis – all of which proceeded with cross-party support – leave a question mark over the value of the unity on offer. What some refuse to forgive is not so much his divisiveness as his apostasy. He was a class traitor. He would not defend the privilege into which he was born or protect the establishment of which he was a part. It was precisely because he knew the rules that he would not play the game.

He hitched these principles to Labour's wagon from an early age. Its founding mission of representing the interests of the labour movement in parliament was one he held dear. He never left it even when, particularly as he got older, it seemed to leave him. His primary loyalty was not to a party but to the causes of internationalism, solidarity and equality, which together provided the ethical compass for his political engagement. When people told him that they had ripped up their party membership cards in disgust, he would say: "That's all well and good. But what are you doing now?"

With his trademark pipe, mug of tea and cardigans, that could have left him a fossilised figure of a distant ideological era. But, contrary to popular misconceptions, his politics did evolve. He did not grow up in a time when gay rights, defending Muslims against Islamophobia, or even gender equality were central to left discourse. But when they emerged as key issues he had no trouble understanding either their value or their potential. He stood for something more than office and he didn't pander. That was why he was one of the few people to emerge from an Ali G interview with his dignity intact.

Some would regard this as evidence of naivety, bordering on delusion, that went from dangerous to endearing the older and further away from power he got. Having fought so hard in the 60s to renounce his peerage, his struggle in later life was to be elevated to the to the role of "national treasure" – like Dame Judi Dench, only without the title or an Oscar. Those who pilloried him as an extremist became eager to patronise him as eccentric. "He may have talked some blather over the years," Keith Waterhouse once wrote of him in the Daily Mail. "But it was always blather he believed in."

"That's the thing you worry about," said Benn. "What is the final corruption in politics? Earlier, it was to get into cabinet, before that, to be popular, but, later on, the final corruption is this kindly, harmless old gentleman … I'm very aware of that. I take the praise as sceptically as I took the abuse. I asked myself some time ago: what do you do when you're old? You don't whinge, you don't talk all the time about the past, you don't try and manage anything, you try and encourage people."

The devotion that has poured out for him since his passing is not simply nostalgia. The parents of many of those who embraced him in recent times – the occupiers, student activists, anti-globalisation campaigners – were barely even conscious at the height of his left turn. They are not mourning a relic of the past but an advocate for a future they believe is not only possible but necessary.

The trouble for his detractors was that Benn would not go quietly into old age. He didn't just believe in "anything": he believed in something very definite – socialism. He advocated for the weak against the strong, the poor against the rich and labour against capital. He believed that we were more effective as human beings when we worked together collectively than when we worked against each other as individuals. Such principles have long been threatened with extinction in British politics. Benn did a great deal to keep them alive. In the face of media onslaught and political marginalisation, that took courage. And, in so doing, he encouraged us.

The Murthys and the Maoists

HARISH KHARE in the hindu

  

Between the relentless demands of corporate leaders and the capacity of the underclass to match the state’s violence, India needs a vision for itself that is morally defensible.

In the first week of 2011, Prime Minister Manmohan Singh allowed himself to be persuaded to accept N.R. Narayana Murthy’s invitation to travel to Mumbai to preside over a function to give away the Infosys Social Science Prizes. The Prime Minister even agreed to attend a dinner that Mr. Murthy wanted to host in his honour after the function at the Taj Mahal Hotel. So far so good. A few days before the event, there was a massive behind-the-scenes dust up between the Prime Minister’s staff and Mr. Murthy. The rub was that Mr. Murthy thought that since he was paying for the dinner, he had a right to dictate not only the guest list but even the seating arrangement. However, there is something called protocol and the dignity of constitutional offices. If the Governor and the Chief Minister of Maharashtra were to be at the dinner, they had to necessarily be seated on either side of the Prime Minister, whereas the host thought he ought to be sitting next to Dr. Singh. Mr. Murthy, however, was not one to be so easily rebuffed. As soon as the first course was served, he sought to convert the evening into a grand intellectual conversation and proceeded to invite his son to open the bowling. And the young son wanted to know from the Prime Minister what the government proposed to do so that young men like him could come back to India.

All this is recalled because the young man is now back in India, as executive assistant to his father, who in turn has allowed himself to be persuaded to take charge of Infosys again. Nepotism, did you say? No; no sir. A private company is free to hire anyone. Fair enough, but not exactly.

Mr. Murthy is not just a private businessman, minding his own business. He has often sought to inject himself into the public domain, telling a thing or two to the political class about how to behave. He has been serenaded as an “iconic” entrepreneur. During the heyday of civil society triumphalism two years ago, there was even a suggestion that Mr. Murthy be made President of India. That was the time when India’s corporate leaders thought they had the ethical credentials to write open letters to the Prime Minister and preach virtues of good governance.

Also read 1. Just how corrupt is Britain
2. Prices, Profits and Markets
3. Dantewada and the Maoists

Like other corporate leaders, the Murthys, father and son, represent an unrepentant ideological approach to the Indian state, its morals, manners and policies and purpose, but they are not the only ones to do so. The Maoists — who once again made their presence felt last month when they massacred the Congress top political leadership in Chhattisgarh — too have a list of ideological claims of their own on the Indian state. Both groups are relentless; both are unforgiving.

The May 25 attack was the boldest ideological challenge that the Maoists have posed to the country’s political leadership. Violence makes a demand on all stakeholders. It was no surprise, then, that as soon as news trickled in of the attack on the Congress convoy in Bastar, the party’s vice-president, Rahul Gandhi, should have taken off for Raipur. It was a commendable journey of political solidarity. It would be interesting to find out if the bloody massacre in Sukma has helped Mr. Gandhi re-set his ideological compass.

Let it be recalled that this is the same Mr. Gandhi who had allowed himself to be persuaded in August 2010 to travel to the Niyamgiri Hills in Orissa, where he told the adivasis that he was their “sipahi,” or soldier in Delhi. Only two days before that visit, the Central government had pointedly withdrawn environmental permission to the Vedanta Group to mine the area for bauxite. For good measure, the young Gandhi had proclaimed that development meant that “every voice, including that of the poor and adivasis, should be heard.” It would be nice to know if Mr. Gandhi has resolved his ideological equivocations in the aftermath of the Chhattisgarh violence.

For two decades the Indian political class has gone about believing that “development” and “growth” are innocuous and painless. The prevailing orthodoxy insists that the Indian state has one and only one business: to get out of the businessman’s way. There is an unwillingness to acknowledge the basic nature of power: irrespective of its political arrangement, every society plays host to a ceaseless struggle over who gains what at whose expense. Growth and development invariably produce dislocation and dispossession. Good politics in a democratic idiom can go a long way in ameliorating the alienation and anger.

PRO-POOR INITIATIVES

The UPA’s approach has been to let the corporate marauders run amok while salving its democratic conscience with a slew of pro-poor, aam aadmi-centric initiatives. In the process, for the past nine years, the country has periodically been treated to a mock controversy over whether Sonia Gandhi’s National Advisory Council was usurping the government’s space and prerogatives, or, when this or that NAC member walks out in a huff, whether the government is not being sufficiently pro-poor. The UPA’s approach neither mollifies the corporate buccaneers nor satisfies the poor and the disadvantaged.

The corporates, however, have sized up the divided political leadership across the spectrum. They have finessed their tactics. If a government is slow to give them the policy breaks that they demand, the democratic space and its anarchic habits will be creatively used to unleash civil unrest on this or that pretext. There is always the age old anger against “corruption” to be tapped. And, as it were, one can always rely on an auditor or a judge to step in to divert attention away from corporate misdemeanours of the most serious kind.

PINCER MOVEMENT

No wonder, then, that the Indian state is caught in a pincer movement. From one side, the ideologues and practitioners of “growth” are unrelenting in their insistence that the country’s natural resources and citizens’ savings be made available to them for exploitation; and, from the other direction, the state is confronted by a vast underclass that is unwilling to see any reason to sacrifice its land and forests so that some others can enjoy the benefit of “progress.” Just as the corporates have served sufficient notice that they have no qualms in taking the state on and causing misery to its political functionaries, the underclass, too, is willing to match the state’s capacity for violence, bullet for bullet.

Both the Murthys and the Maoists are forcing the Indian state to take a stand. For too long, the Indian political leadership has refused to confront the Grand Conundrum: for whom does the state exist, whom does the state seek to reward and whom does it strive to protect against whom. The UPA leadership has neither the appetite for a brutal repression of the angry tribal, nor is it likely to be able to lure the Naxalites into a democratic engagement without a demonstrable capacity to stand up to corporate greed. A kind of alternative arrangement is already on the drawing board: the Gujarat model of no dissent, no trade unions, no civil society, no Medha Patkar, no tribal resistance, no protests.

The great sociologist, Edward Shils, once observed that every society needs grandiose visions and austere standards; the political and intellectual leadership is obliged to prod society to its own historical ideals — “elements which must be recurrently realized without even being definitively realizable, once and for all.” Perhaps we should be thankful that both the Murthys and the Maoists are inviting us to find a vision for India that is morally defensible.