The magic money tree does exist, according to modern monetary theory

Youssef El-Gingihy in The Independent


After seven years of austerity, we are accustomed to thinking of the economy as a household with the nation’s credit card maxed out, to paraphrase David Cameron. The fetishisation of debt translated into massive cuts to UK spending on public services. At the same time, there remains widespread public anger that the big banks continued to make record profits and bonuses in spite of George Osborne’s assurances that we would all be in it together.

That was then though. Both Cameron and Osborne have since departed. This year, the political climate turned on its axis. The Conservative majority of 2015 gave way to a hung parliament with 40 per cent of voters opting for Corbyn’s Labour. The electorate’s acceptance of austerity mantras had evidently reached its limit.

Against this backdrop, the publication of Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal Worldcould not be more timely. It is written by 65-year-old Australian heterodox economist William Mitchell and the journalist and author Thomas Fazi. The book’s introduction is topically titled “Make the Left Great Again”; a sentiment that will no doubt chime with many progressives.

It diagnoses that neoliberalism was not just a right-wing Thatcherite-Reaganite prospectus. The centre-left, as embodied by Mitterrand’s socialists in France, Blair’s New Labour and the Democratic Party in the US, was complicit in its imposition. This consensus culminated in the decimation of manufacturing, decline of union membership, the expansion of financial services, wage flattening, falling living standards and the privatisation of public services. At the heart of neoliberalism was the assertion that the free market is the supreme arbiter with the economy managed by technocratic expertise. The flip side of this depoliticisation resulted in ordinary people becoming alienated and disillusioned with the social democratic parties that formerly represented them. Instead they turned to anti-establishment (usually hard right) parties.

Margaret Thatcher and Tony Blair both knelt at the altar of neoliberalism (AFP/Getty)

Furthermore, Mitchell and Fazi point out that the notion that neoliberalism is anti-state is a misconception. In fact, the state has been essential to the neoliberal project as became evident in the aftermath of the 2008 financial crisis. The state is not only required to bail out corporations and banks but to create new markets and in an authoritarian mould to police its citizens. However, Mitchell and Fazi intend to reclaim national sovereignty as part of a 21st century progressive vision. This is where modern monetary theory (MMT) comes in.

Bill Mitchell is one of its key proponents. MMT is one of those Alice in Wonderland, down the wormhole kind of concepts that neutralises every received wisdom – from that childhood conversation when your father sat you down to explain banks using saving deposits to invest in other businesses right up to politicians telling us that the UK is broke. In other words, prepare to be blown away and forget what you think you knew about money.

MMT essentially proposes that money is created ex nihilo or out of nothing. Whether it is private banks, central banks or governments, money is an abstract concept of ones and zeros. Thus, when your bank lends you a mortgage, it essentially creates money by typing it up on a computer. Similarly, the government has the power to create “fiat money” – that is money established by government regulation or law as opposed to currencies with intrinsic value, such as gold.

In effect, the usual dictum of “tax and spend” is inverted to “spend and tax” with spending stimulating jobs and growth, which can later be taxed. Taxation is not therefore a way of raising revenue but a tool for either controlling the money supply or shaping policy through incentives. Of course, it is much more complicated than that as certain conditions must be met. Public spending cannot be unlimited and must be commensurate to the capacity of the economy amongst other things in order to avoid hyper-inflation.

Ecomomist William Mitchell argues that the notion that neoliberalism is anti-state is a misconception

Both authors have been on a global book tour taking in the US and Europe. In London, Mitchell and Fazi gave their talk at the Newington Green Unitarian Church – one of Britain’s oldest nonconformist churches. Mary Wollstonecraft was the most famous member of its congregation and was inspired by the sermons of the radical minister Dr Richard Price in her thinking on the new French republic and the rights of women.

The setting is certainly suitable for the preaching of a heretical doctrine. In fact, I am reminded that it is the 500th anniversary of Martin Luther pinning his 95 theses to the door of a Wittgenstein church. The parallels are hard to overlook; then as now Europe was in crisis with Britain exiting the established order.

Huddled on a church pew for the interview, I ask Mitchell what exactly is MMT? He answers that it is “a lens through which we can understand the monetary system”. Remarkably, the elemental question – where does money come from? – does not have a settled answer amongst economists, experts and policy makers. Organisations such as Positive Money have already embarked on the process of demystifying money creation. I am reminded of the chapter “The Great Money Trick” in Robert Tressell’s The Ragged-Trousered Philanthropists in which loaves of bread are used to illustrate how the concept of money and surplus value (profit) guarantees perpetual penury for the working class and concentration of wealth for the ruling class.

So how might all of this play out post-Brexit? Mitchell and Fazi seem to be making the progressive argument for Brexit (nicknamed Lexit). This is in keeping with the old-left position that the EU does not represent genuine international solidarity. They acknowledge that it is difficult to make progressive arguments for sovereignty as nationalism has been condemned to a default reactionary position.

John McDonnell and Jeremy Corbyn have pledged to take private finance initiative contracts back into public hands, but how would financing of infrastructure work under a Corbyn government? (Getty)

Yet polling demonstrates that sovereignty was the most common reason for people voting Brexit. Mitchell and Fazi reformulate a progressive definition of sovereignty as having democratic control over the economy rather than simply within ethno-nationalist parameters. According to Mitchell, sovereignty is absolutely fundamental in order for countries to exercise power over their money creation. As long as a country has its own central bank and currency then it is free to spend. While Greece, bound by the constraints of the European Central Bank and the euro, does not have this freedom. After the talk, Mitchell tells me that sovereignty entails having a currency issuing monopoly: “The reality is that national governments are the monopoly issuers of their own currency.”

Mitchell also debunks the idea that governments borrow money from international markets and with it the notion that they are hostage to the market. He has recently written a blog on how Corbyn should not be afraid of global markets. Mitchell cites the 2001 Argentinian debt default as demonstrating that a country can get away with it and recover. Similarly, Iceland imposed capital controls (measures to regulate capital flows in and out of a country) in order to steer the economy through rough waters after its banking system crashed.

In the same vein, Mitchell proposes that governments do not use bonds and gilts to raise revenue. He cites a previous Australian Conservative administration issuing debt when they were running surpluses as an example of the use of bonds as corporate welfare thus “exposing the game”.

At the recent Labour conference, Shadow Chancellor John McDonnell stated that Labour would take private finance initiative (PFI) contracts back into public hands. So how would financing of infrastructure work under a Corbyn government? At the start of the year, this question might have appeared absurd yet only this month The New York Times published an op-ed piece titled “Get ready for Prime Minister Corbyn”.

Milton Friedman said money supply must be controlled in order to limit inflation, so government debt must be prioritised

Here is where quantitative easing (QE) comes in. QE was intended to stimulate bank lending in the aftermath of the financial crisis. However, growth levels have remained stagnant in Britain and Europe. In reality, the banks simply said thank you for the free lunch and used QE to restore their balance sheets. Studies have shown that much of QE ended up contributing to stock market and property bubbles.

Economist Richard Murphy – whose work has focused on tax avoidance and the offshore world – proposed what came to be termed “people’s QE”. For a while, this was a central tenet of the Corbynomics programme. Murphy’s basic idea was that if QE could be used for the banking system, then why not use it to build new homes or create climate jobs? As long as sufficient value was created then the nemesis of hyper-inflation could be avoided.

It therefore appears that Theresa May’s oft-repeated refrain attacking Corbyn on the grounds that there is no such thing as a magic money tree is not exactly true. So if money can basically be created with the press of a button, then suddenly our world appears to be (pacePanglossian disciples) the craziest of all possible worlds.

At this point, you might understandably be asking why on earth we do not just spend our way out of the current mess. And while we are it – give the NHS more money, shelter the homeless and feed the poor of the world. This is where we come up against the ideological edifice of neoliberalism.

Monetarist doctrine states – as per the Chicago School’s Milton Friedman – that the money supply must be controlled in order to limit inflation. Thus, government debt must be prioritised. The Maastricht treaty, which founded the EU, stipulated limits on public spending. Greece is the textbook example of austerity in which debt repayments are prioritised in order to appease creditors (mainly banking institutions).

Banks used quantitative easing to restore their balance sheets (Getty)

However, even mainstream economists feel that the logic of austerity is somewhat fallacious. Keynesian economics posits that public spending stimulates growth with debt as a secondary consideration. As the New Economics Foundation think tank points out, Britain has historically seen much higher levels of public debt. The debt/GDP ratio was higher during a whole century between 1750 and 1850 (at the time of the Napoleonic wars and the height of Britain’s imperial glory) as well as in the aftermath of the Second World War when the welfare state was created.

While a landmark 2014 study demonstrated that the UK coalition government’s welfare changes enabled tax cuts for the wealthiest thus cancelling out any impact on the deficit. Former Greek finance minister Yanis Varoufakis has also argued that the austerity strategy applied to Greek debt has been extremely counterproductive. The combination of bailouts with cuts has depressed the economy resulting in an increase of the debt (as a percentage of GDP).

The ascendancy of neoliberalism was such that its ideology became an all-pervasive atmosphere. During the event, Mitchell asks how many in the audience have heard of the Powell memorandum. Only a couple of hands go up. Lewis Powell was an American lawyer – later appointed as a Supreme Court justice by Richard Nixon – now indelibly associated with his eponymous 1971 memorandum. This outlined a blueprint for the American conservative movement and the network of think tanks funded by business interests. It recommended that the business class should close ranks in order to present a united front. It also stipulated that lobbyists would be needed to influence policy makers and legislators. And it suggested that infiltration of the media and academia would be necessary in order to achieve the goals of unshackling free enterprise from government interference.

So what would happen if governments followed through on the logic of MMT? Well for a start the Goldman Sachs, JPMorgans and HSBCs of this world would not be as rich or powerful and in the worst-case scenario they might even cease to have any purpose. A recent comprehensive survey from the pro-market Legatum Institute confirms that significant majorities of the British public are in favour of renationalisation of utilities and railways. The public is equally split on nationalisation of the banks with 50 per cent in favour. Corbyn and McDonnell have proposed a national investment bank with a network of regional banks in order to help rebalance the economy and encourage lending.

Whether or not one accepts MMT, it is increasingly apparent that public and democratic oversight of finance and money is becoming a central pillar of progressive postcapitalism alongside public control of public services, a green economy, full automation and the four-day week.

The Corbyn Effect

Part 1 Andrew Murray interviewed byTariq Ali

Part 2

The End of Enlightenment?

Pervez Hoodbhoy in The Dawn

I was invited to lecture on ‘Life, Liberty and the Pursuit of Happiness in the Age of Global Terrorism’ at Missouri State University. Missouri is Trump country — he had a 70 per cent majority there. Some essential points are excerpted below.

The first seven words of the title belong to the 1776 Declaration of Independence from Britain: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness.”

America’s founding fathers derived these ideas of equalitarianism from Europe’s then-bubbling cauldron of the European Enlightenment. Thomas Jefferson’s phrase “all men are created equal” is perhaps one of the best-known and profound sentences in the English language.

But truths once self-evident to Americans are no more evident to very many today. They elected a president who sees differences between men as more important than their equality. Had America’s judiciary not struck down his executive order banning Muslims from setting foot on America’s soil, I could not have delivered the lecture. Europe — from where the Enlightenment sprang — is witnessing the emergence of exclusionists like Marie Le Pen and Geert Wilders. This phenomenon begs an understanding.

Some blame this on terrorist acts perpetrated by certain Muslims. Indeed one must not dismiss the importance of fear. Terrorism terrifies. Crazed fanatics piloting airliners into skyscrapers or driving trucks into holiday crowds scare everyone out of their wits. But how seriously should one take this threat, and where did these monsters come from?

Truthfully, we all stand guilty. All scriptures contain a radical strain but whether or not that tendency gets developed and amplified depends on political circumstances. A significant part of today’s organised terrorist groups — though by no means all — originate from the actions of the US and its allies. There would be no Taliban or Al Qaeda but for Ronald Reagan’s obsession with the ‘Evil Empire’, and no IS but for George W. Bush’s criminal invasion of Iraq.
Even so, terrorists — unless they somehow seize nuclear weapons — are not an existential threat to humanity. The number of victims of terrorism is small compared to wars, traffic accidents, killings by deranged individuals, etc. Terrorism alone does not explain why the US is drifting away from its wonderful Enlightenment ideals.

Among the real reasons is growing economic inequality. To profess equality of humans is one thing, to enforce and protect this principle is yet another. When differences of wealth and power become astronomically large, grand assertions lose meaning.

Example: A popular — but absurd — Urdu couplet tells of Mahmood (sultan) and Ayyaz (slave) magically becoming equals as they pray side by side. But could King Salman al-Saud — just back after traveling to Indonesia with 505 tons of expensive luggage — and a Javanese Muslim peasant become equals even if that poor chap somehow got within praying distance alongside the monarch?

The US is faced with an equally absurd situation. Extreme income inequality is imperiling its future, and a decent life for citizens is ever harder to achieve. American CEOs draw seven-digit salaries, workers just five-digit ones. University education is increasingly restricted to richer sections of society. Forty-eight years ago in Boston I could do a weekly average of 20 hours of menial labour and cover nearly half of my university education. Today the same number of hours would not pay for even an eighth.

The upsurge of angry populism is actually fuelled not by terrorism but by America’s losing out in the global race. This is the conclusion reached by a global investment firm (GMO) which recently carried out an extensive data-driven study of this phenomenon. The report details how neoliberal economic policies are leading the US towards disaster.

Arising in the 1970s, neoliberalism has four key economic signatures: the abandonment of full employment as a desirable policy goal and its replacement with inflation targeting; an increase in the globalisation of the flows of people, capital, and trade; a focus at a firm level on shareholder value maximisation rather than reinvestment and growth; and the pursuit of flexible labour markets and the disruption of trade unions and workers organisations.

The upshot: the US has increasingly become a winner-take-all society. According to Forbes, the combined net worth of the 2016 class of the 400 richest Americans is $2.4 trillion, up from $2tr in 2013. The New York Times reported that the richest 1pc in the United States now own more wealth than the bottom 90pc. An angry populace is vulnerable to hate-spouting demagogues who blame everyone — Chinese, Mexicans, and Muslims.

This is only going to get worse because the days of American hegemony are gone, as is its absolute dominance of the world’s economy. When crises threaten, people everywhere tend to retreat into their comfort zones. Resurgent tribalism, aggressive nationalism, and religious fundamentalism become more attractive. But these can only provide solace, not solutions.

It would be tragic if the US were to fail its own constitution. Many countries are not even formally committed to accepting the equality of their citizens, and many more sharply discriminate between them even while professing not to. Pakistan’s constitution explicitly distinguishes between Muslim and non-Muslim, Iran officially espouses vilayat-i-faqih (guardianship of Islamic jurists), Saudi Arabia prohibits all places of worship on its soil except mosques. Although Israel lacks a constitution because of a conflict between its religious and secular forces, legally, as well as in practice, it privileges Jews over non-Jews. And India, which was once committed to secularism, is now turning into a state for Hindus run by Hindus.

How can the future of humanity be protected against this return to primitivism? No magical force drives history; there is only human agency. We must therefore educate ourselves into rising above accidents of birth, think critically, examine facts before forming opinions, keep widening the scope of our knowledge and, above all, act compassionately. To fight for universal humanism, world citizenship, and for the Enlightenment spirit is the only option for a world where boundaries are increasingly irrelevant.

Neoliberalism: the deep story that lies beneath Donald Trump’s triumph

George Monbiot in The Guardian

The events that led to Donald Trump’s election started in England in 1975. At a meeting a few months after Margaret Thatcher became leader of the Conservative party, one of her colleagues, or so the story goes, was explaining what he saw as the core beliefs of conservatism. She snapped open her handbag, pulled out a dog-eared book, and slammed it on the table. “This is what we believe,” she said. A political revolution that would sweep the world had begun.

The book was The Constitution of Liberty by Frederick Hayek. Its publication, in 1960, marked the transition from an honest, if extreme, philosophy to an outright racket. The philosophy was called neoliberalism. It saw competition as the defining characteristic of human relations. The market would discover a natural hierarchy of winners and losers, creating a more efficient system than could ever be devised through planning or by design. Anything that impeded this process, such as significant tax, regulation, trade union activity or state provision, was counter-productive. Unrestricted entrepreneurs would create the wealth that would trickle down to everyone.

This, at any rate, is how it was originally conceived. But by the time Hayek came to write The Constitution of Liberty, the network of lobbyists and thinkers he had founded was being lavishly funded by multimillionaires who saw the doctrine as a means of defending themselves against democracy. Not every aspect of the neoliberal programme advanced their interests. Hayek, it seems, set out to close the gap.

He begins the book by advancing the narrowest possible conception of liberty: an absence of coercion. He rejects such notions as political freedom, universal rights, human equality and the distribution of wealth, all of which, by restricting the behaviour of the wealthy and powerful, intrude on the absolute freedom from coercion he demands.

Democracy, by contrast, “is not an ultimate or absolute value”. In fact, liberty depends on preventing the majority from exercising choice over the direction that politics and society might take.

He justifies this position by creating a heroic narrative of extreme wealth. He conflates the economic elite, spending their money in new ways, with philosophical and scientific pioneers. Just as the political philosopher should be free to think the unthinkable, so the very rich should be free to do the undoable, without constraint by public interest or public opinion.

The ultra rich are “scouts”, “experimenting with new styles of living”, who blaze the trails that the rest of society will follow. The progress of society depends on the liberty of these “independents” to gain as much money as they want and spend it how they wish. All that is good and useful, therefore, arises from inequality. There should be no connection between merit and reward, no distinction made between earned and unearned income, and no limit to the rents they can charge.

Inherited wealth is more socially useful than earned wealth: “the idle rich”, who don’t have to work for their money, can devote themselves to influencing “fields of thought and opinion, of tastes and beliefs.” Even when they seem to be spending money on nothing but “aimless display”, they are in fact acting as society’s vanguard.

Hayek softened his opposition to monopolies and hardened his opposition to trade unions. He lambasted progressive taxation and attempts by the state to raise the general welfare of citizens. He insisted that there is “an overwhelming case against a free health service for all” and dismissed the conservation of natural resources.It should come as no surprise to those who follow such matters that he was awarded the Nobel prize for economics.

By the time Mrs Thatcher slammed his book on the table, a lively network of thinktanks, lobbyists and academics promoting Hayek’s doctrines had been established on both sides of the Atlantic, abundantly financed by some of the world’s richest people and businesses, including DuPont, General Electric, the Coors brewing company, Charles Koch, Richard Mellon Scaife, Lawrence Fertig, the William Volker Fund and the Earhart Foundation. Using psychology and linguistics to brilliant effect, the thinkers these people sponsored found the words and arguments required to turn Hayek’s anthem to the elite into a plausible political programme.

The ideologies Margaret Thatcher and Ronald Reagan espoused were just two facets of neoliberalism. Photograph: Bettmann/Bettmann Archive

Thatcherism and Reaganism were not ideologies in their own right: they were just two faces of neoliberalism. Their massive tax cuts for the rich, crushing of trade unions, reduction in public housing, deregulation, privatisation, outsourcing and competition in public services were all proposed by Hayek and his disciples. But the real triumph of this network was not its capture of the right, but its colonisation of parties that once stood for everything Hayek detested.

Bill Clinton and Tony Blair did not possess a narrative of their own. Rather than develop a new political story, they thought it was sufficient to triangulate. In other words, they extracted a few elements of what their parties had once believed, mixed them with elements of what their opponents believed, and developed from this unlikely combination a “third way”.

It was inevitable that the blazing, insurrectionary confidence of neoliberalism would exert a stronger gravitational pull than the dying star of social democracy. Hayek’s triumph could be witnessed everywhere from Blair’s expansion of the private finance initiative to Clinton’s repeal of the Glass-Steagal Act, which had regulated the financial sector. For all his grace and touch, Barack Obama, who didn’t possess a narrative either (except “hope”), was slowly reeled in by those who owned the means of persuasion.

As I warned in April, the result is first disempowerment then disenfranchisement. If the dominant ideology stops governments from changing social outcomes, they can no longer respond to the needs of the electorate. Politics becomes irrelevant to people’s lives; debate is reduced to the jabber of a remote elite. The disenfranchised turn instead to a virulent anti-politics in which facts and arguments are replaced by slogans, symbols and sensation. The man who sank Hillary Clinton’s bid for the presidency was not Donald Trump. It was her husband.

The paradoxical result is that the backlash against neoliberalism’s crushing of political choice has elevated just the kind of man that Hayek worshipped. Trump, who has no coherent politics, is not a classic neoliberal. But he is the perfect representation of Hayek’s “independent”; the beneficiary of inherited wealth, unconstrained by common morality, whose gross predilections strike a new path that others may follow. The neoliberal thinktankers are now swarming round this hollow man, this empty vessel waiting to be filled by those who know what they want. The likely result is the demolition of our remaining decencies, beginning with the agreement to limit global warming.

Those who tell the stories run the world. Politics has failed through a lack of competing narratives. The key task now is to tell a new story of what it is to be a human in the 21st century. It must be as appealing to some who have voted for Trump and Ukip as it is to the supporters of Clinton, Bernie Sanders or Jeremy Corbyn.

A few of us have been working on this, and can discern what may be the beginning of a story. It’s too early to say much yet, but at its core is the recognition that – as modern psychology and neuroscience make abundantly clear – human beings, by comparison with any other animals, are both remarkably social and remarkably unselfish. The atomisation and self-interested behaviour neoliberalism promotes run counter to much of what comprises human nature.

Hayek told us who we are, and he was wrong. Our first step is to reclaim our humanity.

The economic argument against neoliberalism

Owen Jones interviews Ha Joon Chang

Corbyn supporters are not delusional Leninists but ordinary, fed-up voters

Ellie Mae O'Hagan in The Guardian


 

‘Members of Momentum feel as though the Labour coup is as much an attack on their right to participate in public discourse as it is on Jeremy Corbyn.’ Photograph: Jeff J Mitchell/Getty Images

Lock up your children, for there is a sinister force taking root in modern Britain. It is a cult, with followers like those of mass murderer Charles Manson, shrouded in a cloud of spite and acrimony. The worst thing about this terrifying insurgency? My mum is part of it.

'We're not cult members': Labour supporters at Corbyn rallies



I am, of course, talking about the people who support Jeremy Corbyn – 12,000 of whom have joined Momentum, the activist movement that propelled Corbyn to power. And after Monday’s high court win and a clean sweep in the elections to Labour’s national executive committee, support for Corbyn shows no signs of abating – despite continued suggestions that those supporters are nothing more than an abusive rabble. How many of the journalists writing panicked screeds about these awful people have actually met any of them, do you think? I ask because writing about the Corbyn phenomenon over the last year means I’ve met probably hundreds of his supporters and to be honest, I find dealing with them the most pleasant element of writing about Corbyn.

A couple of months ago, I went to a political event that included a branch of Momentum. All young women; they were energetic, funny and very friendly. Two weeks ago, I had a debate with a Momentum member about Corbyn’s media strategy. Of the two of us, it was me who was the ruder, more impatient one. When Corbyn ran for leadership last year, I visited phone banks for him dozens of times, and spent hours in the company of the very people who went on to found Momentum. I told myself I was researching a piece; actually I think I just liked talking to them.

Sure, my experiences of these Corbyn supporters might not be representative. But they do suggest that the depiction of them as a madcap bunch of deluded cultists is not representative either. Broadly speaking, the media has failed to understand the political moment in the Labour party; it has shown a damning lack of interest in the fact that people who had previously written off party politics are now flocking towards it in their hundreds of thousands – preferring instead to dismiss them as an angry mob.

One half of that description is accurate, however. Corbyn supporters may not be a mob, but they are angry. And to understand why, it is useful to consider the words of the academic Jeremy Gilbert, a longstanding Labour member and activist who has joined Momentum: “Momentum is simply trying to give a voice to a body of opinion which has been widespread throughout the country for many years, but has been denied any kind of place in our public life since the early days of New Labour. It is a body of opinion which believes, with good reason, that the embrace of neoliberal economics and neoconservative foreign policy under Blair was a disaster … Naturally some of those voices, suppressed for so long, sound raucous, aggressive and uncouth.”

The anger that commentators detect in the Corbyn movement, in my experience, is not a symptom of the fact that it has been infiltrated by bullies – but that its members feel as though the Labour coup is as much an attack on their right to participate in public discourse as it is on Corbyn. 

Everything the left traditionally stands for – from human rights and socialism to a foreign policy driven by diplomacy – has been, at best, marginalised and, at worst, actively mocked in mainstream political discourse since the 1970s. And nowhere is this more apparent than in the depiction of the trade unions, the last bastions of organised British socialism, as insidious barons intent on wrecking British life (a claim that sounds particularly ludicrous when made by newspapers who supported the Conservatives at the last election – a party consisting of members of the actual landed gentry).

I am yet to meet a single Corbynite who is naive about Corbyn’s failings as a leader, the great challenges he faces, or who does not want to win a general election. But the reason so many have coalesced around him anyway is because they view his leadership as the only opportunity they have had in at least 30 years to see their views finally represented in public life. The Labour rebels’ attempt to unseat him is, in their minds, as much an attempt to excommunicate the wider left as it is to get rid of Corbyn himself. Perhaps the most salient evidence of this is the decision to charge affiliate members £25 to vote in the leadership election, and ban outright members who joined fewer than six months ago – a decision that has now been overturned in court.

Worse still for Corbyn supporters, the policy positions they have taken over the last 30 years have often been proven right. Lack of social housing has led to a spiralling housing crisis; the deregulation of the financial industry would have caused economic collapse had it not been for state intervention; queasiness around public ownership has caused escalating transport costs and arguably the shambles that is Southern Railway; inequality is the UK’s most pressing social issue; a reluctance to rein in fossil fuel companies has led to a climate emergency; and even Tony Blair accepts that the Iraq war may have led to the rise of Isis. This is why so many Corbyn supporters are upset by the coup, and why they have decided to back him unequivocally, in spite of the incompetence that has at times been part of his leadership.

I have a lot of sympathy with Owen Smith supporters who are horrified by Labour’s poll ratings. But I have zero sympathy with those in the party who have been utterly unwilling to engage with Corbyn supporters, and who have not reflected on why they lost control of their party to someone they so clearly regard as useless. There are simply not enough delusional Leninists in Britain to make up the entirety of Corbyn’s support – these are ordinary British voters who want radical solutions to a growing number of crises. And until they are listened to and taken seriously, Corbyn and the movement keeping him in power is not going anywhere.

Labour has rediscovered its soul under Jeremy Corbyn. If he goes, so do I

Dan Iles in The Guardian


 
Jeremy Corbyn addresses a ‘Keep Corbyn’ rally at the School of Oriental and African Studies, London. Photograph: Jeff J Mitchell/Getty Images



Before Jeremy Corbyn, I would never have dreamed of joining a mainstream political party. Brought up in Wales in a progressive humanist family, my politics was totally alien to the endless parade of shiny careerist politicians who ran the show. My parents had long since torn up their Labour membership over the Iraq war and I was resigned to a political identity on the left without a party. To me and many of my contemporaries Labour was a party without a soul, whose leadership had poisoned the party with its blinkered pro-business dogma and their illegal wars.

But Corbyn changed all that: his distinctly socialist approach based on principled politics inspired me and thousands of others to come in from the political wilderness and join a party that we previously distrusted. I found myself and many members of my family, friends and colleagues suddenly enthusiastic and full of hope for the future. There was still the huge challenge of defeating the Tories ahead of us, but at least that challenge finally meant something. No more putting a cross in a box next to the lesser of two evils.

And, yes, the last nine months have been bumpy. Corbyn’s leadership has been undermined from the start by an influential ring of MPs on the right of the party who were never going to accept his mandate. His team had to make a fresh start, isolated in Westminster away from the social movements that backed him and without the polished political machine that had furnished the previous leadership. And yet despite this, we have seen a whole number of successes: a huge rise in membership, four mayoral posts, the victory in the Lords on tax credits and defending disabled people against cuts to PIP payments, to name a few.

But instead of focusing on his policies, the leaders of the recent Labour coup want to attack Corbyn’s personal qualities. They say that he doesn’t have what it takes to lead the party. But I disagree. While his speech-making abilities are not perfect and he’s far from the machiavellian politician that we have grown accustomed to, Corbyn is a man of ideas – something that the party up until now has been lacking. And what actually is leadership? Because if leadership means being a person of integrity who makes time for the marginalised, who inspires those alienated from the political process, and who isn’t afraid to speak uncomfortable truths, then Corbyn shows leadership in bucketloads.

I come at this from a standpoint of someone who voted remain. Corbyn was right to take a nuanced approach on the EU referendum. I believe Corbyn persuaded 60% of Labour’s supporters to vote remain because he didn’t ignore people’s concerns with the EU. By admitting that the EU is not without its faults and then demanding that we should stay in to reform it (from the left) he was able to bypass the binary claims of the two main referendum campaigns. People voted leave because they felt abandoned by politics and scared about immigration.

These structural issues haven’t just appeared in the last nine months of Corbyn’s leadership. But I think many felt his defence of immigration and his determination to turn the debate towards austerity was refreshing at a time when the leave campaign was openly whipping up racism and xenophobia.

If Corbyn resigns, a move to the right in Labour is inevitable. And the left will be locked out of the party for a decade as the centre of the party pulls up the drawbridge to parliamentary nominations. With this I not only lose a party (so soon after finding it) but the left will lose a strong agent in the fight for a progressive exit of the EU. The UK faces a bonfire of workers’ rights, financial regulation and environmental protections as it’s torn from Europe. Without Corbyn we face being locked into neoliberal rules for the next century.
But this isn’t about Corbyn. Nine months ago I and so many others were inspired back into a party that had refound its soul. Labour cannot be a party of airbrushed professionals. If it has any hope of achieving power it needs to be linked to a mass movement. The membership and unions are where the Labour party gets its strength. They are what sets them apart from the Tories. And for MPs to choose to ignore them now could be one of the biggest mistakes in the party’s history.

The progressive argument for leaving the EU is not being heard

Larry Elliot in The Guardian


It is now nearly nine years since the problems of three hedge funds heralded the arrival of global financial and economic chaos. Britain’s EU referendum this week is the latest manifestation of that crisis.

That is not the way the debate in the UK has been framed. For one side, the decision is all about taking back control, especially over immigration. For the other, it is about the potential consequences for the economy in general and individuals in particular.

This narrow focus reflects the fact that the referendum has been a contest between two wings of the Conservative party, neither of which has any great love for the EU. Few of the bigger themes have been drawn out by this blue-on-blue affair.

There is, however, an obvious reason why immigration has proved an effective weapon for the leave side. Life is tougher for millions of Britons on modest incomes than it was a decade ago.

Contrast the state of the UK when the accession to the EU of Poland and other former Soviet bloc countries led to strong net migration in 2004. At that time, average earnings were growing by 4-5% a year, the Labour government was investing heavily in schools and hospitals and the eurozone appeared to be over its initial problems.

A second big increase in net migration has occurred since the great recession of 2008 and 2009, but the economic and political environment has changed. Real earnings have been squeezed, the expansion of the public sector has been halted and the eurozone has been in a state of permanent crisis.

The British economy has become increasingly dominated by the fortunes of the financial sector, with the bankers responsible for the worst slump since the 1930s escaping pretty much scot free. London and the rest of the UK have become two countries, which explains why hostility to the EU increases with distance from the capital.

Nor is this phenomenon confined to the UK. It has become commonplace to bracket growing support for leave in poorer parts of Britain with Donald Trump’s emergence as the Republican candidate in this year’s US presidential election, but populist and anti EU sentiment is on the rise across Europe.

The US research company Pew conducted a survey earlier this year to test sentiment towards the EU. In Britain, 48% said they had an unfavourable view of the EU and 44% said they had a favourable view. In France, the anti-EU sentiment was much more pronounced at 61% and 38% in favour, while in Germany there had been an eight-point drop in support for the EU in the past year, leaving those in favour only narrowly ahead at 50% against 48% .
The impact of the great recession in Europe has been exacerbated by monetary union, a policy blunder of catastrophic proportions. The euro has been responsible for the slow growth and high unemployment that has angered the French, and the high debts and that have alarmed the Germans. Stir in the unexpectedly large flows of refugees from the Middle East and North Africa, and you have a toxic mix.

Last summer, when the Greek debt crisis was at its most intense, Europe’s leaders came up with a plan. The “five presidents’ report” laid down a step-by-step approach to a United States of Europe, with banking union followed by a common budget and finally political union. Getting even the least controversial part of this agenda – banking union – past sceptical European electorates has proved impossible. Yet the alternative approach, breaking up the euro and giving countries more control over their own economic destiny, is seen as not just potentially dangerous but also a betrayal of the idea of ever-closer union.

When Britain first sought to join the Common Market in the 1960s it did so for pragmatic, not ideological reasons. There was no great desire to pool sovereignty in pursuit of wider political goals, merely a feeling that Germany, France and the Netherlands were growing faster and had more modern economies. After Britain finally became a member of the European club in 1973, there was admiration for Germany’s control of inflation. In the 1980s, the UK left wing changed sides because it saw Europe as a bulwark against Margaret Thatcher. European solidarity was advocated in the 1990s as the best defence against the forces of global capitalism unleashed by the end of the cold war, which is why many on the left wanted Britain to join the single currency.

Times have changed. Even with a welcome pickup in activity in the past year, Europe’s growth performance since the launch of the euro has been pitiful. Talk of protecting workers’ rights is meaningless unless you have a job, and millions of Europe’s citizens do not. The structural adjustment programmes forced on those countries that have required financial bailouts have involved savage attacks on workers’ rights, including collective bargaining. The EU has not taken the fight to multinational capital. Rather, Brussels has become a honeypot for corporate lobbyists demanding deregulation and the transatlantic trade and investment partnership (TTIP).

One of the great ironies of the UK’s referendum debate is that Europe, with its austerity programmes and its drift towards neoliberalism, has been moving in a direction that rightwing Conservatives would tend to support. Just as in the UK in the 1980s, unemployment has weakened the power of organised labour and the trend is for more competition and for free markets.

There is a modern and progressive argument for leaving the EU, but it has struggled to be heard during this dispiriting campaign. It is that Europe is unable to deliver because it is wedded to backward-looking ideas. Or to adapt the words that David Cameron used on his first outing as Conservative leader to taunt Tony Blair, it was the future once.

There is a leftwing case for staying in too. This accepts that the EU is far from perfect and must change, but says the answer is to work for a kinder, gentler, greener and more equal Europe from within. Exit, by contrast, would be the catalyst for a breakup of the EU that would give rise to aggressive nationalism and leave Britain at the mercy of rightwing Conservatives who would have the wherewithal to cause immense damage before there was a chance to get rid of them at an election.

Yet, it is stretching a point to argue that the treatment of Greece has much to do with the theories of Maynard Keynes or that TTIP would sit comfortably with Fritz Schumacher’s “small is beautiful” vision. Europe has been going in an entirely different direction, which is why aggressive nationalism will continue to be a problem even if Britain votes to remain. That’s because Europe’s economic model isn’t working and hasn’t been working for a long time. Bad economics leads to bad politics. Always has, always will.

You’re witnessing the death of neoliberalism – from within

Aditya Chakrabortty in The Guardian

IMF economists have published a remarkable paper admitting that the ideology was oversold

‘You hear it when the Bank of England’s Mark Carney sounds the alarm about ‘a low-growth, low-inflation, low-interest-rate equilibrium’. Photograph: Dylan Martinez/AFP/Getty Images



What does it look like when an ideology dies? As with most things, fiction can be the best guide. In Red Plenty, his magnificent novel-cum-history of the Soviet Union, Francis Spufford charts how the communist dream of building a better, fairer society fell apart. 

Even while they censored their citizens’ very thoughts, the communists dreamed big. Spufford’s hero is Leonid Kantorovich, the only Soviet ever to win a Nobel prize for economics. Rattling along on the Moscow metro, he fantasises about what plenty will bring to his impoverished fellow commuters: “The women’s clothes all turning to quilted silk, the military uniforms melting into tailored grey and silver: and faces, faces the length of the car, relaxing, losing the worry lines and the hungry looks and all the assorted toothmarks of necessity.”

But reality makes swift work of such sandcastles. The numbers are increasingly disobedient. The beautiful plans can only be realised through cheating, and the draughtsmen know it better than any dissidents. This is one of Spufford’s crucial insights: that long before any public protests, the insiders led the way in murmuring their disquiet. Whisper by whisper, memo by memo, the regime is steadily undermined from within. Its final toppling lies decades beyond the novel’s close, yet can already be spotted.

When Red Plenty was published in 2010, it was clear the ideology underpinning contemporary capitalism was failing, but not that it was dying. Yet a similar process as that described in the novel appears to be happening now, in our crisis-hit capitalism. And it is the very technocrats in charge of the system who are slowly, reluctantly admitting that it is bust.

You hear it when the Bank of England’s Mark Carney sounds the alarm about “a low-growth, low-inflation, low-interest-rate equilibrium”. Or when the Bank of International Settlements, the central bank’s central bank, warns that “the global economy seems unable to return to sustainable and balanced growth”. And you saw it most clearly last Thursday from the IMF.

What makes the fund’s intervention so remarkable is not what is being said – but who is saying it and just how bluntly. In the IMF’s flagship publication, three of its top economists have written an essay titled “Neoliberalism: Oversold?”.

The very headline delivers a jolt. For so long mainstream economists and policymakers have denied the very existence of such a thing as neoliberalism, dismissing it as an insult invented by gap-toothed malcontents who understand neither economics nor capitalism. Now here comes the IMF, describing how a “neoliberal agenda” has spread across the globe in the past 30 years. What they mean is that more and more states have remade their social and political institutions into pale copies of the market. Two British examples, suggests Will Davies – author of the Limits of Neoliberalism – would be the NHS and universities “where classrooms are being transformed into supermarkets”. In this way, the public sector is replaced by private companies, and democracy is supplanted by mere competition.

The results, the IMF researchers concede, have been terrible. Neoliberalism hasn’t delivered economic growth – it has only made a few people a lot better off. It causes epic crashes that leave behind human wreckage and cost billions to clean up, a finding with which most residents of food bank Britain would agree. And while George Osborne might justify austerity as “fixing the roof while the sun is shining”, the fund team defines it as “curbing the size of the state … another aspect of the neoliberal agenda”. And, they say, its costs “could be large – much larger than the benefit”.

IMF managing director Christine Lagarde with George Osborne. ‘Since 2008, a big gap has opened up between what the IMF thinks and what it does.’ Photograph: Kimimasa Mayama/EPA

Two things need to be borne in mind here. First, this study comes from the IMF’s research division – not from those staffers who fly into bankrupt countries, haggle over loan terms with cash-strapped governments and administer the fiscal waterboarding. Since 2008, a big gap has opened up between what the IMF thinks and what it does. Second, while the researchers go much further than fund watchers might have believed, they leave in some all-important get-out clauses. The authors even defend privatisation as leading to “more efficient provision of services” and less government spending – to which the only response must be to offer them a train ride across to Hinkley Point C.

Even so, this is a remarkable breach of the neoliberal consensus by the IMF. Inequality and the uselessness of much modern finance: such topics have become regular chew toys for economists and politicians, who prefer to treat them as aberrations from the norm. At last a major institution is going after not only the symptoms but the cause – and it is naming that cause as political. No wonder the study’s lead author says that this research wouldn’t even have been published by the fund five years ago.

From the 1980s the policymaking elite has waved away the notion that they were acting ideologically – merely doing “what works”. But you can only get away with that claim if what you’re doing is actually working. Since the crash, central bankers, politicians and TV correspondents have tried to reassure the public that this wheeze or those billions would do the trick and put the economy right again. They have riffled through every page in the textbook and beyond – bank bailouts, spending cuts, wage freezes, pumping billions into financial markets – and still growth remains anaemic.

And the longer the slump goes on, the more the public tumbles to the fact that not only has growth been feebler, but ordinary workers have enjoyed much less of its benefits. Last year the rich countries’ thinktank, the OECD, made a remarkable concession. It acknowledged that the share of UK economic growth enjoyed by workers is now at its lowest since the second world war. Even more remarkably, it said the same or worse applied to workers across the capitalist west.

Red Plenty ends with Nikita Khrushchev pacing outside his dacha, to where he has been forcibly retired. “Paradise,” he exclaims, “is a place where people want to end up, not a place they run from. What kind of socialism is that? What kind of shit is that, when you have to keep people in chains? What kind of social order? What kind of paradise?”

Economists don’t talk like novelists, more’s the pity, but what you’re witnessing amid all the graphs and technical language is the start of the long death of an ideology.

How corruption revealed in Panama Papers opened the door to Isis and al-Qaida

Patrick Cockburn in The Independent

Who shall doubt 'the secret hid

Under Cheops' pyramid'

Was that the contractor did

Cheops out of several millions?

The message of Rudyard Kipling's poem is that corruption is always with us and has not changed much down the ages. There is some truth in this, but degrees of corruption greatly matter, as the Cheops would have found to his cost if he tried to build his pyramid in modern Iraq instead of ancient Egypt. The project would cost him billions rather than millions - and he would be more likely to end up with a hole in the ground than anything resembling a pyramid.

Three years ago I was in Baghdad after it had rained heavily, driving for miles through streets that had disappeared under grey-coloured flood water combined with raw sewage. Later I asked Shirouk Abayachi, an advisor to the Ministry of Water Resources, why this was happening and she said that "since 2003, $7bn has been spent to build a new sewage system for Baghdad, but either the sewers weren't built or they were built very badly". She concluded that "corruption is the key to all this".

Anybody discussing the Panama Papers and the practices of the law firm Mossack Fonseca should think about the ultimate destination of the $7bn not spent on the Baghdad drainage system. There will be many go-betweens and middle men protecting anyone who profited from this huge sum, but the suspicion must be that a proportion of it will have ended up in offshore financial centres where money is hidden and can be turned into legally held assets.

There is no obvious link between the revelations in the Panama Papers, the rise of Islamic State and the wars tearing apart at least nine countries in the Middle East and North Africa. But these three developments are intimately connected as ruling elites, who syphon off wealth into tax havens and foreign property, lose political credibility. No ordinary Afghans, Iraqis and Syrians will fight and die for rulers they detest as swindlers. Crucial to the rise of Isis, al-Qaida and the Taliban in Iraq, Syria, Afghanistan is not their own strength and popularity, but the weakness and unpopularity of the governments to which they are opposed.

Kipling was right in believing that there has always been corruption, but since the early 1990s corrupt states have often mutated into kleptocracies. Ruling families and the narrow coteries around them have taken a larger and larger share of the economic cake.

In Syria since the turn of the century, for instance, the rural population and the urban poor no longer enjoyed the limited benefits they had previously received under an equally harsh but more egalitarian regime. By 2011, President Bashar al-Assad's first cousin Rami Makhlouf was reported to be a dominant player in 60 per cent of the Syrian economy and to have a personal worth of $5 billion.

In Iraq earlier this year, a financial specialist, who wished to remain anonymous, said that the government of prime minister Haider al-Abadi held files on corrupt individuals, including "one politician who has amassed a fortune of $6 billion through corrupt dealings."

The danger of citing extreme examples of corruption from exotic and war-ravaged countries like Iraq, Afghanistan and Syria is that these may sound like events happening on another planet. But the political and economic systems in Iraq and Afghanistan were devised under the tutelage of the US and allies like Britain. They were proponents of free market economics which in the West may increase inequality and benefit the wealthy, but in Kabul and Baghdad were a license to steal by anybody with power.

Neo-liberal economists have a lot to answer for. A few days after Isis had captured Mosul in June 2014, I was in Baghdad and asked a recently retired four-star Iraqi general why the much larger and better-equipped Iraqi army had been defeated so swiftly and humiliatingly. He replied that the explanation was: "Corruption! Corruption! Corruption!"
He added that this was pervasive and had begun when the US was building a new Iraqi military after the overthrow of Saddam Hussein in 2003, when the American commanders had insisted on out-sourcing food and other supplies to private contractors. These businessmen and the army officers soon determined that, if the Iraqi government was paying money to feed and equip a battalion of 600 men, but its real strength was only 150, they could pocket the difference. So profitable was this arrangement that by 2014 all officers' jobs were for sale and it cost $200,000 to become a colonel and up to $2m a general in charge of a division.

Blatant corruption at the top in Kabul and Baghdad has been frequently reported over the years, though nothing much seems to change. But it is a mistake to imagine that this was simply the outcome of a culture of corruption specific to Afghanistan and Iraq. The most corrupt ministers were appointed and the most crooked contracts signed at a time when US officials were the real decision-makers in Baghdad.

For example, the entire military procurement budget of $1.2 billion was effectively stolen in 2004/5 when the Defence Ministry was substantially under US control, raising questions of the competence, or even collusion, of the US authorities.

The situation has got worse, not better. "I feared seven or eight years ago that Iraq would become like Nigeria," said one former minister in 2013, "but in fact it is far worse."

He cited as evidence a $1.3bn contract signed by a minister with one foreign company that had only a nominal existence - and a second company that was bankrupt. This took place in a country in which one third of the labour force is unemployed, and, if the underemployed are taken into account, the figure rises to over half.
The use of offshore financial centres by the moneyed elite in the oil states and much of the rest of the world is not always to avoid taxes which they would not pay if they kept the money at home, but in some cases to conceal what they have stolen and later to legally launder it.
Some of this can be done by buying property in places like Baghdad, which explains why property prices in that dangerous city are as high as London. But it is safer and better to buy property in London itself, something that will ultimately require the services of a company like Mossack Fonseca - though these services will be far removed from the original toxic source of the investment.

The Panama Papers give insight into the names and mechanisms through which globalised elites hide their wealth and avoid paying tax on it. Commentators now predict that popular disgust with political establishments will benefit radical leaders like Bernie Sanders in the US and Jeremy Corbyn in the UK.

What they do not see is that the way in which the detachment of interests of elites from the countries they rule has already produced states that have failed or are failing, or are wracked by conflict and war.

How friendship became a tool of the powerful

William Davies in The Guardian

Imagine walking into a coffee shop, ordering a cappuccino, and then, to your surprise, being informed that it has already been paid for. Where did this unexpected gift come from? It transpires that it was left by the previous customer. The only snag, if indeed it is a snag, is that you now have to do the same for the next customer who walks in.

This is known as a “pay-it-forward” pricing scheme. It is something that has been practised by a number of small businesses in California, such as the Karma Kitchen in Berkeley and, in some cases, customers have introduced it spontaneously. On the face of it, it would seem to defy the logic of free-market economics. Markets, surely, are places where we are allowed, even expected, to behave selfishly. With its hippy idealism, pay-it-forward would appear to go against the core tenets of economic calculation.

But there is more to it than this. Researchers from the decision science research group at the University of California, Berkeley have looked closely at pay-it-forward pricing and discovered something with profound implications for how markets and businesses work. It transpires that people will generally pay more under the pay-it-forward model than under a conventional pricing system. As the study’s lead author, Minah Jung, puts it: “People don’t want to look cheap. They want to be fair, but they also want to fit in with the social norms.” Contrary to what economists have long assumed, altruism can often exert a far stronger influence over our decision-making than calculation.

Such findings are typical of the field of behavioural economics, which emerged in the late 1970s. Like regular economists, behavioural economists assume that individuals are usually motivated to maximise their own benefit – but not always. In certain circumstances, they are social and moral animals, even when this appears to undermine their economic interests. They follow the herd and act according to certain rules of thumb. They have some principles that they will not sacrifice for money at all.

It seems that this undermines the cynical, individualist theory of human psychology, which lies at the heart of orthodox economics. Could it be that we are decent, social creatures after all? A great deal of neuroscientific research into the roots of sympathy and reciprocity supports this. Optimists might view this as the basis for a new political hope, of a society in which sharing and gift-giving offer a serious challenge to the power of monetary accumulation and privatisation.

But there is also a more disturbing possibility: that the critique of individualism and monetary calculation is now being incorporated into the armoury of utilitarian policy and management. One of the key insights of behavioural economics is that, if one wants to control other human beings, it is often far more effective to appeal to their sense of morality and social identity than to their self-interest.

This is symptomatic of a more general shift in policy and business practices today. Across various fields of expertise, from healthcare to marketing, from military training to finance, there is rising hope that strategic goals can be achieved through harnessing the power of the “social”. But what exactly does this mean? As the era of social democracy recedes further into the past, the meaning of the term is undergoing a profound transformation. Where once the term implied something concerning society or the common good, increasingly it refers to a technique of psychological intervention on the individual. Informal social connections and friendships are being rendered more visible and measurable. In the process, they are being turned into possible instruments of power.

Using the social to make money

Over recent years, generosity has become big business. In 2009, Chris Anderson, former editor of Wired magazine, published Free: The Future of a Radical Price. Anderson argued that there was now a strong business case for giving products and services away for free, in order to forge better relationships with customers. Giving things away for free becomes a means of holding an audience captive or building a reputation, which can then be exploited with future sales or advertising. Michael O’Leary, boss of Ryanair, has even suggested that airline tickets might one day be priced at zero, with all costs recovered through additional charges for luggage, using the bathroom, skipping queues, and so on.

What Anderson was highlighting was the potential of non-monetary relationships to increase profits. And just as corporate giving can be used as a way of boosting revenue, so can the magic words that are used in return. Marketing specialists now analyse the optimal way of saying the words “thank you” to a customer, so as to deepen the social relationship with them.

The language of gratitude has infiltrated a number of high-profile advertising campaigns. Around Christmas 2013, Lloyds TSB, one of the British banks to bemost embarrassed by the 2008 financial crisis, launched a campaign consisting entirely of cutesy images of childhood friends enjoying happy moments together, concluding with the words “thank you”, written in party balloons. There was no mention of money. More bizarrely, Tesco, whose brand has suffered in recent years, released a series of YouTube videos in 2013 with men in Christmas jumpers singing “thank you” to everyone from the person who cooks Christmas dinner, to those driving safely, to other companies such as Instagram and so on. Tesco, it was implied, sprays gratitude in all directions, regardless of its own private interests.

There is inevitably a limit to how much of a social bond an individual can have with a multinational company. Businesses today are obsessed with being social, but what they typically mean by this is that they are able to permeate peer-to-peer social networks as effectively as possible. Brands hope to play a role in cementing friendships, as a guarantee that they will not be abandoned for more narrowly calculated reasons. So, for example, Coca-Cola has tried a number of somewhat twee marketing campaigns, such as putting individual names (“Sue”, “Tom”, etc) on their bottles as a way to encourage gift-giving. Managers hope that their employees will also act as “brand ambassadors” in their everyday social lives. Meanwhile, neuromarketers have begun studying how successfully images and advertisements trigger common neural responses in groups, rather than in isolated individuals. This, it seems, is a far better indication of how larger populations will respond to advertising.

All this – along with the rise of the “sharing economy”, exemplified by Airbnb and Uber, offers a simple lesson to big business. People will take more pleasure in buying things if the experience can be blended with something that feels like friendship and gift-exchange. The role of money must be airbrushed out of the picture wherever possible. As marketers see it, payment is one of the unfortunate “pain points” in any relationship with a customer, which requires anaesthetising with some form of more social experience. The market must be represented as something else entirely.

Digitising the social

Yet the greatest catalyst for the new business interest in being social is, unsurprisingly, the rise of social media. At the same time that behavioural economics has been highlighting the various ways in which we are altruistic creatures, social media offers businesses an opportunity to analyse and target that social behaviour. It allows advertising to be tailored to specific individuals, on the basis of who they know, and what those other people like and purchase. These practices, which are collectively referred to as “social analytics”, mean that tastes and behaviours can be traced in unprecedented detail. The end goal is no different from what it was at the dawn of marketing and management in the late 19th century: making money. What has changed is that each one of us is now viewed as an instrument through which to alter the attitudes and behaviours of our friends and contacts. Behaviours and ideas can be released like “contagions”, in the hope of infecting much larger networks.

FacebookTwitterPinterest Illustration by Pete Gamlen

The most valuable trick, from a marketing perspective, is how to induce individuals to share positive brand messages and adverts with each other, almost as if there were no public advertising campaign at all. The business practice known as “friendvertising” involves creating images and video clips that social media users are likely to share with others, for no conscious commercial purpose of their own. The science of viral marketing, or the creation of buzz, has led marketers to seek lessons from social psychology, social anthropology and social network analysis.

Businesses have long worried about their public reputations and the commitment of their employees. It also goes without saying that informal social networks themselves are as old as humanity. Despite the countercultural rhetoric of the “sharing economy”, what has changed is not the role of the social in capitalism, but the capacity to subject it to a detailed, quantitative, economic analysis, thanks primarily to the digitisation of social relationships.

In the longer term, the most profound cultural and ethical implications of this may be how we come to view ourselves and those around us. As data about social ties becomes easier to collect and access, and as concepts of duty and altruism become increasingly understood by economists (as the pay-it-forward study exemplifies), the temptation to ask self-interested, strategic questions about one’s own social circle will arise. Applying the mentality of cost-benefit analysis beyond the realms of the market is often controversial to start with, but can quickly become normal. Government economists today have no problem calculating the price of human life or the natural environment, if it is useful for purposes of policy appraisal.

Could we come to view our own personal acts of generosity and friendship in a similarly utilitarian sense? The evidence to support such an egocentric logic is growing rapidly. The area where there could be most to gain from such calculations is in the domain of health: social contact is good for us, in both body and mind. Just be sure that it is contact with the right people.

Using the social to improve health

In February 2010, I found myself sitting in a large hall, with a huge golden throne on my left, and the future leader of the Labour party, Ed Miliband, to my right. We were watching images on a screen that reminded me of the fractal videos that used to be sold by “herbal remedy” salesmen on Camden market in London in the early 1990s. Also present were a number of government policy advisers, all straining to appear as relaxed as possible – a status game that goes on in the corridors of power, played to indicate that one is at home there. (The game was won under the coalition government by David Cameron’s former adviser, Steve Hilton, who was notorious for wandering into meetings barefoot.)

There were about 10 of us in the room, one of the more baroque offices in the Cabinet Office, and we were all staring at the screen, transfixed by the movement of individual lines and dots that were being displayed. Standing next to the screen, clearly enjoying the impact that his video was having on this influential audience, was the American medical sociologist Nicholas Christakis. Christakis was on a speaking tour, promoting his book Connected, and had been invited to present some of his findings to British policymakers during the dying days of Gordon Brown’s government. As a sociologist with an interest in policy, I had been invited along.

Christakis is an unusual sociologist. Not only is he far more mathematically adept than most, but he has also published a number of articles in respected medical journals. The images we were watching on the screen that day represented social networks in a Baltimore neighbourhood, within which particular “behaviours” and medical symptoms were moving around. Christakis’s message to the assembled policymakers was a powerful one. Problems such as obesity, poverty and depression, which so often coincide, locking people into chronic conditions of inactivity, are contagious. They move around like viruses in social networks, creating risks to individuals purely by virtue of the people they happen to hang out with.

FacebookTwitterPinterest Illustration by Pete Gamlen

Christakis is part of a growing movement within the policy world. While marketers desperately seek to penetrate our social networks in order to alter our tastes and desires, policymakers have come to view social networks as means of improving our health and wellbeing. The “social neuroscience” pioneered by John Cacioppo of the University of Chicago suggests that the human brain has evolved in such a way as to depend on social relationships. Cacioppo’s research suggests that loneliness is an even greater health risk than smoking. Practices such as “social prescribing”, in which doctors recommend that individuals join a choir or voluntary organisation, are aimed at combating isolation and its tendency to lead to depression and chronic illness.

Driven particularly by neuroscience, the expert understanding of social life and morality is rapidly merging into the study of the body. One social neuroscientist, Matt Lieberman, has shown how pains that we have traditionally treated as emotional (such as separating from a lover) involve the same neurochemical processes as those we typically view as physical (such as breaking an arm). Social science and physiology are converging into a new discipline, in which human bodies are studied for the ways they respond to one another physically.

At the Cabinet Office presentation, there was something mesmeric and seductive about Christakis’s images. Could entrenched social problems really be represented by graphics of this sort? Christakis’s technical prowess was certainly alluring. In the grand tradition of American GIs bringing chewing gum and nylon stockings to the British during the second world war, his hi-tech social network analysis seemed novel and irresistible.

But what I found slightly surreal that day, aside from the gold throne, was the freakish view of this particular inner-city US community that we were privy to. Like the social analytics companies, which try to spot consumer behaviour as it emerges and spreads, there we were in London observing how the dietary habits and health problems of a few thousand relatively deprived Baltimore residents were moving around, like a disease. It felt as if we were viewing an ant colony from above. The fact that these flickering images represented human beings, with relationships, histories and agendas, was almost incidental.

It would seem a little perverse to suggest that policymakers ignore this evidence of the impact of social networks and altruism on health. If medical practitioners can change the behaviour of just a few influential people in a network for the better, they can potentially spread a more positive “contagion”. Yet there is a danger lurking in this worldview, which is the same problem that afflicts all forms of social network analysis. In reducing the social world to a set of mechanisms and resources, the question repeatedly arises as to whether social networks might be redesigned in ways to suit the already privileged. Networks have a tendency towards what are called power laws, whereby those with influence are able to harness that power to win even greater influence.

One example of this is known as “emotional contagion”. Psychologists working with social analytics can now track the spread of positive and negative emotions, as they travel through social networks. This was the topic of Facebook’s controversial experiment using newsfeed manipulation, the results of which were published last summer. Different moods, including anger and depression, are now recognised to be more socially contagious than others. But what will we do with this knowledge? The anxiety, as social life becomes swept up by quantitative analysis, is that happy, healthy individuals might tailor their social relationships in ways that protect them against the “risk” of unhappiness. Guy Winch, an American psychologist who has studied this phenomenon, advises happy people to be on their guard. “If you find yourself living with or around people with negative outlooks,” he wrote on the website Psychology Today, “consider balancing out your friend roster.” The impact of this rebalancing on those unfortunate friends with the “negative outlooks” is all too easy to imagine.

The fabric of social life is now a problem that is addressed within the rubric of health policy, and there is something a little sad about that. Loneliness now appears as an objective problem, but only because it shows up in the physical brain and body, with calculable costs for governments and health insurers. Generosity and gratitude are urged upon people by positive psychologists, but mainly to alleviate their own mental health problems and private misery. And friendship ties within poor inner-city neighbourhoods have become a topic of government concern, but only to the extent that they mediate epidemics of bad nutrition and costly inactivity.

The irony is that, for all the talk of giving and sharing, this is potentially an even more egocentric worldview than that associated with the market. The cornerstone of orthodox economics, dating back to Adam Smith, is that self-interest in the marketplace is ultimately beneficial for society. The era of social optimisation looks set to stand this claim upside down: being social in your everyday life is worth it, because it will ultimately deliver benefits back to you. The trouble is that our appetites for this new commodity can spiral out of control.

Addicted to contact

Over the past decade, the ubiquity of digital media – and social media in particular – has become a lightning rod for media hysteria. The internet or Facebook can be blamed for the fact that young people are increasingly narcissistic, unable to make commitments to one another or concentrate on anything that is not interactive, and so on. There is indeed some evidence to suggest that individuals who use social media compulsively are more egocentric, prone to exhibitionism and grandiose behaviour. But rather than treat the technology as some virus that has corrupted people psychologically and neurologically, it is worth standing back and reflecting on the broader cultural logic at work here.

What makes social media so compulsive, even addictive? It is the experience of social life, stripped of all its frustrations and obligations. People who cannot put down their smartphones are not engaging with images or gadgetry for the sake of it: they are desperately seeking some form of human interaction, but of a kind that does nothing to limit their personal, private autonomy.

 FacebookTwitterPinterest Illustration by Pete Gamlen

What we witness, in the case of a social media addict, is only the more pathological element of a society that cannot conceive of relationships except in terms of the psychological pleasures that they produce. The person whose fingers twitch to check their Facebook page when they are supposed to be listening to their friend over a meal is a victim of a philosophy in which other people are only there to please, satisfy and affirm an individual ego from one moment to the next. This inevitably leads to vicious circles: once a social bond is stripped down to this impoverished psychological level, it becomes harder and harder to find the satisfaction that one wants. Viewing other people as instruments for one’s own pleasure represents a denial of the core ethical and emotional truths of friendship, love and generosity.

One grave shortcoming of this egocentric idea of the social is that none (or at least, vanishingly few) of us can ever constantly be the centre of attention, receiving praise. And so it also proves with Facebook. As an endless stream of exaggerated displays of positivity or success, Facebook often serves to make people feel worse about themselves and their own lives. The mathematics of networks means that most people will have fewer friends than average, while a small number of people will have far more than average. The tonic to this sense of inferiority is to make one’s own exaggerated displays of positivity or success, to seek the gaze of the other, thereby reinforcing a collective vicious circle. As positive psychologists are keen to stress, this inability to listen or empathise is a significant contributor to depression.

If wellbeing resides in discovering relationships that are less ego-oriented, less purely hedonistic, than those an individualistic society offers, then Facebook and similar forms of social media are rarely a recipe for happiness. It is true that there are specific uses of social media that lend themselves towards stronger, more fulfilling social relations. One group of positive psychologists has drawn on its own evidence of what types of social relations lead to greater happiness, to create a new social media platform, Happier, designed around expressions of gratitude and generosity, which are recognised to be critical ingredients of mental wellbeing.

What remains unquestioned by such efforts to redesign social networks for greater wellbeing is the underlying logic, which implies that relationships are there to be created, invested in and – potentially – abandoned, in pursuit of individual optimisation. The darker implication of strategically pursuing positive emotion via relationships is that the relationship is only as good as the psychic value that it delivers. “Friend rosters” may need to be “balanced”, if it turns out that one’s friends are not spreading enough pleasure or happiness.

Neoliberal socialism

Our society is excessively individualistic. Markets reduce everything to a question of individual calculation and selfishness. Unless we can recover the values associated with friendship and altruism, we will descend into a state of ennui.

These types of claims have animated various critiques of capitalism and markets for centuries. They have often provided the basis of arguments for reform, whether moderate attempts to restrain the reach of markets, or more wholesale demands to overhaul the capitalist system. Today, the same types of lament can be heard, but from some very different sources. Now, the gurus of marketing, behavioural economics, social media and management are first in line to attack the individualistic and materialist assumptions of the marketplace. But what they are offering instead is a marginally different theory of individual psychology and behaviour, in which the social is primarily an instrument for one’s own medical, emotional or monetary gain.

What we encounter in the current business, media and policy euphoria for being social is what might be called “neoliberal socialism”. Sharing is preferable to selling, so long as it does not interfere with the financial interests of dominant corporations. Appealing to people’s moral and altruistic sense becomes the best way of nudging them into line with agendas that they had no say over. Brands and behaviours can be unleashed as social contagions, without money ever changing hands. Empathy and relationships are celebrated, but only as particular habits that happy individuals have learned to practise. Everything that was once external to economic logic, such as friendship, is quietly brought within it.

How would one break out of this trap? The example of “social prescribing” by doctors is an enticing one. While it starts from a utilitarian premise, that individuals can improve their wellbeing through joining associations and working collaboratively, it also points towards the institutions to make this happen, and not simply more cognitive or behavioural tips. If people have become locked in themselves, gazing enviously at others, this poses questions that need institutional, political, collective answers. It cannot be alleviated simply with psychological appeals to the social, which can exacerbate the very problems they aim to alleviate, once combined with digital media and the egocentric model of connectivity those media facilitate. There is a crucial question of how businesses, markets, policies, laws and political participation might be designed differently to sustain meaningful social relationships, but it is virtually never confronted by the doyens of social capitalism.

It is not very long since the internet offered hope for different forms of organisation altogether. As the cultural and political theorist Jeremy Gilbert has argued, we should remember that it was only a few years ago that Rupert Murdoch’s media empire was completely defeated in its efforts to turn Myspace into a profitable entity. The tension between the logic of the open network and the logic of private investment could not be resolved, and Murdoch lost half a billion dollars. Facebook has had to go to great lengths to ensure that the same mistakes are not made – particularly by anchoring online identities in “real” offline identities, and tailoring its design around the interests of marketers and market researchers. Perhaps it is too early to say that it has succeeded.

The reduction of social life to psychology, or to physiology as achieved by social neuroscience, is not necessarily irreversible. Karl Marx believed that by bringing workers together in the factory and forcing them to work together, capitalism was creating the very class formation that would eventually overwhelm it. This was despite the “bourgeois ideology” that stressed the primacy of individuals transacting in a marketplace. Similarly, individuals today may be brought together for their own mental and physical health, or for their own private hedonistic kicks; but social congregations can develop their own logic, which is not reducible to that of individual wellbeing or pleasure. This is the hope that currently lies dormant in this new, neoliberal socialism.