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Wednesday, 18 November 2009

Climate Rage


 

By Naomi Klein

17 November, 2009
Rolling Stone


 

One last chance to save the world — for months, that's how the United Nations summit on climate change in Copenhagen, which starts in early December, was being hyped. Officials from 192 countries were finally going to make a deal to keep global temperatures below catastrophic levels. The summit called for "that old comic-book sensibility of uniting in the face of a common danger threatening the Earth," said Todd Stern, President Obama's chief envoy on climate issues. "It's not a meteor or a space invader, but the damage to our planet, to our community, to our children and their children will be just as great."

 

That was back in March. Since then, the endless battle over health care reform has robbed much of the president's momentum on climate change. With Copenhagen now likely to begin before Congress has passed even a weak-ass climate bill co-authored by the coal lobby, U.S. politicians have dropped the superhero metaphors and are scrambling to lower expectations for achieving a serious deal at the climate summit. It's just one meeting, says U.S. Energy Secretary Steven Chu, not "the be-all and end-all."

As faith in government action dwindles, however, climate activists are treating Copenhagen as an opportunity of a different kind. On track to be the largest environmental gathering in history, the summit represents a chance to seize the political terrain back from business-friendly half-measures, such as carbon offsets and emissions trading, and introduce some effective, common-sense proposals — ideas that have less to do with creating complex new markets for pollution and more to do with keeping coal and oil in the ground.

 

Among the smartest and most promising — not to mention controversial — proposals is "climate debt," the idea that rich countries should pay reparations to poor countries for the climate crisis. In the world of climate-change activism, this marks a dramatic shift in both tone and content. American environmentalism tends to treat global warming as a force that transcends difference: We all share this fragile blue planet, so we all need to work together to save it. But the coalition of Latin American and African governments making the case for climate debt actually stresses difference, zeroing in on the cruel contrast between those who caused the climate crisis (the developed world) and those who are suffering its worst effects (the developing world). Justin Lin, chief economist at the World Bank, puts the equation bluntly: "About 75 to 80 percent" of the damages caused by global warming "will be suffered by developing countries, although they only contribute about one-third of greenhouse gases."

 

Climate debt is about who will pick up the bill. The grass-roots movement behind the proposal argues that all the costs associated with adapting to a more hostile ecology — everything from building stronger sea walls to switching to cleaner, more expensive technologies — are the responsibility of the countries that created the crisis. "What we need is not something we should be begging for but something that is owed to us, because we are dealing with a crisis not of our making," says Lidy Nacpil, one of the coordinators of Jubilee South, an international organization that has staged demonstrations to promote climate reparations. "Climate debt is not a matter of charity."

 

Sharon Looremeta, an advocate for Maasai tribespeople in Kenya who have lost at least 5 million cattle to drought in recent years, puts it in even sharper terms. "The Maasai community does not drive 4x4s or fly off on holidays in airplanes," she says. "We have not caused climate change, yet we are the ones suffering. This is an injustice and should be stopped right now."

The case for climate debt begins like most discussions of climate change: with the science. Before the Industrial Revolution, the density of carbon dioxide in the atmosphere — the key cause of global warming — was about 280 parts per million. Today, it has reached 387 ppm — far above safe limits — and it's still rising. Developed countries, which represent less than 20 percent of the world's population, have emitted almost 75 percent of all greenhouse-gas pollution that is now destabilizing the climate. (The U.S. alone, which comprises barely five percent of the global population, contributes 25 percent of all carbon emissions.) And while developing countries like China and India have also begun to spew large amounts of carbon dioxide, the reasoning goes, they are not equally responsible for the cost of the cleanup, because they have contributed only a small fraction of the 200 years of cumulative pollution that has caused the crisis.

 

In Latin America, left-wing economists have long argued that Western powers owe a vaguely defined "ecological debt" to the continent for centuries of colonial land-grabs and resource extraction. But the emerging argument for climate debt is far more concrete, thanks to a relatively new body of research putting precise figures on who emitted what and when. "What is exciting," says Antonio Hill, senior climate adviser at Oxfam, "is you can really put numbers on it. We can measure it in tons of CO₂ and come up with a cost."

 

Equally important, the idea is supported by the United Nations Framework Convention on Climate Change — ratified by 192 countries, including the United States. The framework not only asserts that "the largest share of historical and current global emissions of greenhouse gases has originated in developed countries," it clearly states that actions taken to fix the problem should be made "on the basis of equity and in accordance with their common but differentiated responsibilities."

 

The reparations movement has brought together a diverse coalition of big international organizations, from Friends of the Earth to the World Council of Churches, that have joined up with climate scientists and political economists, many of them linked to the influential Third World Network, which has been leading the call. Until recently, however, there was no government pushing for climate debt to be included in the Copenhagen agreement. That changed in June, when Angelica Navarro, the chief climate negotiator for Bolivia, took the podium at a U.N. climate negotiation in Bonn, Germany. Only 36 and dressed casually in a black sweater, Navarro looked more like the hippies outside than the bureaucrats and civil servants inside the session. Mixing the latest emissions science with accounts of how melting glaciers were threatening the water supply in two major Bolivian cities, Navarro made the case for why developing countries are owed massive compensation for the climate crisis.

 

"Millions of people — in small islands, least-developed countries, landlocked countries as well as vulnerable communities in Brazil, India and China, and all around the world — are suffering from the effects of a problem to which they did not contribute," Navarro told the packed room. In addition to facing an increasingly hostile climate, she added, countries like Bolivia cannot fuel economic growth with cheap and dirty energy, as the rich countries did, since that would only add to the climate crisis — yet they cannot afford the heavy upfront costs of switching to renewable energies like wind and solar.

 

The solution, Navarro argued, is three-fold. Rich countries need to pay the costs associated with adapting to a changing climate, make deep cuts to their own emission levels "to make atmospheric space available" for the developing world, and pay Third World countries to leapfrog over fossil fuels and go straight to cleaner alternatives. "We cannot and will not give up our rightful claim to a fair share of atmospheric space on the promise that, at some future stage, technology will be provided to us," she said.

The speech galvanized activists across the world. In recent months, the governments of Sri Lanka, Venezuela, Paraguay and Malaysia have endorsed the concept of climate debt. More than 240 environmental and development organizations have signed a statement calling for wealthy nations to pay their climate debt, and 49 of the world's least-developed countries will take the demand to Copenhagen as a negotiating bloc.

 

"If we are to curb emissions in the next decade, we need a massive mobilization larger than any in history," Navarro declared at the end of her talk. "We need a Marshall Plan for the Earth. This plan must mobilize financing and technology transfer on scales never seen before. It must get technology onto the ground in every country to ensure we reduce emissions while raising people's quality of life. We have only a decade."

 

A very expensive decade. The World Bank puts the cost that developing countries face from climate change — everything from crops destroyed by drought and floods to malaria spread by mosquito-infested waters — as high as $100 billion a year. And shifting to renewable energy, according to a team of United Nations researchers, will raise the cost far more: to as much as $600 billion a year over the next decade.

 

Unlike the recent bank bailouts, however, which simply transferred public wealth to the world's richest financial institutions, the money spent on climate debt would fuel a global environmental transformation essential to saving the entire planet. The most exciting example of what could be accomplished is the ongoing effort to protect Ecuador's Yasuní National Park. This extraordinary swath of Amazonian rainforest, which is home to several indigenous tribes and a surreal number of rare and exotic animals, contains nearly as many species of trees in 2.5 acres as exist in all of North America. The catch is that underneath that riot of life sits an estimated 850 million barrels of crude oil, worth about $7 billion. Burning that oil — and logging the rainforest to get it — would add another 547 million tons of carbon dioxide to the atmosphere.

 

Two years ago, Ecuador's center-left president, Rafael Correa, said something very rare for the leader of an oil-exporting nation: He wanted to leave the oil in the ground. But, he argued, wealthy countries should pay Ecuador — where half the population lives in poverty — not to release that carbon into the atmosphere, as "compensation for the damages caused by the out-of-proportion amount of historical and current emissions of greenhouse gases." He didn't ask for the entire amount; just half. And he committed to spending much of the money to move Ecuador to alternative energy sources like solar and geothermal.

Largely because of the beauty of the Yasuní, the plan has generated widespread international support. Germany has already offered $70 million a year for 13 years, and several other European governments have expressed interest in participating. If Yasuní is saved, it will demonstrate that climate debt isn't just a disguised ploy for more aid — it's a far more credible solution to the climate crisis than the ones we have now. "This initiative needs to succeed," says Atossa Soltani, executive director of Amazon Watch. "I think we can set a model for other countries."

 

Activists point to a huge range of other green initiatives that would become possible if wealthy countries paid their climate debts. In India, mini power plants that run on biomass and solar power could bring low-carbon electricity to many of the 400 million Indians currently living without a light bulb. In cities from Cairo to Manila, financial support could be given to the armies of impoverished "trash pickers" who save as much as 80 percent of municipal waste in some areas from winding up in garbage dumps and trash incinerators that release planet-warming pollution. And on a much larger scale, coal-fired power plants across the developing world could be converted into more efficient facilities using existing technology, cutting their emissions by more than a third.

But to ensure that climate reparations are real, advocates insist, they must be independent of the current system of international aid. Climate money cannot simply be diverted from existing aid programs, such as primary education or HIV prevention. What's more, the funds must be provided as grants, not loans, since the last thing developing countries need is more debt. Furthermore, the money should not be administered by the usual suspects like the World Bank and USAID, which too often push pet projects based on Western agendas, but must be controlled by the United Nations climate convention, where developing countries would have a direct say in how the money is spent.

 

Without such guarantees, reparations will be meaningless — and without reparations, the climate talks in Copenhagen will likely collapse. As it stands, the U.S. and other Western nations are engaged in a lose-lose game of chicken with developing nations like India and China: We refuse to lower our emissions unless they cut theirs and submit to international monitoring, and they refuse to budge unless wealthy nations cut first and cough up serious funding to help them adapt to climate change and switch to clean energy. "No money, no deal," is how one of South Africa's top environmental officials put it. "If need be," says Ethiopian Prime Minister Meles Zenawi, speaking on behalf of the African Union, "we are prepared to walk out."

 

In the past, President Obama has recognized the principle on which climate debt rests. "Yes, the developed nations that caused much of the damage to our climate over the last century still have a responsibility to lead," he acknowledged in his September speech at the United Nations. "We have a responsibility to provide the financial and technical assistance needed to help these [developing] nations adapt to the impacts of climate change and pursue low-carbon development."

 

Yet as Copenhagen draws near, the U.S. negotiating position appears to be to pretend that 200 years of over-emissions never happened. Todd Stern, the chief U.S. climate negotiator, has scoffed at a Chinese and African proposal that developed countries pay as much as $400 billion a year in climate financing as "wildly unrealistic" and "untethered to reality." Yet he put no alternative number on the table — unlike the European Union, which has offered to kick in up to $22 billion. U.S. negotiators have even suggested that countries could fund climate debt by holding periodic "pledge parties," making it clear that they see covering the costs of climate change as a matter of whimsy, not duty.

 

But shunning the high price of climate change carries a cost of its own. U.S. military and intelligence agencies now consider global warming a leading threat to national security. As sea levels rise and droughts spread, competition for food and water will only increase in many of the world's poorest nations. These regions will become "breeding grounds for instability, for insurgencies, for warlords," according to a 2007 study for the Center for Naval Analyses led by Gen. Anthony Zinni, the former Centcom commander. To keep out millions of climate refugees fleeing hunger and conflict, a report commissioned by the Pentagon in 2003 predicted that the U.S. and other rich nations would likely decide to "build defensive fortresses around their countries."

 

Setting aside the morality of building high-tech fortresses to protect ourselves from a crisis we inflicted on the world, those enclaves and resource wars won't come cheap. And unless we pay our climate debt, and quickly, we may well find ourselves living in a world of climate rage. "Privately, we already hear the simmering resentment of diplomats whose countries bear the costs of our emissions," Sen. John Kerry observed recently. "I can tell you from my own experience: It is real, and it is prevalent. It's not hard to see how this could crystallize into a virulent, dangerous, public anti-Americanism. That's a threat too. Remember: The very places least responsible for climate change — and least equipped to deal with its impacts — will be among the very worst affected."

 

That, in a nutshell, is the argument for climate debt. The developing world has always had plenty of reasons to be pissed off with their northern neighbors, with our tendency to overthrow their governments, invade their countries and pillage their natural resources. But never before has there been an issue so politically inflammatory as the refusal of people living in the rich world to make even small sacrifices to avert a potential climate catastrophe. In Bangladesh, the Maldives, Bolivia, the Arctic, our climate pollution is directly responsible for destroying entire ways of life — yet we keep doing it.

 

From outside our borders, the climate crisis doesn't look anything like the meteors or space invaders that Todd Stern imagined hurtling toward Earth. It looks, instead, like a long and silent war waged by the rich against the poor. And for that, regardless of what happens in Copenhagen, the poor will continue to demand their rightful reparations. "This is about the rich world taking responsibility for the damage done," says Ilana Solomon, policy analyst for ActionAid USA, one of the groups recently converted to the cause. "This money belongs to poor communities affected by climate change. It is their compensation."



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Tuesday, 17 November 2009

You can put a price on happiness, and new study says it's a bargain


 
November 17, 2009
 
By Peter Popham
 
Money can't buy me love, The Beatles sang, and the best things in life are free - but according to new research, they couldn't have been more wrong. Not only is the happiness of falling in love indistinguishable from that of winning the pools but, says a leading Australian economist, it's worth a lot less.
 
In exhaustive research involving nearly 10,000 people and taking eight years to complete, Professor Paul Frijters claims to have established that happiness is really quite cheap. And the monetary value of events such as marriage, moving house and bereavement is dramatically different depending on whether you are a man or a woman.
 
Men, his research finds, are both far more exalted and more depressed by changes in their lives. To an Australian man marriage is worth about £17,000, but to a woman it is worth only half that. Likewise, men are far more affected by divorce.
 
Mr Frijters' team tracked the major life events of his subjects over a period of years and asked them to assign a number between 0 and 10 to their state of mind after important life events and sudden changes in income. This enabled him to put a money value on what he called the "psychic costs" and "psychic benefits" of these changes.
 
Sad events have a much bigger impact than happy ones, Professor Frijters says, dramatically so for men: the death of a partner or a child is like the loss of £350,000 to a man, but only £73,000 to a woman.
 
"Losing a loved one has a much bigger effect than gaining a loved one," Professor Frijters told the Sydney Morning Herald. "There's a real asymmetry between life and death. This shouldn't surprise us. Human beings seem primed to notice losses more than gains."
And some events are experienced as gains by one sex but losses by the other: moving house, for example, which is the equivalent of losing around £9,000 to a man; for a woman it's like a present of about £1,500.
 
The cost of living: How emotions add up
 
*Marriage
Women: +£8,726 Men: +£17,675
 
*Birth of child
Women: +£4,867 Men: +£18,236
 
*Divorce
Women: -£4,977 Men: -£61,116
 
*Death of loved one
women: -£73,205 Men: -£350,830
 
*Moving house
Women: +£1,454 Men: -£8,947
 
Source: Paul Frijters' study



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Saturday, 14 November 2009

The "Gusher Up" Theory Of Economics


 
By Jeff Berg
13 November, 2009
Countercurrents.org

During the Reagan era the government put in place policies that guaranteed that the wealth that naturally accumulates at the top end of the income ladder stayed there. In order to accomplish this bit of social engineering the top taxation bracket was significantly reduced. The policies of this time succeeded to the extent that the wealthy did in fact get much wealthier.

Where they failed was in the second part of the "trickle down" theories that justified this policy to the public. The theory such as it was stated that if the rich were allowed to get richer this would allow the society at large to become wealthier as a whole. This extra wealth would then "trickle down" thereby resulting in everyone become wealthier than they had been previously and would have been otherwise. To no great surprise to the critics of this policy what happened instead is exactly what the critics projected. I.e. The gap between the rich and everyone else increased dramatically.

Simultaneously the Reaganites embarked on a massive increase in military spending which resulted in two major economic effects. First it massively accelerated America's debt and deficits. Second it acted as a further transfer of wealth from the middle class to the wealthiest classes. An aspect of military spending that is seldom publicly discussed but has been fully understood for centuries if not millennia.

Today we have a new variant on this economic theory that I would like to call the "Gusher Up" theory. In this economic model the government sprays massive amounts of money directly upwards into the pockets of the investor class. This is justified by declaring that a state of emergency exists and to do anything else would result in a complete collapse of the entire financial system. It is further justified by claiming that the end result of this massive geyser of money will be - in the long run - to make everyone wealthier. (As many of you know Keynes had a different view of this long run) This time around no one is saying out loud that this wealth will then "trickle down". No doubt afraid that the terminology might create negative associations for what is already a hard sell. It is nonetheless relentlessly implied.

Once again the critics of this policy have a different take. They are projecting that the net result of this policy will instead be a monumental transfer of money to the richest classes while leaving the entire country burdened with an unprecedented level of debt. The effects of massive debt on a county's economy and its citizens standard of living being at least as well understood as the effects of massive military spending on the pockets of the rich.

This debate could not be said to be raging in the mainstream media as the only critics of the current policies of the U.S. Federal Reserve given major media attention come from the deranged end of the "laissez-faire" libertarian fringe. Folks who would have had all governments do nothing after the collapse of Bear Sterns and Lehman. These "invisible handers" insist that the market like mother knows best. It is now clear in retrospect that what would have happened instead is a cascading failure of all derivative bets that would have taken down the entire economy. A situation that would have led to most of us being unable to access our funds from our banks and a subsequent run on the banks. The resulting panic, pandemonium and street level unrest would have led to an international credit seizure that would have stopped the global economy in its tracks. The net effect may well have put 1929 in the shade. This would have been to no one's advantage.

Those making an informed and balanced critique of these policies are as usual shunted off to the margins. Though they did have a few moments in the sun when it turned out that their projections about the housing bubble were exactly right. Dean Baker comes to mind.

Another critic whose projections have been exceptionally accurate for the last four years is Mike Whitney. In his latest article he refers to a recent study that shows that the critics of the "Gusher Up" theory are proving to be as prescient as those that predicted the effects of the earlier "Trickle down" variant.

"The Fed's meddlesome interventions (now in-excess of $11.4 trillion) represent the largest transfer of wealth in history.

Berkeley economics professor Emmanuel Saez, recently released a report which just confirms that income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression. The report shows that
1--Income inequality is worse than it has been since at least 1917
2--"The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007"
3--"In the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth." ~ http://www.informationclearinghouse.info/article23947.htm

Along with these facts are the current facts about the productive economy in the U.S. today. The true jobless rate is at 17.5% and shows every sign of increasing. The number of people "upside down" on their mortgages and being tossed out of their home continues to grow at an alarming rate. Worse yet there is another round of resetting beginning in the Adjustable Rate Mortgage market which will only exacerbate this already drastic situation. Simultaneously commercial real estate is giving off every sign that it too is a bubble ready to burst. This is the picture for the working and non-working stiff for the next few years at least. To call this a depression for the non-investor class is no exaggeration.

Meanwhile the asset and equities bubbles are being reflated with the Fed's money. It's as if the Fed has decided that the only way markets will be allowed to go is up. No matter how much public money this takes. What Whitney and people like Marc Faber, Peter Schiff and Jim Rogers rightly call "lunacy".

When we finally get around to tabulating the numbers for the period of 2008 to 2010; the gap between those few at the top and what is now being referred to as the "bottom 90%" will have become the widest chasm ever seen in the U.S. What this will mean for the social fabric of the country is not hard to guess. The only upside that I can glean is that this time, surely, the U.S. will not turn to a massive increase in military spending to pump-prime its economy. If only because they have no foreign creditors to bankroll the effort.

Who knows maybe this will leave the energy, transportation and housing retrofit sectors as the only places large enough to turn to in order to kick-start the U.S. and global economy. If this turns out to be the case, and the U.S. meets its domestic challenges and international obligations in these areas, then there is a good chance that all else will be pretty much forgotten if not forgiven. "The War on Terror" like the "Domino Theory" fading into well deserved obscurity. Horrific episodes that ultimately meant little to those not directly affected and not permanently fatal to the human project. Meaning there is at least something to be hoped for if not to be counted on.

Ton confrere,
Jeff Berg
Jeff is a founding member of Post Carbon Toronto. His writing focuses on Energy & Emissions and their micro and macro implications ecologically, economically and socially. He can be reached at jeffberg@rogers.com
 



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Private supply of a 'Public Good'

 
 
Private 'police' provoke concern
 

The growing number of private security companies policing UK streets is a worrying development, senior police figures say.

The Police Federation of England and Wales said there is "huge concern" over their powers and accountability.

Former Metropolitan Police Commissioner Sir Ian Blair has also said there should be no role for the private sector in Britain's law enforcement.

The firms typically charge residents to patrol streets and deter troublemakers.

 

Regular patrols

The growth in private security firms taking on policing work comes despite an increase in police numbers.

A record 141,252 police officers are available for duty in England and Wales, although there have been reductions in 16 police areas.

Private security firms have no powers, although chief constables may award some limited ones such as allowing them to move people on.


 
 
" It's the police who patrol public space and we should be very wary about giving those powers to private security companies "
Simon Reed, Police Federation
 

BBC correspondent Keith Doyle joined one private security company who began patrolling the streets of Darlington this week.

He said residents there pay between £2 and £4 a week to have their homes included in regular patrols and to receive an instant response if they need help.

"These guards know they have no powers but they say simply by being here it prevents trouble and that's something local residents agree with and have signed up for," he said.

Francis Jones of Sparta Security told our correspondent the patrols provided a visual deterrent to potential criminals.

He said: "We are giving a deterrent to them and also raising the confidence of the public who have taken us on board and there are quite a lot of people coming forward, ringing us up, wanting our service."

 

'Fear of crime'

But the vice chairman of the Police Federation, which represents officers, said such firms could cause problems.

Simon Reed said: "We have got people who have certain powers, we are going to see them in uniform. Potentially there is confusion there for the public and who are they actually accountable to?

"I understand the public's fear of crime but actually it's the police who patrol public space and we should be very wary about giving those powers to private security companies."

Sir Ian Blair said more use should be made of community officers and civilians working within the police, otherwise there could be more private police patrols.

He said: "I do not see community safety as a commodity to be bought and sold and therefore we shouldn't be having the private sector in policing.

"Unless we get this right, we will end up with private security coming in and they will work for the rich and the poor will go without."




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Friday, 13 November 2009

Non-Europeans shut out from another 250,000 skilled jobs

 

Non-Europeans shut out from another 250,000 skilled jobs

Brown to clamp down on student visa abuses
Home Office plans big asylum system changes

More than 250,000 skilled engineering, care and catering jobs are to be closed to non-European overseas workers next year as a result of Gordon Brown's immigration speech today.

 
The prime minister promised that these sectors would be taken off the official list of shortage occupations as soon as employers and training bodies can provide sufficient qualified recruits.
 
In his first major speech on immigration for 18 months, he also promised to clamp down on widespread abuse of the student visa system.
 
An official review will look at raising the minimum level of course for which foreign students can get a visa, introducing mandatory English language tests and blocking overseas students from working part-time in temporary jobs that could be filled by young Britons.

 

After the speech the Home Office published a draft immigration bill which is designed to be enacted after the general election. The 243-page bill – which would be the eighth major piece of immigration and asylum legislation since Labour came to power in 1997 – is designed to "simplify and consolidate" the baffling jigsaw of bills and rule changes introduced since the bedrock 1971 Immigration Act.

 
The bill also proposes sweeping changes in immigration procedures, including the replacement of the deportation process with a general power to expel failed asylum seekers and illegal migrants. They would also be banned from returning to Britain for a fixed period or indefinitely.
 
A Home Office consultation paper on welfare support for asylum seekers also published today underpins these proposals with plans to limit housing and benefit payments to three months for those told to leave the country. Families who have been told to leave would have to live in "full-board" Borders Agency accommodation and replacing all cash payments with a plastic pre-paid card.
 
The further changes to the points-based immigration system outlined by Brown involve implementing recommendations from the government's migration advisory committee. From this autumn, shortage occupation jobs will have to advertised for four weeks rather than the current two before they can be filled by non-European skilled workers.
 
The previous work permit regime covered about 700,000 jobs in shortage occupations. Since the migration committee was set up last year, it has recommended a cut to about 500,000. The latest recommendations covering engineering roles, skilled chefs and care workers would remove a further 290,000 British jobs.
 
The number of these jobs filled by non-European workers, however, is very much smaller, with only 30,000 coming to work in Britain between November 2008 and August 2009. The door was closed to unskilled workers from outside the European Economic area when the points-based system was introduced. Now, step by step, the door is also being closed to skilled workers from outside Europe.
 
The prime minister said realistic timetables needed to be developed for adequate training to take place before these jobs could be taken off the shortage lists.
 
"As growth returns I want to see rising levels of skills, wages and employment among those resident here – rather than employers having to resort to recruiting people from abroad," said Brown.
 
The Conservatives said that the PM's speech had a hollow ring to it. "This is the Government that tried to cover up a deliberate
policy of increasing immigration and the prime minister's comments show that he has no idea about how to deal with the whole question of immigration now," said the shadow home secretary, Chris Grayling.
 
The Liberal Democrats' Chris Huhne said Brown was trying to shut the stable door long after the horse had bolted and argued that the government's mismanagement of the immigration system had long ago undermined the country's liberal attitude to the issue.
The Refugee Council said the consultation on asylum support showed the government was determined to make life as miserable as it could for those who got to Britain. Jonathan Ellis, the organisation's head of policy, said: "It has proposed to re-enact the widely condemned section 55, making refugees homeless and destitute, that was ruled illegal by the courts four years ago. Not only that, the government proposes that families who are unable to return home will be refused cash support, and forced to rely on a payment card.
 
"This makes a mockery of the government's claim to be safeguarding and promoting the welfare of children seeking asylum as it announced last week."
 
The Home Office denied any change of policy on section 55, insisting it would not be used to make anybody destitute in the way condemned by the law lords.
 
Refuge and Migrant Justice said that buried in the bill was provision to give ministers the power to overrule bail decisions made by judges in immigration and asylum cases.



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Wednesday, 11 November 2009

Powerful interests are trying to control the market


 

 

By John Kay
Published: November 10 2009 20:34 | Last updated: November 10 2009 20:34
John Kay, columist
You can become wealthy by creating wealth or by appropriating wealth created by other people. When the appropriation of the wealth of others is illegal it is called theft or fraud. When it is legal, economists call it rent-seeking.
 
Rent-seeking takes many forms. On Europe's oldest highway, the Rhine river, the castles on rocky outcrops date from the time when bandits with aristocratic titles extracted tolls from passing traffic. In poor countries the focus of political and business life is often rent-seeking rather than wealth creation. That helps explain why some countries are rich and others poor.
 
Rent-seeking drives the paradoxical resource curse. Oil or mineral wealth mostly reduces the population's standard of living because it diverts effort and talent from wealth creation to rent-seeking. Sadly, foreign aid often has a similar effect.
Rent-seeking can be effected through rake-offs on government contracts, or the appropriation of state assets by oligarchs and the relatives of politicians.
 
But in more advanced economies, rent-seeking takes more sophisticated forms. Instead of 10 per cent on arms sales, we have 7 per cent on new issues. Rents are often extracted indirectly from consumers rather than directly from government: as in protection from competition from foreign goods and new entrants, and the clamour for the extension of intellectual property rights. Rents can also be secured through overpaid employment in overmanned government activities.
 
Rent-seeking is found whenever economic power is concentrated – in the state, in large private business, in groups of co-operating and colluding firms. Private concentrations of economic power tend to be self-reinforcing. This problem was widely recognised in America's gilded age. The well-founded fear was that the new mega-rich – the Rockefellers, Carnegies, Vanderbilts – would use their wealth to enhance their political influence and grow their economic power, subverting both the market and democracy. Today it is Russia that exemplifies this problem.
 
But America has a new generation of rent-seekers. The modern equivalents of castles on the Rhine are first-class lounges and corporate jets. Their occupants are investment bankers and corporate executives.
 
Control of rent-seeking requires decentralisation of economic power. These policies involve limits on the economic role of the state; constraints on the concentration of economic power in large business; constant vigilance at the boundaries between government and industry; and a mixture of external supervision and internal norms to limit the capacity of greedy individuals in large organisations to grab corporate rents for themselves. Vigorous pursuit of these is the difference between a competitive market economy and a laisser-faire regime, and it is a large difference.
 
Privatisation and the breaking up of statutory monopolies has reduced rent-seeking by organised groups of public employees. But the scale of corporate rent-seeking activities by business and personal rent-seeking by senior individuals in business and finance has increased sharply.
 
The outcomes can be seen in the growth of Capitol Hill lobbying and the crowded restaurants of Brussels; in the structure of industries such as pharmaceuticals, media, defence equipment and, of course, financial services; and in the explosion of executive remuneration.
 
Because innovation is dependent on new entry it is essential to resist concentration of economic power. A stance which is pro-business must be distinguished from a stance which is pro-market. In the two decades since the fall of the Berlin Wall, that distinction has not been appreciated well enough.
 
The story is told of the Russian policymaker, visiting the US after the Soviet Union collapsed, who asked: "Who is in charge of the supply of bread to New York?" The bureaucrat had not learnt how markets work, and we are in danger of forgetting it. The essence of a free market economy is not that the government does not control it. It is that nobody does.
 
johnkay@johnkay.com



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Tuesday, 10 November 2009

Corporates hold key to recovery


 

 

By David Bowers
Published: November 9 2009 19:12 | Last updated: November 9 2009 19:12
 
It might be heresy but what if the credit crunch turns out to be more of a supply shock than a demand shock? While markets appear to be focusing on the prospect of multi-year consumer deleveraging and weak consumption growth, it strikes us that investors risk forgetting that it is corporates, rather than consumers, that have been on the frontline of the 2009 recession.
 
The conventional wisdom is that this recession was in essence a housing bubble followed by a bust. But that is too narrow a view. Analyse this year's gross domestic product falls in the US, eurozone and Japan and you will discover that the dominant contributing factor has been the collapse of corporate, rather than consumer, spending. Capital spending has been cut back brutally and inventory levels run down. So it might be that corporates rather than consumers now hold the key to the shape and duration of the recovery.
 
We believe corporates were significant beneficiaries from the plentiful supply and mispricing of credit during the boom years. Multinational companies profited from an extremely low cost of capital as banks rushed to offer them Swiss franc- and Japanese yen-denominated credit to help fund the long, thin supply chains that seemed such a winning formula during the Great Moderation. Moreover, this "portable cost of capital" supported a plethora of vendor financing deals, whereby producers extended credit to their customers to purchase their products, making revenue lines appear more predictable than was really the case.
 
This business model came crashing down with Lehman's collapse. Companies' cost of capital went through the roof (assuming you could get any) and the vendor financing deals evaporated as the credit ratings of customers were called into question. This happened so rapidly that companies found themselves with excess inventory at a time when they had no recourse to bank credit. In a desperate attempt to preserve cash they cut dividends, jobs and capital expenditure and when that failed they temporarily ceased production to liquidate inventories. Thus, Lehman's failure triggered a contraction in global supply all the way down the supply chain as inventories were liquidated and capex projects abandoned.
 
Economic recovery, however, may pose an even greater challenge to these fragile supply chains. As any accountant will tell you, one cast-iron way of ceasing to be a going concern is to have nothing to sell. When inventory falls to critically low levels, companies will reorder only to find that their suppliers have no inventory either – a pattern echoed all the way through the supply chain. In the ensuing scramble for resources, we fear a rise in "frictional" inflation – particularly among the industrial sector.
Already our proprietary news flow indicators are showing much more concern about inflation than we would normally expect given the depth of the recession. Did the credit crunch force companies to cut back capacity excessively? If so, then the amount of spare capacity in the economy might not be as great as first thought, meaning deflationary pressures will be weaker than the bond bulls had been expecting. It would come as a big surprise if what they saw as a negative demand shock turned out instead to be a negative supply shock. One of the greatest risks of this is that we see a sudden "bear flattening" of the yield curve where short-term bond yields rise faster than long-term yields.
 
So next year could see the start of some fundamental challenges to the business models of global non-financial companies. For a start, companies will have to start thinking how to reinstate that supply. With employers having maxed out productivity gains from their current workforce, there could be a rush to re-employ workers. It is quite conceivable that US unemployment might fall in 2010, which would call into question the consensus view of a "jobless recovery".
 
The second challenge will be to rebuild and resecure their supply chains. But that will depend on what funding is available. Following the credit crunch, the supply of private sector cross-border finance will be much reduced, especially the farther away companies stray from their home market. Faced with these and other challenges, companies might look to relocate their supply chains nearer to home – "nearshoring" rather than "offshoring" could be a buzzword to watch out for in 2010.
 
Finally, companies will find that they face a very different regulatory agenda as scientists persuade the politicians of the need to reduce carbon emissions. Not only will companies have to reinstate their supply and relocate it closer to home, but they will also have to re-engineer their capital stock to be more climate-friendly. Maybe it is time that we stopped worrying about the consumer, and focused more on how the corporate sector is going to have to rebuild its capital stock and how that rebuilding is going to be funded.
 
David Bowers is global strategist at Absolute Strategy Research


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