Big Pharma, my cancer patient and me

My patient was refused compassionate access to a cheap chemotherapy. Why? Because pharmaceutical companies are often guilty of selling an ethically murky kind of hope

• 
• • Ranjana Srivastava
  • theguardian.com, Friday 2 May 2014 00.43 BST

'We both knew that the gesture will be more therapeutic than the drug itself'. Photograph: Christopher Thomond

After failing two types of chemotherapy for advanced cancer, my patient knew that her lease on life was short, but a cherished family event stood in the way. "My son is going to propose at the Christmas table, I just want to make it there." Her son has been her anchor throughout her challenge; I could see why his engagement mattered so much. But Christmas was still some months away, and I feared the feat will be difficult.

"I am not afraid to die but I just want to know that I gave it my all." This is an all too frequent exchange, unfailingly poignant, often heart-wrenching. An entirely reasonable answer would be to gently reiterate the lack of meaningful chemotherapy, broach the benefit of good palliative care, and allow for regret at both our ends. Contrary to popular belief that mythologizes every patient raging against cancer to the very end, for many this discussion eases the burden of expectation and allows for a peaceful end.

But this relatively young mother was simply not ready yet. "I would happily die right after he proposed" she smiled, reminding me that her goalposts had never changed. When a patient like that looks you in the eye, it isn’t easy to separate foreboding statistics and human longing into two neat piles and deny hope.

My head said that another chemotherapy drug wouldn't make a significant survival difference. But my heart urged me to try, if not to boost survival, then merely to reassure her that she gave it her best shot. Put simply, we both knew that the gesture will be more therapeutic than the drug itself, hardly a rare observation in medicine.

I wrote to a large pharmaceutical company for compassionate access to a common chemotherapy that’s not government subsidised for her precise type of cancer (most likely because patients typically don’t live long enough to need it). It is a relatively old and cheap drug, importantly with manageable toxicity, and I requested a month’s supply to gauge response. I added that the patient does not expect recurrent funding in case she responds to the drug, addressing a legitimate concern. In a world where we frequently push the boundaries or prescribe chemotherapy in more questionable circumstances, I feel comfortable that what I am really doing is asking the company to be my partner in nurturing hope. Which is after all what every pharmaceutical representative has told me for as long as I have known.

So I simply don’t believe it when my request is declined. Thinking this to be a mistake, I protest further up the chain, pointing out to a senior executive that only recently the company had offered me conference sponsorship worth thousands more than the small cost of the chemotherapy. The apologies come fast, but the explanations are notably absent.

'If subsidy looks unlikely, access schemes are retired, sometimes abruptly'. Photograph: Stefan Wermuth/Reuters

My naive puzzlement slowly turns into the realisation that almost every instance where a company has facilitated compassionate access to a product, it has been as a form of marketing as a means of gaining lucrative, government-subsidised listing. In the era of astonishingly expensive blockbuster drugs, government subsidisation is the holy grail of big pharma. The cost of treating a few hundred or even a few thousand patients for free (and in the process, securing the backing of doctors), is negligible when the ultimate prize is full government subsidy. Indeed, individuals and organisations including the UK’s NICE and Australia’s PBS are now questioning the feasibility of subsidising drugs that can cost as much as AU$200,000 a year for ambiguous benefit.

Compassionate access schemes for these incredibly expensive drugs might facilitate access for selected patients but they are not truly compassionate in the way that the average person understands. Pharmaceutical companies sell an ethically murky kind of hope than what doctors and their patients might understand. The benefit to the company must ultimately outweigh the benefit to the individual patient. If subsidy looks unlikely, access schemes are retired, sometimes abruptly. When a commonplace drug is neither vying for market recognition nor fighting for subsidisation, there is no incentive to provide it to a patient like mine, whose story would anyway never be the stuff of headlines.

You might ask the obvious question as to why it would take so long for an oncologist to figure out that a pharmaceutical company is not a charity. The common argument is that companies must necessarily recoup the cost of drug development, as only a small minority succeed in the marketplace.

But for every dollar spent on research, nearly twice is spent on lobbying and marketing – and it is also this expense that companies want to recover. From the time they are students, doctors are exposed to relentless advertising that big pharma is their companion in healthcare. The glory days of advertising saw doctors offered egregious forms of largesse, from conferences hosted in ancient castles and on cruises to lavish dining and entertainment. Then there were the rivers of pens post-it notes, stress balls and cute toys to influence prescribing. Regulation is much tighter today, but there is still plenty of money in sponsorships, paid speaking tours, adding one’s credible name to journal articles, and just promoting a drug to one’s peers, especially if you are anointed a key opinion leader.

Drug companies think nothing of sending a representative to wait for three hours in a clinic to spend five minutes with a doctor. Unlike other people, these people never ever express frustration at the ludicrous wait and are unfailingly courteous. They ask subtly about you, your family and your holidays. They probe your prescribing habit and tell you why your peers prefer their drug. They routinely ask what would make it even easier for you to prescribe their drug. It is impossible to navigate the discussion towards cost or what makes for the greater societal good.

And to be honest, it’s unseemly to be anything but polite towards someone who has waited hours to see you, seems genuinely nice, and from whom you might need a favour for your next patient. These favours are rare but the younger you are, the more impressionable. No wonder many medical schools and hospitals have banned pharmaceutical representative visits, hopefully signalling to doctors that the sandwiches have a hidden cost.

Eventually, I tell my patient that my request for compassionate access was denied. Crushed, she asks if she wasn’t important enough. "That’s not true", I say unconvincingly, "it’s just the way it is." She dies, with a few weeks to go before Christmas, leaving me to wonder whether the drug might just have bridged the small gap. I will never know, but feeling morally compromised by the whole exchange, I tell the drug company that I won’t see its representatives in future.

I didn’t expect an acknowledgment but when it came, it sounded like a thinly veiled warning that the visits were an essential prerequisite to receiving favours. An incredulous representative exclaims, "you would really do that, stop seeing us due to what happened with that one patient?"

But "that one patient" represented the human face of what happens when the interests of a patient and the pharmaceutical company don’t align. That one patient’s crushed hope felt no less important than the renewed hopes of another. What happened with that one patient finally opened my eyes to what has gone before.

It seems only right to start by paying tribute to my patient, while acknowledging my complicity in the thorny tangle of doctors, patients and drug companies.

Economics is too important to leave to the experts

Citizens may be able to see the world more clearly than narrowly focused professional economists

• 
• • Ha-Joon Chang
  • The Guardian, Wednesday 30 April 2014 17.30 BST

'Thatcher's big bang in 1986 laid the ground for freewheeling financial capitalism, whose destructive nature is at the heart of the current mess.' Photograph: PA Archive

You wouldn't have guessed it, given the fanfare surrounding the 0.8% growth figure for the first quarter of 2014, but people in the United Kingdom have been living through a period worse than Japan's infamous "lost decade" of the 1990s.

During that time, Japan's per capita GDP grew at 1% per year. This means that in 2000, Japan's per capita GDP was 10.5% higher than in 1990. In the UK, per capita GDP at the end of 2013 was 6.6% lower than that in 2007. This means that, unless the UK economy miraculously grows at around 5% a year for the next four years (factoring in population growth rate of around 0.7% a year), it is going to have a decade that is even more "lost" than Japan's 1990s.

The costs of the 2008 crisis in terms of human welfare have been even greater than the growth figures suggest. Unemployment is still nearly 7%, or at 2.24 million, depriving people of dignity and putting them under huge stress. Real wages have had some of the biggest falls in the OECD bloc of 34 countries and have a long way to go before they can recover to pre-crisis levels.

Steep cuts in welfare spending have hit many of the poorest hard. Increasing job insecurity, symbolised by the rise of zero-hours contracts, has been making workers' lives more stressful. The spread of food banks, the popularity of "poverty recipes" in cookery, and the advance of German discount supermarket chains, such as Aldi and Lidl, are the more visible manifestations of this pressure on the living standards of citizens.

What is more, even this sorry achievement has been made on the reversion to the economic model whose bankruptcy was laid bare by the 2008 crisis. That model was predicated on the deregulated financial system fuelling unsustainable growth by creating asset bubbles, one of the highest household debts in the world (as a proportion of GDP), and a large current account deficit.

How has this mess been created? The mismanagement of the crisis by the coalition government means it has to bear significant blame, but the main cause lies in the nature of the economic model that the UK has pursued for three decades.

This model started, as is well known, with Margaret Thatcher. She ripped up the post-second world war consensus on the mixed economy and started establishing one of the most deregulated economies in the rich world. Full employment was ditched as a goal and worker rights were weakened. State-owned enterprises were privatised, often with very negative consequences, as in the railways, water, and energy. Most importantly, her big bang financial deregulation laid the ground for the development of freewheeling financial capitalism, whose destructive nature is at the heart of the current mess.

Subsequent Labour governments took the roughest edges off Thatcherism by, for example, increasing social welfare spending and introducing the minimum wage. However, the underlying economic model remained intact; the New Labour thinking was that we should let the City maximise its profits by minimising regulation, and then help the poor with the taxes on those profits. There was no realisation that the financial system itself may be a problem.

After a brief period when it made noises about rebalancing the economy and the "big society", the coalition government has made a headlong dash for Thatcherism-plus. True, it has somewhat strengthened financial regulation, but in the meantime it has also subsidised the banks to the gills, both explicitly (bailouts) and implicitly (quantitative easing). Pursuing the doctrine of the balanced budget, it has cut spending in the middle of a recession, seriously delaying the recovery. It has made cuts to the welfare state that Thatcher herself would have found radical, while privatising "the Queen's head" (the Royal Mail), which even she refused to sell off.

Of course, all of these policies are supposed to have been backed up by scientifically proved economic theories – saying that markets are best left alone, that making the rich richer makes everyone richer, that welfare spending and protection of worker rights only make people lazy and dependent, and so on. Most people have accepted these theories without much questioning because they are based on "expert" advice.

However, all these economic theories are at least debatable and often highly questionable. Contrary to what professional economists will typically tell you, economics is not a science. All economic theories have underlying political and ethical assumptions, which make it impossible to prove them right or wrong in the way we can with theories in physics or chemistry. This is why there are a dozen or so schools in economics, with their respective strengths and weaknesses, with three varieties for free-market economics alone – classical, neoclassical, and the Austrian.

Given this, it is entirely possible for people who are not professional economists to have sound judgments on economic issues, based on some knowledge of key economic theories and appreciation of the political and ethical assumptions underlying various theories. Very often, the judgments by ordinary citizens may be better than those by professional economists, being more rooted in reality and less narrowly focused.

Indeed, willingness to challenge professional economists and other experts is a foundation stone of democracy. If all we have to do is to listen to the experts, what is the point of having democracy?

What this means is that, as citizens in a democracy, all of us have the duty to learn at least some economics and engage in economic debates. This is not as difficult as it may seem. As I try to show in my new book, Economics: The User's Guide, most of economics can be understood by anyone with a secondary education, if it is explained accessibly.

The economy is too important to be left to professional economists (and that includes me). As citizens, we should all learn economics and challenge what the professionals tell us to believe.

What's behind team spirit?

Martin Crowe in Cricinfo

New Zealand gelled as a team int he 1992 World Cup but splintered thereafter © Getty Images

Teamwork, team spirit, team culture, team dynamics - all buzzwords that point to the same thing. Yet in truth it is the team "functionability" that must work if success is to be achieved and a legacy created. Sports teams are no different to business teams, except sport is played out in public and each individual player is under scrutiny, as much as the team's performance is.

In reality, most teams fail, if winning a championship or event or being ranked No. 1 is the measure they are judged by. Those few fortunate enough to hold the trophy aloft, let alone do it often and frequently, like the once all-conquering Manchester United, or the Australian cricket team of yesteryear, they are the ones that come together as one. As d'Artagnan famously said, "All for one and one for all."

There are thousands of opinions, hundreds of books, case studies and manuals on the subject worldwide. There are many ways to skin a cat. Yet really, when all is said and done, it is the simple methods of how people function best in everyday life that need to be executed in a sporting team environment. It comes down to how our relationships work in any form of life, and this points always to the ability to love, to talk, to listen and to commit. In short, to relate.

In my years of experiencing the good and the bad in relationships and teams, studying others, reading lots, and hearing grand and sad stories in all kinds of endeavour, the one thing that stands out more than anything is building and maintaining trust.

Trust stems from a willingness to openly share anything and everything. It is about not being afraid to show vulnerability, admitting mistakes and weaknesses, and generally and genuinely sharing the truth outwardly and honestly among the group. Trust rules the lot.

When it is not built, or is broken, then the essence of the team's functionality is lost. Great leaders and captains have been able to rely on this trust, once established, as the cornerstone to team success.

	Australia have always had the ability to work together even if one or two of the personalities clashed

Ian Chappell, the great Australian captain, would easily speak his mind, using his open-door policy style, by buying his team-mates a beer and sitting them down at the bar, loosening them up a little and getting a natural flow of conversation bedded in. He was famous for building that trust within his all-conquering team of the '70s by simply using straight honest talking and listening. In this he helped create the environment to challenge and debate with each other.

This is incredibly healthy, the key being that the trust generated leads to open challenging discussions and passionate debate based on respect. It doesn't mean you have to hold hands when doing so, just simply to speak your truth "out in the open", be heard, and take time to listen in turn. The worst thing is to speak your truth behind the backs of the team, in particular to the media and opposition. This kills trust, and it kills the desire to continue to share. Once trust and openness are broken, there is no chance going forward.

If the first two are working well, it will go a long way to solving any commitment issues. Committing or buying into the team's work is about the desire to go to great lengths to perform your specialist role for your team's benefit. When team members are allowed to share the truth, there is a natural tendency to buy in to committing wholeheartedly to the decisions made by the team's leaders.

Without commitment there is no accountability. When all are in, it becomes easier to call team members on actions and behaviours that will assist the team cause. When accountability becomes understood, then so too is the need to focus attention to the goals and results of the team. Accountability removes the individual needs, like personal recognition and ego, from the equation.

Australia had a great handle on this with their dominance through most of the 1990s and much of the following decade. They have always had that ability to work together even if one or two of the personalities clashed. This was the open positive conflict working well. West Indies, under Clive Lloyd, showed a real theme to their togetherness, small nations becoming one, and they displayed a spirit unrivalled for 15 long years.

Through the '80s, New Zealand had a mixture of good and bad, but mainly positive functionality. Sometimes there was a lack of attention to team results and accountability, but overall there was an enduring trust, openness and commitment.

	West Indies, under Clive Lloyd, showed a real theme to their togetherness - small nations becoming one © PA Photos  Enlarge

In my term as a Test captain, I didn't allow for enough open debate and sharing, and so we had little trust to start with, and the rest of the dysfunctions followed. My failure was in not generating enough open conflict to ensure everyone had a say, bought in, and truly committed. However, it did come slowly, so by the time of the 1992 World Cup, we had nearly all five functions working smoothly.

Sadly, rather than building on that success, we splintered dramatically, the catalyst being the bomb blast outside our hotel in Colombo in late 1992, an incident that split the team in two when six players and the coach, with families at home, left the tour. From then, as a team, we were damaged goods. Administrators got involved, wrongly, and developed hideous resentment. Over just a few months all the trust we had garnered started to evaporate.

By February 1993, factions were everywhere and our team dynamic was dead. The coach, Wally Lees was sacked for very little reason. Mark Greatbatch was inexplicably replaced as vice-captain, and therefore I lost my trusted lieutenant, and before long, after just one more Test in charge, my tenure as skipper was over too. The team spirit suffered.

My last seven Tests, as a mere batsman not knowing how to retire, were the saddest of all that I played, as I watched a team pretend it existed. There wasn't one ounce of trust. That positive team dynamic never rose again for New Zealand until Stephen Fleming began his own team-building with a young bunch of mates and an experienced and inspirational management, from 1998 to 2003.

The point is, anything can disrupt the dynamic, and so it's vital that whatever happens, or whoever comes into the group, the five functions must be quickly and often referred to: Motivation for maintaining the flow of attention to results; accountability; commitment; open, honest and respectful conflict; and sharing truths - these make the lifeblood of a team's fulfilment and longevity.

Why Karl Marx was right

Lee Sustar explains why mainstream economists are referring to Karl Marx in discussions of the world economy--and why they won't talk about the whole Marx.

September 13, 2011

ECONOMIST NOURIEL Roubini, whose predictions of the financial crash of 2008 earned him the nickname "Dr. Doom," has referred his patients to a specialist in capitalist crisis: Dr. Karl Marx.

In an interview with the Wall Street Journal, Roubini said:

Karl Marx had it right. At some point, capitalism can destroy itself. You cannot keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand. That's what has happened. We thought that markets worked. They're not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else's income and consumption. That's why it's a self-destructive process.

For several hours on August 12, the Journal website ran the video of the interview as a top story, under the headline, "Roubini: Marx was Right."

Considering that the first edition of Marx's three-volume masterwork Capital appeared in 1867, Roubini's revelation isn't exactly news to socialist opponents of capitalism. But given the intractable nature of the current crisis--a deep global recession, a weak recovery in the traditional core of the system in the U.S. and Europe, and now the possibility of a lurch into a second recession--mainstream, or bourgeois, economics has been exposed as ideologically driven and incapable of offering solutions.

Stimulus spending, championed by liberal followers of the economist John Maynard Keynes, was in full swing two years ago. It staved off total economic collapse after the financial crash, but failed to produce a sustained boom and led to big government budget deficits.

That opened the door to the free-market champions of the so-called Austrian economic school of Friedrich von Hayek, who argued that slashing spending was key to an economic revival--only to see such measures choke off growth in Europe and, more recently, the U.S.

But in August, stock markets gyrated worldwide amid a worsening European debt crisis, a near-stall in U.S. economic growth and a slowdown even in China, home of the world's most dynamic big economy. Suddenly, the ideological crisis that accompanied the 2008 crash was palpable once more as the world system appeared on the brink of a new recession.

- - - - - - - - - - - - - - - -

ROUBINI, A professor at New York University, made his name--and quite a bit of money--by telling the unvarnished truth to Big Capital before the Wall Street meltdown hit. He's done so once again, this time referring to Marx for an explanation.

In his interview with the Journal, Roubini argued that the U.S. economy is flagging because business is hoarding cash--more than $2 trillion by one estimate--rather than investing it in factories, new equipment and hiring workers. As he put it:

If you're not hiring workers, there's not enough labor income, enough consumer confidence, enough consumption, not enough final demand. In the last two or three years, we've actually had a worsening, because we've had a massive redistribution of income from labor to capital, from wages to profits.

That shift has taken place not during the crisis, but during the recovery, as economist David Rosenberg pointed out earlier this year when he noted that the "labor share of national income has fallen to its lower level in modern history," 57.5 percent in the first quarter of 2011, compared to 59.8 percent when the recovery began. While that might seem like a small change, given the $14.66 trillion size of the U.S. economy, it's huge.

In alluding to this trend, Roubini is apparently referring to Marx's observation about a central contradiction of capitalism. "The consuming power of the workers is limited partly by the laws of wages, partly by the fact that they are used only as long as they can be profitably employed by the capitalist class," Marx wrote in Capital Volume 3. "The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses."

It's wrong to assume, Marx contended, that capitalists limit their investments during a crisis because "the absolute consuming power of society" has reached its limit. On the contrary, the unemployed want jobs and workers desire a higher standard of living as the slump wears on.

But during crises, capitalism can't deliver, even when business has plenty of capital to invest. That's because capitalists won't put their money into building factories and offices and hiring workers--as Roubini pointed out--unless they have a reasonable chance of making a profit. Otherwise, they sit on their money.

"The capital already invested is then, indeed, idle in large quantities," Marx explained. "Factories are closed, raw materials accumulate, finished products flood the market as commodities. Nothing is more erroneous, therefore, than to blame a scarcity of productive capital for such a condition."

The result, Marx wrote, was both a "superabundance of productive capital" and "paralyzed consumption"--a fairly accurate description of recent trends in the U.S. economy.

- - - - - - - - - - - - - - - -

THE BIGGER questions are these: Why do such capitalist crises come about at all? And why are some downturns in the economy mild recessions, while others generate protracted crises, like the Great Depression of the 1930s or the "depression-with-a-small-d" that's gripped the world economy since late 2007?

Marx wasn't the first to observe what today's mainstream economists call the "business cycle"--the economic slumps that take place every few years. His contribution was to delve into the reasons for that pattern. He concluded that the internal contradictions of capitalism doomed the system to periodic, highly destructive crises.

The root of these crises is in the unplanned and competitive nature of capitalist production. For the capitalist, what matters isn't meeting social needs, but obtaining the maximum profit. If obtaining profit is possible from producing a life-saving medical device like a heart pacemaker, that's fine. But if more money can be made by producing junk food or nuclear weapons, greater investment flows into those industries instead.

Meanwhile, competition puts capitalists under constant pressure. They have to make sure that workers produce goods in as little time as possible--at what Marx called the "socially necessary labor time" required to produce a particular commodity. Otherwise, more efficient capitalists will drive them out of business. Thus capitalists are constantly compelled to invest in labor-saving machinery to cut production costs.

That is the secret of capitalist profitability. For example, new technologies may allow workers to produce enough to cover the costs of their wages in, say, just three hours instead of the four needed previously. The result is an increase in labor time spent working just for the capitalist--increasing what Marx called "surplus value," which is the source of profits.

But a portion of surplus value must also be reinvested in the production process. Refusing to do so is not an option for capitalists--who live by the rule of eat or be eaten. To the capitalist, Marx wrote in Capital Volume 1, the motto is:

Accumulate, accumulate! That is Moses and the prophets!...save, save, i.e., reconvert the greatest possible portion of surplus-value, or surplus-product into capital! Accumulation for accumulation's sake, production for production's sake: by this formula classical economy [the original bourgeois economics] expressed the historical mission of the bourgeoisie, and did not for a single instant deceive itself over the birth-throes of wealth.

The drive to accumulate is blind and chaotic. As Roubini recognized, "markets aren't working" because what is rational for an individual person or corporation--the maximization of profit by pushing down labor costs--can be irrational for the system as a whole.

During the upswing of the business cycle, the problems are largely hidden. As long as profits are high and credit is available, companies can borrow to invest in new production and hire new workers. Pundits proclaim that recessions are a thing of the past.

But even as production expands, profits are squeezed as new entrants flood the market. Companies go bust, which hits their banks hard. The banks, in turn, raise interest rates or simply refuse to lend, which triggers further bankruptcies. Factory closings and mass layoffs ensure--and, in the modern era, job cuts hit the public sector as tax revenues decline.

In the section of Capital Volume 3 quoted above, Marx described how the crisis can seem to erupt out of nowhere. Thanks to the extension of credit, he wrote:

[E]very individual industrial manufacturer and merchant gets around the necessity of keeping a large reserve fund and being dependent upon his actual returns. On the other hand, the whole process becomes so complicated, partly by simply manipulating bills of exchange [i.e., checks and promises of future payment], partly by commodity transactions for the sole purpose of manufacturing bills of exchange, that the semblance of a very solvent business with a smooth flow of returns can easily persist even long after returns actually come in only at the expense partly of swindled money-lenders and partly of swindled producers. Thus business always appears almost excessively sound right on the eve of a crash.

Marx's description of how credit could delay, but then exacerbate, a crash applies to the financial debacle of 2008, which involved no small amount of the kind of manipulation and swindling Marx saw in his day. Set aside the toxic alphabet soup of today's financial assets--CDS, CDO and MBS--and Marx's analysis of the role of bankers sounds familiar: "the entire vast extension of the credit system, and all credit in general, is exploited by them as their private capital."

The development of credit, in turn, helps expand capitalist production beyond the capacity of the market to absorb new commodities: "[B]anking and credit...become the most potent means of driving capitalist production beyond its own limits, and one of the most effective vehicles of crises and swindle."

But Marx also stressed that the credit crunch is actually a symptom of problems in the underlying productive economy. He wrote in Capital Volume 2, "[W]hat appears as a crisis on the money-market is in reality an expression of abnormal conditions in the very process of production and reproduction."

- - - - - - - - - - - - - - - -

THERE ARE longstanding debates among Marxist economic theorists about just how capitalist crises play out in general and their manifestation in different historical periods.

Marx identified a long-term tendency in the rate of profit to fall--the result of the constant pressure to invest in technology to replace workers, who are the source of surplus value. But capitalists have been able to counteract the falling rate of profit in various ways--for example, by destroying unprofitable capital through highly disruptive means, ranging from bankruptcies to wars like the Second World War, which ultimately was the most important reason the system finally overcame the Great Depression and was launched into a postwar boom.

In the 1970s, severe slumps returned to the world system as a revived Europe and Japan, along with several newly industrialized countries, emerged as more effective competitors to the U.S. But the restructuring of uncompetitive industries, free-market policies and corporate globalization opened the way to a new boom in the 1990s, when the U.S. declared that its "miracle economy" was the model for the world.

Ultimately, however, the economic expansion of the 1990s set the stage for a new crisis--one that Marx would have recognized. In the Communist Manifesto, written in 1847, years before he undertook a systematic study of the system, Marx and co-author Frederick Engels noted that capitalism's drive to expand led to crises of overproduction--of too many goods to be sold at a profit:

In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity--the epidemic of overproduction. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce...

And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.

That passage still has the ring of truth. It was capitalist overproduction on a world scale in the 1990s that set the stage for the 1997 East Asian financial crisis and the recession of 2001. But by dropping interest rates to rock bottom, the Federal Reserve was able to postpone the real day of reckoning for the U.S. for nearly a decade. Cheap credit and the housing bubble kept American consumers spending and the number of Asian factories growing, even if the number of manufacturing jobs in the U.S. continued to decline during the 2002-2007 expansion.

As we now know, banks were happy to make the loans for mortgages and then pass them along to Wall Street, which bundled them into securities that later turned toxic. When even a limited number of sub-prime loans started to go bad, a credit squeeze quickly destroyed investment banks Bear Stearns and Lehman Brothers. Nouriel Roubini, who had been warning about all this for years, was suddenly a business celebrity--and even Karl Marx made the financial press.

The bad debts of that era of casino capitalism continue to weigh down the world economy. Yesterday's toxic assets held by private banks have morphed into today's government budget deficits, thanks to the no-questions-asked, multitrillion-dollar bailouts in the U.S. and Europe.

And the global crisis of overproduction is still unresolved. In the U.S., the capacity utilization rate for total industry was 77.5 percent in July, some 2.2 percentage points above the rate a year earlier, but 2.9 percentage points below the average for the period between 1972 and 2010. That's unmistakable evidence of a depressed economy--and it's what Roubini was talking about when he cited "excess capacity" and mentioned Marx.

With mainstream economists fresh out of ideas about how to overcome the crisis, perhaps it shouldn't be surprising that Marx made news even in Rupert Murdoch's Wall Street Journal. But don't hold your breath waiting for a follow-up Journal headline: "Capitalism Isn't Working: Socialism is the Alternative." That part is up to us.

Thomas Piketty's bestselling post-crisis manifesto is horrendously flawed

Allister Heath in The Telegraph

Given that today’s fashionable economic ideas tend to become tomorrow’s government policies, it’s not looking good for the future of free-market capitalism. Consider the current bestselling book in America, Capital in the Twenty-First Century, a hugely important work that has already become the defining post-crisis manifesto. Its ground-breaking research on historic patterns of wealth ownership is second to none, but its conclusions are horrendously flawed.

Its author, the French economist Thomas Piketty, advocates an 80pc income tax rate for those earning more than £300,000 a year. For good measure, he also floats a range of other even worse ideas, including an internationally coordinated progressive wealth tax, hitting anybody with at least £165,000 in assets and peaking at a crippling 10pc a year on billionaires, a windfall tax on private capital, a dose of inflation and a war on inherited wealth. It’s the kind of hardcore message to warm the hearts of your average British socialist, circa 1976 – and yet it is being embraced as the latest, cutting-edge thinking.

Even more fantastically, this assault on private property and wages would supposedly have no meaningful negative side-effects. Piketty writes that “the evidence suggests that a rate [of tax] of the order of 80pc on incomes over $500,000 or $1m a year would not reduce the growth of the US economy but would, in fact, distribute the fruits of growth more widely while imposing reasonable limits on economically useless behaviour”. Instead of being laughed out of town, Piketty is being treated with the sort of adulation usually reserved for a rock star.

At this point, I could cite some of the many peer-reviewed studies that show — unlike the author’s own research — how high marginal tax rates reduce work and effort, remind readers that eating capital is the best way to impoverish a nation, reduce productivity growth and keep wages down, or point out that societies where the most successful entrepreneurs are rewarded by the state seizing their assets don’t prosper.

Instead, let me consider Piketty’s big idea, which he believes justifies his policies of “confiscatory” taxation – to him, a positive term. He believes that in a peacetime free-market economy, the returns on capital — dividends, interest, rents and capital gains — inevitably grow faster than the overall economy. The owners of capital will therefore end up grabbing an ever-greater slice of the pie, leaving workers with less and less.

Related Articles

• Youngsters were hit hardest by the recession - but they are recovering fastest 
  22 Apr 2014
• One of the most destructive taxes of the past 40 years could soon be axed 
  15 Apr 2014
• Give the people what they want - the ability to shop all day, every day 
  08 Apr 2014
• Budget 2014: five themes George Osborne should focus on 
  18 Mar 2014
• Scotland's goose that lays golden eggs has gone on strike, Mr Salmond 
  25 Mar 2014
• Selling UK Plc is the only way we can avoid a full-blown crisis 
  01 Apr 2014

I buy neither the prediction nor the proposed solution. For a start, João Paulo Pessoa and John Van Reenen from the LSE have shown that the share of UK income going to labour is largely the same now as it was 40 years ago, unlike in America. And if the returns to capital do go up, more money will eventually be invested to reap the rewards — and that, in turn, will increase productivity and hence wages, and keep down capital’s share of GDP.

There are other problems. Try telling pensioners that “rentiers” always end up ahead. The rate of interest on many bank accounts is close to zero, and therefore negative after inflation, and returns on gilts have been awful over the past couple of years. Of course, share prices have shot up — but risky assets come with a premium, and total returns on UK equity markets haven’t exactly been stellar over the past 15 years.

Capital is an amorphous concept; it keeps changing, as does its ownership. Entire industries are being decimated by technological progress; the whole point of capitalism is creative destruction, which means that old capital becomes obsolete, wiping out its owners, and is replaced by new capital, enriching its creators. It is also easy to destroy assets by consuming them — and that is what happens, in most cases, when money is passed down generations.

The fact that Piketty’s book is selling so well busts several myths.

The first is about American intellectual exceptionalism: the idea that US Left and Right differ only marginally in their support of capitalism, unlike in Europe. That certainly isn’t the case today. Parts of the US intelligentsia now advocate the same ideas that are to be found on Europe’s Left-wing fringes; Piketty and his adoring fans would go much further even than Ed Miliband.

The second incorrect idea is that the recent episode of banker-bashing from Occupy Wall Street et al was merely a reaction to the bail-outs, or to the financial sector’s role in the crisis. It was perfectly possible, we were told, to slam bankers but to embrace entrepreneurs. It was a case of Wall Street bad, Silicon Valley good; money accrued through finance was supposedly “undeserved” and that accrued by building a business wasn’t.

The truth, as I long suspected and as the almost delirious reception that this book has received confirms, is altogether different. Envy is back, disguised as a concern about “inequality”, and the bail-outs and QE were merely a convenient excuse to bash the rich. It is shocking how many intelligent people now support seizing most of the wealth created by entrepreneurs, including the founders of the great software companies (which is what a 10pc annual tax on the assets of billionaires would soon achieve).

The third myth is that there is such a thing as the “1pc”. This was always nonsense: someone earning £150,000 a year (the threshold at which a UK income taxpayer joins the club) has nothing in common with a billionaire. The Left now has another enemy, the top 0.1pc or even 0.01pc, which is just as well given that plenty of those waxing lyrical about Piketty are in the lower reaches of the top 1pc themselves. It is a case of the rich waging war on the extremely rich.

One reason why many believe Piketty’s claim that returns to capital will continue to outpace GDP is the experience of the past three to four years. Share prices have bounced back, and house prices have outperformed; meanwhile, wages are down in real terms. Yet that doesn’t mean this will continue indefinitely.

Regardless of whether Piketty’s key prediction is true — and I’m sure it isn’t — a much better solution is to encourage an ownership society so all can enjoy returns from capital. In the UK, auto-enrolment means that nearly everybody will begin to accumulate financial assets in pension pots.

Housing policy needs to change. In London, New York and San Francisco, house prices have rocketed because of planning rules that limit supply growth, pricing many out of the market. The best way to refute Piketty’s law in this area is to make it much easier to build new homes.

We also need a normalised monetary policy, not one designed to keep the price of capital assets as high as possible, thus artificially (but temporarily) boosting the wealthy.

Last but not least, supporters of capitalism need to get their act together. They are being slaughtered on the intellectual battlefield by opponents who are finding sexy new justifications for their old arguments. We need more and better defences of the free enterprise system, and we need them now.

The Downfall of Max Clifford - the ultimate PR guru for the guilty

Hubris had been his metaphorical middle name for decades, a strain of madness was apparent from the way he virtually invited prosecution, and nemesis duly delivered her payload at Southwark Crown Court on Monday. Yet however familiar from Greek drama that progression may be, it would require a public relations operator of warped genius to portray Max Clifford as a tragic hero. And the only one with the malign chutzpah to attempt such a task is the one now awaiting sentence for eight counts of indecent assault.

I could have a feeble crack myself, by pretentiously pointing out that the distinctive hallmark of the tragic hero is the inability to see in himself the flaws that are blindingly obvious to everybody else. It took lack of self-awareness on a cosmic scale for this self-proclaimed profiteer from outlandish falsehoods to accuse his accusers of being“fantasists and opportunists” who told “a pack of lies” and “fairy stories” in the hope of selling their alleged confections to the tabloids without noticing an irony. Could you imagine a more perfect example of projection than this?

Yet all anyone charged with writing about Clifford could honestly wish to do is find that a waterproof lap top cover has magically materialised on the doormat. This is one of those columns that should be written in the shower, followed by the kind of skin-breaking scouring Karen Silkwood had to endure after being contaminated by a radioactive leak.

The detail that coats you in an especially thick film of voyeuristic filth is the one that led to this overdue corrective to the foolish misapprehension that, because of various acquittals, the justice system had no business chasing down ancient sex crimes. In the wake of the Jimmy Savile revelations, Clifford went on television and cockily predicted that that there was much more to come. It came for him when police raided his Surrey home, and found a letter in which a woman reminded him graphically of the abuse he visited on her 35 years ago, when she was 15 and he promised to make her a star if she pleasured him.

“I had no one to turn to,” she wrote. “You were very clever. A+ in grooming children.” He bullied her into fellating the penis that incited such contradictory evidence about its size. He had persuaded her, falsely, that he had commissioned a photographer to record the incident with a long lens. “I thought my life had ended,” she said. “I was going to jump off a bridge.”

However repugnant the facts, more shocking was this. Detectives came upon that letter in the drawer of Clifford’s bedside table. My rationale for that geographical fact is brought to us in association with a family-size box of Kleenex. What are we to make of a man to whom an anguished reminder of how he wrecked a human life is not itself a source of anguish, but a masturbatory aid?

All I can make of it is that some people, usually male, are born missing that part of the brain’s structure of psychochemistry which confers the gift of empathy. Nothing known of Clifford’s early life suggests any environmental reason for him finding the torment he inflicted sexually arousing rather than desperately shaming. If that perversion is a random genetic accident, perhaps one should try to see it is a curse and such people as victims. There are limits to the cardiac blood flow of even the most bleeding heart liberal, however, and Clifford seems to delineate those. While the sight in which he hid was not as plain as Savile, and his crimes were neither as many nor heinous, it feels venal even to hint at a ranking formula for the psychological destruction of the vulnerable young.

Clifford, who after destroying David Mellor with the Chelsea football shirt invention piously announced he would expose the sexual hypocrisy of other Tory ministers in revenge for their maltreatment of the NHS, and whose web site continues to advertise his patronage of children’s charities, was as rancid a hypocrite as even the PR-red top interface could produce.

He bragged about earning a fortune from suppressing stories, but failed to perform that protective role for himself. Having enriched and aggrandised himself by exposing the private lives of other, he was belatedly brought down by the exposure of his privates. Poetic justice comes no more unpoetic. But it is justice that efforts to punish ancient sex crimes were vindicated. And it is justice that Clifford has been deposited, by the giant tongs of public disgust, into the dustbin of history, to rot alongside Savile as an emblem of that grotesque era when rapacious predators destroyed young lives with what for so scandalously long seemed  impunity. 

The Privatisation of Royal Mail: how hedge funds cleaned up

OLIVER WRIGHT  , JIM ARMITAGE , MARK LEFTLY

 The Independent

Tuesday 29 April 2014

The Royal Mail flotation scandal has deepened after officials finally admitted that hedge funds were among the “priority investors” sold hundreds of millions of pounds of shares.

The Business Secretary, Vince Cable, has repeatedly insisted that the handful of key investors offered Royal Mail shares on preferential terms were long-term institutional investors. This was to ensure the new company started with “a core of high-quality investors” who “would be there in good times and bad”. He promised to marginalise “spivs and speculators”.

But sources in the Department for Business have confirmed to The Independent that around 20 per cent of the shares it had allocated to 16 preferred investors had gone to hedge funds and other short-term investors. This would equate to around £150m of Royal Mail shares – 13 per cent of the entire stock sold by the Government. The companies bought in at the float price of 330p a share. The shares shot up within seconds of trading, eventually peaking within weeks at more than 600p, allowing the hedge funds to bank vast profits at the taxpayers’ expense.

Mr Cable is now under mounting pressure to name the priority investors given preferential deals in the form of extra-large share allocations, which his department has so far withheld citing commercial confidentiality. Unions have called for his resignation over the “botched” handling of the sale.

A recent National Audit Office report revealed that of the 16 priority investors, half had sold their shares within weeks of the flotation.

Vince Cable refuses to apologise over the losses, and says Royal Mail remains fragile (Getty)
Sources close to Mr Cable told The Independent that hedge fund involvement had been necessary to give the new stock “liquidity” and that the practice was entirely normal in share offerings. They added that they made up a small minority of the total share allocated to institutional investors.

But the revelation contrasts with Mr Cable’s previous statements on the sale. He has said institutional demand was so strong that the Government would be able to allocate shares to “responsible long-term institutional investors” rather than speculators.

An analysis of Royal Mail’s share register shows that Och-Ziff, an aggressive US-based hedge fund, had a holding of 10 million shares on 15 October, the day the company’s shares started trading. A week later it had reduced its holding to 3.5 million shares. It is not known if Och-Ziff was allocated shares or bought its holding from other institutional shareholders who sold out as soon as shares started trading.

Lansdowne, another hedge fund which is known for its close links to the Conservative Party, also appears to have received an allocation of around 18 million shares, at a cost of just under £60m. Lansdowne said the owners of the shares are Lansdowne’s clients not Lansdowne. It is understood that Lansdowne has not sold any shares.

The revelation that the Government knowingly sold off Royal Mail shares to hedge funds is likely to come under scrutiny today when the Public Accounts Committee questions the Department for Business’s Permanent Secretary and representatives of the investment banks who handled the sale on behalf of the Government.

The PAC will examine what advice was given by investment banks including Goldman Sachs, UBS and Lazard and why the shares were priced so cheaply. It will also demand to know why Lazard has been appointed to run the vast majority of major privatisations under the current Government following previous revelations by The Independent.

Shares in Royal Mail were floated on the London Stock Exchange last October (Getty)

Today in openly hostile exchanges with MPs on the Business Select Committee, Mr Cable refused to apologise over accusations that the Government sold Royal Mail on the cheap. He argued that the 360-year-old postal service remained “a fragile company”, despite becoming a City favourite since shares debuted in October.

Conservative committee member Brian Binley said that government advisers had underpriced the shares out of the “fear” of being unable sell them at a higher but more accurate valuation. “I don’t understand why you are being so obstinate about getting this right when you so palpably got this wrong,” Mr Binley admonished William Rucker, the chief executive at lead adviser Lazard.

Business minister Michael Fallon insisted that the Government had sold the shares “at the best price we possibly could have got at that particular time”. Committee chairman Adrian Bailey mocked this claim as “absolutely Alice in Wonderland”.

Mr Fallon also indicated postmen and women were partly to blame for the suppressed price of the sale, because the unions had “no interest in lifting the threat of industrial action”.

However, the Business Secretary conceded that he would have to take a close look at whether selling shares in the markets was the best way of privatising public assets.

He also promised to “reflect” on whether the full list of the 16 major institutional investors should be revealed. Mr Cable has agreed to privately hand the list to Mr Bailey.

Then and now: What Cable said

“We are in a position to ensure we do get the right type of investor community – pension funds, insurance companies that hold the savings of millions of people. That’s the type of community we want.”

Vince Cable to MPs in  October 2013. (At the same hearing he said the Government would be able to block shares from going to “spivs and speculators” in favour of “responsible long-term institutional investors”.)

“We wanted to make sure that the company started its new life with a core of high-quality investors who would be there in good times and bad, interested in  Royal Mail and the universal service it provides for  consumers over the long term. We were told if we sought a higher price, these investors would have walked away, leaving the company exposed to short-term  hedge funds with different objectives.”

Mr Cable in an interview in December 2013

“Having a long-term investor base remains a basic objective, and we  have achieved that fundamental objective.”

Mr Cable in the Commons on 1 April 2014