Archives for October 2011

Richard Wilkinson on how inequality harms societies

VIDEO: This is Richard Wilkinson’s TED lecture. Richard is co-author of ‘The Spirit Level’, a book that has done so much to emphasise the cost, both social and financial, of inequality in our society. Inequality is divisive and socially corrosive and yet we have a political class that seem incapable, unwilling even, to address the problem.

As Richard points out, in terms of relative income it is the size of the gaps between us that is important. In Britain that gap is widening. Inequality is getting worse not better.

Interestingly, in countries with the most unequal societies, principally the USA and Britain, there are stirrings of discontent. With austerity and genuine hardship set to continue for some time, this discontent is going to increase. How long will it take for politicians to realise that current levels of inequality will no longer be tolerated? As practitioners of masterful inactivity, they’ll probably decide to do nothing and hope it all goes away. They may be in for a very rude shock.


Save us from the ‘Little Englanders’! Little people with little ideas

“I wish to speak to you today about the tragedy of Europe. Yet all the while there is a remedy which, if it were generally and spontaneously adopted by the great majority of people in many lands, would as if by a miracle transform the whole scene, and would in a few years make all Europe, or the greater part of it, as free and as happy as Switzerland is today. What is this sovereign remedy? It is to recreate the European Family, or as much of it as we can, and to provide it with a structure under which it can dwell in peace, in safety and in freedom. We must build a kind of United States of Europe”.

This what Winston Churchill said in Zurich in 1946. A speech which was to be the catalyst for European integration. Not only was Churchill a man of vision, he was a rare breed of politician, and had a quality few possess today. He was a man of ‘big ideas’.

European integration was a ‘big idea’, a revolutionary idea designed to put an end to conflict and build a union of prosperity. it was an enormous project. Few who were involved all those years ago could have imagined how successful the EU would become. And they would probably be astonished at how few problems there had been in the 54 years of its existence.

The European project has always been about learning, growing and adapting to changing circumstances. About understanding and responding to the different needs, strengths and weaknesses of members: about integration. But above all it’s dynamic, positive and exciting – something some members (i.e. us!) seem to have lost sight of.

There will be many crises along the way. Currently it’s the single currency. A crisis which is principally about fiscal integration, although the problem has been exacerbated by world ‘events’. But crises are sometimes the best way of achieving real and lasting change. If a positive outcome can be achieved, it will strengthen the union.

But what of Britain? Is it playing its full part in the EU? Is it putting its full weight behind Churchill’s ‘big idea’? Hardly. Today we have the shameful spectacle of mithering Tory ‘eurosceptics’ arguing for a referendum on whether we should remain in the EU. Doubtless we will be treated to the spectacle of that intellectual colossus and super eurosceptic Bill Cash spouting his usual twaddle and making us look as foolish as he demonstrably is. Sad. We do ourselves no favours. These ‘Little Englanders’ with their little ideas are doing their best to take the ‘Great’ out of Britain and jeopardise our future prosperity.

Winston Churchill would turn in his grave if he could hear the nonsense spouted by these self-important ‘little Englanders’. Little people who wouldn’t recognise a ‘big idea’ if they tripped over one. Time to move on and time to re-engage with Churchill’s ‘big idea’.


Where has the doughty Vince disappeared to?

Has anybody seen Vince Cable recently? The man has completely disappeared. Is he being sat upon? Has he been sunk by the sheer weight and complexity of his brief? Where’s the man who was prepared to speak his truth about banksters, and who was proved right about the evil Murdoch? Has he been told to ‘cool it’ by the mighty mouse Clegg or is he desperately looking for a match to light the fuse on the ‘nuclear option’?

Rumour has it that he’s been giving his colleagues a rough time in Cabinet. By rough time, it appears he’s been squaring up to them and telling them a few home truths about the pickle were in – which will not have endeared him to Dave. He may also have been fretting about the government’s new growth strategy, due to be announced next month. Again rumour has it that it’s a bit feeble, and he won’t like that because it will reflect badly on him. (Incidentally we’ll know if it’s feeble if the phrase “cutting red tape” is used as an incentive for businesses to grow. It isn’t, and means the square root of diddly-squat. A clear indication that there is a paucity of ‘big ideas’ when it comes to stimulating growth)

Belonging to a government that has made Herculean efforts to reduce demand when growth was stalling with all the attendant consequences, must be starting to eat away at his conscience.  It would be great if he had some ‘big ideas’ about growth, if he could get Osborne to commit to business banks, for instance.

Maybe our Vince is doing good things behind the scenes? Great if he is, but we really don’t know. I have a feeling that he’s taken the Coalition shilling and he’s putting up and shutting up. We may never see the Vince we came to know and love again. Which would be unfortunate.


Has the fool Fox been replaced by the idiot Hammond?

The new Defence Secretary Philip Hammond, days into his new job has demonstrated that he may be as foolish as the Fox.  On Andrew Marr’s programme this morning he expressed disappointment that Gaddafi had been killed before he had a chance to face trial. Fair enough, it might have been better to put him in the dock (although many will be relieved that he wasn’t), but he then went on to say that the new Libyan government’s “reputation had been stained” by the killing.

Oh for heaven’s sake! Firstly there is no Libyan government and secondly he was killed by a group of untrained, fired–up, leaderless ‘freedom fighters’ who had spent the last eight months suffering brutal assaults by Gaddafi’s army. To say that the Libyan government’s reputation had been stained is not only stupid, it shows a complete lack of understanding of what was going on and the mood of the people on the ground. And why poke a finger at ‘the Libyan government’ in such a schoolmasterly fashion? What purpose will it serve? All it is likely to do is to alienate those trying their best to create a ‘new Libya’.

Don’t do a Gove Mr Hammond. Read your briefs before you open your mouth, and force yourself to avoid making any further comments until you have a better handle on your job, there’s a good fellow.


What is money? The Wizard of Oz is alive and well

The interesting thing about banks and bankers before the 2008 crash is that we trusted them. It might have been a cautious trust, an unquestioning trust even, but they had our trust. After all they had our money. We had to trust them. But then they betrayed our trust. As in personal relationships, betrayal of trust is a cardinal sin. A sin that is seldom forgiven. But do they care? No, not really, they actually couldn’t give a damn.

Bankers live in a world we don’t understand. Their activities are a total mystery to most ordinary people. So we trusted our politicians and the clever (?) gurus in the Treasury to see that everything was above board and working in our best interests and the best interests of the majority. Not an unreasonable thing to expect really – but they didn’t have a clue.

The lesson we’ve learned has been a harsh one. But it boils down to the fact that we have got to trust less and make more of an effort to find out exactly what is going on for ourselves. Transparency only happens when someone pulls back the curtain and starts asking awkward questions. It happened to the Wizard of Oz, it’s time it happened to the banks. It’s up to us to ferret and fossick and get to the truth, and keep people on their toes.

We’ve got a lot to learn, as Dan Hind points out…


Protests against the world’s financial institutions are growing, but do most people even know where money comes from?

We spend a lot of time thinking about money, one way or another. We think about how to get our hands on it, how to keep it safe and how to spend it. When we aren’t asleep, there’s a good chance that we’re paying attention to money. But while money is never far from our thoughts, there is something curious about our relationship with it. For all that we use it to get through the day, most of us don’t know what it is.

I mean, we know what it can do. We know how much we have, more or less. We know what things cost and so we have some idea of what we can afford at any given moment. When we start thinking about the future, how long we might live and how much money we’ll need, we tend to want to think about something else. But money itself escapes our calculations. For the most part we don’t think to ask where it comes from or what it is, in itself. The advantages of having money and the consequences of having none loom so large that we seldom stop to wonder about money as such.

Today is as good a day as any to explain where money comes from and why it matters. On Thursday, the Bank of England announced another £75 billion of “quantitative easing”. If you don’t know what that means or vaguely think it has something to do with “printing money”, it is probably because you don’t know what money is. All will be revealed in what follows. OK. Are you ready to know where money comes from, to know the truth jealously guarded from the dawn of recorded time?

Money is lent into existence by banks

There’s nothing complicated going on behind the scenes. The great secret is that there isn’t really much of a secret. Yet the truth about money eludes us for most of the time.

The economist and ironist JK Galbraith once wrote that “the process by which banks create money is so simple that the mind is repelled. When something so important is involved, a deeper mystery seems only decent”. Offered the unadorned truth, stripped of any technocratic flim-flam, we can scarcely believe it. It seems preposterous that money should have such humble origins, as though it is beneath money’s dignity that it should begin life at a banker’s keystroke.

The truth about money creation is a bit like the end of The Wonderful Wizard of Oz, when it turns out that there is no all-knowing wizard, only an old man behind a curtain, making things up as he goes along. It’s a lot like The Wonderful Wizard of Oz, in fact. Frank Baum’s book is a parable about currency reform, written at the height of the struggle in America between the architects of corporate finance and those who wanted the money supply to be controlled by the public. The 1939 film adaptation brought the story to a vast new audience, but somewhere along the line, the author’s original point was somehow lost. I know, that such a thing could happen in Hollywood, of all places.

So, banks create money through the act of lending it. They don’t have to limit themselves to lending out the money deposited with them. In fact, they can end up lending huge multiples of the money they hold in reserve. When they authorise a loan or extend credit in the form of an overdraft, the money is conjured out of nowhere. The banks then receive interest on the loan. The interest is how banks make their profits, so they want to lend out as much as possible for as long as possible, even if the lending is unsustainable in the long run. This is what Chuck Prince was getting at when he said in July 2007 that “when the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing”.

As the authors of Where Does Money Come From?, a handy guide to money creation published by the New Economics Foundation, point out, banks prefer to lend money against existing collateral. As a result they have a really bad record when it comes to supporting start-ups and small and medium-sized enterprises that want to expand or innovate. But they are brilliant at inflating bubbles in commercial and residential property. Perhaps mindful that the money they lend out has an immaterial quality, bankers crave the solidity of bricks and mortar.

Intelligent conversations, not riots

I said earlier that the Bank of England has announced another round of quantitative easing. Quantitative easing (QE) occurs when central banks create new money and use it to buy interest-bearing assets. So far QE in Britain has been used to buy government and corporate bonds. This has supported asset prices and relieved the pressure on the other banks. The banks exchange assets of uncertain value for cash backed by the credit of the government.

If you think it’s a little odd that one national institution, the Bank of England, is buying bonds issued by another, the Treasury, you’re right, it is. The government doesn’t want you to think too hard about it, in case we start thinking that they, like the wonderful wizard, are making things up as they go along and hoping for the best.

No one is claiming that finance and economics aren’t complicated. But this shouldn’t blind us to the fact that they both rest on a cardinal simplicity – the money-creating power of banking institutions. Those who profit from this underlying simplicity have had no great desire to enlighten the public. Their control of the money supply has never been subject to democratic debate. It is doubtful that this control would survive any such debate. As protesters gather in the world’s financial districts, I hope they will be able to bring reform of the banking system out of the shadows.

The established order can cope with riots. It cannot cope with a reasonable conversation about the role of the banks in misallocating capital and creating crises.

Britain’s Chancellor of the Exchequer, George Osborne, has already indicated that some of the money conjured up by the Bank of England should find its way to small and medium-sized businesses, in a tacit admission that the financial sector in its current form cannot adequately support productive industry. Private and unaccountable control of the money supply – the very archetype of unconstitutional privilege – has failed and this failure is bringing misery to millions around the world.

A discussion began in the spring of this year in North Africa, about the society and economy we want. Europe and North America are now joining in. The problems we face are complicated, it’s true, but they are not as complicated as some would like to make out. We will begin to see how to solve them when we have a clear understanding of the fundamentals of social organisation, including the origins and nature of money.

It is an understanding that those who are currently powerful would rather we didn’t have. After all, as another great American ironist, Walter Karp, put it, “usurped power is only secure as long as it remains unregarded”. For too long, the banks have shaped the laws of economic exchange in private. Even in the midst of a debt crisis their privilege has so far evaded our understanding. It is time that it became the object of our steady and patient attention.

Dan Hind has worked in publishing since 1998 and is the author of two acclaimed books: The Return of the Public and The Threat to Reason. He is this year’s winner of the Bristol Festival of Ideas prize.


Reform delayed is revolution begun, Mr Cameron

There was a note of petulance, testiness even, in the yesterday’s statement from Downing Street about lobbying reform. The government is not going to be rushed just because Foxgate has uncovered feral lobbying at the heart of government. No, it will address the matter in its own time. It was a statement redolent of the emotions expressed before the expenses scandal broke.

The government is now acutely aware that if the lobbying can of worms is opened, it has the potential to make the expenses scandal look like a Sunday school outing. Why? Because lobbying has not only corrupted the body politic, it has spawned a culture which accepts, and even promotes, practices which are corrupt. Successive governments have turned a blind eye because it has suited their personal and party interests to do so. They’re super-sensitive about this – and so they should be.

But politicians have had their antennae fine tuned by the expenses scandal. They are acutely aware of the fate which awaits them if they allow a lobbying scandal break. Foxgate has shaken them. They will do everything they can to smother discussion on the lobbying issue. Watch out for sops about registration and endless obfuscation as they play for time and try to distract us. They will use every trick in the book.

And when the scandal breaks, as it surely will, steal yourself for the pathetic bleating of politicians claiming they were only ‘working within the rules’ – rules which of course they made.

The root cause of the problem is of course money. In America money has corrupted politics to such a degree that it has become dysfunctional. Unless we address both lobbying and political funding, and do so properly, we are very likely to have a similar problem to the Americans.

In a few weeks time there will be a report from the Committee on Standards in Public Life on political funding. In the coalition agreement the Government promised to ‘remove big money from politics’ by ‘limiting donations and reforming party funding’. They need to be kept to their word, but the likelihood of any substantive changes emerging are slim.

The bottom line is that until we take money out of politics it will always remain corrupt and the best interests of the people will be secondary to those of the political class.

Is the state funding of political parties an option? It certainly is. If we pay .68p pa for the Royals, surely there would be few who would not be prepared to pay £5 pa if it meant that we had honest politics? Politicians would of course argue that we would never agree, but that’s because they don’t want it to happen. They’d be very unhappy if their gravy train were to be derailed. It’s time we made our feelings felt

There are stirrings of discontent in the land. If real and meaningful reform is not forthcoming, politicians could be in for a rude shock.


Oh thank you Mr Fox, a thousand times thanks!

Who would have thought Liam Fox would be the man to “shine the light of transparency on lobbying” as Dave promised to do before the last election? We should be thankful to the foolish Liam for his timely reminder to the Prime Minister who bravely said that “ secret corporate lobbying…is why people are so fed up with politics” and who promised to “force our politics to come clean about who is buying power and influence”.

Lobbying is a cancer in our democracy. Deliberately left untreated it has metastasized within the body politic and rendered it defenceless and unable to function properly. And despite his brave words, Cameron has done absolutely nothing about reforming the system. His pre-election promises hollow words.  Lobbying, pre Fox, was nestling quietly on his rather overcrowded backburner.

So thank you ‘foolish Fox’, you have done the country a great service – albeit unintentionally. Thanks to your foolishness the extent of the spread of the cancer has become clear to all. The prime minister is going to be forced to do something about it – but will it be enough? There’s talk of a register, but this is a sop. The whole system needs to be dismantled – outlawed even.

That wealthy individuals, corporations and institutions can exert undue pressure and influence over politicians and the political process is surely the prime reason why our democracy has become exclusive: the interests of the electorate excluded and secondary to the interests (personal and collective) of politicians and political parties.

The British people are going to have to claim back their ‘democracy’ from our self-serving political class intent as they are on self-enrichment and personal advancement at the expense of those they purport to represent. How the coalition deal with the lobbying issue will be an indicator of how seriously they consider the problem to be. Will they consider it from their perspective or ours? It’ll be interesting to see. Chances are they’ll play for time, make a few token gestures and hope the whole thing goes away. We need to be on our guard.


The politics of health…in a full and unlimited democracy


Mental illness and obesity are rising in the UK and US, leading activists to fight for a new approach to healthcare.

In the late 1840s, typhus fever broke out in Upper Silesia, a Prussian province in what is now Poland. The education ministry sent a physician called Rudolf Virchow to investigate. While Virchow identified insanitary working conditions as the immediate cause of the epidemic, he traced its origins to the region’s lack of political liberty. In the absence of free institutions the inhabitants were “poor, ignorant and apathetic”. In order to prevent a recurrence of the disease Virchow recommended a remedy that he summarised in a few words: “full and unlimited democracy”.

Modern day Britain and America are not in quite the same condition as Upper Silesia. We are not dying in the thousands from typhus and starvation. But we are not well, either. The problems with the US healthcare system are well known. Millions lack adequate insurance coverage, and thousands suffer unnecessarily and die prematurely as a result.

There are other, more insidious problems. We are living through what appears to be an epidemic of loneliness and distress. By the beginning of the century in Britain one in six adults suffered from a neurotic disorder, most likely anxiety, depression, or both. In 2004, a Department of Health study estimated that around a quarter of all adults had “an alcohol use disorder”.

According to the psychologist Bruce Levine between a fifth and a quarter of Americans are receiving drug treatment for psychiatric disorders. He notes, too, that there is an epidemic of compulsive and addictive behaviour. These compulsions and addictions exact a terrible toll on people’s physical health.

Ineffective care

As in Silesia in the 1840s, there is no shortage of medical and bureaucratic expertise in America or Britain. But the treatments approved and promoted by experts haven’t been terribly effective. Governments have tried to promote balanced nutrition and healthy lifestyles, though they have been wary of upsetting the producers of high-margin, branded and processed foods.

About a third of American adults are obese and around three hundred thousand people a year die as a result of being overweight, somewhat more than typhus killed in Silesia at the height of the epidemic.

In fact the bureaucracy’s reluctance to irritate the food industry has sometimes shaded into abject collaboration with it. At one point the US Department of Agriculture was running an anti-obesity campaign while helping Domino’s to develop a range of pizzas with 40 per cent more cheese.

Meanwhile, doctors treat mental distress with drugs that are of highly questionable value. Much of the medical profession appears convinced that mental distress is an issue for individuals. The ‘socio-logical’ approach of Virchow is driven to the margins while the rates of mental illness steadily climb. It is a funny kind of progress. Perhaps physicians notice their countries’ deepening insanity but they remain more eager to rearrange their patient’s brain chemistry than the political arrangements they share with them.

All in all, many modern efforts to promote public health from above seem about as effective as the efforts to deliver general prosperity. In both instances experts enthusiastically prescribe treatments that are demonstrably useless or harmful. There is no lack of originality or creativity, as long as it is accepted that only a minority is qualified and that the majority must wait patiently until conditions improve. Every course of treatment can be considered, in other words, except the one that Virchow proposed back in 1848, ‘full and unlimited democracy’.

Winds of change

But there are signs that this is starting to change. More and more people in both Britain and America are starting to act as if they were the citizens of a free Republic. There are protesters occupying public spaces in hundreds of American cities and towns. This weekend will see thousands of people join them in Great Britain.

Now that mainstream commentators and journalists have stopped ignoring the protesters in America they are busy complaining that they don’t have a coherent plan for social and political reform. This is, of course, to miss the point. People are engaging in open deliberation about the kind of world they want and how to get there. After years of being told to keep quiet and pick from the items on the menu provided, the mere fact of effectual freedom is invigorating. These thousands will go home and meet with thousands more. They will discover they have more in common with the people they meet than with the personalities that appear on television and radio. Those who wish to converse as equals will finally do so uninterrupted by those who long to address ecstatic crowds.

We are witnessing a reinforcing wave of political actions. One doesn’t cause the next but they inform and embolden one another. We look to the Middle East and Southern Europe and see what is possible, and what is at stake. We see people not so different from ourselves decide that this is as good a time as any to be free. We feel a little less helpless when we see that change can happen without the blessing of the media, and that leaders will, in the end, rush to follow.

We are starting to realise we have the power to change things. 

– Dan Hind

No matter how shrill the mainstream media has become, we are starting to realise that we have the power to change things, that the decision to start is itself transformative. We don’t have to cling to a single party line, or prove to journalists that we are serious and committed. We can be candid with one another and work patiently to understand what is happening now and what needs to be done.

It will take a little while to figure out what we don’t know and to figure out where the dividing lines really are. Differences of opinion and interest will not vanish. We are looking to improve things, not to impose perfection on the world. The occupations will not, I imagine, create the disciplined army of revolutionaries that some still dream of. They will create something altogether more terrifying to those who love hierarchy and the power that comes from the suppression of others – they will create citizens with the confidence and skills to make common cause with one another, in pursuit of individual liberty and public freedom.

No one can safely predict where the occupations will lead. But it is reasonable to expect that another wave of action will follow them. The abuses of our leaders are now too glaring, the costs of their corruption too high. My guess is that the protesters will go home, and find each other, and find others. The assemblies in Manhattan and Westminster, in cities all over the world, will resume on an ever greater scale. More and more of us will discover how it feels to deliberate without limit. More and more of us will discover that our fellow citizens are both more sensible and more creative than the media have taught us to expect.

Perhaps we are finally about to try the remedy Virchow proposed, and set about creating a “full and unlimited democracy”. We have tried everything else. We have trusted all kinds of experts. We have voted for charismatic leaders. We are left with all we really ever had – each other.

Dan Hind is the author of The Threat to Reason and The Return of the Public this year’s winner of the Bristol Festival of Ideas Book Prize.


Occupy Whitehall?

When thousands demonstrated against tuition fees, politicians were distinctly disquieted by the sight and sound of real people, real angry people. They seemed affronted by it. It was confirmation (as if we needed it) of the disconnect between the political class and the electorate.

It’s very easy to communicate decisions that cause pain and misery through the impersonal megaphone of television and radio, to play with people’s lives to gain political and personal advantage, but when the consequences of these decisions get ‘personalised’, when real people appear on the streets, politicians start to twitch – and well they might.

When bankers are gifted ‘light touch’ regulation they do what all people do when the boundaries are blurred, they take advantage. So it is with politicians who, gifted the trust of the electorate and under the guise of ‘democracy’, they too take advantage. The interests of the people who elected them become secondary to personal and party advantage. They see self-advancement and self-enrichment as a right. Political decisions are made with political advantage in mind, not the interests of the people – as the News International scandal illustrates all too well.

In America the political process has become so corrupted by money that it’s almost dysfunctional. Normally a politically quiescent lot, the American people – that’s the 99% who have dropped off the political radar – have started to squeal. The ‘Occupy Wall Street’ campaign is a middle class action and it’s scaring the hell out of the feral elite. Why? Because it has two strong emotional drivers: injustice and unfairness. Two drivers that could – and probably will – provide a huge impetus to the campaign. Could this lead to American Revolution 2 as one protester postulated yesterday? Possibly, but maybe better if it were a ‘New Enlightenment’.

Isn’t a ‘New Enlightenment’ what we need in this country? The enlightenment thinkers of the 18th century were opposed to the abuses of the state and wanted to use the power of reason to reform society. Perhaps the reform of a ‘New Enlightenment’ should have the aim of reforming the practices of the legislature and the executive, and removing money and corrupt external influences from the political arena. And perhaps it could promote the ‘power of reasonableness’ to bring about a more equal society?

So what could bring about a ‘New Enlightenment’? An ‘Occupy Whitehall’ movement? It might just put the fear of God into our politicians, but whether or not it would bring about change is another matter. Movements need leaders and until they appear and issue a challenge, nothing will happen.


Fox resigns…a headline we have the right to expect

Stephen Byers (of all people) said this when he resigned:

“What is clear to me is that I have become a distraction from what the government is achieving… that by remaining in office I damage the government.”

Liam Fox is a major distraction at a time when the last thing the government – or the electorate (remember them?) need is a distraction. If he stays in denial and remains in office for very much longer he’ll not only damage his own reputation (such as it is), the reputation of the government and the credibility of the Prime Minister – who appears to be all of a dither.

The bottom line is that Fox has behaved in a manner which is incompatible with the position he holds. It really is that simple. The fact that he clings to office is a measure of the man. That his judgement has been so poor should indicate to the prime minister that he is not fit to be a secretary of state. But, as with Coulson, Cameron is proving that he’s not good at taking ‘people decisions’, which is not a sign of a strong, decisive leader.

Gladstone said the the first requirement of a prime minister was to be a good butcher. Prime ministers need to protect their own position and to see that the interests of an individual do not get in the way of the greater purpose. David Cameron would be wise to understand this and learn from his predecessors. Perhaps Sir Gus O’Donnell should ‘wise him up’ – he clearly failed to do so in the past, but maybe Dave’s inexperience is showing and/or he’s pig headed – maybe he’s a bit of a light weight after all and leadership’s not his thing? He needs to prove to us he’s made of sterner stuff.

Meanwhile the chase is on and the hounds are baying. It is not an edifying sight. Time to cull the Fox and put it out of its (and our) misery.