Foreign investment increases house prices

Average house prices in England and Wales have almost tripled in the last 15 years, from just over £70,000 in 1999 to about £215,000 in 2014. Apart from a reduction in 2009, at the height of the global financial crisis, house prices increased every year during this period. Behind this average lies considerable regional variation, with average prices in the prime London area of Kensington and Chelsea reaching £1.3 million in 2014. Continue reading

British Medical Journal calls for a study of universal basic income

Recently, there have been increasing calls for dialogue on a universal basic income (UBI) from political parties, think tanks (including the Royal Society for the Encouragement of Arts, Manufactures, and Commerce (RSA)), civic activists, trade unions, and leading entrepreneurs such as Tesla chief executive Elon Musk. These calls are a response to growing income insecurity, some sense that welfare systems may be failing, and as a preparation for the potential effects of automation and artificial intelligence on employment prospects in industries that might be better served by machines.3 UBI-style pilots are planned in Finland, the Netherlands, and Canada as a potential answer to these questions and concerns.4

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Brexit: British Business and Industries

The UK has long depended on heavy flows of investment from abroad to make up for the weaknesses in its own corporate and financial institutions. In 2015 the UK ran a deficit in its external trade in goods and services of 96 billion pounds ($146 billion in 2015), or 5.2 percent of GDP, the largest percentage deficit in postwar British historyand by far the largest of any of the G-7 group of industrialized economies. By comparison, the US ran a deficit of 2.6 percent of GDP, while Germany earned a surplus of 8.3 percent, Japan a surplus of 3.6 percent, and France broke even. In the memorable words of Mark Carney, the Canadian-born Governor of the Bank of England, the UK must depend on “the kindness of strangers” to remedy its trade gap.

The reason for this unusual dependency is that for decades the UK has been unable to produce enough goods that the rest of the world wants to buy. According to WTO statistics, between 1980 and 2011 the UK’s share of global manufacturing exports was halved, from 5.41 percent to 2.59 percent, so that by 2011, according to UN statistics, the dollar value of UK merchandise exports at $511 billion was not far off the level of Belgium’s at $472 billion, an economy with one six the UK’s population, (and not included in the Belgian figures, the value of German exports routed through Belgium ports).

Looking at export industries such as IT products, automobiles, machine tools, and precision instruments, all strongly dependent on advanced R&D and employee skills at all levels, the UK’s performance looks even worse. The period of 2005-2011 is especially revealing because it includes both the years of the Great Recession and the collapse of trade between the advanced industrial economies, but also years in which their trade with China and other BRIC economies such as India and Brazil grew rapidly. Since one of the chief claims of the Brexit campaigners has been that there are now these exciting new markets in BRIC countries waiting for British exporters to conquer, it is worth looking at how British companies actually performed during those years.

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Euro

Unusually perceptive of the political and historical roots of monetary union, the author begins and ends his book by reminding readers of Altiero Spinelli’s call for “the definitive abolition of Europe’s division into national sovereign states” (p. 1). The common currency, even though not specifically mentioned in the Ventotene Manifesto, may be seen as the most radical answer to Spinelli’s call to end the nation state. At the same time, the success or failure of the euro could well turn out to be the ultimate test of Spinelli’s proposition.

The book has little sympathy for objections inspired by a narrow reading of “optimal currency area” theory (interestingly, its original proponent, Robert Mundell, came out in favour of the creation of the euro). In contrast to American economists such as Kenneth Rogoff (“a giant historical mistake”) and, more recently, Joseph Stiglitz (“fatally flawed from birth”), Sandbu argues that the architecture of the common currency has been wrongly blamed for the Eurozone crisis, and has been used as a decoy by policy makers for their own unforced errors.
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RAF urged to recruit video game players to operate drones

The commander who oversaw the use of Reaper drones in Syria has said the relentless demand to deploy the unmanned aircraft means the RAF needs to test recruiting “18- and 19-year-olds straight out of the PlayStation bedroom” to operate the weapons.

Air Marshal Greg Bagwell, a former RAF deputy commander of operations, disclosed that the psychological pressure on drone operators in the UK was such that some had quit due to mental stress or illness. Continue reading

The Deep Place approach to sustainable placemaking

Deep Place is a holistic approach to sustainable place-making. It is grounded in an empirical concern with how to achieve more economically, socially, environmentally and culturally sustainable places and communities. It seeks to overcome what it identifies as the harmful consequences of the current dominant Neoliberal economic paradigm. Although it is not anti-capitalist, it recognises the weaknesses and failings of Neoliberalism, which is exploitative of human and natural resources as factors of production. There has been a significant drive toward Neoliberalism since the 1980s, and the costs in terms of increased inequality are all too clear (Ostry et. al., 2016). The UK is now one of the least equitable countries in the world. Income inequality has been well above the OECD average for the last 30 years. The average income of the richest 10% is 10 times that of the poorest 10%. Between 2005 and 2011 the average income of the poorest 10% in the UK fell by a further 2%, and the share of the top 1% of income earners has grown from 6.1% in 1981 to 12.9% in 2011. (OECD, 2015)

Deep Place is based on the premise that the economy is socially constructed, and it therefore argues that it can be socially reconstructed. Even some of those who have been so closely linked to Neoliberalism, such as the IMF, are now appearing to accept the significant economic and social damage that arises from the inequality it causes. Key people within the IMF have now argued that policy makers should be more open to redistribution (Ostry et. al., 2016). At the same time, the Capital Institute has argued for a form of ‘regenerative capitalism’. They suggest that ‘…today’s greatest challenge is to address the root cause of our systemic crises – today’s dominant (Neoliberal) economic paradigm and the financial system that fuels it and rules it – by transitioning to a more effective form of capitalism that is regenerative and therefore sustainable over the long term’ (Fullerton, 2015, p. 12). Deep Place does not deny the complexity of global economic interrelationships; indeed, it fully recognises the difficulties and implications of managing and controlling these hugely complex circumstances. The impact of the 2007/8 Global Financial Crisis and the as yet not fully understood consequences of the decision of the UK in a referendum to leave the European Union, clearly illustrate the limitations of national governments to control such forces. That is why Deep Place is place-based. It argues that more localised action can often have a significant impact on strengthening community resilience against these external forces. In order to be most effective however, it contends that local action needs to be coordinated and fully integrated: it needs to be whole-place. Continue reading

Our complex economic, technical, political and social systems, eroded by energy-related and other biophysical constraints, are showings early signs of failure

Thought provoking.

Slow economic growth is not just an after-effect of the Great Recession but part of a deeper malaise that predates, and indeed may have helped cause, the financial crisis. A number of narratives have emerged in recent years to try to explain this global dearth of growth, such as the ‘debt overhang’ narrative, which states that growth is primarily hampered by an excessive indebtedness of economic agents, or various versions of the ‘secular stagnation’ narrative, which sees the cause of slow growth in a chronic shortfall of demand resulting from population ageing and the rise of income and wealth inequality, and/or in the diminishing returns of technological innovation. These various narratives probably all have some degree of validity. However, they tend to focus on developments that, even if they act as mutually reinforcing drags on growth, are in fact symptoms of the world’s economic predicament rather its deeper root causes.

Even more than from what most economists usually look at, i.e. constraints on capital and labour and on the productivity of their use, the slowdown of global economic growth since before the financial crisis might be resulting from factors that they typically ignore, i.e. constraints on the supply of energy and other biophysical resources that feed into the economic process and impact its functioning. In fact, the world’s capacity to create additional wealth is getting increasingly eroded by biophysical boundaries that over time tend to raise the acquisition costs, constrain the quantity and degrade the quality of the flows of energy and natural resources that can be delivered to the economic process, as well as by the constantly increasing costs of some of the economic process’ side effects (i.e. ‘negative externalities’ including environmental degradation and climate change), and the growing need to ‘internalise’ them into the price system. These biophysical constraints, as they increase, tend to weigh more and more on the economy’s productive capacity, thus eroding the potential for productivity and output growth.
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How to make a Universal Basic Income a reality

In the UK, growing interest is being driven by two deep-seated structural trends: the growing fragility of the jobs market and the inadequacies of the existing, increasingly punitive, intrusive, and patchy benefits system. With its built-in income guarantee, a universal basic income (UBI) would help relieve both problems. It would bring a more robust safety net in today’s much more precarious working environment while boosting the universal element of income support and reducing dependency on means-testing. A UBI also offers a way of providing income protection as the robotic revolution gathers pace, and could be used to help ensure that the possible productivity gains from accelerated automation are evenly shared rather than being colonised by a small technological elite. Continue reading

Understanding Trump

Unconscious thought works by certain basic mechanisms. Trump uses them instinctively to turn people’s brains toward what he wants: Absolute authority, money, power, celebrity.

The mechanisms are:

1. Repetition. Words are neurally linked to the circuits that determine their meaning. The more a word is heard, the more the circuit is activated and the stronger it gets, and so the easier it is to fire again. Trump repeats. Win. Win, Win. We’re gonna win so much you’ll get tired of winning.

2. Framing: Crooked Hillary. Framing Hillary as purposely and knowingly committing crimes for her own benefit, which is what a crook does. Repeating makes many people unconsciously think of her that way, even though she has been found to have been honest and legal by thorough studies by the right-wing Bengazi committee (which found nothing) and the FBI (which found nothing to charge her with, except missing the mark ‘(C)’ in the body of 3 out of 110,000 emails). Yet the framing is working.
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How the destruction of industrial Britain casts a shadow over present-day public finances

A new report by Christina Beatty and Steve Fothergill, Centre for Regional Economic and Social Research, Sheffield Hallam University

  • UK manufacturing employment has fallen from 8.9 million to just 2.9 million overthe last fifty years, and 500,000 jobs have disappeared from the coal industry. This has destroyed the economic base of many communities, especially in the North,Scotland and Wales.
  • The main effect ofthis job loss has been to divert vast numbers of men and women out ofthe labour market onto incapacity related benefits, these days Employment and Support Allowance (ESA) which accounts for almost 2.5 million adults of workingage. The highest claimant rates – 10per cent or more of all 16-64 year olds – are nearly all in older industrial areas.
  • ESA and the additional benefits received by ESAclaimants – Housing Benefit and Disability LivingAllowance for example – are a £30bn-plus annual claim on the Exchequer.
  • Low pay in former industrial areas depresses tax revenue and inflates spending on in-work benefits. Spending on Tax Credits, for example, exceeds £850 a year per adult of working age in much of older industrial Britain – double the level in parts of southernEngland.
  • The Treasury has misdiagnosed high welfare spending as the result of inadequate work incentives and has too often blamed individuals for their own predicament, whereas in fact a large part ofthe bill is rooted in job destruction extending back decades.
  • The welfare reforms implemented since 2010, and strengthened since the 2015 general election, hitthe poorest places hardest. In effect, communities in older industrial Britain are being meted out punishmentin the form of welfare cuts forthe destruction wrought to their industrial base.
  • Across most of older industrial Britain the loss arising from welfare reform is expected to exceed £750 a year per working age adult by 2020-21.
  • There is an alternative – a genuine rebalancing ofthe economy in favour of industrial production and a revival of regional economic policy.
  • Policy makers need to take a long-term perspective, look at the differences between places, and stop thinking in silos.

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Ralph Miliband on ‘Corbyn’

Something like a blueprint for the shift of power in the party was set out in Ralph Miliband’s Parliamentary Socialism, first published in 1961. Miliband’s attack on the Parliamentary Labour Party (PLP) anticipated the Corbynite strategy with uncanny prescience. Cautioning his comrades on the left who wanted to use Labour as a vehicle for socialism, Miliband wrote in a 1972 postscript to the book:

 

The kind of political changes at the top which a good many socialists hope to see one day brought about in the Labour Party, and which would signify a major ideological shift to the left, would presumably, given the nature of the political system, have to be engineered from within the ranks of the Parliamentary Labour Party. But to say this is surely also to indicate how unrealistic that hope is. It is unrealistic because it ignores the perennial weakness of the parliamentary left. That weakness is not accidental but structural . . . There have been some exceptions: a few Labour MPs have, so to speak, slipped through the net. But they have remained isolated and often pathetic figures, bitterly at odds not only with their leaders but with that large and permanent majority of the Parliamentary Labour Party which entirely shares its leader’s orthodox modes of thought.

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Petition: Cancel the F-35

A petition to the United States Congress and the governments of Australia, Italy, the Netherlands, Norway, Turkey, the United Kingdom, Israel, Japan and South Korea from the world and from the people of Burlington, Vermont, and Fairbanks, Alaska, where the F-35 is to be based. Initiated by Vermont Stop the F35 Coalition, Save Our Skies Vermont, Western Maine Matters, Alaska Peace Center, University of Alaska Fairbanks Peace Club, North Star Chapter 146 Veterans For Peace, World Beyond War, RootsAction.org, Code Pink, Ben Cohen.

The petition reads:

The F-35 is a weapon of offensive war, serving no defensive purpose. It is planned to cost the U.S. $1.4 trillion over 50 years. Because starvation on earth could be ended for $30 billion and the lack of clean drinking water for $11 billion per year, it is first and foremost through the wasting of resources that this airplane will kill. Military spending, contrary to popular misconception, also hurts the U.S. economy (see here) and other economies. The F-35 causes negative health impacts and cognitive impairment in children living near its bases. It renders housing near airports unsuitable for residential use. It has a high crash rate and horrible consequences to those living in the area of its crashes. Its emissions are a major environmental polluter.

Wars are endangering the United States and other participating nations rather than protecting them. Nonviolent tools of law, diplomacy, aid, crisis prevention, and verifiable nuclear disarmament should be substituted for continuing counterproductive wars. Therefore, we, the undersigned, call for the immediate cancellation of the F-35 program as a whole, and the immediate cancellation of plans to base any such dangerous and noisy jets near populated areas. We oppose replacing the F-35 with any other weapon or basing the F-35 in any other locations. We further demand redirection of the money for the F-35 back into taxpayers’ pockets, and into environmental and human needs in the U.S., other F-35 customer nations, and around the world, including to fight climate change, pay off student debt, rebuild crumbling infrastructure, and improve education, healthcare, and housing. Continue reading

Intellectual Property and Inequality

That’s the displacement story, but suppose that robots are extremely cheap. There is no obvious reason they shouldn’t be cheap. After all, we probably won’t need any rare materials to make robots. And presumably robots could be mostly manufactured by other robots, so the labor involved wouldn’t be expensive. In this case, we should be able to buy a robot at our local hardware store or from our favorite internet retailer for a few hundred dollars.

Once we buy the robot, we can have it clean our house, cook our food, mow our lawn and do all sorts of other tasks that we may not want to do ourselves. We can probably even save on our food budget by having the robot plant and tend a vegetable garden. If robots are doing all this work for us and we no longer need to buy and maintain a car to meet our transportation needs, we should have all have a high standard of living.

But suppose that patents and related protections keep the price of robots high. And instead of technology driving down the cost of transportation with self-driving cars to almost nothing, patent monopolies allow the top executives and shareholders of Uber or its equivalent to get very rich at the expense of the rest of the population. In that scenario, most people may not benefit to any great extent from technology. In that case, robots may take our jobs, but instead of the benefits from productivity growth being passed along in higher wages and lower prices, as was true in past decades, the benefits go to minority of well-situated individuals. Continue reading

CAAT: UK government works ‘hand in glove’ with arms firms

The British government and the UK arms industry have a “politically intimate and hugely compromising relationship” that sees government officials working “hand in glove” with companies promoting weapons exports, according to campaigners who have tracked thousands of meetings between officials and arms trade representatives.

Officials from the government’s dedicated arms export department, the Defence and Security Organisation (DSO), attended more than 1,000 meetings since the 2010 election – more than a third of all meetings recorded by the Campaign Against Arms Trade (CAAT), which has published data on contact between the government and the arms industry.
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Immigration and wages

In fact, we might go even further. Restrictions on free movement may actually reduce wages and workers’ standards.

Because we know from history that immigration doesn’t stop when it becomes harder. Just look at Mexico and the United States. If more EU nationals enter the UK undocumented, they will be working outside official channels, labour laws and the official minimum wage.
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Oxfam: UK one of the most unequal countries

The richest 1% of the UK population owns more than 20 times the wealth of the poorest fifth, according to Oxfam.

That made Britain one of the most unequal countries in the developed world and contributed to the vote for Brexit, the charity said.

Its analysis found that about 634,000 Britons were worth 20 times as much as the poorest 13 million people. Continue reading

Poor growth and/or increases in inequality owe as much to global forces as domestic policies

Note two things here. First, there are a lot of dots with very low income growth, low enough to deserve the label “stagnant”. Second, wherever similar-coloured dots are on an upward slope, higher-income groups left their lower-income compatriots behind. Aside from the very lowest deciles (who are often cared for with welfare benefits), that very often seems the case. Again, Lakner and Milanovic looked into this, and wrote: “Some examples with particularly low real growth rates among rich economies include almost the entire lower halves of the income distributions in Austria, Germany, Denmark, Greece and the United States. They all had overall 20-year growth rates of less than 20 per cent which translates, in the best case, as 0.9 per cent per capita annually.”
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Macroeconomic policy, not technology, undermines workers bargaining power

Well, a big part of the story is that the UK (like the U.S.) has a very weak labor market. This was a result of conscious policy decisions. The Conservative government put in a policy of austerity that had the effect of reducing demand in the UK and slowing the rate of job creation. In this context, of course employers get to call the shots.

Serious people would address the context which has denied workers bargaining power. It is not “technology” as Harris and his elite Trumpians would like to pretend, it is macroeconomic policy. But Harris has no time for talking about macroeconomic policy. He dismisses a plan put forward by Labor Party Leader Jeremy Corbyn to produce full employment as, “either naive or dishonest” adding “but they reflect delusions that run throughout Labour and the left.” Continue reading

UK, the second biggest arms dealer in the world

Britain is now the second biggest arms dealer in the world, official government figures show – with most of the weapons fuelling deadly conflicts in the Middle East.

Since 2010 Britain has also sold arms to 39 of the 51 countries ranked “not free” on the Freedom House “Freedom in the world” report, and 22 of the 30 countries on the UK Government’s own human rights watch list.
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