Ragging on Ritchie

The fundamental fact that Wolf ignores is that we live on a finite planet. The gains of the past, about which he enthuses, were built on cheap energy, abundant abuse of materials without taking into consideration the consequences of doing so, and a willingness to ignore the external costs imposed on society as a result of that indifference. That era is over. We face climate breakdown now. We are already on a dire path to 1.5 degrees Celsius of warming because we pretended that infinite growth was possible, and Wolf still wants more of the same. This is economic, social and climate madness. He might wish for increased productivity from consuming (and abusing) ever more of the world ‘s natural resources, whilst showing complete contempt for the rights of working people, but the stalling productivity numbers he quotes in his article do not show a failure of effort or the consequence of laws protecting labour rights; they show the natural consequence of economies hitting planetary and social limits.

Sigh.

First, growth is not coming back in the form he imagines, whether he thinks it necessary or not. Wolf might lament the collapse of postwar productivity miracles and clearly longs for their return, believing a combination of AI, other disruptive technologies, and greatly relaxed labour laws — allowing companies to dispense with their employees at will to the detriment of employees everywhere — might deliver them again.

Double Sigh.

Rising productivity allows you to do more with the same resources. That’s the very definition of rising productivity – more value of output from the same inputs. So, if 20th century growth wsa largely driven by rising productivity – it was – then 20th century growth is exactly the sort of growth that *we insist upon* for this new world of limited resources. Because the whole point of increasing prouctivity is greater value of output *from the same resources*.

The 2008 global financial crisis happened in no small part because US banks sold portfolios of debt that they had issued to US consumers to investment bank clients who did not understand the risk in those portfolios, and subsequently discovered that the supposed AAA debt they had acquired was nothing of the sort, and banking balance sheets collapsed as a result all over the world.

The AAA tranches were good. Near none of them failed. That the banks were putting the C – the equity – tranches in their own books financed with massive leverage is what caused the problem. Because slicing and dicing loan pools actually worked – the equity tranches went bust first and protected the synthetic AAA tranches from default even as the underlying mortgages went kablooie.

Spud’s got 2008 wholly and entirely the wrong way around.

Now there’s a surprise, eh?

As the Guardian reports this morning:

When all that’s left is the rentier economy — and in households that rent, that is the only interest they are really working for — something has to give.

This is completely unsustainable.

Radical thinking is required. Steve  Keen is doing some. So am I.

We might need to talk about it.

I’ll betcha that neither of them will come to the same conclusion I did in the face of the same evidence:

Say it ain’t so!

Average private rents in Great Britain have climbed to record highs, with the amount tenants are being asked to pay in some hotspots rising more than 25% in a year, data shows.

Our word.

Rightmove also said conditions for landlords were challenging. It indicated that last autumn’s rise in stamp duty , as well as speculation about more tax changes in next month’s budget and the impact of the government’s renters’ rights bill, may be prompting some buy-to-let landlords to bail out and may be putting off others from investing in the sector.

The returns to being a landlord are being deliberately managed down. There are, therefore, fewer landlords – not as a happenstance, it is deliberate public policy that there be fewer landlords. Fewer landlords means a lower supply of rentals, therefore rentals cost more.

That’s the sort of chain of logic people could build a theory upon you know. We look forward to someone having a crack at it too. You know, just as an intellectual exercise that might be able to inform public policy?

For that insistence that supply and demand just don’t work with housing, rentals or landlords just doesn’t seem to be panning out, does it?

But what’s the value of Econ 101 in the face of political economy, eh, eh?

Rachel Reeves says the UK needs tax rises to balance her budget. That’s simply wrong. Tax doesn’t fund government spending: spending comes first. Raising taxes now would drain money from an economy already struggling with low demand and weak wages. The only people who should pay more are the idle wealthy, who are those hoarding unproductive wealth in property and shares.

Second, entitlement in this sense is underpinned by a neoliberal mindset

That’s Kamala Harris being described as neoliberal.

His central equation, that r > g, captured that truth in a simple inequality. His argument is that when the rate of return on capital (r) exceeds the rate of economic growth (g), wealth accumulates faster than incomes rise. Those who already own assets grow richer, while those who rely on wages fall behind. Over time, inequality does, then, become self-perpetuating.

He argues that r is greater than g. Which it ain’t. Therefore it’s all nonsense.

And what we need, I suggest, is a Basic British Bank, the BBB, to keep private banks honest as well.  And that BBB would, of course, be owned by the UK state.

What would it do? It would offer basic, current and savings accounts to everyone, in the way that those old enough to remember it will recall that the Girobank once did, and it operated through the post office.

There would be no extortionate overdraft rates.

There would be fair interest on savings, entirely in line with bank base rate, or maybe a per cent or so less, but nothing like the penal and very low rates offered to small savers now.

And this Basic British Bank would have local branches, either of its own or in partnership with post offices and councils, and hubs of that sort are now becoming more common and are really important.

That’s not really the point being made here. This is:

We could open the doors to what should be a public payment infrastructure, which is a measure of resilience. I talked about this in 2008, when I thought that the biggest threat arising from the financial crisis, at least in its very early stages, was that there was a chance that the payment mechanism which ensured that British households could pay their supermarkets for food might fail. And that risk still exists at this moment, and it could present us with a crisis again, because if people can’t buy their food because there’s no payment mechanism to let them do so, then they will riot.

The fact is that payment infrastructure is not in public hands. We’ve learned nothing from 2008, yet. 17 years later, we still do not have a state-owned payment system within this country. And this British Basic Bank, Basic British Bank, whichever way around you wish to put it, the BBB could build that mechanism on which all other banks could be built, so that we would have a payment infrastructure in this country  which would work whatever happened to our banks, because the state would own it.

Of course, we do have a public payments system. CHPS. Which is owned and run by the Bank of England. And of course a publicly run payments system handling the next level down, the £5 for a pint level, would never, ever, be used as a form of social credit. Ho no.

But, you know. Spud’s mentioned this before, that the State should create the banking system, everyone else just gets to be a brand that runs on top of that. Because this would be better, much better.

As shown the last time the stat tried to build a real time retail payments system of course. ICL built Horizon for the Post Office…..

The latest evidence comes from the appeals for more funds for the NHS to manage likely demand this winter. This is seen as a sign of management failure by those in the Treasury. Actually, it is the result of the failure of neoliberalism as it feeds us ever more toxic food in pursuit of profit in a world already poisoned by doctrines of indifference to the condition of most people, who live lives of despair as a result.

The problems of a monopoly, state run, health care system are that we all have cheap and nuritious food now.

John Rawls’s A Theory of Justice (1971) redefined moral and political philosophy for the modern age. In a century when economics had displaced ethics, Rawls reintroduced a simple but powerful idea: that of fairness.

He asked us to imagine a “veil of ignorance.” Behind that veil, we do not know who we will be. We have no idea if we might be rich or poor, healthy or sick, powerful or powerless. He then asked if, knowing only that we will have to live under whatever rules we choose, what kind of society would we design?

Rawls believed that rational people behind this veil would not choose a system that leaves most in poverty so that a few might prosper. They would, instead, design institutions that guarantee basic rights for all, ensure opportunity, and allow inequality only when it benefits the least advantaged.

It was a profound moral test, and one that economics has largely failed, whether before or after he wrote.

Failed, eh?

Such failure.

Irish, Welsh, Scottish nationalism is all fine and ticketty boo. English nationalism is vile of course.

My how far Spud manages to stretch himself beyond trite and conventional views, eh?

For the first time, I’m making a video for this channel where I’m well out of my comfort zone. In other words, I’m  not sitting in my office in front of our normal camera. I’m out and about.

And that summarises the whole of modern politics. The far-right parties are only interested in promoting the cause of the wealthy. At the end of the day, that is all their agenda about. Everything else – from furore about migration onwards – is about deflecting attention from this fact. And it is working. It seems that almost a third of voters in England – the vast majority of them not well off – are being persuaded to destroy the very system of government that was created to protect their interests, and they are falling for it.

If the people choose to do the things I disapprove of then that’s not democracy.

See?

Small is beautiful and all that.

Hence, the Schumacher Question: if small is beautiful because it respects life’s limits, why do we persist in worshipping size, speed and growth when they destroy the very foundations of well-being?

Well, one answer might be to read some Krugman. His Nobel was about well, what happens when the efficient size – so, the size which uses the least resources to get the job done – is larger than one country’s economy, possibly even as large as the world economy?

But the real lesson fro Schumacher is very much more important than that. The lsat chapter of the book is an insistence that much more coal needs to be dug up and much more coal needs to be used and really, the UK should be doing everything to support the coal industry. Mr. Schumacher was the chief economist for the National Coal Board.

From which we can derive one of those truly important pieces of economics.

Incentives matter.

Then appreciate, firstly, that if the government “borrowed” a near record amount, it did no such thing. Financial institutions placed a near record amount on deposit with the government, lapping up all the bonds it had to offer in the process. There is no borrowing crisis in the UK.

Except those £600 billion of QE bonds the BoE can;t get rid of at a price that’s aceptable to them or Spud.

When economics is stripped of politics, it becomes a convenient alibi for inequality. It allows wealth to accumulate unchallenged and poverty to be dismissed as individual failure. It turns questions about justice, security, and dignity based on real-life experience into technical debates about productivity and growth.

In other words, the depoliticisation of economics is itself a political act, and one designed to preserve the privileges of those who already hold economic power.

Economics ends up saying things which I do not want said. Therefore I’ll call it politics so that I can carry on being wrong.

Every pound of so-called “government debt” is a private financial asset. When the government spends, it creates money that becomes your wealth. Yet politicians pretend debt is a burden.

Because it is the wealth of private persons and must be repaid therefore it is a burden upon government finances.

It’s as if an accountant can#t do double entry bookkeeping.

However, having an open free-for-all which anyone could attend would, whilst technically possible, be immensely difficult to manage, because we are aware that such events often attract trolls who are abusive, not least in the comments that they post while live-casts are running. We do not see any reason for suffering the stress of managing such a situation, and so instead we are looking to record more controlled events.

Do not, ever, allow the Sage to be questioned.

Only government can issue currency because only government can tax to maintain the value of that currency.

First, the creation of money must always be a matter of public trust. Stablecoins are, by definition, privately issued claims on supposedly safe assets.

Private money must be banned because it might work.

Second, and vitally, money is not a private commodity. It is a public institution, representing a social contract guaranteed by the state. When private corporations create quasi-currencies, they are in effect privatising part of that social contract. They want to capture the benefits of issuing money without accepting any of the public responsibilities that accompany it.

Or is it because private money might have value without it being taxed to produce that value?

Why do I still do this at 67?

Darwin’s theory of evolution is one of the most influential ideas in human history. But what if the story we have told about it is wrong, or, more precisely, incomplete?

The popular interpretation of Darwin’s work suggests that the world is driven by the survival of the fittest. Yet what if it is really driven by the survival of the wisest, who are those who cooperate and not compete to adapt and endure?

Humans are, in fact, remakably cooperative animals. Look outside the window and see what millennia of cooperation have built – a vast civilisation of unparallelled richness.

Markets, we are told, reward the strong, the clever, and the efficient.

Markets are how people cooperate. Who am I going to cooperate with in my Rincewindian quest for potatoes? Mr Aldi or Mr Lidl? Come along now, by definition a market transaction is a cooperation. They even gave a Nobel to Ronald Coase for explaining types and forms of cooperation in Theory of the Firm.

Sigh.