UK at Risk as Next Financial Crisis Looms
October 26th, 2008No one predicted the collapse of the western banking system in 2008. A financial storm rolled in off the Atlantic, wreaking havoc with UK and world markets. Despite the best efforts of governments, this raw force of nature was beyond human control and no one could have stopped it.
Hang on, that’s rubbish. The catastrophic failure of this man-made system was both predicted and inevitable. In 1993 Professor Richard Dale described the conditions, that would inevitably lead to this crash and recession.
Influential economists fetishise the free market, claiming markets know better than regulation and are inherently capable of self-correction. No other factor, legal, historical or otherwise is seen as important. Dale however, allowed his investigation into the effects of deregulation in the banking sector to encompass just these factors. He considered how the deregulation of the baking sector in the 1920s and 30s had directly led to the Great Depression, as banks were allowed to extend beyond their normal role of lending, to trade in securities. Following the Great Depression, legislation was passed to prevent banks operating in both these areas and so avoid another banking collapse. At the point Dale wrote his book, these laws were being dismantled across western economies. As he predicted, by 1999 the liberalisation of the banking sector took place and once again banks could trade in securities.
A common definition of insanity is to do the same thing as you did before but expect the result to be different.
Economists were intellectually limited by their faith in the infallibility of the markets and willful ignorance of historical precedence. They convinced themselves that the market could not break down in the same way again, revising the history of the Great Depression to lessen the emphasis on securities trading.
Economists extended their influence in political circles. Governments around the world were seduced by the power of ‘the market’. Incessant anthropomorphism of the market’s attributes elevated it from king to God. Together, economists and politicians worshiped at the alter of their own creation, evangelical servants to the Market God who had a plan for us all.
Other than Dale, people who predicted the crash were not economists but sociologists, historians, commentators; people who had looked at the irrational deference of these people to the market idea and so foreseen the dangers for us all.
Now the banking sector has been brought widely under state ownership and the global regulatory framework is being discussed to prevent yet another calamity. The stated aim though, is that the ‘free market’ God must be restored and placed as soon as possible back fully into private hands. Rather than anthropomorphise the market, let’s recognise it as the pathological tool it is.
Markets work in a very straight-forward way and for a very straight-forward purpose. They externalise cost and risk to the public, and privatise profit. As citizens we pay money to profit private hands when things go well, and when they go badly and regulation fails, we as taxpayers pay again while those running the market are protected. The public bears the risk and the costs of business, while business shares the profits with itself. When free from regulation markets will adopt increasingly risky activity until they fail with massive liabilities. Because that risk is born by the public there is little disincentive for those running the corporations. Regulation is essential for mitigating some of the risks of the market and making corporations bare some of those risks themselves.
There can be no laws that govern gods and so the Market God always seeks to remove constraints and trade with increasing freedom. Freedom allows the acceleration of cost, risk and profit until ultimate failure. The function of the market is, in this way, to redistribute wealth in society from the public to the hands of the few at the top. In witnessing the collapse of the financial sector, politicians saw immediately the danger that people will understand this blatant truth: free markets can not exist, only regulated markets can survive. This would undermine the function of the market as a redistributive tool for the powerful and cannot be permitted.
Key politicians during this crisis have said we don’t want socialism. Perhaps we should ask why they do not want socialism; what does it represent that is so abhorrent? It is simply that socialism envisions a world where there are regulations and constraints on the excesses of markets, ensuring that citizens benefit from the wealth generated, by shifting the redistribution of wealth back to the many rather than the few. It sets conditions so that risks are not externalised to the public for the sheer benefit of private profit. Why would they want it; it’s not them it helps.
I am therefore going to predict that the powerful will have their way again. That this failure will be remembered as an act of God, rather than the acts of dirty human hands. I further predict that while the last two major collapses were 80 years apart, the acceleration of the global economy means that the next will arrive in around 30, and the sums of money involved will be a magnitude greater.
A Long Wait
February 9th, 2008To explain why it has been such a long time since my last posting, there are photos in the gallery of my baby daughter Anna, who was born in the Summer of 2007.
Blair Leaves Office: Bolt the Door Behind Him!
May 10th, 2007There is no more bitter betrayal than a leader who masquerades as something he is not. In 1997 the wilful delusion of British socialists was the hope that Tony Blair wore an electoral disguise, beneath which he raged at eighteen years of Tory rule. Once in office he would reverse Thatcherism because he knew, in his blood, that human life means more than private interests, money and manipulation. But his puppet façade, architectural smirk and dead steel gaze, was as deep as he ran. There was no flesh and blood to Blair’s politics, only the death and horror wrought on the world once in power.
Any fig leaf of dignity held to his naked, shivering corruption was stripped piece by piece over the next ten years. Purging Labour values with such glee that Margaret must have rubbed her hands in frenzied jealousy. The end of free university education, increased privatisation in the NHS, subsidised private education, blocking the social chapter, regressing civil liberties, widening the gap between the richest and poorest, selling peerages to his backers – a stunning record of social vandalism that only skims the surface of his treachery.
Blair’s shallow appeal to the public was: “Trust me, I’m Tony”. A lesson we learned the hardest way. More times than any Prime Minister since Churchill, Tony Blair sent troops to war. Most shamefully he lied, misled and defamed this country in pursuit of Bush’s “evil-doers” in Iraq. The fabrication was that their illegal war would bring democracy to Iraq – paradoxical when the majority of people in the UK objected to it. Today, Iraq continues to suffer the predicted and unspeakable horror caused by our invasion. Saddam was a vile dictator but let us never forget, our country knowingly supported him at the time he committed his most horrendous crimes. When America became a superpower it took over control of the Middle East from the British Empire. The CIA helped Saddam seize power in 1963, the French and Americans gave him chemical weapons and Britain cashed in on the weapons bonanza too, even helping him build a chemical factory knowing that he had already gassed Iranian troops. The West gave Iraq to him and then took it away, not for his crimes against humanity but, decades later, for his disobedience. With each terrible action, everything we have done in Iraq has harmed its people. Blair’s eager support was criminal.
At home education policy has made a production line of our children. Privately owned city academies give businesses control of state education, so they can raise children to meet the needs of short-term profit. By personally supporting faith schools, Blair has encouraged racial segregation and even defended those who teach creationism in place of evolution. State investment in hospitals and schools was welcome, but Private Finance Initiatives mean that the buildings are costing tax payers many times more than was spent to put them up, just so that private companies can profit.
Reliance on performance measures has created a psychopathic health service, driven financial rewards. Based on the deficient ideas of game theory, care staff are rewarded when they manipulate patients clinical needs to fit target definitions. In some hospitals it has resulted in minor surgeries being performed ahead of vital major surgeries, to bring down waiting lists.
As we slip into a police state, the contempt held for the population is evident. Blair’s reactionary politics of fear has excused legislation that makes it illegal to gather in a group. You can now be arrested without charge or sight of the evidence against you. Laws introduced to prevent suicide bombings are being used to prevent legitimate protest, bringing into question the freedom of any one of us to speak out. Today we live in a society that has accelerated many aspects of Thatcherism. Blairism has brought the increased control over our lives of private wealth and with it, the further erosion of individual value. The greatest benefits of health care and education have been weakened by policies that aim to see them destroyed. Voting for Blair has made most of us poorer, seen our great institutions undermined to our detriment and seen laws passed that make us increasingly vulnerable. The pittiful consolation is that the Tories would have been worse.
Idealists are easily seduced and so Blair’s “I’m one of you” rhetoric was enticing. The faith was soon replaced with malice but in his final days, Blair continued to herald policies broadening privatisation and other right-wing nonsense. It is the tragic poetry dished out on a Labour Party whose electoral greed gave life to the monster and betrayed its own morality. Now the party is plagued by career politicians who seek to divorce it completely from its roots. We may blame Blair, but every voter and abstainer is culpable, as is the Labour party. He is just one man: weak, feeble and mortal as we all are. The natural successor to the Iron Lady, this aluminium opportunist, was flesh and blood after all: a bloody disappointment.
After 28 years being dragged further to the right by successive governments, it really is time for a change. Unfortunately it does not seem that we will get one at any time soon.
UK Too Slow in Adopting Linux and Open Source
March 8th, 2007Twice as many local government authorities in France and Germany are using open-source software than in the UK, according to a survey carried out by University of Maastricht in the Netherlands. Despite government agencies warning of “lock-ins” to Microsoft licence agreements, change in the UK is slow and confused.
For some years there has been a trend towards open-source adoption in developing counties. China already considers open-source vital to its future and is committed to investing significantly in Linux based systems. Venezuela has made it illegal for educational institutions to purchase proprietary software, while Africa and India are also both embracing open-source.
Last week Japan’s public broadcaster NHK reported that the Ministry of Economy, Trade and Industry is planning to introduce the Linux operating system in classrooms across the country. Linux will be used to replace existing Microsoft Windows 98 and Me operating systems on 400,000 PCs. Since the introduction of Windows Vista there has been considerable anecdotal evidence that Linux is receiving increased interest as an alternative upgrade. News of Japan’s move provides evidence that the shift away from Microsoft may be concrete and accelerating.
In October 2006 the UK spending watchdog, Office of Government Commerce, published a report stating open-source offers “a viable desktop alternative for the majority of government users”. The following month Microsoft was awarded £460 million for 900,000 software licences for the NHS. As Linux requires no licence, a considerable cost-saving could have been achieved and, more importantly, a large-scale public investment like this would have helped stimulate much needed training and development.
The continued reliance on proprietary software is both foolish and short-sighted. Despite the stated UK government policy of seeking to “avoid lock-in to proprietary IT products and services”, we see little evidence of success. As the UK delays, so the rest of the world is moving on and the harder it becomes to catch up. If we want to be at the leading edge of high technology in the future, then we need government give leadership through investment.
Who’s Hoarding the Money?
February 13th, 2007
I rarely consider myself rich. That is until I compare myself to those living in most other countries. If you then factor in the employment opportunities, healthcare, education and other benefits of being born up in the UK, you realise the striking differences to be found. Even if you ignore this, the inequality is staggering.We already know that there is a colossal inequality within the UK, where 1% percent of the population have nearly 4 times more than the poorest 50% (2002, ESRC). This means, person for person, half of our population has 190 times less money than those in the privileged 1%.
The end of 2006 saw the WIDER Project published ‘The World Distribution of Household Wealth’ report (based on the year 2000). The most complete study of its kind, the report gives a breakdown of the world’s wealth by country, based on both people’s physical and financial assets, less their liabilities. What it shows is predictable and shocking.
From WIDER we see that globally 1% of adults possess 40% of the wealth (2006, Wider WDHW Report). This is an extraordinary centralisation of wealth and, by country, is dominated by the richest five: USA, Japan, Britain, Germany and France. These five nations control 67% of the world’s net worth, though represent only 10% of its population. As a consequence, a person living in the richest parts of the world possess on average $124,712. In Nigeria this drops to just $377, some three hundred and thirty-one times less money. US military spending alone, reaches 10 times the net worth of Nigeria every year (US Department of Defence).
China, a country of more than 1.2 billion people, has only 2.6% of the world’s net worth. Despite having twice the population of the richest five countries combined, it still has 25.5 times less money. China’s high-paced economic development suggests that this, at least, is probably changing.
Now look at those counties with the greatest wealth of oil reserves. Saudi Arabia, Canada, Iran, Iraq and Kuwait together have over 60% of the world’s remaining oil reserves (U.S. Energy Information Administration, 2005). It is staggering that these five countries, with such colossal natural resources, possess less than 3% of the world’s wealth. The richest five have more than 22 times the wealth. American and European military and political interference in the Middle East must be the explanation for this disparity.
Our world is so unequal that a Nigerian’s entire personal estate amounts to just one week’s minimum wage in the UK. This is without justification. Were the wealth of the world shared equally, without even considering healthcare, education and many other benefits we take for granted, then a Nigerian would be 55 times richer. In the UK we would be six times poorer.
Time for Work
November 7th, 2006Ring bound folder of office procedures. Telephone extension numbers and a date stamp for the post. Fingers click, click on computer keyboards to contact clients, type up minutes, type up letters. It is time to make appointments, book meetings, send emails after letters after telephone calls. Chat. Make tea and coffee. Check the drinks list to see how many sugars people take. Sign the birthday card, the leaving card – lucky guy. Watch the clock for lunch time, home time or just to watch it to pass time. Either the clock in the corner of the monitor, or the large clock on the wall, which rules us all, will track the endless day.Computer fans whir and hum, breathing warm, dry, dusty air. Dust gathers on pen holders and in paperclip trays. It frosts the top of monitors and specks of fluff collect on the phone. It circulates in the air, caught in the turbulence left by hurried bodies darting between rooms.Artificial light wins out over the sun’s warm rays. Windows frame a bright street, busy with people and life and bright sun. But little permeates the numb bubble of the office. Windows exclude everything but the muffled grind of straining engines, the constant tread of rubber tyres on the road, or the metallic slide and crash of van doors across the street.
Autumnal leaves fall from trees in the park across the way. Children play, crunching the brittle leaves under foot, collecting them in gloved hands and throwing them at cold faces. But in the office everything is man-made, dead and artificial. Reheated air with the aroma of burnt dust is all you breathe. Hard plastic keys, buttons, pens and implements are all you touch. The dirty, grimy rubber stamps, bulldog clips, desks and chairs is all you see. The sounds of computers, idle conversation, shuffling paper, telephone greetings, mumbling thoughts, curses and heavy feet on hollow floors surround you. The smell of rotting minds, the death of time, the strangling of creativity weighs heavily on shoulders and tightens around your neck. How many hours are left?
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