new economics foundation

Why politicians don't get the riots

Thu, 11 Aug 2011 17:49:41 +0100

By David Boyle, nef fellow

I have had a fascinating response to the blog http://davidboyle.blogspot.com/2011/08/let-them-yearn-for-tat.html

I wrote earlier this week about the riots, blaming vacuous materialism and urging a new kind of political language. Most of it was even positive.

But the politicians have returned to Westminster today, and the new political language which does not have ‘aspire to own tat’ at the heart of it has certainly not arrived yet.

In fact, much of the political positioning on the riots has been deeply depressing.

No, it is not about people who are so poor they are hungry – you can’t eat flat-screen TVs.

No, it is not about leniency – Britain relies more on prison for young people than most other countries in Europe.

No, it isn’t about the cuts – the symbols of state authority were largely ignored compared to the lure of the superstores.

No, it isn’t about ‘broken Britain’ – the response of communities around the country, acting together to protect their high streets and to clean up the mess, is a sign that Britain is not broken. So is the shocked tones with which Le Monde announced that there were no water cannon on mainland Britain.

No, it isn’t about immigration. In fact, the Harvard sociologist Robert Sampson http://en.wikipedia.org/wiki/Robert_J._Sampson suggests that Latino immigration to the USA, with their strong sense of family and community, is one of the reasons crime is falling in the USA.

Why is it that the political Left rejects the idea that disorder is partly about the breakdown of family life? On the other hand, why is it that the political Right can’t see that family breakdown has been driven by high house prices, shift work and job insecurity?

Why is it that those who talk about the ‘culture of entitlement’ don’t see that this applies equally well to our banking elite, and their greedy record of extraction, as Compass suggested today http://www.compassonline.org.uk/news/item.asp?n=13301 ?

The truth is that both Left and Right have a great deal to answer for creating this culture of entitlement, from the feral underclass to the feral elite – for abandoning their moral vision for society and replacing it with retailing.

Both have been responsible in the UK for the corrosion of community and family life by the wrong kind of economics.

We have to pretend for a while that foul fair and fair is foul, said John Maynard Keynes. It maybe that the riots mark the last gasp of this pretence – because foul is not useful after all if it leads to moral, spiritual and mental decay.

This is no time for glib solutions to what is a moral crisis as much as a practical one. But part of the solution is going to have to be rebuilding local relationships by reforming out public services.

We need services that are human scale and capable of reaching out into their surrounding communities and rebuilding reciprocal links. That is the co-production agenda. http://www.nesta.org.uk/library/documents/Co-production-report.pdf

It is the antidote to the factory schools and hospitals, and the inhuman technocratic institutions into whose tender mercies we now fling those communities which have bred the rioters and which have in turn been torn apart by them.

It isn’t just glitzy and inhuman materialism which has created the riot generation, it is inflexible and inhuman services.

Unfortunately, our political elite sees neither of these problems very clearly. It is up to us to articulate them in such a way that they do.

James Meadway on GDP fixation and lessons from Japan | Comment is Free

Wed, 10 Aug 2011 14:59:40 +0100

James Meadway on GDP fixation and lessons from Japan | Comment is Free

Economics needs history

Wed, 10 Aug 2011 12:41:16 +0100

By David Boyle, nef fellow

In the week that the banks failed – that strange week in October 2008, where everything seemed to be unravelling – I ventured into the City Business Library, in its familiar, slightly unkempt building off London Wall.

I used to spend quite some time there, when I was writing about the history of money. I remembered it – perhaps wrongly – as a font of hidden knowledge. By 2008, it certainly wasn’t that.

Where were those decades of back issues of obscure American business magazines? Where were those strange 1960s books of business predictions?

I asked at the desk and was informed that it was the library’s policy to dispose of most material after three years, and all of it after five years.

It was rather a strange discovery. Wall Street and the City of London had allowed the banking system to collapse because their risk software had little or no memory beyond ten years – barely longer than the business cycle.

Most of those taking day to day decisions about risk in the City were in their twenties and had little memory of the great rises and falls of the market. Their lack of history had hampered their ability to see events for what they really were.

I don’t suppose the City Business Library’s decision to bin anything dog-eared contributed to this historical vacuum – it was symptom not cause.

Nor was the last government’s strange blindness to history (heritage was one of the only areas of government funding to go down under New Labour), but neither of these can have helped.

Yet the excision of history from business commentary and corporate life – and its replacement by marketing mush – was definitely one of the major causes of the current miserable economic climate. That is why Andrew Simms and I wrote Eminent Corporations.

Now, George Soros’s Institute for New Economic Thinking (INET) has organised a whole series of interviews of leading economists under the title ‘How economists were made’, and it is fascinating how they also urge the importance of history – and especially Irwin Collier.

He says that, without philosophy, politics and history, economists can’t ask interesting questions. They can’t tell reality from illusions. They are lost, in other words, in the unreal world of quantitative data, formulae and economic theory that may or may not be related to the real world.

This is important. When the Post-Autistic Economics movement first made this point during the Sorbonne revolt by economics students in 1999, it seemed a revolutionary idea. Now that INET has taken up the cause, it may be that the days of autistic economics – the strange soulless rule of econometrics, may finally be coming to an end.

Not before time. Because the last thing we want is for public policy to be dictated by an ivory towered elite who are innocent of the world, or real people and how they really work.

We must rein in our feral financial system

Wed, 10 Aug 2011 10:08:00 +0100

By Andrew Simms, nef fellow, and Tony Greenham, head of Finance and Business

Yesterday marked unprecedented consecutive daily falls in the history of modern markets.

It’s clear that our Ponzi economy, built on debt has reached its limits. Many of the debts have become unpayable. They can only be dealt with through default, rescheduling or being ‘inflated away.’

The financial elite resist this because they will lose out. But not to act is to be in denial and delay the inevitable.

Also, the idea that tax cuts for the rich, such as abolishing the 50% rate, will do any broader good is insupportable in fact or theory. It is, frankly, nonsense. The economy will stagnate until we put money back in their pockets of middle and low income people.

That means rebuilding around productive, employment intensive sectors that also are vital to the UK’s transition to a modern, low carbon, low through-put economy. A new phase of targeted, rather than unfocused quantitative easing to support these sectors would do that.

The model of financial liberalization and self-regulation that has proved so self-destructive must be re-regulated in the public interest. George Osborne speaks of using the crisis to push the old, failed, unmanaged economic agenda. These are dead ideas walking.

The government must act in the whole national interest and bring our feral financial system under control.

nef's Lydia Prieg on the eurozone crisis at Comment is Free

Wed, 10 Aug 2011 09:46:52 +0100

nef's Lydia Prieg on the eurozone crisis at Comment is Free

London can't afford to ignore inequality any longer

Tue, 09 Aug 2011 15:34:12 +0100

By Stephen Whitehead, Researcher, Valuing What Matters

Image by George Rex via Flickr

As Londoners set to with brooms and binbags, trying to clear away the signs of last night’s violence, there’s a strange sense of unreality over the capital. Despite the sirens blaring through the night, despite the wreckage on the streets, despite the smoke on the skyline, it seems hard to believe that this could have happened. The breakdown of the social order was so sudden and so apparently total, that it defies understanding.

This is London, after all. Not one England’s decaying, post-industrial relic cities. This is the jewel in England’s economic crown, the beating heart of the global financial network, the millionaires’ playground. Yes, we all know that things are bad in Hackney, in Lambeth, in Barking. But we never quite believed that this would effect us.

In fact, London is by far the most unequal city in the UK, or by some measures, in the developed world. Its riches are matched by pockets of sheer, unmitigated poverty. The richest tenth of Londoners possess a staggering 273 times as much wealth as the poorest. Hackney and Tower Hamlets are among the most deprived parts of England, while the satellite towns like St Albans whose residents flock to London every day are among the least. While bonuses flow in the city, youth unemployment is running at over 20%.

Violent disorder is not a novelty for London’s poorest areas. While across England murder rates have fallen, the regular litany of young men killing and injuring other young men in poor urban areas has become depressingly familiar. But as tragic as it was, from the leafy streets of Clapham, or Chalk Farm it all looked like somebody else’s problem.

So when, last night, angry young people erupted out of the estates and into the high streets it was a shock. Not because we didn’t know they were there, but because we never expected them to come here.

Today, commentators from the left and the right are keen to hang labels on the motivations of the rioters, rearranging facts in a way which fits their viewpoints. The rioters’ convenient anonymity lets them be class warriors, anarchists, anti-cuts protestors, uber-consumers or just straightforward, mindless thugs. The truth, as ever, will be more complex than that.

But one thing is clear. Affluent London can no longer fool itself into believing that the cost of living cheek-by-jowl with poverty can be paid in car alarms, window bars and insurance premiums.

It's the 1780s all over again

Tue, 09 Aug 2011 14:28:00 +0100

Image by J@ck! via Flickr

By David Boyle, nef fellow

I live in a relatively peaceful suburb of south London, in the heart of a huge allotment, secure in the knowledge that – if there is rioting – it will not come near here.

So it was a genuine shock, as I walked through the park to the station this morning, to find clothes hangers and plastic bags and the other detritus of looting, and then an abandoned car rammed into the side of the local mobile phone shop.

It made me all the more aware that we don’t understand what is happening, still less do we have a coherent new economics narrative of the riots.

The idea that the violent disorder was primarily about anger with the police went out of the window when the mobs began burning and looting people’s homes. No doubt somebody will suggest that this is about alienation in the face of the spending cuts – as if the mob would resist burning down libraries or children’s centres along with anything else.

No, but the official explanation – “sheer criminality” – while it is certainly true, does not seem quite adequate.

Two things strike me.

One is the faint folk memory of the Gordon Riots in 1780, when racist anti-Catholic mobs went on an orgy of burning and looting across London, culminating in the release of prisoners from Newgate and the destruction of the gaol.

It includes the picture of members of the mob drinking themselves to death in a burning distillery, brought alive so dramatically by Charles Dickens in his novel Barnaby Rudge.

Two centuries on, and we still have not progressed beyond sheer greed and appetite of the mobs at work over the last few nights, the fear of which lies at the heart of the motivation of so many British governments.

Second, the focus on shops gives these events a completely different atmosphere to the inner city riots a generation ago. These are not riots of rage, they are riots of greed. They are also perhaps a symptom of the way that retailing has been allowed to dominate economic policy for the past two decades or more.

But it is worse than that. We have developed a political dialogue which is no less terrified of the mob than it was in the 1780s, but has shifted from Marie Antoninette’s famous dictum about cake to the more modern ‘let them yearn for tat’.

We have a political system divided between ‘let them work for tat’ (the right) and ‘let them buy tat’ (the left). The result is a deep and valueless materialism that allows hundreds of young people across London to go on violent and thieving rampages simply because they can get away with it.

We have a school system dedicated to encouraging people to work for still more expensive tat. We have houses filled with tat. We have conversations dominated by tat and a culture that encourages us to yearn still more strongly for it.

There is a sense in which those terrifying television pictures of burning pictures are a vision of the spiritual and mental poverty that our materialist economics threatens to spread everywhere. It is the internal contradiction that, in the end, makes it impossible.

Our political debate is now so impoverished that we barely have the political language to stitch together an alternative.

I hope we try. This may be the new economics blog in exile (our servers have been whacked by an act of God involving lightning) but I for one dedicate myself to finding that new language.

Bravo to Fish Fight, but we still need to eat less fish

Tue, 09 Aug 2011 11:12:00 +0100

By Aniol Esteban, Head of Environmental Economics

Getting people excited about fish has never been easy, but since its launch last January, Hugh Fearnley-Whittingstall’s FishFight campaign has raised public attention to the fish and the madness of discards like no one had done before.

Yesterday’s episode of Hugh’s FishFight on Channel 4 certainly showed just how successful this campaign has been in what was both a powerful and entertaining programme. In just a few months FishFight has recorded massive successes: they have mobilized over 700,000 supporters mainly in UK, they have forced action from big retailers, and they have successfully changed EU policies to ensure the madness of discards comes to an end. And what’s most important they’ve raised consumer’s awareness about fisheries

This is all good news for fish. Hugh and the FishFight crew deserve congratulations and lots of support to spread the message across Europe; something to which nef’s work on the economics of fair and sustainable fisheris will contribute to.

There was, however, one point in the programme where I had to disagree with Hugh. I just don’t think that eating new species like dab, mackerel or gurnard, as he suggests, will ease pressure on overfished species like cod. Switching species makes ecological sense in theory but there’s no evidence it works in practice. It could actually have a negative effect if it leads to higher levels of fish consumption. Big retailers reporting higher sales of fish show that people are buying new fish species in addition to rather than switching to them and this is a reason for concern.

It might be too early to say whether FishFight has changed people’s habits or increased demand for fish consumption. What is clearer though is that with global fish consumption reaching an all-time record and fish stocks not improving we can’t eat more fish unless we restore fish stocks first.

Creating markets for new species is a small part of a complex solution which has been getting disproportionate attention. We can do much better by investing more efforts in fish stock restoration and fishing more selectively than in promoting markets for new species.

We remain a passionate supporter of FishFight but it’s time to tell people that if we want to eat fish for many years, there’s no other option but to eat less fish. An unpalatable truth which people are reluctant to accept, the good news is that if we eat less fish for a few years we will have much more in the future.

So support FishFight and spread the word but eat less fish too!

It's 1931 all over again

Tue, 09 Aug 2011 10:07:00 +0100

By David Boyle, nef fellow

“Future students of history will be shocked and angered by the fact that in 1945 the same monetary system that had driven the world to despair and disaster [in the Great Depression], and had almost destroyed the civilisation it was supposed to stand for, was revived on a much wider scope.”

So wrote the Conservative French economist Jacques Rueff in 1964. The collapse of the old system in 1929 led to the Great Depression and the Second World War, so these are not unimportant questions.

There is also more than a whiff of 1931 about the current situation. The markets have realised that they have not, after all, recovered their confidence from the crash two years before. The banks are withdrawing money from circulation to pay for new reserve requirements. The leading economies in the world are involved in major cuts. Eight decades later, here we are again.

The real problem is not so much generating confidence in the system. It is that nobody in their right mind would have much confidence in it right now, as the great edifice totters under the weight of dollar and euro debt.

We are, in short, at a uniquely dangerous moment. And because of the interconnectedness of the system, it is in some ways far more dangerous than 1931. We have fewer human systems to fall back on to provide us with the basic requirements of life. The technocratic systems we rely on will rapidly unravel without the fuel of money.

But it is not hopeless. In the event that the system malfunctions disastrously, as well it might, we need our leaders to accept two fundamental measures.

If the system collapses, the central banks of the world must – by agreement that must be negotiated now – create the money they need to pay off the ruinous debt and reset the system. We need to accept, in other words, that the old system is dead rather than waiting hopelessly and disastrously for its revival. Human life, in the end, trumps the integrity of the banking system.
That implies the second part. Once the system is reset, then the world’s leaders must gather once more in Bretton Woods as they did in 1945, and this time re-organise the system in such a way that people and planet and their legitimate needs come first. We need a financial system fit for purpose, as they say, and fit for the needs of a different kind of world.

We're in exile...

Tue, 09 Aug 2011 09:34:00 +0100

Due to a fire at a data centre, our website is currently offline. We’re working as hard as we can to bring it back up.

Until then, we’ll be blogging here.

London’s feral youth?

Mon, 08 Aug 2011 14:59:00 +0100

By Jennifer Leadley, Researcher, Valuing What Matters

Image by Nicobobinus via Flickr

After the riots that swept across London last night, the next few days will undoubtedly see a host of theories put forward about why and how a local Tottenham protest escalated into two nights of widespread violence and looting.

It’s not difficult to understand why emotions are running high in Mark Duggan’s community. As an outsider I too am completely perplexed as to why we have had so little information about the shooting of Mark Duggan on Thursday night. But the copycat riots springing up across London don’t seem on the face of it to be an uprising of popular anger in the style of the 1992 Rodney King LA riots. On the face of it, many of the rioters seemed less political and more economically minded – for every burnt out police car, there are many more looted shops.

The dominant narrative that our establishment figures seem to be offering however is one of out of control feral youths and organised troublemakers looking for an excuse for a rampage. The Deputy Mayor Kit Malthouse commented yesterday that

Obviously there are people in this city, sadly, who are intent on violence, who are looking for the opportunity to steal and set fire to buildings and create a sense of mayhem, whether they’re anarchists or part of organised gangs or just feral youth frankly, who fancy a new pair of trainers.

The image of hoodied no-good yoofs gathered around a glowing smartphone to tweet on the next big opportunity to smash in the windows of a Sports Direct store though seems just a bit simplistic to me.

I want an explanation from the establishment that’s a little more sophisticated than the boogieman in a balaclava. Perhaps one that has at least reflected on the wider context. What about breakdown of local police-community relations; dramatic youth unemployment rates in the wake of the a recession caused by banking elites; the reports of 75% of Haringey’s youth services being cut in the last year; the abolition of the Educational Maintenance Allowance; the weeks of revelations about the roles of the Met’s most senior police officers in the News International scandal. It’s hardly surprising that marginalised young people are losing their trust in the social and economic system which claims to offer them opportunities and the authority figures who front it. And without trust of course the implicit consent to be policed, on which social order is founded, is at put to the test.

Vandalising and violently terrorising people’s communities is unacceptable behaviour. But that should not preclude a search for explanations. Our political elite should not be so quick to depict the rioters as ‘feral youth’, with no more profound motivation than greed or malicious boredom. Those burning and looting in London last night were reflecting back the society they see and are a part of. At the moment this society is looking pretty unfair, unaccountable and uncaring for many - these riots may not be recognisable as frustrated protest to shocked onlookers but this explanation cannot and should not be dismissed so carelessly.