Friday, 31 October 2008

We Need a Good Lefty President

Like almost every civilised person on the planet I am quietly praying for an Obama victory in the US elections. I am so nervous about his chances that I have been unable to admit even to myself how much I want him to win. So imagine my disappointment when in Raleigh North Carolina he ridiculed McCain’s accusation that he was a socialist.

Partly I can understand him doing this when you consider what has happened to socialists in the United States. But part of me wanted him to say, “so what”?

I suppose my dream is for a Eugene Victor Debbs.

He was the Socialist Party of America candidate for the presidency between 1904 and 1920, the final time from prison. In a speech in Utah in 1910, he said,

I am not a Labor Leader; I do not want you to follow me or anyone else; if you are looking for a Moses to lead you out of this capitalist wilderness, you will stay right where you are. I would not lead you into the promised land if I could, because if I led you in, some one else would lead you out. You must use your heads as well as your hands, and get yourself out of your present condition.”

In the 1912 election he received almost a million votes, and in 1920 from prison over 400,000. Debs was arrested for violating the Espionage Act 1917 which led to socialists being arrested for sedition for opposing the First World War. Deb's speeches against Woodrow Wilson’s administration and the war really got under Wilson’s skin and Wilson lead a vendetta against him.

Debs was convicted and sentenced to serve ten years in prison. He was also disenfranchised for life. (Something that cripples the black vote in America to this day).
From the dock he made his most famous speech which contained the following:

Your Honor, years ago I recognized my kinship with all living beings, and I made up my mind that I was not one bit better than the meanest on earth. I said then, and I say now, that while there is a lower class, I am in it, and while there is a criminal element I am of it, and while there is a soul in prison, I am not free”.

Now that is the sound of a socialist and roll on the day when someone saying that can get elected not just in America but everywhere.
p.s. We had a sparklers and parkin party on Sunday sort of bonfire nite lite. Anyway that was my excuse to mark the fact that Debbs was born on November 5th 1855!

Tuesday, 28 October 2008

The Centenary of the Worlds Wisest and Wittiest Economist

“The only function of economic forecasting is to make astrology look respectable,” one of the many wise and witty sayings of John Kenneth Galbraith whose centenary we celebrate this month. I still have my dog eared penguins of his classic texts - for the first time I had found a readable economist! When probably the greatest Canadian died in April 2006 the Chancellor of the Exchequer was quick to pay tribute, he "was a brilliant economist and writer and a great friend of the United Kingdom, and his books will be widely read in generations to come."

Gordon Brown is now discovering as Galbraith put it that, “politics is not the art of the possible. It consists in choosing between the disastrous and the unpalatable”. In retrospect it’s a pity Brown did not read Galbraith’s work more assiduously. At least it would have enriched his economic vocabulary with phrases like "the conventional wisdom", “countervailing power”, the "technostructure" and the "affluent society" instead of just stating it’s the right thing to do he would have been able to explain why.

He was born on October 15th 1908 on the north shore of Lake Erie, in Iona Station, Ontario, the only place where to be a ‘scotch’ is not to be a drink. His 1964 book, the Scotch, explains that the southern Ontario farmland was occupied by Scots driven from the Highlands by the clearances and therefore sworn enemies of the Tories. A trait he carried throughout his life as he said, “the modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness”.

Galbraith is remarkably ‘quotable’ when asked if Galbraith’s work would last. Amartya Sen, economist and Nobel laureate, said read The Affluent Society it showed a “great insight,” which “has become so much a part of our understanding of contemporary capitalism that we forget where it began. It’s like reading Hamlet and deciding it’s full of quotations. You realize where they came from”.

As he wrote in the Affluent Society, "People are the common denominator of progress. So... no improvement is possible with unimproved people, and advance is certain when people are liberated and educated. It would be wrong to dismiss the importance of roads, railroads, power plants, mills, and the other familiar furniture of economic development.... But we are coming to realize... that there is a certain sterility in economic monuments that stand alone in a sea of illiteracy. Conquest of illiteracy comes first".

Of course “conventional wisdom” has kept him out of fashion for twenty years but now as he said “the enemy of the conventional wisdom is not ideas but the march of events” and his book the Great Crash 1929 is a best seller again. It is not too late for us to learn from him, “the salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself” or “the process by which banks create money is so simple that the mind is repelled”.

His great works like American Capitalism, the Affluent Society and the New Industrial State; show a far from dismal science. He criticised economic theory for ignoring and obscuring the economic power of large corporations. He criticised politicians who aligned themselves with the objectives of the large corporation instead of acting in the public interest. He also censured his fellow economists as ‘idiot savants’ who perform sophisticated mathematical analysis but make no attempt to understand the real world.

"The emancipation of belief," he wrote, "is the most formidable of the tasks of reform, the one on which all else depends." His weapons in leading that struggle did not always please his fellow economists; they included irony, satire, and laughter as he said “the conventional view serves to protect us from the painful job of thinking”.

Galbraith stood out from his profession like much of academic thinking economics has spent decades insulating itself behind impenetrable language, building abstraction upon abstraction using equations and models to build worlds of perfect competition and rational actors.

“It is my guiding confession that I believe the greatest error in economics is in seeing the economy as a stable, immutable structure”, he said and “it is a far, far better thing to have a firm anchor in nonsense than to put out on the troubled sea of thought.”

Galbraith made it his life long quest to expose business's capacity for self-deception; “When you see reference to a new paradigm you should always, under all circumstances, take cover. Because ever since the great tulipmania in 1637, speculation has always been covered by a new paradigm. There was never a paradigm so new and so wonderful as the one that covered John Law and the South Sea Bubble — until the day of disaster”. As he said, “faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof”.

When interviewed about his last short monograph, the Economics of Innocent Fraud (1999) he said, “It deals with all of the things we do, in an innocent way, to cover up the truth. I begin with the renaming of the system. It used to be capitalism. But that evokes Marx and Rockefeller. So now we speak of the market system. That is a nice bland expression, which forgets those off-color references. Then I write about work. We talk of the enormous virtues of work, but it turns out that that is mostly for the poor. If you're rich enough or if you're a college professor, the virtue lies in leisure and the use you make of your leisure time. Next, I go on to the stock market, where I show, I think without a doubt, that what is called "financial genius" is merely a rising market. That whole effort has given me a good deal of pleasure”.

The vindication of the final uncovering of that fraud would undoubtedly bring Galbraith pleasure just as surely as it brings misery to millions. Although I still remember how he bought me pleasure when he was cavorting with Bette Midler on the Michael Parkinson show.

As he pointed out, "In all life one should comfort the afflicted, but verily, also, one should afflict the comfortable, and especially when they are comfortably, contentedly, even happily wrong".

Friday, 24 October 2008

Our Mutual Friends in the North

Events have turned the world upside down in the provision of financial services. It is crystal clear that the demutualisation, the conversion of Building Societies into banks has been a total disaster. Building Societies have not been immune to the global banking crisis but their record compared to those that took the route of transition into banks is stark. There are the high profile collapses like Northern Rock, HBOS and Bradford and Bingley. But not one of the converted building societies has survived as a viable independent business.

Many of us argued this was a mistake from the start. Some time ago the All Party Parliamentary Group for Building Societies and Financial Mutual’s under took an enquiry into the true costs of demutualisation. In evidence the Building Societies Association said it would not be surprised if the full costs of all the demutualisation’s amounted to well over £1billion. Well we now know that was just the first billion!

That cost did not include the loss of over a quarter of their branch networks. There are technical arguments about the merits or demerits of mutuals over plcs but current events have more than demonstrated the merits of mutuality.

Greed and privatisation did not just take out those ex-building societies we also lost the Trustee Savings Bank and The National Giro Bank. Almost every City had a Trustee Savings bank; my own personal favourite was the Birmingham Municipal Bank which at its peak had three quarters of a million account holders. Following amalgamation in the 1970’s to form the national TSB it in turn disappeared into the private sector when it merged with Lloyds in 1995. The National Giro bank started out in 1968 as the “people’s bank” an innovative post office bank that was the first to pay interest on current accounts. It too succumbed to privatisation being swallowed by the Alliance and Leicester now part of Spanish banking giant Santander.

Now we have the chance to turn the tide against privatisation. The demand was made loud and clear at the Co-op Party conference that we must start a massive campaign for the remutualisation of Northern Rock.

Northern Rock will be slimmed down in public ownership but will still have all the flaws of a mortgage bank and will be no more sustainable in the private sector than it was before the government bail out. The Government will then look to sell the remnants off to a major bank and it will disappear as an independent institution.

When “greed was good” demutualisation was relatively simple – first bribe the management and then the members and get them to vote for a flotation. Remutualisation is more complex but not impossible.

Last year Britannia Building Society successfully remutualised 850,000 customers of the old Bristol and West Building Society which had been taken over by the Bank of Ireland. In buying the 65 strong Bristol & West branch network and £4.5bn savings book from the Bank of Ireland for £150m the customers became members once again.

Interestingly the Britannia is now in talks with Co-op Financial Services which includes The Co-op Bank, Smile and CIS about a possible merger. The Co-op Bank owned by the Co-op Group is not in itself a Co-op itself and this potential merger depends on changes to the Building Societies (Funding) & Mutual Societies (Transfers) Act, which is currently at the House of Commons committee stage. Legislation is expected to be in place by the end of the year.
So it will be possible for mutual’s to take on and remutualise failed mortgage banks - we have to begin to make this the preferred option for the Government. We have to turn the tide in favour of social ownership.

“Now is the time, in the wake of the collapse of Northern Rock and the wider economic downturn to reinvigorate the debate about social ownership in the 21st century”, says John McDonnell in the new Left Economics Advisory Panel pamphlet, Building the New Common Sense, Social Ownership for the 21st Century. He adds, “We need to be creative, imaginative and bold in our demands and our actions – and that means tackling the fundamental question of ownership.” I could not agree more and let us start by giving Northern Rock back to the people of the North East!

Friday, 17 October 2008

Good as Gould

It was good to hear from Bryan Gould in the Guardian recently. He began his excellent book, ‘A Future for Socialism’, back in 1989 with, “The Thatcherite experiment is now approaching its end”.

Sadly it has taken almost a further twenty years for that statement to be confirmed. And what a tragedy that now millions of people will lose their jobs and thousands more will lose homes, savings and pensions to show Gould’s analysis and prescription to be spot on.

The economic crisis has lead some to look back to see where it all went wrong. Gordon Browns bank nationalisation has reminded people of the 2003 Manifesto. On rereading it is far less suicidal than Peter Mandelson’s 1998 proclamation that new Labour was ‘intensely relaxed about people getting filthy rich’.

It is worth remembering that Michael Foot lost that election not on economic policy but because of the Falklands War. Many will be surprised to hear that his successor Neil Kinnock wrote quite a good book on economics. ‘Making Our Way’ was published in 1986 and it’s not bad. He wrote, “The Labour Party’s economic priority is to expand investment – in industry, in ideas and in people – and to form a partnership for production between, government managers and workers committed to the modernisation of economy and society”.

It was Gould however, the face of the 1987 election, who was the most articulate in presenting the case for modern socialism. He argued in ‘A Future for Socialism’ that;

“The concession that full employment could no longer be the central objective of economic policy was of profound significance. It fundamentally undermined the post- war accommodation of capital and labour. Labour – even- organised labour – was dealt at severe blow. The balance of advantage in the labour market swung decisively to the employer.
The implications are wider still. If the government was now powerless to intervene in the workings of the labour market, and if economic policy as a whole was now to be defined in terms of what is acceptable to the money markets – if in other words markets alone were to determine outcome in these central parts of the economy – why should not markets not also prevail in other spheres of policy? If markets were to be trusted to produce the right results in economic policy, why not in education, or housing, or health care? So it was the Left sold the pass and lost the argument”.

How right he was he was also dead right that Britain had fallen in to habit of, “giving absolute priority to those who held assets and dealt in money, as opposed to those who made and provided goods and services and tried to sell them in international markets”.

Unfortunately when he ran for Labour leader there where few Gouldites and his anti-EU stance was against the grain of the time. So instead of following his prescription we followed a different one from the Cannon and Ball of contemporary economic thinking,

“For a time, it appeared as though Thatcherism’s harsh medicine and ‘enterprise culture’ had produced the great economic leap forward that Britain needed. In the 1990’s Britain can boast of some notable economic strengths – for example the resilience and internationalisation of our top companies; our strong industries like pharmaceuticals, aerospace, retailing and media; the pre-eminence of the City of London”.

Yes that’s Mandelson and Liddel, in ‘The Blair Revolution’, in 1996. Of course we may have had more such companies if we had not had Thatcher’s ‘enterprise culture’!
As recently as 1995 in the introduction to ‘The City in Europe and the World’ he argued that the City was the ‘economic powerhouse of Europe’ and urged Germany to become more like Britain. God forbid. Mandelson once gave the Churchill lecture in Berlin he could have done with Churchill’s comment, “I would rather see finance less proud and industry more content”.

Now the crisis is turning conventional wisdom on its head its time to state some facts firstly a deregulated city has had a license to print money yet now we need it can’t be found, secondly a healthy retail sector is a result of wealth not is cause, and a house is a place to live not a cash point.

Now the money lenders are being thrown out of the temple its time to look again at Gould’s ideas. This crisis is a turning point. The country is crying out for change lets not repeat our mistakes lets follow Gould’s advice;

“A Labour Government that wished to meet the twin objectives of managing the economy efficiently and putting socialist principles into practice would have to be clear that this bias in favour of financial orthodoxy must be reversed. Giving priority to the wealth creators is not in itself socialism, and it would require a radical departure from past practice and attitudes. It would take a Labour chancellor to be clear that it was the real economy, rather than the money economy that mattered, and it was our task to serve the interests of those who created real wealth”.

Tuesday, 7 October 2008

Once, Twice, Three Times a Mandy

Dear Editor, Oh despair! Is Gordon Brown mad? Peter Mandelson represents all that is wrong with the Labour Party and as a consequence the British economy today. He is the architect of the hubris that lead Labour to swallow the Thatcherite mantra of deregulation and liberalisation regardless of its consequences. Slavish support for the so called "wealth creators" who have turned out to be no more that spivs and hucksters. We are not choosing to shut down financial globalisation as he puts it (Guardian 3/10/08). It is closing down because it was built on sand. When I worked to bring business and Labour together for a better understanding of one another before the 1997 election I said that Labour had gone from being anti-business to pro-business without an intervening period of understanding. How true that has turned out to be. Now Brown is creating new mega banks from the collapse of the unregulated secondary banking system. We are moving from a
position in which we had Banks that we could not afford to let fail to Banks we will not be able to afford to save. This crisis has only just begun and the last thing we need are new Labour cliches about globalisation is good for you when all that has happened is that with the conivance of governments like the one here in Britain international businesses have been allowed to escape any effective regulation.

Letter to the Guardian Published October 4th 2008

Co-operators go back to School

A big issue at the Co-op Party conference was the role the movement should play in education. Co-operators have always had a commitment to education, an original Rochdale principle, was to the education of “their members, officers and employees and of the general public in the principles and techniques of Co-operation, both economic and democratic.”

In April the first co-operative trust school, Reddish Vale Technology College in Stockport, opened, and the second Andrew Marvel College in Hull is set to open soon. Schools Minister, Ed Balls, speaking at Co-op conference said the Government will make £500,000 available to pilot up to a 100 Trusts with the co-operative governance model.

One of the architects of the model, Mervyn Wilson, Co-op College CEO, hopes for a national chain of co-op trust schools and believes that “using co-operative values to raise achievement”, will help meet the governments’ aim of increasing diversity in the education system. Co-op Group CEO, Peter Marks, is also enthusiastic about the potential for co-op structures to allow stakeholders greater participation in school management “and a sense of ownership and engagement”.

In the August issue of the Journal of Co-op studies Professor Johston Birchall makes an important contribution to the debate about mutuality in the public services. He argues that ideas about a ‘new mutualism’ in the public services have three potential weaknesses, firstly that genuine mutuality, which implies solidarity and collective provision, is in competition with ideas favouring a more individualistic approach – like the personalisation of services, secondly that it is seen as an attempt to restore some of the benefits of mutual forms of welfare lost when the welfare state was founded without explaining what those benefits are - after all the performance of the old friendly societies was patchy to say the least and thirdly the reforms to public services hailed as mutual are not really all that mutual.

If we define mutuals as membership based organisations then in the public services who are the members and how much power do they have? Foundation hospitals, for example, have three categories of member each with their own representatives, patients, the public and the employees and their control over the nature and provision of services is strictly limited. These are substantial criticisms that require serious answers if mutual solutions are to play any part in the public services.

There was considerable disquiet at Co-op Party conference about aspects of the governments’ education policies including faith schools and the drive for trust schools and academies. Indeed Co-op MP Ken Purchase has tabled a Commons motion attacking the expansion of city academies, expressing disappointment that "Ed Balls should have been taken in by this nonsense spouted about the improvements in academies when there is no real evidence to show they can do anything at all, unless they have huge tranches of money that should be available in the education system generally".

Co-operators will come together to discus and learn more about what the co-op role in education should be at a day conference hosted by the Midlands Co-op Society at the Birmingham and Midland Institute on November 8th.

Personally working in a University before we try to mutualise the state sector there is plenty of work to be done. There is little teaching of the values and operation of non-plc structures in our business schools with widespread ignorance of co-ops and mutuals, and also of trusts and partnerships. This is a gap that the movement needs to fill if mutual business solutions are to become more widespread.

Meanwhile this years Co-op Party conference was a great success, don’t take my word for it, that was the view of Socialist Campaign Group News, its worth quoting ‘Tel’s Tale’ in full.

“The recent Co-op Party annual conference was a refreshing change from the mind-numbing world of new Labour. Delegates debated a wide range of resolutions, adopted a swath of progressive policies, including withdrawal from Iraq and Afghanistan, no war against Iran, an early solution to the illegal armed Israeli occupation of Palestine. UK Co-ops were encouraged to build links with Co-ops in Palestine. Conference called for the strengthening of the UN and advocated that Britain starts a drive for global nuclear disarmament under its obligations under the Non-Proliferation Treaty, together with withdrawal from NATO. Delegates agreed that the Co-op Party should celebrate the 50th anniversary and achievements of the Cuban revolution, and intensify the campaign against the US blockade. Local Party councils were encouraged to affiliate to the Cuba Solidarity Campaign. The conference called on the party’s parliamentary group to oppose the building of any more nuclear power stations.
Among other good policies, delegates supported Northern Rock being turned into a mutual, instructed the party’s NEC to conduct an enquiry into NHS foundation trusts, to see whether they are sufficiently democratic and cooperative, and calls for the phasing out of faith schools. The coop party has getting on for 10,000 members, and every SCGN reader should join up.”

Sound advice!