Thursday, 30 April 2009

What is good for GM is good for America!

I see in todays paper that General Motors is to be nationalised. And the main shareholders in Chysler are to be the United Auto Workers Union.

I wonder if in 1955, when the then Chairman and CEO of General Motors, Charlie Wilson, said: "What is good for General Motors is good for America." This is what he had in mind.

From the NICE Decade to the Sticky Brown Stuff

I wrote in Tribune on the 15th June 2007. I argued that Britain could not survive simply as a low tax deregulated financial centre. I said at the end of my piece that, “We could not live beyond our means on this scale forever. The end will surely come with a massive devaluation of the pound or a recession.”

I was wrong. It wasn’t either/or it was both! As the nice decade well a truly ends we are to face at least a decade of austerity. This economic mess has been caused by three things that we are ill equipped to cope with. Let’s face it we would have struggled with a simple down turn. There are still large parts of the country that have seen little from the boom years that benefited the few not the many!

Secondly the “credit crunch” the collapse of the secondary banking system will hurt us deeply because finacial services are a much bigger share of our economy (and an important contributor to our trade balance) than any other major economy.

I suspect the Treasury, having taken control of a large proportion of the banking system, has not done the sensible thing and separated retail banking from investment banking because they feel they may kill the Goose. They hope that our Investment Banking will rise from the ashes.

This I fear underestimates the third factor that will be the most significant element in the current crash. That is the fundamental restructuring of the global economy that is underway. With the most obvious sign being the G8 becoming the G20.

When Brazilian President Lula was humiliating Gordon Brown for the crimes of the white people who had been lecturing Latin America on financial prudence he was doing so from a position of strength. That day the market capitalisation of the Brazilian banks was larger than that of the UK banks.

Whilst we spend a decade digging ourselves out of the sticky Brown stuff this fundamental restructuring of the global economy will continue apace with China, India and Brazil growing at rates we can only dream of.

The Tory response to this is sadly predictable. No recognition that they where the original architects of the edifice that has now collapsed, the ones who laid the dodgy foundations.

No their answer is thrift! As if simply cutting spending would generate growth. Of course we have to live within our means. But the challenge we now face is to grow those means!

Once Gordon Brown knew he had to increase the growth rate of the UK economy. That was before he became a convert to neoliberal orthodoxy. It was his post neo-classical endogenous growth theory phase. He seems to have given up on endogenous growth a) because Michael Hesletine had a pop at him in the Commons commenting on a Brown speech that “Its not Brown its Balls”! (Gordon does like being laughed at).

And b) because when in office the only apparent vehicle for endogenous growth seemed to be a Prescott idea of regional development agencies. Stillborn underpowered and under funded bodies that have made little impact.

This does not mean the idea of increasing endogenous growth, essentially internally generated growth is a bad one, far from it this is the most important thing we can do. We have growing amounts of resource in our economy lying idle, people, land and machinery. The missing ingredient is capital.

That is why we have to continue to spend. Of course we must rebalance public spending and there will be cuts. There will have to be a reduction in spending on prestige projects like in defence, on foreign wars and an end to Britain’s nuclear weapons, spending on the Olympics will have to be scaled back, daft PFI ideas in education, health and transport will have to go and almost certainly the ID cards computer disaster that is just waiting to happen.

In areas where investment increases the competitiveness of the economy public spending will have to increase to compensate for the lack of private investment. Obvious examples are housing – a huge public sector house building programme needs to start now and we need to use the downturn to increase the capacity of the railways and to complete the electrification of all the major routes.

We also need to make huge investments in our energy infrastructure, from clean coal, nuclear, gas and all the renewables, especially wave and tidal. And we cannot afford to cut back on further and higher education. None of this is cheap. Our task is to increase the output of the economy not to just make cuts and hope.

Thrift sounds sensible when it comes to individual households. For the national economy it will lead to inexorable decline and a whole decade of thrift will see the newly industrialised countries over the hill and out of sight.

Tuesday, 7 April 2009


It was shocking to follow the saga of the Home Secretaries domestic arrangements. Hubby at home in Redditch watching porn whilst she was in, her ‘main’ home, her sisters back bedroom in London!

Whilst cabinet ministers are busy making do with two (or even three) homes at the taxpayer’s expense they are unlikely to want to reform Britain’s housing system. In what other job can you build up equity in a second home that you can sell tax free when your job ends!

They say the global banking crisis has its roots in an unsustainable housing model in the US sub-prime sector. Gordon Brown was quick to blame our difficulties on the US – except when President Obama was in town then he is nauseatingly obsequious - but here in Britain we have our very own sub-prime disaster.

The single biggest privatisation of the Thatcher years was not the utilities or the nationalised industries but the sale of our council housing stock. A privatisation that gave the original tenants a windfall gain, a house at less than market value. But that has over time seen a large transfer of wealth from the poor to the rich.

The propaganda that houses could only go up in value meant home ownership gave millions, many of whom had never had any debts an asset against which to build up huge debt. Collectively that mountain is now unsupportable with £1.2 trillion of housing debt and £1.4 trillion of total debt equivalent to the annual output of the UK economy.

Rather than creating a viable housing system Government policy has lead to disaster - the standstill in house building making this the worst housing crisis since the Second World War.

Back to Jacqui Smith, her Redditch constituency contains the largest new build housing Co-op in the UK. Redditch Co-operative Homes is a great success for those who live in its houses but with only 200 it can only make a small contribution to solving the housing crisis.

The UK Co-op Housing sector consists of some 35,000 homes in around 650 co-operatives sounds large but there are about 25 million homes in the UK. So why is the co-op sector after twelve years of Labour Government still so small?

One would not expect a party that felt here was no such thing as society to see the social benefits of housing co-operation. The increase in social cohesion and stronger communities is well documented in co-op’s. The 1988 Housing Act which introduced the current funding regime of a mixture of grants and private finance meant that large housing associations with strong management and a substantial asset base cleaned up most of what was a relatively small budget.

The sad fact is that Labour has done little to support co-op’s whether deliberately or as a sad side effect of its obsession with all things private the result is the same the registration of new co-ops virtually dried up in the mid 1990’s.

The Government through the Housing Corporation was only interested in a business model of housing management. Nic Liss, chair of the Confederation of Housing Co-op’s says that as the regulator the Housing Corporation simply had no interest in tenant involvement. Of course for that involvement to be meaningful a co-op does have to be relatively small so that members can have real control over their property.

The effect has been that today even the United States with 6,400 co-ops with 425,000 homes has a bigger co-op housing sector than the UK. Other countries also have significant co-op housing sectors, such as Germany (2.2million homes), Sweden (750,000), Norway (750,000), Austria (334,000), Canada (92,000) and Turkey with (1.4M). So how can we build a more substantial co-operative housing sector?

That is the remit of the independent Commission on Co-operative and Mutual Housing. Chaired by Adrian Coles, Director General of the Building Societies Association, it aims is to build the evidence for a long term strategic framework for the growth and management of the sector.

What changes in the law, taxation and general attitudes are needed to foster a growing co-op housing sector? The truth is that much of our housing policy and law is distinctly feudal in character after all what does the term ‘landlord’ imply? The very best landlords have often been local councils although as a council tenant for many years I know councils, even some run by socialists, do not always make good landlords!

Time to abolish landlordism I say!

For more information on the Commission on Co-operative and Mutual Housing go to: or

Open Letter To Co-op: Time to Boycott Israel

Like many co-operators I have been delighted with the run of good news about the Co-op Group and co-operatives of late. The decision to put ethics at the centre of our branding following the example of the Co-op Bank has proved to be a master stroke. Now at a time of recession when trust, such a vital comment of any retailer’s relations with its customers, is at a premium it could really come into its own. We have seen some stunning marketing of late making all co-operators proud of the whole co-operative ethic.

Our role in the fair trade movement has been exemplary and the range and quality of fair trade products sold in our stores is second to none. I was especially pleased given the difficulties the producers face that we are to begin selling Palestinian fair trade olive oil sourced from co-operative sources in some of our stores from the end of March. Olive oil exports are a vital ingredient in the viability of a future Palestinian state.

This brings me to the black spot on this fine record. I fully appreciate that we in the British Co-operative movement have long standing relationships with the Israeli Co-operative movement directly with co-operative organisations in Israel and through the ICA. Indeed there was a time when Israel seemed to be pursuing the kind of democratic socialism, many of us had dreamed of, with the Kibbutz movement, the Histradut and the co-operative movement it looked like a genuine ‘promised land’.

Many people in the 1950’s and 60’s looked to Israel like some had looked to the Soviet Union in the 1930’s. Now we have to face the sad fact that we where wrong. The recent attacks on Gaza and the elections in Israel have produced really shocking results. The complaint from Israel for many years was that they had no one to negotiate with now it is the Palestinians who have no one to negotiate with.

In January Len Wardle, Co-operative Group chair, wrote:

"The Co-operative Group board has decided to suspend sourcing products from illegal West Bank settlements. However, we will continue to trade with Israel and will seek to develop trading links with Palestinian farmers. The Co-operative Group only rarely curtails trade with particular countries or regions. However, in the case of the illegal settlement in the Israeli controlled occupied territories, it has proven to be all but impossible to ensure that supplies derived from the region are not perpetuating injustice and unfair terms of trade. We will no longer source dates, grapes and a number of herbs from the illegal West Bank settlements and will be phasing out the use of similar items from our own brand products."

Full marks then for developing links with Palestinian farmers and as Somerfield has sold products from the occupied territories at least we can put a stop to that but is our position tenable? With no end in sight to the occupation and settlements growing how can we be asked to police produce labelled as Israel is not come from settlements in the occupied territories?

If as Len points out “it has proven to be all but impossible to ensure that supplies derived from the region are not perpetuating injustice and unfair terms of trade”.
There is only one ethical course of action. There are numerous examples of mislabelling of produce we can not be asked to police this ourselves and in a way this misses the point. It is Israel that is undertaking an occupation that has gone on for far too long and we should therefore admit sadly that we have to stop sourcing produce from Israel whilst the occupation continues. Anything less would be hypocritical and would be undermining our own ethical principles.

In many ways we dragged our feet on apartheid South Africa lets us not make that mistake again.