Mark Steel at the People’s Assembly

There is a new “organisation” called the People’s Assembly which is, essentially, a movement against austerity. I’ve been rather lax in my reading (at least semi-political reading) and blogging recently and so don’t really know much about it. I do, however, think that austerity has been a disaster, both socially and economically, and so – if I understand the motivation behind this movement correctly – I agree with it wholeheartedly.

What I thought I would do is include, below, the speech given by Mark Steel at the People’s Assembly meeting yesterday. It’s both quite amusing and quite fiery. Something that I won’t expand on much here (but is something I may try and write about at a later stage) is why it appears that the most effective rhetoric for those on the left appears to come from comedians, while the most effective rhetoric on the right appears to come from what, I’ll politely call, firebrands. I’m don’t really understand why there is such a difference in style between the right and the left, but it is something I find of great interest. Anyway, enjoy the video.


Wage stagnation and the financial crisis

There was a very interesting and well-written article that I read a little while ago about wage stagnation, rising profits and the financial crisis. I can’t seem to find it again, so if any else knows the one, maybe they could point it out to me. It was about the US, rather than the UK. The basic narrative was that the increasing influence of neo-liberalism and the reduction in union power (and collective bargaining) meant that corporations were (from the 1980s onwards) keeping more of their profits than they had in the past. So, basically profits were increasing as a fraction of GDP while wages were dropping as a fraction of GDP.

So business owners, shareholders and investors now have more capital than they’ve had in the past. Of course they want to do something with this capital which, presumably, they will invest in the financial sector. Their consumers (who are also their employees), however, have less disposable income than they’ve had in the past. So what happens? Well, the financial industry sees all these people who could use more credit and who might like to buy houses. Sub-prime mortgages come into existence and credit becomes easier. People buy their houses and spend their credit on the very products made by the companies who’s profits are rising as a fraction of GDP. These people are, however, also the employees of these companies and their wages are dropping as a fraction of GDP.

So, at this stage corporations are winning on multiple levels. They’re keeping more of their profits than they have in the past (by not increasing wages at the same rate). They’re continuing to sell their products because of the easy credit that this extra capital allows, so they’re able to maintain their revenue streams and continue to extract their profits. Since this credit is essentially their money in the first place, they’re also earning interest on the money being lent to their own employees.

However, there’s a fundamental problem. If people’s wages aren’t rising while their debts are, there’s every likelihood that many won’t be able to repay their debts. Hence the credit crunch arrives when this starts to happen and the financial sector finally realises that the risk associated with the sub-prime mortgages and easy credit is much greater than they had initially realised.

Now, I appreciate that this applies to the US, but I recently saw an article on the Liberal Conspiracy website about wages and profits in the UK. It discusses essentially the same trend, which is illustrated in the figure below which I’ve taken from the article on their site. It’s certainly my view that we should be aiming to reverse this trend if we want to reduce the problems we currently have in our economy and possibly also in our society.

Graph showing the variation in wages and profits (net and gross) since 1960.

Graph showing the variation in wages and profits (net and gross) since 1960 (credit : Duncan Weldon, Liberal Conspiracy).

The intelligent management of the public finances

This is a topic that I have very interesting. It did seem obvious that trying to simply slash public spending may end up being counterproductive. This post seems to confirm that general view, but I’ll need to read it a bit more carefully to make sure I understand what it is saying and to get a sense of where the number are coming from.

The Uxbridge Graduate


Much discussion has surrounded the contention that high public debt levels are associated with low / no economic growth. Specifically,well-publicised research has suggested that if the public debt to GDP ratio exceeds 90% then economic growth will slow down markedly and perhaps come to a standstill. The British government  has eagerly accepted this finding and has used it to justify its debt reduction strategy, which is that cuts to public spending are necessary if the economy is to return to growth. The government has hence proceeded to cut public spending on the promise that the cuts will reduce borrowing and thereby generate economic growth. However, instead of economic growth, the government’s cuts to public spending have coincided with stagnation and recession.  I suspect this is because the spending reductions have been indiscriminate.

The following sets out my view on why indiscriminate cuts to public spending will often increase the…

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Thatcher’s funeral

So, Margaret Thatcher’s funeral is tomorrow and although I object strongly to the changes that Margaret Thatcher oversaw while Prime Minister, I can’t bring myself to celebrate the death of an old lady. I don’t, however, particularly object to others doing so. I agree with something I heard on the radio which was that we should, ideally, be making a distinction between protesting against Thatcherism and celebrating the death of an old lady. What I do disagree with is the decision to give Margaret Thatcher a Ceremonial Funeral with Full Military Honours which, as far as I can tell, is essentially a State Funeral in all but name. Amazingly, I agree with Peter Oborne in the Telegraph who writes that This is a State Funeral, and that’s a Mistake.

Essentially the UK is a parliamentary democracy with a Head-of-State (the Queen) and a Prime Minister who is an elected Member of Parliament who also happens to be leader of the dominant party in parliament. This then allows this person to form a government and to run the country. Simply being Prime Minister should not guarantee a state funeral (I appreciate that Margaret Thatcher’s isn’t, technically, but let’s accept that it essentially is). We do not need to respect this individual or hold them in high esteem. They are simply a politician who is also the leader of a party that essentially won an election. State funerals should be for heads of state and others who are genuinely held in high esteem by a significant majority of the population (or at least that’s who I think they should be for).

According to what I can find on Wikipedia, there have only been 12 non-royal state funerals since 1586 and this would be the first non-Royal Ceremonial Funeral since 1953. Those getting state funerals in the past does include some Prime Ministers, Churchill being the last to get a state funeral when he died in 1965. I don’t think it is fundamentally wrong to give a state funeral to someone who has been Prime Minister, but it should be the exception rather than the rule. So, what makes Margaret Thatcher’s premiership exceptional. She was the first woman Prime Minister, but I suspect that many would argue that she did little to promote the equality of woman in the workplace. I certainly feel that she was an exceptionally strong and motivated person who succeeded despite the obstacles that she faced, rather than someone who paved the way for others in the future. She led the country during the Falklands war, so maybe that’s enough but I’m not really convinced.

Essentially I think that a state funeral should be to honour and pay respects to someone who was generally regarded positively and regarded as having been, in some sense, exceptional. It shouldn’t be simply because they were the first female Prime Minister, or because they happened to be Prime Minister during a war, and certainly not because some core of the dominant party in Westminster happens to revere them. This feels more like we’re being told “you will pay your last respects whether you like it or not”, rather than something that genuinely reflects the feelings of a majority of the population. Maybe history will look kindly on Margaret Thatcher and those who strongly oppose what she did while in power, will be judged to have been wrong. Maybe she will be regarded, in the future, as one of the best Prime Ministers. That, to me, isn’t really the point. It is clear that the country, today, is heavily divided regarding Margaret Thatcher’s legacy and to decide to give her a state funeral despite this seems unfortunate. It seems as though the Tory party hardliners are quite happy to thumb their noses at all of those who feel that they have suffered due to the policies introduced by Thatcher. I had always assumed that despite different views on how best to run a country, most in government would like to do things that bring us together, rather than divide us further. It seems to me that deciding on a state funeral for Margaret Thatcher is a funny way of doing this.

I also think it makes it much harder to criticise those who protest at the funeral. If there had been a private funeral for family and friends to pay their last respects, I would regard protests as unacceptable. We should allow a private individual to be laid to rest in peace. Given that this is essentially a state funeral paid for with taxpayers money, I see no reason why protests aren’t entirely valid. Part of me hopes that the government doesn’t live to regret this decision, but another part hopes that this is a turning point where people start to recognise the true motives of those in power and start to do something about it.

The Economic Crisis and Inequality

Excellent video of an interview with a Stephanie Sequino, a Professor of Economics at the University of Vermont. What Stephanie Sequino is suggesting is that one of the factors (maybe the primary factor) that contributed to the economic crisis was the rising income inequality. Maybe one reason that I like the video is that it is similar to an argument that I made in a post (We are the 99%) a couple of years ago. I recommend watching the video, but the basic argument is that rising inequality since the 1970s lead to increases in company profits (money that – in an ideal world – should have gone to the employees in the form of higher salaries). Some of this would have been used to pay off debt or invest in the financial sector. The rising inequality, however, impacted on the consumer base for these companies. The excess capital in the financial sector was, however, targeted at people who, in the past, would have been regarded as credit risks and were the very people who’s salaries were stagnating. In a sense, rather than this money going to these people in the form of salary increases, it went to them in the form of loans. They still spent this money, but they had to pay it back with interest. Companies therefore won twice because they sold their products and the money used to buy these products was their capital which they then recovered with interest. They should really have lost this money when the financial crisis hit but, of course, the banks were bailed out and so their investors did not lose as much as they should have had we followed a true free-market policy. I think it is a very sensible argument and applies to the UK as well as the US. The real concern I have is that nothing that is being done today appears to be attempting to address income inequality. If anything it is doing the reverse and I can’t see how our economies can recover until we address this issue.

April Fool’s Day

Not really a day for joking. Today is the day that a large number of the coalition government’s new policies come into effect. This includes the introduction of the “bedroom tax”, changes to NHS commissioning that many think is one of the final steps in the privatisation of healthcare in England, the scrapping of the 50p tax rate for those earning over £150000, and changes to legal aid, to name some.

I don’t really know what to say about this. I think the “bedroom tax” is terrible, I think the reduction in the top-rate of tax is exactly the wrong thing to do at the moment, and I genuinely worry about the future of healthcare provision in the UK. The mantra that is continually used is that we can’t afford to maintain our current spending levels and we have to wean people off a dependence on benefits. Make no mistake, I would be quite happy if everyone was employed, contributing to the economy and getting paid a salary that allowed them to afford to live decently; and I’m quite happy with there being an income distribution with some being paid more than others. I just think the problems are much more complicated than suggested by the rhetoric used by the current government.

One of problems – in my opinion – is that income inequality has increased in the last 30 – 40 years. The top earners are taking a bigger fraction of the income than they were in the 1970s. It seems to me that if income inequality increases, welfare/social security spending will have to increase to help the increasing number of people on low incomes or who become unemployed. It’s my view that if we want to reduce welfare spending, we should act to reduce income inequality. I’ve written about this before, but since I think income inequality and welfare spending are related I thought I would link to this video (link at bottom of post) of Steve Machin, from University College London, discussing income inequality. It’s quite short and doesn’t really say all that much, but is quite interesting. It’s clear that inequality has increased since the 1970s and that this might be related to changes in technology that mean there is a demand for very qualified people and for those who do very basic tasks (that can’t easily be replaced by technology), but those in the middle doing skilled but repetitive tasks can often be replaced. He suggests that income inequality doesn’t have to continually increase and that good labour policies could help, but doesn’t really suggest what these might be. Worth a watch anyway.

NHS privatisation

I wanted to add a link to the video below, which shows Lucy Reynolds discussing changes to the NHS that suggest that we are heading towards the privatisation of healthcare in England and how this could be disastrous. What’s interesting about this is that Lucy Reynolds is an academic who studies “medical and healthcare programmes”. It’s clear that she’s very critical of what is happening to healthcare in England and a lot of what she says certainly makes sense to me. One issue I had was that, as an academic, maybe one should aim to be objective and unbiased when discussing one’s research, and so I wasn’t quite sure what to make of an academic who studies healthcare provision having such strong personal views about healthcare in England. On the other hand, I sometimes feel that academics in the UK aren’t sufficiently political. Aren’t we meant to be intellectual and think about society and the implications of decisions made by politicians on our society. If not, then who else? So, fundamentall, I was very pleased to see someone, who is clearly an expert in this area, discussing – very clearly – why the proposed changes to the NHS in England could have a very damaging impact on our ability to provide decent healthcare for the population.

I don’t want to say too much, but one of the basic messages was that in a publicly funded healthcare system you can prioritise the needs of the patient. It still costs money and so there isn’t complete freedom, but if one assumes that most doctors and nurses went into healthcare in order to help people, it makes sense that the optimal system is one that allows them to put the patients first. In a private healthcare system this is no longer necessarily the case. Legally, private companies are obliged to do what’s best for their investors. They therefore need to optimise their profits. They can’t simply put the patient first. They’re not obliged to treat those who haven’t taken out suitable healthcare. They can refuse treatment if someone hasn’t told them their complete healthcare history when taking out insurance. They can prescribe treatments or tests that may not be strictly necessary. Profit has to come first, ahead of patient care.

Something that has confused me about this supposed desire for privatisation of the NHS in England is that the private sector is already very heavily involved. The NHS doesn’t make anything. They buy all of their equipment, vehicles, pharmaceuticals, etc. from private companies. Also, once the staff have paid their taxes they spend most (if not all) of their money in the private sector. They buy food, electrical goods, pay for holidays, etc. Most of the money that goes into the NHS ends up passing the private sector anyway. If we continue privatising the NHS all that this will mean, apart from the damage it is likely to do to healthcare provision, is that a new set of investors will be making a profit from the NHS. I would have thought that companies like Sainsburys, Tescos, Currys, Thomsons travels, …. would all be slightly worried about this. Surely there’s no great benefit to them to see the NHS privatised. Of course, if their investors are the same as those who will be investing in healthcare companies, maybe they’ll still see the dividends. On the other hand, if the investors are American pension funds, they will effectively be losing money.

I appreciate that you can’t have a successful economy if it is fully public. Similarly, however, I would argue that it’s hard to see how you can have a successful economy that is fully private. You need some kind of balance. Certain things fit well within a market. I can have a choice of foods, types of transport, holidays, entertainment, etc. It is, however, harder to see how you can apply a market philosophy to healthcare, education, policing, the military, the justice system. If you apply a market to these it implies a variety of different provisions and hence some receiving a better level of healthcare (for example) than others. I don’t really care that my car is clearly not as fancy as someone else’s. Similarly, I don’t really care if some people have to catch a bus rather than driving. It’s a perfectly fine way to get around. I do, however, care about my children’s education or about the healthcare that I may receive in the future. I don’t think these type of things should depend on your income/wealth. It should, ideally, be provided at an equal level to all. Getting educated or receiving healthcare isn’t really something you want to have to choose. You would like the best you can get. A private healthcare system may well benefit some but at the expense of others who will be locked out because of the costs, and I think that would be very unfortunate.

Anyway, I recommend watching the video below. It is a little long but she does make a very strong case for why we should resist what is essentially the privatisation of the NHS in England.