Month: April 2015

Hello!

There is a popular belief that so-called “benefit scroungers” are a scourge, sapping the strength of the economy by choosing to live on state hand-outs forcibly taken from the tax payer. Of course we cannot simply leave helpless people to die, but many people would argue that benefits should be cut in order to force everyone who can work to earn their living like decent citizens, instead of gorging on the wealth generated by the honest and productive working population.

When we talk about benefit scroungers we need to be clear about exactly who we mean. We are not talking about benefit fraud – that is simply illegal, like any other fraud and obviously cannot be condoned by anyone. Nor are we talking about people who have a job, but who do not get paid a living wage – the “deserving poor”. You could argue that they should get a better job – but somebody has to do the jobs which do not pay a living wage – unless you force ALL employers to pay a living wage – which we can come back to another time.

We are obviously not talking about people who are sick or disabled – it would be a savage and barbaric society that let them starve. Nor can we be talking about children. We cannot mean the unpaid carers of toddlers or the old or the otherwise infirm, because without the carer, those people would have to be supported by the state at greater expense. We shouldn’t penalise people who are genuinely looking for a job – nor should we force people who are finishing a higher degree to abandon their studies. Finally, it would be a serious injustice to cut off people who have been paying national insurance and find themselves unemployed through no fault of their own – they have paid into the system and are entitled to take something out.

Is there anyone left? Is there a mass of people who have consciously chosen to live in poverty, rather than enjoy the wealth they could gain by picking fruit and cleaning toilets? I don’t know. But just suppose there is. What is to be done about them?

Firstly, I must point out that with power comes responsibility; if you want people to work, you have to provide jobs that pay a living wage. It is surely wrong to insist that people work when there is no work for them to do. There is fashionable belief that the Free Market Will Provide, but this has to be set against the observation that actually, it doesn’t. And there is after all no shortage of useful work to be done; within the next few years we will have to transform our energy and transport systems away from fossil fuels, a task that has been compared to a war effort, that could employ millions of people with every possible skill. It is a paradox that has often puzzled me, how there there can be so much work to do, and so many people to do it, yet no way of getting the work done. I realise now that the key to the paradox is our system of money.

Followers of this blog will know that I am in favour of restoring the power to create money as debt to the Government (that is, us, we the people). Many people do not understand that money is debt. Money is not a constant quantity. Our economy is constant seething foam of money being created as debt, and disappearing when the debt is paid. At present this debt is created by banks, for vast profits – but it could be created by the government for nothing. Today, money can be seen as an accounting tool that can be used to mobilise the effort of rebuilding our infrastructure. It can be created by the government, used, and then destroyed again (if this seems crazy, please read my first three posts for more details!). Indeed, as I write, even the IMF has suggested that Greece should create it’s own currency for internal use, in parallel with the Euro. The popular idea that “there is no money” to facilitate our own citizens to build our own projects with our own materials is simply not true. Money can be created for this purpose – and taken out of circulation when its purpose is served.

However, there is second, powerful idea that can eliminate benefit scroungers at a stroke. The Green Party suggest that all citizens should receive a basic “citizens income” simply because they are members of the population. This seems a very radical idea until you realize that most useful work is done by machines with little human input. A farm of a thousand acres can be run by a handful of people; electricity can be generated by unmanned turbines and solar cells; freight trains have a single driver; modern factories rely on robots with little intervention. Certainly machines do enough work to give everybody a basic standard of living with very little input, so why should we not all be entitled to benefit from that? If some people choose to live on that basic income, earned by machines, there is no rational reason why they shouldn’t only our puritanical work ethic insists that they should work anyway.

Keynes suggested that in extremis the government could pay people to dig holes and fill them in again. This seems like a crazy idea – until you realise, on consideration, that a a great part of our economy is exactly such a giant make-work scheme. The primary purpose of jobs in our economy is not to produce goods and services, but to redistribute the wealth created by machines – and to redistribute it in a capricious way, rewarding the selfish and strong at the expense of the selfless and weak. To start with, in my view (and in the view of Lord Adair Turner, former banker and now regulator) almost all the “city” is redundant, and simply extracts the wealth created by others by various devious schemes – but it goes further than that. We live in a consumer society of “built in obsolescence”. Almost every “durable good” we buy is in fact not made to be durable but to be ephemeral, so that we constantly have to dispose of old items and make new ones. The fashion and electronics industries are prime examples. In my previous description of a thneed factory I explained how, by producing genuinely durable goods, and working shorter hours, everybody could be materially and socially better off.

So to stamp out “benefit scroungers, I suggest a two-pronged approach – firstly guarantee a good job for everybody by starting the urgent effort of rebuilding our energy infrastructure, paid for by government created, interest-free debt. And secondly pay everybody a “citizens income” in recognition of the fact that most work is done by machines, and most human effort is unnecessary anyway. And incidentally, stop wrecking the planet by pursuing this mad policy of increasing activity (read GDP), by making stuff and throwing it away at ever increasing rates.

There. That’s enough for one evening!

I had a “water cooler” conversation with a friend at work recently, in which he told me that he believed Putin was the greatest threat to world peace. He made this claim on the basis of the annexation of Crimea. This is a kind and intelligent man who I respect. But does this claim stand up to scrutiny?

Since winning the Nobel Peace prize. President Obama has authorised tens of thousands of bombing raids on 7 countries (Iraq, Syria, Libya, Afghanistan, Pakistan, Sudan and Somalia). The effect of US intervention in these countries over the last decade has been to destroy civil society and civil infrastructure, reducing thse counties to chaos and ruin, in increasingly flagrant and reckless violation of international law. No sanctions have yet been imposed on the US.

The destruction of Iraq by US forces included some of the most appalling war crimes in all history (Google Images “Fallujah Babies” for evidence to back this claim but BE WARNED!! This is the stuff of nightmares and you should NOT TRY IT if you are sensitive). The official death toll of verified deaths reported in English speaking papers to 2006 was 60,000. The “Lancet” estimated in 2006 that actually over 600,000 Iraqis had died as a result of the invasion. After eight more years of war, with civil infrastructure in ruins, the toll must be over a million.

Ten years ago, the UK travel advice on Syria was that it was one of the safest, friendliest, welcoming countries in the middle east, adventurous Brits flocked to Aleppo to marvel at the historic bazaars, and Assad was hailed by Western nations as a modern and enlightened ruler.  But Syria too has been completely destroyed. The US has made no secret of it’s support for religious fundamentalist rebels, and since it is clearly impossible for unarmed teachers and shopkeepers to take on a large, well equiped professional army and win, that support must have been very considerable. The destruction has been a staggering tragedy. According to the UN, 10 million (50% of the population) have fled thir homes and become internal or external refugees. The dead are uncounted. The Syrian crisis has been described by aid agencies as the worst humanitarian catastrophe in Middle East history. The Telegraph recently published a picture a four year old girl who lifted her arms in terrified surrender when the camera was pointed at her, a sobering commentory on the effects of years of war. Similarly, Libya, Somalia and Afghanistan are now anarchic lawless states as a result of Western bombing, over-run by competing factions. Pakistan has been bombed with thousands of drones.

The fingerprints of the CIA are also all over the crisis in Ukraine – US Secretary Victoria Nuland was famously plotting the installation of right wing extremist “Yats” in government 2 weeks before the overthrow of the government in a coup. The subsequent bombing of the Russian speaking areas by Kiev, has resulted in 50,000 civilian casualties, according to German intelligence, and over a million refugees fleeing to Russia for safety, with another million internally displaced. It is said that 60% of the houses of this 7 million population are damaged.

Throughout this campaign, Russia in general and Putin in particular have been painted as violent aggressors. The annexation of Crimea in particular has been held up as a frightening crime of aggression. But in contrast to the interventions listed above, not a shot was fired by Russian troops in Crimea. This is probably because, according to a German polling organisation commissioned by Canada, over 97% of the population would rather be part of Russia than Ukraine – perhaps because they don’t speak Ukrainian, and the Ukrainians hate them (much of the population were born as Russian citizens, when Crimea was still a part of Russia). Russia is accused of the downing of a Malaysian passenger jet – but although many questions remain unanswered, the only concrete evidence made public to back this claim, videos of Russian missiles on the move, were actually fabricated from films shot in Georgia years ago.

I know there will be many people who will be shocked at my defence of Putin. They will claim that I have been brainwashed by Russian propaganda. I have no doubt that he is guilty of many offences. But facts are facts. There have been repeated claims in the media that Putin is a mad dictator who is bent on the invasion of Europe, and who is a threat to the world. But the claim that the annexation of Crimea was a worse violation of international law and human rights than the invasion, bombing, occupation and destruction of the countries listed above simply cannot be squared with the facts.

It is said that the leaders of these countries were monsters, but intervention has resulted in the slaughter of millions. Military invasion of another country is absolutely prohibited as the worst of war crimes in international law, whatever the motives, and we see now for good reason. It is said that the interventions were necessary to spread democracy and protect the population, but these objectives have been so spectacularly failed, so repeatedly, one begins to wonder. Is this death and destruction at colossal expense really the consequence of honest incompetence and misguided pilanthropy?

The Brazilian journalist Pepe Escobar has been the author of an article called “The Roving Eye” in the Asian Times for the last ten years. He has recently published a collection of his articles under the title “Empire of Chaos”. His thesis is that the intention of American interventions across the world for the last decade has been to spread chaos in countries which refuse to sign over their oil resources to American interests. The maze of names, places and dates is bewildering, but the research is meticulous; The US has armed rebellions against governments, and has then armed rebellions against the rebels, the effect of which has been to lock these countries into a Long War. Iraq and Afghanistan in particular have been theatres of war for the United States for decades.

Like most people in the West I have been brought up to admire and trust the United States. But the slaughter of millions of people is a crime that must be answered. The total destruction of one country could be an accident; the total destruction of two looks like carelessness; but the destruction of half a dozen really should make one sit up and ask questions.

At any rate, what is one to do? When in doubt, I wonder what Jesus would have done. Would Jesus have found himself piloting a military drone over Pakhistan? No? When war and chaos are the goals, the only true act of rebellion is to strive for peace and reconciliation.

 

On April 1^st,,  The Telegraph reported that the improbably named Frosti Sigurjonsson of Iceland had proposed a drastic reform of Iceland’s money in response to a request from the Prime Minister.  Frosti’s document, “A Better Money System for Iceland” suggested nothing less than an end to the right of commercial banks to create money.  (A quick reminder; when a building society makes a loan, it is recycling existing money. But when a bank makes a loan, the money is created in the act of making the loan. Most money is created this way. See my previous post “How to Make Money” for more details).  Frosti suggested that our money supply should instead be controlled by the Central Bank (those of you who think the money supply is already controlled by the central bank should read the official Bank of England report referenced in the post mentioned above). The name “Frosti” suggested that this was an April Fool’s joke, but it seems not – other sources have added further detail.

In their article, the Telegraph say

In Iceland, as in other modern market economies, the central bank controls the creation of banknotes and coins but not the creation of most money, which occurs as soon as a commercial bank offers a loan.

It is rather amazing that the way our money system works is now being openly discussed in national newspapers as if it was the most normal thing in the world.  For decades there was an active campaign of misinformation – there was a view that if the public understood that they were being charged interest on money that the banks created out of nothing, there would be uproar.  Perhaps the current view is that the public is so baffled by finance that they will not question the system.

At any rate, the gist of Frosti’s report is that money should be created by a money committee that is independent of government. When the committee felt that the money supply should be expanded,  perhaps because of low inflation, they would create money to be spent by Government. When they wanted to shrink the supply because of high inflation, money could be collected in taxes, and written off.   This is almost exactly the proposal of the UK organisation Positive Money.  And there are very good reasons for thinking that commercial banks should not be able to create money. Quite apart from the fact that it is an outrageous scam, which allows banks to fleece the population of hundreds of billions of pounds a year, it creates serious  instability. According to the UK Financial watchdog, Lord Turner, efforts to reform the financial sector

“have still failed to address the fundamental issue – the ability of banks to create credit, money and purchasing power, and the instability which inevitably follows. As a result, the reforms agreed to date still leave the world dangerously vulnerable to future financial and economic instability.”

Those of you who have read my previous posts will know that I am very critical of the system which allows the financial sector to shamelessly rob us. I have been a supporter of Positive Money for some time, and I am fully in favour of reform. But actually, I am not completely convinced that this is the best way to arrange things.

One problem is that there is no reason to believe that the committee would make sensible decisions. For at least two decades, the prevailing economic theories have been, frankly, garbage, that have left central banks baffled by events. One specific problem is that even qualified economists seem unable to distinguish different causes of a change in prices, which they lump together as “inflation”– and different causes require different treatment (more in another post?).  My gut feeling is that the committee will be the priests of a disfunctional ideology  that will leave us impoverished.

Another problem is that the proposal seeks to separate government from a committee of financial technocrats. There is understandable concern that a populist government would create money to spend recklessly, causing hyperinflation and malinvestment, but the other side of the coin is that there are many occasions where policy comes first. For example, Europe is currently hurtling towards a desperate energy crisis; the UK is hurtling towards a crisis of inequality; the US is hurtling towards a desperate water crisis; the world is hurtling towards a Carbon Dioxide crisis; only enormous government spending can solve these problems. Can we allow idealogical financiers to stop us? There is no guarantee that rational governments will actually take the necessary action, but without at least the possibility of massive government spending, there is no hope of a solution.

Positive Money believe that a fixed money supply will solve the problem of inequality, but this is not supported by the evidence. Money lenders can still operate with a fixed money supply, and their power to accumulate gold and silver at the expense of the poor has been a bone of contention since antiquity. That greatest of all economic thinkers, Jesus Christ, identified money lenders as public enemy number one, commenting ruefully that the poor would always be with us.

The Political Compass is the idea that politics is not simply left and right, but also up and down.  To the left, people believe the strong should support the weak; to the right people believe the strong have a right to exploit the weak. Upwards, people believe that there should be central control and hierarchy; downwards is the belief in devolved freedom of action and anarchy.  Everyone has their own personal preference in the space defined by the conflicting instincts to protect and to exploit; and to control or to be free.

The prevailing economic orthodoxy is down and to the right – neo-liberalism is the idea that the strong should be freed from regulation and allowed to exploit other people.  My own fundamental position is down and to the left; the purpose of the state is to free people from control and exploitation. My natural preferences, together with my reading, have convinced me that the best system is one in which money can be created by banks in the form of loans; but that banks should be not-for-profit institutions; and that all interest on such money should go to the government in lieu of taxation.

If  you have any questions or comments I would be delighted to hear them!