Thought for the Day, the homily slot on the BBC's main morning news radio program, used to play the really useful role of getting me out of bed when I was a university student. I had worked out that if I set the radio alarm to go off at quarter to eight and placed it out of my reach, then come 0750 I would be forced out of bed to turn the radio off.

I gradually became more used to it; it stopped working as a morning call to action, and slowly I began to enjoy it, although usually with remnants of the aversion to being preached to that has abated only slowly. There are occasionally some really thoughtful thoughts ---Mona Sidiqqi, for example, stands out. And sometimes, even when the thoughts are aggravating, they have pushed me to record a counter-thought (like here, on Catastrophes, or here on Exodus versus Odyssey).

This morning's thought by Dr Giles Fraser was particularly good --- maybe it struck me so because it resonates with what feels like a big thought that has been stalking me for a while about sameness and difference.

Fraser uses Jonathan Freedland's view that we have now seen the "human face of Iran", and, specifically, that the last 3 weeks of protest have developed in the West "a strong affinity" to Iranians in the streets to ask a big question about our common humaity. Does this "human face" do its work of transforming out attitudes because it emphasises the humanity that we comonly share (apparently Freedland's view)? or because it recognises the profound difference that unites us (Emanuel Levinas' view)? and does this foundational difference matter?

The thought that has been stalking me is that the distinction really does matter because within it lies a guide to how liberalism, in some of its recent incarnations, became so anti-pluralist. "Let the market solve it" is attractive if what we all share is the kind of thin nature assumed by modern economists; "let the tanks impose regime change, democracy and rule of law" is attractive if political value and social selves are given, invariant, and waiting only for an opportunity to be expressed.

More convincing, practically and philosophically, is that difference is irreducible and the starting point of our social selves. This makes the basic human impulse for politics that of hospitality rather than sympathy. If we base morality and politics in sympathy, then we will always be looking at ways of thowing away what really makes others others.We will think that conflict can be dissolved by easy universalism rather than real and respectful accommodation. 

I look forward to more on this during the conversation this evening between Susan Richards and Anatol Lieven around Susan's emergent recent history of ordinary Russians. It is the quality of difference, not sameness, that seems to permeate the extracts we have here on the site. 

Chris Giles and Simon Briscoe in the FT have a beautifully produced flash-data feature describing the state of the UK economy. Their basic message would not have sounded out of place in 1980: the state has become too large; taxpayers are unwilling to fund it; public spending will have to give.

But their message is too crude for their graphics. We now understand better than we have for 50 years what the "mixed economy" really is: it is a mixture of centralised and decentralised decision-making processes with all the fundamental parameters of markets relying on explicit or implicit social choices. The financial sector has effectively been socialised in "capitalism" ever since the lender of last resort interventions of central banks became the norm (1825); technology has been set by the social choices of the strength of patent protection; basic R&D occurs mostly in non-market institutions; entertainment economics has been underpinned by access to scarce broadcast media, content-related law, and copyright; land-use and house prices have been determined by planning politics; agriculture has been socialised ... The list goes on.

The truth of the mixed economy is not that it is a little bit pure capitalism and a little bit pure socialism. It is that the significant, parameter-setting choices are all made socially and varying usage is made of decentralised decision procedures thereafter.

An OurKingdom conversation. [History: Thomas Ash > David Marquand > Thomas Ash > George Gabriel > Thomas Ash > George Gabriel > Thomas Ash > this post]

All ideologies offer conceptions of a person upon which their social vision is constructed. For neo-liberalism this is that of the “rationally self-interested” individual, a being solely concerned with its own self-interest and to be judged “rational” according to the efficacy with which that interest is pursued. Power and self-interest, a nihilistic nightmare.

In his latest post Thomas Ash suggests that “rational man” is a mere “simplifying assumption” which predicts our actions with a relative degree of accuracy and which neo-liberals need not insist captures all the motivations that move us. Likewise we can be comforted that such a philosophy extends only to certain domains of our behaviour, not on the politics of offering one’s seat.

This mushy Jekyll and Hyde human being, free from self-interest in certain concerns and moderately guided by it in others provides no individual ethic whatsoever. Neo-liberalism, as envisioned by Thomas on an individual level issues no directives except for those demanded by the legally constituted neo-liberal system. It is from this lack of something to say presumably that neo-liberal claims to be somehow “realistic” derive.

We have seen the dangers of a macro social vision that provide no individual ethical imperatives before. Historically determinist Marxism stripped values in the name of inevitability and thereby commended only an ethic of acceleration, it was this that Camus observed to lead to “Slave camps under the flag of freedom, massacres justified by philanthropy”. Thomas suggests that neo-liberalism is not necessarily committed to an “egoistic code of ethics”, but if this leads to a vacuous “realistic” conception of personhood the consequences are equally to be feared - the absence of an individual ethic within an ideology is as dangerous as its presence, it’s just that the latter holds the promise of a better future too.

An OurKingdom conversation. [History: Thomas Ash > David Marquand > Thomas Ash > George Gabriel > Thomas Ash > George Gabriel > this post > George Gabriel]

George Gabriel is targetting "neo-liberalism as an individual code of ethics"; effectively, one of egoism. I doubt that any of neo-liberalism's defenders have ever understood it as such; most commonly, they advocate a set of policies on the grounds that they will promote some value, be it individual freedom or an increase in welfare supposedly brought about by more efficient markets. True, as George points out, they have often modelled individual economic choices as self-interested in the course of arguing that their policies will best promote these values. But for this purpose it functions only as a simplifying assumption, which needs only predict a subset of our choices (not extending to many moral ones, such as whether to offer bus seats to frail old gents, which have little impact on the efficiency of markets) with a rough degree of accuracy. The neo-liberals are commited to its doing so does not mean that they are commited to its capturing all the motives behind human behaviour, let alone to adopting self-interest as their only motive.

If neo-liberals are not commited to an egoistic code of ethics, what about bankers? The bulk of George's commentary concerns them, after all, and they are  a quite distinct group, not all possessing neo-liberal opinions about public policy (or any opinions about public policy at all). In the comment thread on his initial post, George claims that their actions show that they live by this code in practice, if not necessarily in theory. I would be surprised if most bankers' lives did contain some altruistic acts which belied this claim, but perhaps George was concerned only with their work lives. However, I struggle to see what they do in this that reflects a concern with self-interest to the exclusion of any other value. George talks of those who "short sell a productive company into oblivion, reap obscene payments for failure, and gamble the money of others". It is only possible to do the first in a highly unusual situation in which a company's survival depends on its stock price - generally a sign that it is not a succesful, productive company. The second does no harm to anyone else, and hence it shows a concern with select-interest, but not to the exclusion of any other value. And it was ultimately the bank bosses' decisions while led to investors' money being put at such risk - some of them (like Jimmy Cayne of Bear Sterns) supposedly did not understand this, and the decision was evidently against their self-interest.

An OurKingdom conversation. [History: Thomas Ash > David Marquand > Thomas Ash > George Gabriel > Thomas Ash > this post > Thomas Ash > George Gabriel]

In our ongoing exchange concerning the nihilistic implications of neo-liberalism, Thomas Ash challenges my suggestion that “the congregation believes in neo-liberalism as a social vision”. Is it true that anger from the bailout is because public money was used to compensate private liability or is it, as Thomas puts it, because it was “our money”?

The question is however too simplistic. People’s social visions are normally not highly defined, signposted, or even coherent. My own contains as many contradictions as opinions, despite the ongoing struggle for consistency. The point is that the neo-liberal social perspective informs individuals’ social visions. Neo-liberalism espouses a pure cause and effect individualist paradigm of responsibility; quite simply “I am responsible for what I do freely”. A public bailout to privately incurred risk is a clear violation of this ethic. So though few define themselves as neo-liberals many continue to be profoundly defined by elements of this neo-liberal social vision.

Thomas rightly observes that the logic of the market is not itself nihilistic, nor is contractualism for that matter. But this is a part of what I described as the “social vision”. Neo-liberalism as an individual code of ethics is stridently nihilistic. Why? Because of its utter subservience to the concept of “rational self interest” – the cornerstone of most contemporary microeconomic analysis, the justification of a hyper-individualist money-obsessed life, and at the same time the death of values.

An OurKingdom conversation. [History: Thomas Ash > David Marquand > Thomas Ash > George Gabriel > this post > George Gabriel > Thomas Ash > George Gabriel]

I want to make a few points about attitudes to competive markets in response to George Gabriel's post on 'neo-liberal nihilism' below.

The first concerns public attitudes to them. George describes me as saying that public anger at bankers stemmed from violations of free market norms, but it's important to read this the right way. I claimed that the anger stemmed from taxpayer bailouts. These are violations of free market norms, but that fact was not the main cause of the anger.  After all, it's not clear that most people care about these norms in general - though open to correction on this point, I'm not aware of evidence that they dislike subsidies for agriculture or car-makers, as they would if they were convinced free-marketeers.

Instead, it seemed that the main cause of public anger was public money being used for pay for bankers' compensation. A sense that this was against the rules of the neo-liberal game we'd been playing (to bankers' benefit) - because, as George says, after privatising profit it socialised risk - may have played a small part. But if so it was small indeed compared to the simple fact that it was our money being used. (Contrary to what many on the left now claim, I doubt that the average taxpayer objects to excessive salaries if they come out of banks' own money, and employers are left to pick up the tab if they prove to have catastrophically over-estimated their employee's financial value.)

So I question George's claim that "the congregation believes in neo-liberalism as a social vision, that fair and free competition will allow those who deserve it to advance in the market in the pursuit of happiness by the sweat of their brows." Even some of neo-liberalism's defenders reject the second half of that claim, if it's read to imply that all the 'deserving' (presumably those who are talented, hard-working and so on) will succeed.

Now, move on to George's own attitude to competitive markets, which I sense many on the left now share.

Although the price of oil is rising, the outlook for the Russian economy remains uncertain. Official statistics suggest that one in seven of the workforce could be unemployed by the end of the year, warns Andrei Zaostrovstev

The Association of Train Operating Companies tells us that there is a case for re-opening 40 stations and 14 lines that were closed after the Beeching report of 1967. A moment for environmentally concerned rail-lovers to rejoice, surely? After all, rail is, according to David MacKay's numbers, by far the most efficient form of fast land transport:

Actually, he has a full electric train as being about as energy efficient as walking. Only cycling beats the energy efficiency---at about a tenth of the speed.

The Latvian national currency, the lats, has become one of the most expensive currencies in the world. And that despite the fact that the country is on the verge of bankruptcy and may find itself unable to fulfil its internal obligations, never mind the foreign ones. With an increasing intensity, economists from New York to Barcelona have been saying that Latvia should opt for currency devaluation to aid the crippled economy. But in the country itself, the topic of devaluation is being consistently, or some may even say, stubbornly, ignored.  

The Lats has been pegged to euro since 1 January, 2005 at the rate of 1 euro = 0,702804 lats with +1% fluctuation. Many international economists (Edward Hugh and Nouriel Roubini, among others) and some local ones, point out that the zealous, regardless-of-the-costs policy of keeping the peg is becoming too costly for the already weakened Latvian economy. But Ilmars Rimsevics, the governor of the Bank of Latvia, remains steadfastly determined to pursue it. He is convinced that the policy remains the right one and dismisses critical remarks as "irrational, irresponsible and silly." His main argument in favour of keeping the value of lats untouched is that 82% of the 16.4 billion lats worth of loans in Latvia have been issued in euros. Should the lats devalue, the borrowers, he argues, will have trouble paying back their loans.

It is worth noting that the aforementioned ‘trouble' would also affect Rimsevics himself, because last year, at the height of the real estate market, he bought a flat and land for 750 000 euros. What the governor fails to acknowledge is the fact that some Latvian people will experience, if are not already experiencing, problems with their mortgage payments because of the massive layoffs and pay cuts for government employees, reaching, in some cases, 30% of their pre-crisis salary. With Latvian economy shrinking by 18% in the first quarter of 2009, similar cost-cutting is inevitable in the private sector, too.

The management of the Bank of Latvia is becoming lonelier by day in its desire to preserve the lats but is not losing its resolve to ignore other arguments, presented both by local and foreign economists. One can spot some signs of mounting pressure in Rimsevics' rhetoric. More and more frequently, he appears to be losing his nerve and calls those suggesting devaluation ‘pseudo-economists', even if the ranks of his opponents include such stellar names as Roubini.

So far, business leaders have not been forthcoming with their opinion on the issue. They are the ones to whom the government pins its hopes in filling state coffers with much-needed cash, but they may have a hard time delivering it as they are rapidly losing market, both at home and abroad. On the one hand, business leaders admit that devaluation would serve as an additional boost for their business, on the other, they are trying to find arguments in favour of keeping the peg intact. In fact the economy has become a hostage to the euro-borrowers who chose this currency over the lats because loans in the national currency simply were, and still are, too expensive. The base lending rate for the lats, set by the Bank of Latvia, is 5%.

A forbidden topic

For many years, the topic of devaluation of lats has been a ‘holy cow', something not to be disturbed. In 2007, Latvia started experiencing high inflation, which rapidly reached double digits, and the competitiveness of Latvian businesses suffered. In February 2007, the first voice in favour of using devaluation as a mechanism for restoring it was raised. It was Morten Hansen, head of the Economics Department of the Stockholm School of Economics in Riga. The official response was quick and strong: the economist was accused of incompetence. Later the same year, another Latvian economist, Alfs Vanags of the Baltic International Centre for Economic Policy Studies, suggested the same. And he, too, was told to mind his own business and focus on the issue of raising productivity instead.

The lats survived the first wave of growing inflation, which started in early 2007 and reached its peak in May, 2008 hitting a record, 17.9%. However, with problems in the economy mounting, the discussion on devaluation sparked again with a renewed passion. Those who initiated the discussion were, once again, accused of ‘spreading rumours' and ‘feeding the panic' over the stability of lats. The official response to the renewed debate brought back memories of the USSR: in December, 2007 the Latvian parliament passed amendments to the Criminal Law introducing a new section, Dissemination of Untrue Data or Information regarding the Condition of the Finance System of the Republic of Latvia. According to the new law, a person "who commits knowingly the dissemination of untrue data or information orally, written or in other ways regarding the condition of the finance system of the Republic of Latvia" can be sentenced to up to two years in prison, community service, or a fine of a maximum eighty minimum wages. Citing the new law, the Latvian Security Police last autumn arrested Dmitrijs Smirnovs, lecturer at the Ventspils University College, who had expressed his opinion on the future development of Latvian economy, banking system and lending institutions in a round table discussion published by the local paper Ventas Balss.  Musician Valters Fridenbergs also ended up in handcuffs after encouraging the audience to listen the concert till the end "before rushing off to the nearest ATM."  These arrests sparked a discussion as to the proportionality of the police's response and the word ‘devaluation' in people's conversations was jokingly replaced by the term ‘the D word'.

Section 194 of the Criminal Law is still in force and therefore anyone who dares start a discussion on the current state of Latvian economy and the ways of dealing with the crisis may end up on the Security Police's black list. The government and central bank officials claim that any mention of possible devaluation in mass media adds to the run on the lats.

Economists press on

Latvian government has decided to protect the lats and instead is implementing income devaluation through pay cuts. The ‘no devaluation' option was agreed with the international lenders and both the IMF and the European Commission have recently confirmed that the euro-peg is an "anchor of stability" in Latvia. "Given that we have chosen the policy of cutting costs and income we have to continue pursuing it. It is not sensible to hop back and forth between two different solutions," says investment banker Girts Rungainis.

However, an ever-growing number of economists are saying that, apparently, propping the national currency is becoming too-expensive an affair for Latvia (so, the legal implications of discussing devaluation have not stopped the debate). Although a coordinated wage cut could in theory approximate the effects of a devaluation, it is extraordinarli difficult to achieve, and will in any case have different impacts on borrowers and lenders.

Spokesman of the Bank of Latvia Martins Gravitis dismisses the arguments of devaluation supporters as ‘laughable'. Despite the results of a recent survey by the leading daily Diena, which showed that nearly half of the population would like to hear a ‘serious discussion' on the subject of devaluation, paternalist attitudes still prevail in official circles. ‘The people' are perceived as ones who do not understand the issue and a public discussion on such matters is therefore unnecessary and potentially harmful as it would lead to further destabilization. Another popular official line is that the experience of other countries that have gone through similar crises is irrelevant in Latvia. It seems that the ranks of those who "do not understand" include the undesirable economists, in other words, those who argue in favour of devaluation. If ‘the D word' is discussed by officials at all, it happens behind closed doors in the government meeting rooms to which the devaluation advocates have no access.

"Rimsevics [the governor of the bank of Latvia] believes that he is the only one who can speak on the subject of devaluation competently. It seems that he no longer sees any options for backing away. He is experiencing psychological problems. People are just being told, in a mantra-like manner, that devaluation will be a great calamity," says Janis Ogsts, who has worked as the senior broker for Swedbank and is now one of the economists discussing the issue of devaluation in his blog. He believes that, thanks to the internet, the discussion has spilled into the "real life" and is convinced that devaluation is an issue of "when" rather than "if". The stubbornness of state officials is going to cost Latvian economy dearly, he says.

The fact that officials are reluctant to listen to expert advice is obvious to Uldis Osis, an economist, business consultant and the first finance minister of independent Latvia. He says: "everybody is talking about devaluation of the lats, except for the government and the central bank, which has declared that in no case it will devalue."He points out that, in the name of the stability of lats, businessmen are losing market and are forced to close factories and let off workers thereby increasing the army of unemployed. Besides, suffering goes beyond the remaining exporters for whom the expensive currency means shrinking export markets. Those businessmen who are working locally are affected too, because they are unable to compete with imported goods that come from the countries whose currencies have recently fallen in value, such as Poland.

Last week, not a single day passed without Latvia's name being mentioned in the international press. Columnists and bloggers, The Financial Times and The Times, Latvia Economy Watch and A Fistful of Euros, all have been talking about the "when" of devaluation and the cost of postponing it. As Copenhagen-based macroeconomist Claus Vistesen points out, "this is called a market discourse and although the commitment to maintain status quo may be there one cannot make the waters go back." The Bank of Latvia may continue chanting the mantra, "we will not devalue, we will not devalue", but it may find itself in a position that will contradict this song.

The worst is yet to come

The survey by one of the biggest banks in Latvia, DnB Nord shows that, in April, optimism among the general population started growing. 15% believe that, in a year's time, the situation will be better. But a 2% monthly increase of optimism is more likely to be related to the beginning of spring (which is always a welcome change in this northern country where winter temperatures may reach minus 20 degrees Celsius) rather than to a real improvement. Besides, both economists and government officials are convinced that the hardest time is yet to come. In the autumn this year, the situation could even turn critical because many people will simply run out of money.

By early May, the unemployment rate had already reached 11%. However, the social support system has not been amended, which means that only those who have been paying social tax for 20 years are eligible for a 9-month unemployment benefit. If the period of social payment is lower, 10 to 19 years, then the benefit expires after 6 months. And those whose official working life is shorter than 10 years can only hope to receive support for 4 months. Employment experts estimates show that currently about a half of the 50 000 unemployed are not receiving any benefits. In the autumn, the numbers are very likely to go up whilst the funds available for social needs will continue shrinking.

The new Latvian prime minister, Valdis Dombrovskis, who came to power in March following the fall of the previous government, has repeatedly stressed: if the country fails to receive international help then in July or, possibly, even June Latvia may face default, in other words, it will be unable to fulfil its international obligations and will not have money for paying public servants and other state employees. Ivars Ijabs, a prominent Latvian political scientist, has even argued that the country is rapidly approaching the classic definition of a failed state.

Late last year, the IMF and the European Commission agreed to lend Latvia 7.5 billion euros over the period of three years. However, after the first payment of 1.6 billion, further funding stopped. In March, the 200 million euros due from the IMF did not arrive and it is not clear whether the June payment will come either. International lenders are waiting for the structural reforms that were promised but never implemented.

The latest statistics on the Latvian economy, published by the Latvian Statistics office in early May, were shocking even by the global downturn standards. In the first quarter of 2009, Latvian GDP had shrunk by 18%. Economy minister Artis Kampars has admitted that the cost-cutting measures will likely have to be even harsher than previously expected and new ways of stimulating economy will have to be found to stop the freefall. But does that mean that the government is ready to talk to experts, initiate the discussion people are so eager to hear and start acting decisively? So far, there is very little to suggest that this is the case. Last week, prime minister Dombrovkis pledged to push through budget cuts and ensure the inflow of loan payments. "These rumors and speculations [about devaluation of the lats] should finally be stopped," Dombrovskis said in an interview to a Latvian TV station. „The currency will not be devalued!" We will not devalue, we will not devalue. And we will not talk about it either. Not yet.

Latvia’s financial meltdown raises questions of a neighbour: are you more regional power or friendly partner? Mats Engström, in Riga, reports.

A crisis in the US real economy marked by growing unemployment and failing businesses is not a product of the current financial crisis. In fact, the financial crisis was but a symptom of a long brewing systemic crisis in the real economy. These claims are made separately by economists Richard Wollf (Univ. of Massachussetts, Amherst) and Ravi Batra (Southern Methodist University, Dallas). They propose an alternative diagnosis of the current economic crisis. If their analysis is correct, fixing the financial system might just deal with one of the symptoms but not the root cause of a deeper economic malaise. Given the amount of public money being thrown at fighting the economic downturn, it is crucial to consider alternative explanations of current economic problems in order to devise strategies that make the best use of scarce resources.

Housing Bubble
The most widely accepted diagnosis of the current financial and economic crisis is that it started with the housing bubble in the US. This in turn resulted from irresponsible sub-prime mortgage lending coupled with unregulated and reckless financial engineering. When the housing bubble burst, banks found themselves holding heaps of unsecured debts packaged into complex financial products that could no longer find new buyers. Financial institutions suspected each other to be in a precarious financial position similar to their own and inter-bank lending came to a halt. Several of these institutions went bankrupt or would have gone down that route if public money ($2.98 trillion at last count) had not bailed them out.

Wage-Productivity Gap
Wollf and Batra do not deny the role of housing bubble and financial malpractices in triggering the financial collapse. What they seem to suggest is that there is a need to explore the chain of causation further. Doing so in their analysis reveals that a wage-productivity gap since the last three decades in the US created a systemic imbalance between aggregate demand and aggregate supply in the economy. Since the early 1970s wages of employees in the US have not risen at the same rate as their productivity (output per hour). In fact, real wages of roughly 80% of the US workforce have been stagnating for more than three decades. On the other hand, productivity has been increasing rapidly due to technological innovation and improvement in human skill levels. Now, wages are a key lever for creating demand in the economy whereas productivity drives the increase in supply. In other words, workers' wages need to increase in order to absorb the increase in supply of goods that results from increased productivity. Yet, the wage-productivity gap has now existed for nearly 35 years.

The consequence of this imbalance is that demand for goods and services required to keep up with supply is created in the short term by creating new debt. The housing bubble was a product of this demand-supply disequilibrium. Since real wages are not rising in step with productivity, people could only consume the increased supply of goods and services by taking help of cheap and easy credit. But after the housing bubble burst, credit is no longer easily available and levels of debt have been exposed to be unsustainable. Businesses realize that their goods will not be sold, profits will decline and they are laying off employees and in many cases closing shop. Due to the wage-productivity gap, this economic decline may have happened even in the absence of a mortgage driven financial crisis. Then again, the housing bubble may have simply postponed the real economy crisis that was imminent, and in the process exacerbated the systemic tensions between demand and supply in the economy.

Where did the profits go?
So why have wages not kept step with productivity despite a "golden era of profitability"? Where have the profits from the productivity growth gone? A paper by Gordon and Dew-Becker, economists from Northwestern University, found "that over the entire period 1966-2001, as well as over 1997-2001, only the top 10 percent of the income distribution enjoyed a growth rate of real wage and salary income equal to or above the average rate of economy-wide productivity growth...[whereas] the bottom 90 percent of the income distribution fell behind or even were left out of the productivity gains entirely" (italics in original). Additionally, the wage share of national income is declining in the US, while the share going to corporate profits has increased from 17.7% in 2000 to 20.9% in 2005. The European Trade Union Congress complains of a widening wage-productivity gap in the eurozone as well.

It appears that "the killing fields of inequality" (as Göran Therborn puts it in his recent piece) and the relentless pursuit of profits by many businesses are critically undermining the primary source of demand in the economy - its workers' wages. As more people lose their jobs in the recession, there is further downward pressure on consumer demand. Making credit available to businesses alone is not likely to reverse the unemployment trend since businesses will invest only when they have confidence in potential returns on their investment. Lack of demand for goods and services in the economy, however, does not give that confidence. It is a vicious cycle but one that can be broken by restructuring the economic system to distribute the wealth more equitably. And unless this fundamental factor is addressed, according to Wollf and Batra, it is hard to see a long term economic recovery.

Barclays Bank and BP have both announced the closure of their final salary pension schemes. Beyond the financial arguments, this highlights the decline of the workplace as a source of social cohesion and solidarity.

"Today" featured an item today about whether we should know the salaries of top BBC radio presenters (as if queued by Anthony's reply to my post about their lazy journalism yesterday). The National Audit Office had asked for the information, but had not been able to sign the confidentiality agreement that the BBC needed to have in order to protect its contract with employees. That sounds like a plausible excuse --- if I were embarrassed by the amount I had been able to negotiate for myself, and even more if I thought that it might reduce my credibility in my job, I would certainly negotiate a clause in my contract making the pay confidential.

The real question --- and one which Humphreys avoided in his faux-probing of Jeremy Peat, Trustee of the  BBC --- is whether the BBC should sign such contracts. Morning radio shows are today's equivalent of a church service---they prepare millions of minds for the day ahead; they are the daily cult that makes up our culture. It is crucial that the priests of the cult be exemplary. This was the great discovery of the 10th century West European movement of monastic reform: you can only claim authority if you are seen to be beyond reproach. In the 10th century, this meant re-establishing the chastity of the monks (... yes ... they had given it up; poverty had to be re-established later as a sign of authority---the fabulous wealth of the monasteries was not at that time anticipated).But if the Church was going to legitimate the rule of monarchs as representatives of Christ on earth, they had better come across as credible authorities on the subject.

I don't want chaste or poor priest/presenters on my morning radio. But what the monastic reformers got right is that whatever the standard of legitimacy it is that you champion, those in ritualistic charge of the system must adhere to it. Journalism lives under the standard of transparency and accountability, and it cannot afford to itself be opaque. It will lose its ability to probe if it is.

There was a fascinating demonstration of this in the morning interview: Edward Leigh, the MP who is chair of the select committe that was looking into BBC Radio's performance, turned the tables  on Humphreys as I have nver heard before. Listen to the clip: at minute 1:48, after the usual priest-to-victim grilling, Leigh says: "the taxpayer pays a polltax for the BBC, and has a right to know. How much do you earn, John?" Humphreys is stumped. He doesn't want to break rank, he stumbles, he blames the men in suits. The high sacrificer has turned sacrificial victim. At minute 1:48, the logic of accountability---one that MPs have been thinking a bit about these days---is confronted to the logic of the Corporation's interest. Not only is accountability the clear winner, John Humphreys clearly knows it. When he asks for a justification from his trustee, Jeremy Peat answers that "the BBC is not like any other public body. It is established by Royal Charter." 

Well ... the aura of monarchy may not extend so far these days as to keep the BBC closed. What I really look forward to is not so much knowing the salaries --- though I expect that will reduce the bill to taxpayers, not increase it --- I look forward to having transparency in the news-making, and in particular to reducing the power of public relations in our public realm.

When Michale Buerk went onto the Today program today to announce this evening's Moral Maze about the crisis of trust and authority, he signed off with a little insider joke: "It's not just MP's, it's judges, churches, doctors ... who is left that people can trust? Just journalists and broadcasters..." There was a satisfied chortle from Humphreys. Not the laugh of the joshing that Today encourages when it is Melvyn Bragg making a joke about Humphreys' age. No. It was the embarrassed chortle of someone who is trying to hide the satisfaction of believing this was true but should not be said too loud. "We know "Today" is a rock of truth and trustworthiness" whispered the chortle. 

And yet, just a few minutes before, we had had someone from the Institute of Mechanical Engineers talking about combined heat and power - the practice of taking waste heat from power stations to heat houses and supply hot water. Innocent enough, it seems. And trustworthy. Yet there was no probing questioning. A small amount of research would have revealed David MacKay's fascinating argument for heat pumps and against combined heat an power.

So was this piece just lazy journalism? No doubt a Public Relations company approached Today with a ready-made story that didn't seem as if it would cause too much of a fuss and filled the difficult slot of 0650-0653 when politicians have gone to ground. But do we want to be paying a license fee to maintain a Public Relations channel open for whatever lobby group happens to strike the audience equivalent of a small win on the national lottery? Who was behind the story? Where were the engineering firms that supply combined heat and power plant? And how many stories, like this one, are lazy and questionable plugs?

The wind of mis-trust is blowing hard, and the national treasures on the BBC should not confidently chortle as they think of themselves as the rocks in the system while all other sources of confidence fall away.

We will soon, I hope, be asking the BBC to tell us how stories have come to them. We will want to know whether we would believe a story less if we understood its provenance. And we will be shocked to discover how much news that is presented as trustworthy becomes questionable when examined closely. And, in so far as we become more responsible for our own judgements,  that will be a good thing.

May 31st 2009. Join the Group Read. Chapter 22. Can we be more efficient users of electricity?

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Evolved biases that made sense long ago now threaten to make us wilfully ignorant of real threat. Environmentalists must try to work with human psychology in making and "selling" policy.

I agree with David Purdy that the real issues that we need to collectively deal with today are the economic and environmental crises. But the character of these big issues is such that we won't get the right sort of solution to them from a Parliament that demonstrates the attitude we have seen towards problems of social choice.

Think about the deep nature of the big crises. The economic crisis was the end and failure of "gentlemanly capitalism"---a system by which agents (bankers) were assumed to be the trustworthy delegates of pension fund beneficiaries, shareholders, etc. But they weren't trustworthy, and ultimately they took down the financial system and the world economy with them. Rebuilding a way of allocating capital is an important political task today. But wouldn't we expect a group---our MPs---who have abused their own institutional position in such an analogous way, to be rather blind to the deep causes of the financial problem?

Similarly with climate change. Despite widespread recognition of the dangers of climate change and the sorts of action we need to take to counter it, there is a sense that collectively we continue to "fiddle our expense account with nature." Everyone's doing it, so no one's responsible ... We haven't been caught yet, so why not continue ... We're not bad, carbonophagy just creeps up on us ... We will have to change our systemic dishonesty to nature and to the future if we are to reduce our carbon emissions. But how can a group that has become institutionalised into a culture of "getting away with whatever you can" really change our political decision-making to tackle a problem which requires us to abandon exactly that thinking.

The way these bigger issues are dealt with will reflect the institutions through which our collective wills are exercised. And the nature of the issues suggest that Parliament as it now stands will not generate the right kind of understanding of the world to solve these bigger issues.

May 10th 2009. Join the Group Read. Chapter 21. Efficient Heating

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There are three strategies for reducing the carbon footprint of keeping warm: reduce the temperature difference between the inside and outside; reduce heat losses from inside to outside and increase the efficiency with which energy is transformed into heat.

The first two seem obvious and cheap solutions. We hear a lot about "nudging" as a policy, and this seems an ideal area for clever devices to make people aware that they could be heating less and leaking less heat. David does not mention my own favourite long term solution here---a widespread move to small exoskeletons as a substitute to housing: we should be able to walk around with our temperature control close to our bodies and our living spaces open to the elements.

David makes a powerful argument for heat pumps rather than Combined-Heat-and-Power plants, and slips in a big fault-line in eco-politics versus eco-engineering: energy transformation efficiency tends to rise as scale rises, whereas green politics loves to decentralise and make solutions small and local.

This chapter is full of low-ish tech, labor-intensive investments that make energy-efficiency sense today. This is just what government policy should be stimulating our economies with today.

Royal Bank of Scotland’s first quarter loss of £44m masks increased recession-related loss provisions, and includes significant revenues from the bank’s investment banking arm. It includes £1bn of accounting profit relating to the depreciation of the group’s own debt. 

Much of RBS’s increased revenue comes from continued derivatives trading, no doubt taking advantage of the unprecedented opportunities presented by international government support for the banking sector itself and central bank activity in the bond markets. 

The British Government proclaimed a return to sound banking, but it has washed its hands of any substantive involvement in deciding what the banks do. Instead, it and the taxpayer are busy funding a derivatives business.

So the hedgies are about to pack their bags and go to Geneva? Maybe we should give them a hand.

Let's grant that hedge funds do some useful global capital allocation work. Their work is essentially global, so in terms of  usefulness, it doesn't really matter where they are located.

But Britain seems to me to be particularly ill-equipped to welcome the industry. There are two political preconditions to being global money manager, neither of which exists here.

BBC Radio 4 carried a piece on 3 May covering Berkshire Hathaway's annual shareholder jamboree in Omaha, NE. It included an interesting interview with the sage himself, Warren Buffet. He is clearly a likeable, intelligent, and conscientious man whom one should respect. Inevitably, he was asked about the financial crisis and his view of the prospects. He was wise enough to say that neither he nor anyone else could predict when or by how much the economy might start to grow again. But he expressed two sentiments - and I think they are sentiments - about capitalism, specifically free-market capitalism, that are often heard and rarely challenged. They are these: (1) capitalism has provided a tremendous increase in living standards since WW2; and (2) the capitalist system will move forward into a new phase of growth.

There is no available proof or disproof for statement (1). Had some clearly different system whose aim was also to increase wealth done better or worse, we might be in a position to judge. The disaster of communism is no evidence that capitalism did this, because communism was not primarily intended to increase wealth measured with money. We don't know whether capitalism did a good job but believe it did for the simple, circular reason that that's what capitalism is for. We should also ask how far the enrichment of the US and Europe might have been at the expense of other people in the world and of the world's own natural resources. It is not self-evident that the solution to world poverty and inequality is capitalism in more countries and more capitalism in one country. I don't know that the statement is false, only that it is an article of faith rather than demonstration.

Statement (2) is more interesting. It offers a notion of progress, a hope that the future will be better than the past. Visions of a brighter future, particularly as a relief from present misery, are common to many ideologies and religions and this may be such a statement of faith. But if it's really a statement about the economic system as such, a prediction of long-run growth, then (a) it contradicts the (true) statement that economic outcomes are not predictable; (b) it expresses the political position that forever increasing wealth is the right objective for society; (c) it says that the human and social costs of the downturn - which must be ascribed to capitalism if the upturn is - are worth paying, so instrumentalising people; and finally (d) by reifying capitalism, it reinforces the idea that the capitalist market is objectively given. It also, of course, ignores what happens to those outside the charmed circle.

The need to question what we really mean by and want from capitalism is far from new, but it has certainly been put into sharper focus by the current economic troubles. Capitalism is part of the political system and can be changed. But that means the politics have to change too.

John Authers starts this otherwise disappointingly fluffy Long View video interview with Andrew Lo with these fascinating charts.

The top chart shows that it was getting tougher being a hedgie between 1998 and 2007. Whereas in early years you really could point to extraordinary returns, these were clearly getting harder to generate. Competition and arbitrage wasn't completely ineffective, we presume.

But the bottom chart shows what the hedgies did: they took on more and more leverage. That is, for a given amount of capital they were given to play with, theyborrowed more and more. In 1998, a hedge fund with $100m to gamble would borrow  $200m from the bank and gamble with $300m. The same $100m capital in 2007 was translated into a $1bn to gamble with. Returns fell about five-fold and leverage increased about five-fold ... making for a remarkable constancy in the take home $s of the hedgy.

Here is a plausible behavioural hypothesis. A whole lot of no longer so young men congregated on the big financial centers in the late 90s with the attitude of "we're here to dig for gold; the world owes us a pile of cash; now we just need to go about satisficing our modest goal."

May 4th 2009. Join the Group Read. Chapter 20. Transport

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David MacKay comes down softly on the car---which shows great realism---and finds that electrification is the only real solution there. He debunks hydrogen as a good energy carrier. Flying is a really tough case---there is not much that can be done to reduce its energy intensity. (I was sitting in an easyjet plane the other day that tried to convince me of its greenery by saying: "Flying contributes less CO2 than driving to the atmosphere" ...). Batteries are the way to go---though just wait for the peak lithium scares.

David has an interesting aside on nuclear ships. If we could make the (political) world safe for small-scale nuclear power, maybe there's more than ships that could benefit.

The Mail has this interesting story about a tax proposal hatched somewhere between Andy Burnham's DMCS and Mandelson's BERR to tax internet advertising to fund the BBC. I don't like the idea of shovelling more money at the BBC---I think there are lots of others providing public service content who need support (like us! Donate Here!)---but I like the idea of an online advertising tax.

Taxes are basically a good thing when you put a cost on something that needs some degree of discouragement. This is why a carbon tax would be good. Advertising---and especially online advertising---falls into that category. Every time an advertisment mis-sells a product, it should be counted as a pure social cost. Moreover, in a world of internet search, I do not believe that someone who is actively searching for a product actually needs advertising---searching does the job if you know what you're looking for. And if you end up buying when you don't know what you're looking for, I think that the likelihood of a mis-sell---of buying something which does not corespond to your considered desire---is very high.

That suggests that online advertising, which has a high private pay-off to the advertiser, also has a high externality, or social cost.

So, Mandelson: yes, go ahead and tax online advertising; but Burnham, please sort out a way to support non-BBC public service providers.

John Kay has a telling of Labour's economic record that I think is wrong -- he thinks there was "good Blairism" that sought to increase public provision without centralising decision-making and "bad Brownism" that sought to increase public spending and central control.

He writes:

"When Labour came to power in 1997, dissatisfaction with publics ervices such as health, education and transport was widespread, and justified. For two decades not enough money had been spent, particularly on capital projects. This underspending had contributed to weak and demoralised management, reservations about which led to a fear that simply allocating more cash would provide poor value for money.

There were two possible directions of reform. One – it might be described as Blairite – decentralised management authority and financial responsibility. The other – it might be described as Brownian – tightened centralised control and imposed performance targets on managers, with associated sticks and carrots. Both approaches were pursued, inconsistently, but overall with more Brown than Blair. When, by 2000, there was little to show in the way of beneficial results, the decision was made to spend lots more anyway. There were some service improvements, but the concern that the extra money would not be well spent proved largely justified."

Actually, I think there is very little evidence of decentralising Blairism anywhere. This is probably most visible in the rapidly abandoned regionalisation agenda.

Gillian Tett's micro-historical view of the crash is extracted in the FT. Quite apart from satisfying a sort of morbid fascination about which regulators had what wooled pulled over their eyes, it highlights another aspect of the great waste of the last 20 years of finance-mania: what passed as innovation.

In this extract, she tells the story of one team of bankers doing the first securitisation, or "Bistro" deals as they were then called. The "innovation" seems amazingly paltry: "let's bundle some loans together and resell them". It seems an absolute triumph of form over substance. It is "innovation" from an age that thinks that packaging is an art. Harry Markowitz, a 1950s economist, formalised an investment practice that had been known for thousands of years: you don't put all your eggs in one basket. What the bankers did in the Tett story was to offer a very slight increase in the number of baskets available for egg-storage. This is innovation in the same way that the stall-holder at my local streetmarket innovated when she offers a basket of mixed apples and pears for a pound, rather than offering only apples or only pears. (I will congratulate her on her breakthrough next time).

The "innovation", of course, was not in weaving another basket. It was in tricking regulators to accept that some magic had been done to make risk disappear. What is fascinating in the Tett story is how that regulatory bamboozlement happens. Find a firm that falls outside the regulations; get them to perform the magic trick; then get your regulators to feel that if they won't let you claim magic, they'll lose their regulatory empire.

The Virginia and Chicago schools of economics love regulatory competition. This is exemplified by the image of "voting with your feet": if you are abused by one sovereign, some degree of regulatory competition means you can move to another sovereign. This "divide and rule" should help keep sovereigns honest.

But the trouble is that the process does not keep sovereigns honest---it forces them in the direction of those who can exert pressure. So if the pressure is to be dishonest, this is a recipe for making sovereigns even worse than they naturally would be.In the case Tett describes, this is a process of putting pressure on a regulator to ignore proper misgivings.

Yet another case where we'll have to learn that competition is not good per se, but good only if the pressure moves us in the right direction. The religion of competition from Chicago and Virginia, just like the innovation in the finance sector, is the abandonment of substance to form.

Here's an excellent piece of rapid debunking of Treasury rhetoric by Robert Chote, Director of the Institute for Fiscal Studies.

The basic point he makes is important. The Treasury would like to write recent economic history to be as consistent as possible with the "end of boom and bust" Brown used to boast of. The official account from the budget is that "the productive potential of the economy grew by almost 3½% a year inLabour's first term and then by roughly 2¾% a year thereafter until thecrisis hit and trend growth fell to 1% a year for three years". Odd to make "trend" growth fall for just three years, isn't it?

As Chote says, the alternative (and more plausible) view is that trend growth has been pretty constant at 2.6% since 1997, but that worldwide falling prices (from ex-USSR raw materials and Chinese workers) blinded policy-makers to the fact that they were running highly inflationary policy throughout the period when growth was higher than trend. So the end of "Tory boom and bust" in fact meant the arrival of Gordon's alternative: "HUGE boom, followed by HUGE bust".

 Over and above the intrinsic interest of the analysis, there is an important point here about the political manipulation of history. Why are public servants involved in massaging facts for political reputations? Can we have a real Parliament with the equivalent of the US's Congressional Budget Office  since we can no longer trust the Treasury to give us plain data?

James Kwak has a great post about cultural transmission between Wall Street and the Treasury. It could just as easily have been written about the City and Westminster for the UK. Krugman also has a deflating piece saying: "First, there’s no longer any reason to believe that the wizards of Wall Street actually contribute anything positive to society, let alone enough to justify those humongous paychecks.". John Kay has a similar point about the infection of public service by the banking lobby: "But the illusion was at its most influential at the highest levels of government. Investment bankers had become the most powerful political lobby in the country and there was no vestige of political support for action to restrain City excess. Light touch regulation was not just a matter of policy but a matter of pride."

Why this flurry of meta-economic pieces? It used to be the ultra-liberals from West Virginia who were preoccupied with the process by which lobbies turned policy to their advantage. When centrist economists start to blog about Bourdieu, the French structuralist Marxist sociologist, something important is happening.

I think these pieces reflect two undercurrents. The most immediate is that the bankers seem to have won. They have been bailed out, they can now grow again, and, importantly, so can their bonuses. This seems extraordinary: while we have been waiting for reform of this value-destroying sector to churn slowly out of the political process, the banks have been rebuilding their balance sheets and now claim a return to profitability.We may have a generation of high taxes to payfor the bail-out, but it seems the party is back. In disbelief, the economists are searching for tools that can analyse the causes of this scandal, and Bourdieu is a pretty good start.

The second undercurrent is the realisation from within the profession of economics that it is powerless. When push comes to shove, wonga rather than right wins. A crisis for a discipline makes it turn to others who had a better theory of the role of knowledge in society.

Gideon Rachman is the emblematic "good liberal" of my generation. He viewed the world from his office at the Economist since the late 80's and saw the unfolding of the idea of individual freedom---a sort of British, whig ideal of the Victorian era--- and reported its good progress. Since moving to the FT a couple of years ago, that view has been harder to sustain. In December '08, he became a europhilic advocate of world governmen. During the latest Gaza war, he reported the thrill of the return of history in our lives. And today, he almost writes that Thatcherism is dead.

 Almost, because he feels that if the Alternative cannot supply an alternative "ism", the last hegemony holds its place.  Although I don't think that is true --- beliefs can be generally seen to have failed before a new model emerges --- he is right that the difference between 1979 and 2009 is that Thatcher used the economic crisis of the winter of discontent to launch a coherent assault on all that was wrong with the late bi-partisan Keynesianism of 1966-1976.

But Gideon choses the wrong date for comparison, I think. 2009 is like 1974, not 1979. The failure of modernising Keynesianism was clear then, in its response to the oil shocks. But the inertia of old system  extended its life for another five years. During that time, the ideas of Chicagoism was turned into the politics of Thatcherism. 

Expect the same sort of timetable today. Our political systems, entirely captured by the finance industry (read this De Long post, please), will have a final go at making money manager capitalism work. It will fail just as the reflation of '74-5 failed. The game-changing election to prepare for is 2015.

 “Budget 2009: Building Britain’s future” was the title of Wednesday’s budget report, published by the UK government.  But on what will this future be built?  

April 21st 2009. Join the Group Read. Chapter 19. The basic solution

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Assume: a) we can't change energy per capita too much; b) we can't change the capita (ie no creepy population control) and we still want sustainability ... The basic solution is: 

1. electrify transport

2.  electrify space heating

3. produce electricity with whatever local renewables we can, augmented by clean coal, nuclear and imported solar from desert regions.

Sounds simple, no?

It very well may be that we are witnessing the beginning of the end of financial capitalism. This is becoming a popular refrain, and one certainly being taken up by a number of our contributing authors on the Dictionary of Ethical Politics, who are each proposing some interesting solutions to this particular econocrisis. See how Hazel Henderson, Charles Eisenstein, and David Korten are attempting to reinvent economics to serve the needs of the 21st Century.

As European progressives seeking to allay contemporary anxieties look to Obama's US for comfort, they may be inspired, but should not assume that this is a model for what is needed in the ‘Old continent'.

Should those eager to rule protectionism out of order as a tool for growing sustainable economies prevail, even in an economic crisis?

A viable Palestinian economy is impossible without disengagement from the Israeli economy, thoroughgoing reform of the Palestinian Authority, not to mention lifting the siege.

The financial logic of neo-liberal capitalism has devoured the world and exhausted itself in the process. A new model beyond "financialisation" is needed, says Saskia Sassen.

(This article was first published on 1 April 2009)

From the FT on what's happening at the G20:

"A large police presence kept under control a small group of protesters playing a game of Monopoly outside the London Stock Exchange on Thursday morning."

I hope no one cheated and that the police kept an eye on that, too.

The global economic crisis is rooted in failures of governance in the rich world whose harshest effects fall on the poor. The remedy, says Stephen Browne, must be a rethinking of approaches to aid, trade, finance and the way multilateral institutions work. The London meeting on 2 April 2009 is the place to start.

Paul Hilder from Avaaz will give us a write-up of what the poll tells the G20 leaders.

The financial crisis afflicting much of the world is part of more fundamental shifts in the world's economic power-balance. It is time for a new model of global governance that recognises the reality of current trends - starting with the creation of a Global Strategic Council, says Krzysztof Rybinski.

(This article was first published on 4 December 2008)

The university is a space of public freedom and part of the fabric of democracy. That is why we should sign the petition to keep UEL open during the G20

March 30th 2009. Join the Group Read. Chapter 18. A first balance

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This is the first chapter attempting to balance-up consumption and production. While the story told so far of the raw energy potential from renewable sources shows an ecouragingly close race to maintain our rich lifestyles with sustainable energy sources, a little digging provides much disappointment. Between the potential and the realisation lies a factor of over 100! From a production potential of 180 kWh per day per person, we get to an actual production figure of just 1 kwh/d/p and a "realisable" estimate of 18 kwh/d/p---a full ten times less than our consumption.

Looking at the heart of the physics problem, David MacKay points to the geographically diffuse nature of renewables: each person needs a huge amount of land, tidal exposure, wind per person to make the sums add up. The sustainable potentials, as David emphasises, need "country-sized solutions". "To get a big contribu- tion from wind, we used wind farms with the area of Wales. To get a big contribution from solar photovoltaics, we required half the area of Wales. To get a big contribution from waves, we imagined wave farms covering 500 km of coastline. To make energy crops with a big contribution, we took 75% of the whole country."

Yet protection of species, habitats, nature, beauty etc. all move the same people who want to reduce fossil fuel dependency to limit the installations. Something will need to give to balance our energy ...

At the first signs of a cessation of the conflict in Gaza, tunnel building recommenced. They are both goldmines and graves

A perilous fusion of land and climate crises is at the heart of the problems consuming the planet. But the G20 summit in London won't help, says Sue Branford.

The financial plans of Barack Obama and Ben Bernanke will drain life and energy from the rest of the planet, says Krzysztof Rybinski.

(This article was first published on 18 March 2009)

Once a physics teacher in Uzbekistan, Shukhrat has to work as a builder in Russia to keep his family alive. He has been robbed, cheated, almost burned to death deliberately. Welcome to the life of a migrant worker..

The efforts of world leaders to find solutions to the economic crisis are intensifying. The last preparatory meeting before the leaders' summit on 2 April 2009 shows what needs to be done, says Katinka Barysch.

March 15th 2009. Join the Group Read. Chapters 14 and 15. Geothermal and Public Services

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It matters where the energy is: lots of heat just 100km under our feet doesn't help much although manufacturing earthquakes might, just a bit. We're not Iceland which can rely on geothermal heat closer to the surface to operate huge aluminium smelting plants. So we can (almost) forget geothermal. Public "services" like a well-equipped army or well-heated academics also consume. Maybe some demand should be counted as production if it can be sustainably avoided by our efforts?

Next week is the first chapter looking at the overall balance of demand to potential renewable supply.

An activist approach by the European Union towards the economic troubles on its eastern flank would do more harm than good, says Anand Menon.

(This article was first published on 6 March 2009)

March 8th 2009. Join the Group Read. Chapters 14 and 15. Tides and Stuff

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Tide farms, tide barriers and two-way tide pools sound very attractive. And they won't make the world stop turning. Unfortunately, even for the rather tide-rich British Isles, we can only really hope to cover something about equivalent to our lighting and gadget energy consumption this way. And the economics of building large installations are not yet clear. Stuff, on the other hand, is much less attractive. Just making and transporting it -- TVs, food, drink, packaging, cans, computers ... -- is our biggest single consumption category. Reducing the stuff-intensity of well-being seems like a good goal.

Feb 23 2009. Join the Group Read. Chapters 12 and 13. Wave and Food

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In which we learn that to get by on wave power you need to be very very insular -- that is, have a small number of people per unit length of exposed coastline (sounds like a nice place to me, but the British Isles don't fit the description) -- and also that our food habits, especially for red-blooded carnivores with meat-eating pets -- amount to more than half our driving habit in energy. There is a real energy case to be made for vegetarianism (approximately twice as efficient) and even more for veganism (another doubling).

Many of the sessions at the convention here today are about the state of our politics. We have had 30 years of governments who talk the talk of Liberty. They have presided over an era of centralisation, nannyism, a drip-drip erosion of civil liberties and a perpetual disregard for the spirit of democracy? What can we do about it?

In this context, a session on "Love and Liberty" may seem strange, almost an embarrassment to bring "love" into play at a political convention. The proposition we are exploring -- even proposing -- here is that "love", somehow understood, is a critical missing ingredient in our attitude towards the social and political world, and that without it we have no foundation for civil society or for the true flourishing of humanity that is at the heart of liberty.

Our four panelists will all bring a different interpretation of what that "love" is. For Mike Edwards, thinker, writer and development expert, there are personal attitudes and dispositions of care and friendship which can build mutually reinforcing cycles of political and personal change. Sheila Rowbotham, historian and philosopher of feminism, describes in her recent biography of Edward Carpenter a life that seeks to unite "inner" and "outer" democracy, making a politics out of the everyday experiences of work, sex, home and community. Marina Warner, cultural critic and feminist writer, highlights the importance of the imaginary and the aesthetic in shaping political possibility. Satish Kumar, a spiritual voice of ecology, brings the love of nature and the change of consciousness it requires to centre of building a good, just and sustainable world.

So what has love got to do with it?

For the very radical early nineteenth century Jeremy Bentham, a world ordered by the calculation of utility---the greatest good for the greatest number---is one that has at its core all the natural sympathy and egalitarianism that progress requires. Social problems become technical problems of calculation; society is a causal and computational nexus of utilities. Utility was a kind of civic religion.

However, the "short 20th century" was marked by the horror of the hubristic, dehumanising reason that this sort of technocratic view eventually produces. We should remember Hannah Arendt's view of totalitarianism: it is not evil that creates horror, it is action in the absence of thought. Much of the loss of civil liberty that forms a reason for our coming together can be seen as excused and caused by that view of politics as "the rational adminsitration of things" (in the words of Saint Simon, strange John the Baptist for the database state). Security and efficiency, all go with discretionary executive power.

We will be exploring the role of the emotional, affective, aesthetic, personal, cultural and dispositional in creating another sort of politics, one which really can deliver a modern liberty. There is a long tradition of the serious examination and analysis of "civic religion" -- of the types of consciousness that society must make possible in order to be a good, just and free society. From Rousseau through JS Mill, as well as later in the syndicalist and anarchist traditions, there is a sense that the emotional attachments to society matter to politics. This is what this session is about.

A reverse-angle perspective on global economic realities, from Nadeem Ul Haque.

(This article was first published on 23 February 2009)

Feb 23 2009. Join the Group Read. Chapters 10 and 11. Offshore and gadgets

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Offshore wind seems intuitively a nice option for an island liuke Britain - out of the sight, a sort of power belt that you can see from high places on a clear day. The energy is indeed there - about as much as we use for our heating and cooling. But you'd need an aweful lot of turbines and a massive investment. (Would we then have to worry about the birds?)

What about our chargers and gadgets? There is a myth that they are responsible for the developing "power gap" -- all those new power stations we will need over the next 20 years as the big nuclear power stations are decommissioned. Well, it turns out to be quite small - about the same energy consumption we use for lighting.

Just like to repeat a big thank you to David MacKay who has been very supportive of this project, and to William Sigmund without whose amazing html and perl skills I do not think we would have had an online version to work with.

The reflationary stimulus in the UK and USA will not work because these countries no longer have the social capital and national cohesion that can commit them to honestly paying the debt back in the future. The social capital constraint changes the policy outlook

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If the crisis turns into a new Great Depression, it will most likely be due to a breakdown of cooperation among the major economies. But sustaining international cooperation requires domestic support; ignoring the demands of poor and middle-class citizens for relief will inflame more extreme anti-globalisation views, making international cooperation much more difficult.

If the current crisis turns into a disaster on the order of the Great Depression, it will most likely be due to a breakdown of cooperation among the major economies. The history of the modern world economy - and especially of its collapse in the 1930s - makes clear that the principal powers have to work together if they are to maintain an integrated international economic order.

International cooperation needs domestic support for openness

Yet governments are only able to make the sacrifices necessary to sustain international cooperation if they can rely, in turn, on domestic political support for an open world economy. National publics unconvinced of the value of international integration will not back policies - often costly and difficult policies - to maintain it. This can lead - again, as in the 1930s - to a perverse process in which global economic failure undermines support for economic openness, which leads governments to pursue uncooperative policies, which further weakens the global economy.

On both dimensions, international and domestic, we are in trouble. So far, despite high-sounding internationalist rhetoric, governments have responded to the crisis with policies that take little account of their impact on other nations. And the crisis has dramatically reduced domestic public support for globalisation, and for national policies to sustain it.

Why reasonable governments do unreasonable things

On the international dimension, the threat is not so much of explicit protectionism but rather of nationally specific policies that impose costs on others, directly or indirectly.

These beggar-thy-neighbour policies are not normally the result of some inexplicable bloody-mindedness on the part of venal governments, or of purposeful antagonism toward rivals. They are, instead, desperate attempts to defend national economies from gathering storms. But they impose negative externalities on other countries, and in so doing can provoke hostile reactions that can drag all parties concerned into bitter conflict.

Not out of arrogant nationalism but out of domestic desperation

The early-October Irish blanket deposit guarantee, implemented with the perfectly understandable goal of avoiding a bank panic in a small and vulnerable economy, nearly induced a run on British banks as British depositors rushed to transfer funds from British to Irish banks. The current American financial bailout is drawing capital from the rest of the world - including from emerging markets that urgently need it - not out of arrogant nationalism but out of domestic desperation. And the buy-American provisions of the current stimulus package demonstrate the ease with which well-intentioned policies can turn into uncooperative predation.

The range of policies of this type - sincere national initiatives with counter-productive international implications - is virtually endless.

Negative externalities galore

Support for troubled national firms can turn into anti-competitive subsidies to national champions. Currency depreciation, a common recommendation for difficult times, can put competitive pressure on trading partners, leading to round after round of "competitive devaluations." Debt-averse governments can limit the size of their fiscal stimulus, thereby free riding on the deficit spending of neighbours. Countries with intolerable foreign debt burdens can seek debt write-downs that further cripple creditor-country financial markets. And all of these can interact to create powerful protectionist pressures. One country's fiscal stimulus can "leak" into a neighbour, draw in a surge of imports from the neighbour, and provoke a bitter protectionist backlash.

Even with the best of intentions, governments can act in ways that drive wedges among countries, block cooperative responses to the crisis, and ultimately make everyone worse off. And despite today's flowery rhetoric, there is little evidence that national policymakers are willing or able to take into account the international implications of their actions.

If this pattern continues, it will be a major obstacle to a rapid recovery.

Will anyone speak for the rest of the world?

National governments rarely consider global consequences, because their constituents are domestic and national publics are very sceptical about the contemporary world economy.

Even before the crisis hit, there had been real erosion in popular support for globalisation. Economic integration has come to be associated with job losses, competitive pressures, and a worsening of income distribution in developed and developing countries alike. Nearly universally, the lower registers of the income distribution are most dubious about the benefits of international economic integration, and these doubts are particularly widespread in more unequal societies.

The crisis has heightened suspicion of a world economy that appears to be the source of much of our current predicament. There is increasing resentment that the expansion of the past ten years primarily helped the wealthy, while the poor and middle classes are being asked to sacrifice to deal with the hangover of the binge. This is coupled with similar resentment that governments appear to privilege the concerns of international banks and corporations. There is an advancing popular view that insulation will help reinforce national attempts to deal with the crisis.

National publics will increasingly resist making national sacrifices in order to honour international economic obligations. Meanwhile, concentrated interests who support globalisation - such as the international financial and corporate sectors - have been undermined by international economic weakness. Broad popular sentiment is increasingly widespread and powerful that national responses to the crisis must take priority over international obligations.

Attention must be paid: Crisis's impact on income distribution

The impact of the crisis on income distribution cannot be ignored, for it will determine much of the politics of government responses to the crisis. Ignoring the demands of poor and middle-class citizens for relief will inflame more extreme anti-globalisation views, making international cooperation that much more difficult.

These two dimensions, the international and the domestic, are closely interrelated. The less domestic support there is for globalisation, the harder it will be for national governments to reach cooperative agreements with partners. The less international cooperation there is, the greater the likelihood of a deterioration in the global economy. As in the 1930s, beggar-thy-neighbour policies, distributional conflicts, and international economic stagnation could feed on each other in a downward dance.

Into the maelstrom?

Governments have to act consciously to counteract this dismal possibility.

• At the domestic level, governments need to work out an equitable and politically sustainable allocation of austerity across the population. This means ensuring that those sectors of society hit hardest by the crisis are not also the ones asked to bear the stiffest sacrifices. Societies with existing social safety nets will have to expand them and make sure they work for wider segments of the population than they were planned. Countries with weak or non-existent social programs for the victims of crises such as this will have to create them, and quickly. By the same token, basic principles of equity - and even more basic political realities - demand that those who received the main benefits of the boom have to bear their share of the costs of the bust. Governments that ignore the social and distributional implications of the crisis are likely to find themselves either driven toward extreme and counter-productive policies, or swept away. Even sustaining existing social programs is extraordinarily difficult in such hard times. This is true of all governments, which face powerful fiscal pressures as tax revenues dry up and demands for spending soar. The difficulties are especially challenging for developing countries, many of which have lost whatever access they may have had to external sources of capital. Yet governments that do not provide effective relief to those hardest hit by the crisis face the prospect of dramatically increased social and political strife, which will only deepen the disaster.
• At the international level, governments need to work just as consciously to coordinate not just words, but actions. This will not happen of its own accord. So far, the solidarity of OECD central bankers has been impressive. However, this builds upon a long-standing tradition of the solidarity of central bankers, and upon decades of institutionalised collaboration, and can only take us a very short part of the way. There is nothing analogous on other dimensions.

The free interplay of government policies will not spontaneously bring forth international cooperation
Jeffrey A Frieden is Professor of Government at Harvard University. This article is based on a column in Vox. Additional material by Dennis Nottebaum
Collaboration among governments has to be intended, designed, and monitored. This almost certainly requires some international institutional framework, some set of agreed-upon rules and ways of enforcing them. The governments of the major economic centres need to consult regularly on the international dimensions of the crisis, and of its resolution. They need to hold each other to account, and they need some reasonably independent mechanism to identify policies that risk driving governments toward conflict rather than mutual assistance. Other foreign policy goals can and should be linked to supportive efforts on the economic front.

Conclusion

If governments do not pay real attention to the domestic distributional impact of the emergency, and to the international implications of their national policies, the current calamity will feed on itself. The Great Depression of the 1930s was more a failure of national policy, and of international cooperation, than it was a failure of markets. Success in confronting the current crisis will similarly depend on socially responsive and viable national policies, and on globally responsive and viable international cooperation.

Benjamin Constant, at the dawn of the industrial revolution, warned we needed both indicidual and collective notions of freedom to survive if modernity were not to turn into tyranny. In this new technological dawn, we face the same threat and should look once again at Constant's lessons

Feb 7 2009. Join the Group Read. Chapters 5 and 6. Flight and Solar

(Instructions on how to join are at the bottom of the original post)

Will solar energy technologies allow us to sustainably take those long-haul flights to get our winter dose of sunshine? On the way, we discover that flying intecontinentally once per year has an energy cost slightly bigger than leaving a 1 kW electric fire on, non-stop, 24 hours a day, all year, despite the fact that modern planes are twice as fuel-efficient as a single-occupancy car. It may be no surprise, therefore, that Airline businessman Michael O’Leary, CEO of Ryanair, has developed a Swiftian the solution to the problem: " The best thing we can do with environmentalists is shoot them."

Just like to repeat a big thank you to David MacKay who has been very supportive of this project, and to William Sigmund without whose amazing html and perl skills I do not think we would have had an online version to work with.