Monthly Archives: May 2015

The Nordic model: a beneficial culture for Britain

 

tim harfordTim Harford, the Financial Times economics leader writer and author of ‘The Undercover Economist Strikes Back’, won the Royal Statistical Society’s 2010 award for statistical excellence in broadcast journalism.

He raises an important subject, comparing the tax-raising regime in Scandinavian countries with that in Britain: Denmark, Norway and Sweden receive taxes worth about 45% of GDP according to economist Henrik Jacobsen Kleven – 10 points higher than the British take. The following text follows Harford’s theme, supplemented by an Economist article and Wikipedia entry on the Nordic countries.

Scandinavian “universalist” welfare states aim to enhance individual autonomy, promote social mobility, ensure the universal provision of basic human rights and stabilise the economy. They rank highest on the metrics of real GDP per capita, healthy life expectancy, interdependence, perceived freedom to make life choices, generosity and freedom from corruption.

nordic welfare model graphic 2013Jon Kvist: Institute of Society and Globalisation, Roskilde University, Denmark

The Nordic model emphasises maximizing the labour force, promoting gender equality, extensive benefit levels, income redistribution and maximisation of public participation in social decision-making. This also operates in the workplace as employers, trade unions and the government, negotiate terms as a social partnership, rather than having conditions imposed by law. Other strengths:

  • free education,
  • universal healthcare,
  • strong property rights,
  • contract enforcement,
  • overall ease of doing business,
  • public pension plans or
  • union-run unemployment funds.

Transparency

Comprehensive tax reporting in Scandinavia makes evasion very difficult. Norwegian tax returns are published for all to examine. An Economist article amplifies: “The performance of all schools and hospitals is measured. Governments are forced to operate in the harsh light of day: Sweden gives everyone access to official records. Politicians are vilified if they get off their bicycles and into official limousine.”

Tax

The Nordic welfare systems are mainly funded through taxation: Sweden at 56.6% of GDP, Denmark at 51.7%, and Finland at 48.6% reflect very high public spending. A large number of public employees work in various fields including education, healthcare and the civil service. They often have lifelong job security and make up around a third of the workforce (more than 38% in Denmark).

Harford points out that the UK system needlessly excludes swathes of the economy from tax. Rather than charge a 10%t rate of VAT on everything, the UK government charges a 20% rate of VAT on roughly half of what consumers spend.

He concludes that the simplest way to broaden the tax base is to dismantle barriers to getting a job, putting entitlement programmes on sound economic foundations: “Scandinavian governments subsidise education, transport and care for children and the elderly, all of which help people to work who might otherwise find themselves stuck at home. As a result, even high taxes do not keep them out of the labour market”.

True free trade

Though they employ 30% of their workforce in the public sector, compared with an OECD average of 15%, they are true free-traders who resist the temptation to intervene even to protect banks (following the lessons learnt in the ‘90s) and iconic companies: Sweden let Saab go bankrupt and Volvo is now owned by China’s Geely.

Tempering capitalism

The Economist notes that Nordic countries look for ways to temper capitalism’s harsher effects. Denmark has a system of “flexicurity” that makes it easier for employers to sack people but provides support and training for the unemployed, and Finland organises venture-capital networks.

The anonymous author concludes: “A Swede pays tax more willingly because s/he gets decent schools and free health care. The generous Nordic welfare states have negotiated far-reaching reforms with unions and business lobbies to sharpen performance”.

A prescription for Britain? So near and yet so far below par

nordic countriesThe Nordic culture has been arrived at by rooting out corruption and vested interests and a readiness to forage for good ideas across the political spectrum. It would be good to believe the Economist’s conclusion: “The world will be studying the Nordic model for years to come” and – even better – to see action under way for beneficial change.

Will Government consider new tools for the Bank of England?

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The first proposal has been made by Mark Blyth, Eastman Professor of Political Economy at Brown University; Eric Lonergan, Fund manager, M&G Investments; and Simon Wren-­Lewis, Professor of Economic Policy at the Blavaynik School of Government, Oxford University.

Stimulating demand – QE for the people

They note that government policy is based upon a belief that now the crisis is over, the private sector will flourish and interest rates gradually normalise. But rather than relying on policy-­making based on hope, the writers propose that the government legislates to enable the Bank of England to make payments directly to the household sector – quantitative easing [QE] for the people. They refer to evidence that transfers to the household sector have a great impact on demand; consumers appear to spend between a third and a half of any cash windfalls.

Funding job creation

Positive Money adds to this, “When new money is created, it should be used to fund vital public services or provide finance to businesses, creating jobs where they’re needed, instead of being used to push up house prices or speculate on the financial markets . . .”. This proposal would enable the increased household demand to be met by domestic suppliers, reducing the trade deficit.

And transforming Britain’s buildings and energy supply

The Green New Deal Group advocates that a programme of ‘green quantitative easing,’ rather than propping up failing banks, could help to reduce the public debt and kick-start the transformation of the UK’s energy supply and housing stock, creating thousands of new green-collar jobs.

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Will government expand the Bank’s mission: “Promoting the good of the people of the United Kingdom by maintaining monetary and financial stability” by adding purposeful work for all, including the building of an environmentally sustainable housing and energy supply?

The growth of a Westminster voice in favour of more integrated, global policymaking – the fourth largest unofficial ‘party’: Simpol

“Simpol has always been a powerful voice for progressive global politics – and it just got louder”.

simpol latest headerSimultaneous Policy (Simpol-UK), the voice for global solutions in parliament, has become the fourth largest unofficial ‘party’ in Westminster. There has been a 38% increase in elected MPs pledged to implement its global justice agenda. The group includes candidates from all the major parties – including Conservative, Labour and the SNP – who echo their national success by making up 31% of Simpol’s parliamentary collective.

The Simultaneous Policy campaign invites citizens in the UK, and citizens around the world, to use their votes in a powerful new way to encourage politicians to solve global problems like global warming, financial market regulation, environmental destruction, war, and social injustice. By supporting Simpol they are telling politicians that they will be voting in future national elections for ANY candidate, within reason, who has signed the pledge; a declaration of support for a process leading to the simultaneous implementation of a range of policies to solve global problems.

john bunzl 2Co-founder and director John Bunzl says: “Following a pre-election campaign that saw 630 candidates from across the party spectrum sign its pledge, the citizen-led Simpol campaign is celebrating an increase in its representation in the House of Commons – with 29 elected MPs now confirmed. The number makes Simpol’s collective of MPs the fourth largest unofficial ‘party’ in Westminster”

The MPs who signed this pledge could prove a decisive voice in favour of more integrated, global policymaking in the next five years. The pledge’s condition of simultaneous implementation avoids any nation suffering a first-mover competitive disadvantage – something that presently hampers substantive agreement on issues such as corporation tax, tax evasion and climate change.

Simpol will be working with all its MPs to broaden support for the campaign in parliament. UK citizens are asked to sign the Simpol Petition to encourage more MPs to support the campaign.

Economic revolution – this time in the interests of the general public

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POSITIVE MONEY LOGO 2

“We’re working to change the UK money system, in order to create a fairer society and a more stable economy” say Positive Money – a movement to democratise money and banking so that it works for society and not against it.

Quantitative easing? When new money is created, it should be used to fund vital public services or provide finance to businesses, creating jobs where they’re needed, instead of being used to push up house prices or speculate on the financial markets . . .

pm conway hall 14People of all ages are rallying to support this work, see some of those attending their 2014 conference in Conway Hall London.

One adviser comments:

Positive Money text(2)

From their website:

We need a change. The power to create money should only be used in the public interest, in a democratic, transparent and accountable way. The 1844 law that makes it illegal for anyone other than the Bank of England to create paper money should be updated to apply to the electronic money currently created by banks . . .

Much of the post-election analysis has pointed towards the handling of the economy as a key factor in the party’s electoral success. But beneath the headline economic indicators is a far more complex picture. For millions of people, the recovery has barely been noticeable and the ratio of household debt to income will soon surpass its pre-crisis level.

A leading economist says:

martin wolf quote

Positive Money:

In the next Parliament we will campaign for Parliamentary monetary commission to be set up to analyse the role of money within banking. However, right now we are getting ready to head to 10 Downing Street.

pm no 10

We are taking our message, that money creation should only be used in the public interest, to David Cameron. Next Tuesday 26th May, members of the Positive Money team and supporters will deliver this petition (signed by over 12,000 people) to 10 Downing Street.

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Readers are welcome to join us! Email dora@positivemoney.org to find out how.

Can you help us reach 15,000 signatures before next Tuesday?
Share our petition: http://www.positivemoney.org/petition/

“Is Islam violent? I would say absolutely not” Professor M. Steven Fish

prof m steven fish“Is Islam violent? I would say absolutely not,” Steven Fish said in an interview, according to the New York Times.

Professor M. Steven Fish, a political scientist at the University of California, Berkeley, studies democracy and regime change in developing and post-communist countries, religion and politics, and constitutional systems and national legislatures. He is the author of Are Muslims Distinctive? A Look at the Evidence (Oxford, 2011), which was selected for Choice‘s Outstanding AcademicTitles in 2012: Top 25 Books.

It is the first major scientific effort to assess how Muslims and non-Muslims differ–and do not differ–in the contemporary world.

are muslims distinctive coverIn this book, he seeks to quantify the correlation between Islam and violence and found that murder rates are substantially lower in Muslim-majority countries and instances of political violence are no more frequent. Using rigorous methods and data drawn from around the globe, it reveals that in some areas Muslims and non-Muslims differ less than is commonly imagined, and shows that Muslims are not unusually religious or inclined to favour the fusion of religious and political authority.

Zack Beauchamp (Brown University and the LSE], pilloried by American rightwingers as an anti-semitic leftist hipster, quotes from the book: “Predominantly, Muslim countries average 2.4 murders per annum per 100,000 people, compared to 7.5 in non-Muslim countries. The percentage of the society that is made up of Muslims is an extraordinarily good predictor of a country’s murder rate. More authoritarianism in Muslim countries does not account for the difference. I have found that controlling for political regime in statistical analysis does not change the findings. More Muslims, less homicide”.

Fish further fleshed out these findings, for example by re-running the numbers to exclude non-Muslim-majority states with extraordinarily high murder rates (Colombia, El Salvador, Guatemala, Honduras, Jamaica, Lesotho, South Africa, and Venezuela). Countries with lots of Muslims were still less murder prone by a pretty large margin.

Turning to the Google Books extracts, differences are noted:

  • gender inequality is more severe among Muslims,
  • Muslims are intolerant of homosexuality
  • and democracy is rare in the Muslim world.

Other areas of divergence give Muslims the advantage:

  • less violent crime
  • lower class-based inequities

Professor Fish’s research findings have vital implications for human welfare, interfaith understanding, and the foreign policies of the United States and other Western countries.

As Seumas Milne in the Guardian put it: “The perpetrators of one attack after another, from London 2005 to Boston 2013, say they’re carrying them out in retaliation for the vastly larger scale US and British killing in the Muslim world”.

Extracts from Are Muslims Distinctive? may be seen here and a more recent article in the Washington Post by Professor Fish here.

John Kay, Professor of Economics [LSE] on the ’good corporation’

John Kay, whose remarkable career currently includes work as visiting Professor of Economics at the London School of Economics advises the Labour Party on its ‘rethinking of economic policy’.

In his FT article he focusses on the profit-making corporation a central institution of the modern economy. Though the writer qualifies his view of their status, remembering that many are subsidised by SMEs who perforce give them extended credit and that to date government, despite expressed intentions, have not addressed the matter. She also bears in mind that the European Commission’s SME Performance Review estimates the Gross Value Added of SMEs as €473 billion or 49.8% of the UK economy.

pcu3Setting aside that reservation, however, John Kay’s words are well worth putting before readers who receive alerts and also random visitors to this site from many countries – see last week’s stats, left.

John Kay stresses that the purpose of a profit-making corporation is not only to make a profit: “We must breathe to live but breathing is not the purpose of life.

The purpose of a corporation is to produce goods and services to meet economic and social needs, to create satisfying and rewarding employment, to earn returns for its shareholders and other investors, and to make a positive contribution to the social and physical environment in which it operates”. He continues:

The good corporation contributes relevant expertise to the formation of policy but does not engage in lobbying on a scale that corrupts political decision-making.

Like the good smartphone or the good school it can be identified by what it achieves:

  • It pays workers a living wage;
  • it does not engage in aggressive tax avoidance.
  • It develops the skills and capabilities of its employees
  • It does not bewilder customers with complex tariff structures.
  • It earns profits, reinvests some and pays a dividend to shareholders.
  • Its executives spend more time walking around offices and shop floors than sitting in the meeting rooms of investment banks.

Kay concludes: “The political and social legitimacy of the market economy and of the corporations through which it functions, cannot simply be asserted — as it has been in the market-fundamentalist rhetoric that has dominated economic policy for the past three decades. Its legitimacy has to be earned by the behaviour of the leading economic institutions. That social contract has too often been broken in recent years. And drawing attention to that breach, and the measures needed to regain trust, is an agenda that is not hostile but rather friendly to the long-term interests of the business community.