Category Archives: economy

Doreen Massey: government policy has been to acquiesce in and feed London’s voracious growth. Is this what we want?

Looking back through a Facebook page I saw with great regret that Professor Doreen Massey had died in 2016. After hearing her speak on Radio 4, I read her book, World City, Polity, 2007, and we corresponded by email several times. I think this photograph shows her warm and lively personality.

Yesterday, following input about ‘shrinking cities’ on WMNEG’s website, and as a belated tribute, some points made in that book will now be shared, selected from five pages of notes made at the time. Several references are relevant to the Grenfell Tower disaster. 

Extracts

In the world as a whole big cities are increasingly dominant and central to globalisation: the shining spectacular projects and the juxtaposi­tion of greed and need reflect their market dynamics.

The World Bank, one of the institutions whose policies have contributed to this massive flow of people into cities, has argued that it is through competitive cities that nations as a whole can develop.

Global cities are defined by their elite – the rest are invisible.

London is a political, institu­tional, economic and cultural power. Its influences and its effects spread nationally and globally but it increasingly overshadows everywhere else. National government policy accepts and also feeds its voracious growth.

Forces in the financial City took the lead in advocating and developing the deregulation that lies at the heart of globalisation; it is a command centre, place of orchestration, and significant beneficiary of its continuing operation.

Despite talk of `national sovereignty’, the first thing Margaret Thatcher did on coming to power in 1979 was to lift restrictions on for­eign currency exchange, to be followed in the mid-1980s by the deregulation of the City (the so-called Big Bang). A whole gamut of deregulatory and commercialisation policies, in pensions, housing, health care and education consid­erably increased the market for City activities.

Thatcherite policies benefited the private sector, financial services, the middle classes, London and the South East at the expense of the public sector, manufacturing, the old industrial regions and the working classes.

The colonisation by private capital of industries and services formerly provided by government – the utilities under Thatcher and Major, signifi­cant parts of the welfare state, especially health and education, under Blair – led to London’s reinvention and resurgence.

Policies of competitive individualism and individual self-reliance have been promoted –  people have been encouraged/required to take much greater financial responsibility for their own housing, pen­sions, health care and education. Previous notions of mutuality have been abandoned and the idea of the public good has been system­atically undermined.

The world’s biggest interna­tional financial centre

From the mid-1960s the City took advantage of an offshore status manufactured by British taxation policy . . . and became an off­shore extension of New York, creating a major market in eurodollars which now makes it the world’s biggest interna­tional financial centre. It has been a lucrative subservience, for some: out of this that the new elite has been born.

The emergence of the new elite includes those involved in business services as well as finance: real estate, renting and business activities. Advertising, research and development, accounting, auditing and taxation, legal serv­ices, market research and consultancy, personnel recruit­ment, renting of machinery and technical consulting, investigation and security have grown rapidly as part of London-global-city.

For the ultra-rich few, this country is now a vir­tual tax haven and princes, tycoons and oligarchs are making it their home. Others are attracted by the lucrative opportunities in the City – more than one in 10 professional staff in the City of London come from coun­tries outside the EU and the US, including the plunderers of Eastern Europe and the old Soviet Union. A report on French people working in the UK found 69% of them in London and half of those are working in finan­cial services in the City.

 The pattern of British chief executives’ pay is now openly modelled on the American lead

Directors paid 113 times more than the average UK worker in 2005 are awarding each other their increments. Over the last five years the average salary of a chief executive in Britain’s leading companies, including bonuses, has more than doubled, just as American remuneration has grown – bearing little relationship to company performance. This has resulted in levels of inequality far higher than in the major economies of continental Europe.

Such high salaries make London the most unequal city, and London and the South-East the most unequal region in the UK.This inequality of the extremes is character­istic of the `Anglo-Saxon’ version of neoliberalism and it is growing.

The exuberant, champagne-swilling claim of the success of London’s reinvention is, however, almost always hedged about with a regretful caveat – `but there is “still” poverty too’. The success and the poverty of London are the com­bined outcome of politico-economic strategies, establishing a two-tier society, corporate greed and the privatisation of need in the capital and at national level.

Some facts are indisputable. Inequality between rich and poor, the glaring starkness of class difference, is more marked in London than anywhere else in the country

  • Unemployment in Inner London is higher than in any other subregion in England, while Outer London hovers around the national average; on almost any index there is an enormous geographical variation between boroughs.
  • London has the highest incidence of child poverty, after housing costs have been taken into account, of any region in Great Britain.
  • The gender pay gap is wider in London than in Great Britain. London has local authority areas with both the highest and the lowest rates of means-tested benefit receipt in the country.
  • Nearly a quarter of London’s children (24 %) are living in households dependent on Income Support’ whilst the rate for Great Britain as whole is 16 %, and London’s rate is the highest of any region.
  • Poverty is common among pensioners, too; in Inner London, a quarter of people aged sixty and over are on Income Support  – only 15 % in Outer London and in Great Britain.
  • Homelessness and overcrowding are higher in London than elsewhere. The differ­ence in life expectancy, is stark even between the boroughs of London.
  • On average, women in Kensington and Chelsea live nearly six years longer than women in Newham; and men in Kensington and Chelsea (again) live nearly six years longer than men in Southwark .

People are trapped in poverty because of the high cost of living, and the cost of getting to work Those currently dependent on benefit find that loss of entitlement to benefits, particu­larly housing benefits can com­pletely erode gains from entering employment.  The higher cost of housing, transport and childcare are important factors in explaining the pattern of disadvan­tage in the city.

Within the UK the old ‘North-South divide’ has widened and has increasingly taken the form of an ever-­expanding London versus the rest of the country

The New Labour government & London-centred private capital share an understanding of London/the South-East as the golden goose of the national economy – the `single driver’ of the national economy – which lays golden eggs for everyone.

There is an insistence that encouragement to `the regions’ must in no way be allowed to challenge, question, or in any way restrain the growth in London and the South ­East of England. Her Majesty’s Treasury, in a joint document with the Department of Trade and Industry, argued that `attempts to address regional differentials must be done by a process of levelling-up, not levelling down … whilst regional economic policy must aim to strengthen the indigenous growth potential of all regions, the focus should be on the weakest regions, without constraining growth in the strongest’ .

Brain drain

London’s growth over recent years and as planned for the future, requires labour with degree-level qualifications. It is demand for this kind of labour that dominates the net increase in employ­ment in the capital. London does not provide all of this and in consequence draws in professional people from abroad and from the rest of the country.

Many workers come from Eastern Europe and the global South. London is dependent, for instance, on nurses from Asia and Africa. These countries can ill-afford to lose such workers, and they have paid for their training. So India, Sri Lanka, Ghana, South Africa are subsidizing the reproduction of London. It is a perverse sub­sidy, flowing from poor to rich. It is, moreover, a flow that is both fuelled and more difficult to address as a result of the increasing commercialisation/privatisation of  health services.

It is a brain drain that has a double effect. In London the dominance of demand for this kind of labour makes it more difficult for Londoners without those qualifications to find work and, through the influx of higher ­paid workers, increases the pressure on prices and therefore inequality within the capital. From the regions and nations of the North and West it drains a stra­tum of the population that could be significant to their eco­nomic growth.

(Yet) Gordon Brown has told the regions that their regeneration should be led by the knowledge economy and Alan Johnson, when minister for manufacturing, repeated the refrain that low skills are part of the regions’ problems. In other words, the regions are blamed for the losses they incur through feeding London’s demand.

Arguments that London is a ‘successful’ region which must not in any way be chal­lenged rest on a crucial assumption. This is that London has achieved its present position through its own efforts. As the hegemonic terminology has it:  to do anything to disturb London’s trajectory would be to buck market forces.

London’s transnational financing and service-providing roles have not, however, been the main driver underlying the city’s growth since the 1980s, nor do these functions represent the major ele­ment of London’s export base. London’s main export market is in fact the `rest of the UK’ (RUK) which takes 28.5 % of all London’s exports, compared with 12.33 % going abroad. For financial services, the comparable percentages are RUK 39.88 % and interna­tional 31.46 % and, for business services, RUK 32.89 % and international 12.08 %.

This data contradicts the notion that London, in eco­nomic terms, is floating free from the rest of the UK econ­omy into an international arena of its own. It directly contradicts the conclusion that in a globalised economy London does not need the markets of northern Britain. As a London School of Economics study puts it, `the London economy is still closely integrated with the overall UK econ­omy’.

Despite the facts, however  . . . there is also some resentment: an argument that London has been subsidising the rest of the country and can afford to do so to the same extent, voiced in a report for the London Chamber of Commerce and Industry (LCCI) entitled The London deficit – a business perspective provides an example:

The London economy is the largest and most successful regional economy in the UK. It has often been suggested that its success has been to the detriment of other UK regions, drawing highly skilled people away from other areas. The reality is more complex. As will be seen from this report, the UK’s progressive taxation structure ensures that London contributes a greater proportion of total income raised from taxation in the UK than any other region. In short, London subsidises the rest of the UK, enabling the nation as a whole to benefit from the capital’s success. 

The fig­ures for London, however, usually include expenditure on the bulk of the national Civil Service. But this service operates over the country as a whole and should not appear on London’s balance sheet. The presence of so many Civil Service jobs and functions within London also contributes significantly to London’s economic growth and helps to influence the drawing up of national economic policy.

From Doreen Massey’s conclusion: “In the United Kingdom, London increasingly overshadows everywhere else and government policy has been to acquiesce in and feed its voracious growth. Is this what we want? The question is rarely heard in democratic debate”.

This book followed her pamphlet advocating Decentering the Nation: a radical approach to regional inequality, written with Ash Amin and Nigel Thrift, Catalyst 2003, on which notes also were made.

 

 

 

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Professors Minford and Scott Cato: whose assessment will prove to be more accurate?

The BBC and other media outlets report the views of Patrick Minford, Professor of Applied Economics at Cardiff Business School, Cardiff University.

In his report From Project Fear to Project Prosperity, to be published in the autumn,  he predicts that a ‘hard’ Brexit will offer a ‘£135bn annual boost’ to economy around a 7% increase in GDP.

Minford, lead author of the introductory nine page report from Economists for Free Trade says that eliminating tariffs, either within free trade deals or unilaterally, would deliver trade gains worth £80bn a year. He has expressed the view that the British economy is flexible enough to cope with Brexit. The four elements in his calculation are listed in the Guardian as:

  • free trade, either via free trade agreements with the EU and the rest of the world, or if those are sticky via unilateral moves to remove our trade barriers
  • UK-run pragmatic regulation to replace the EU’s intrusive single-market regulation of our whole economy
  • our net EU contribution and
  • the cost to the taxpayer of the subsidy paid to unskilled EU immigrants, which we estimate at £3,500 per adult.

MEP Molly Scott Cato (left, speaking in the European Parliament), who read Philosophy, Politics and Economics at Oxford, giving up her professorial chair at the University of Roehampton after election, says that Patrick Minford’s  modelling is based on the UK unilaterally removing all restrictions and tariffs and trying its luck in a global market. According to LSE economists who have analysed his work, this would mean a massive fall in wages and the “elimination” of UK manufacturing.

Minford views the EU as a costly protectionist club, but in reality, Scott Cato continues, the single market eases internal trade and reduces costs: “In the real world, proximity, common standards, and rapid movement of components matter, hence the importance of the customs union. UK manufacturing is largely foreign-owned and revolves around assembly of components manufactured elsewhere in the EU. Ironically, this makes it even more important that we stay in the customs union, to ease the passage of components across borders”. She ends:

“Minford’s work is indicative of the whole Brexit project: based on the illusion that the UK has some manifest destiny that allows us to stand alone in a globalised world. It is high time this phony economics was sent into retirement”.

 

 

 

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Paul Hohnen: a better physically connected Europe could deliver multiple benefits

In the Financial Times today, Paul Hohnen* writes about the ‘hard realities of climate change’ showing across Europe, with the historic drought in Italy and Spain being only the latest example. He continues:

What seems increasingly clear is that Europe, with or without Britain, needs to invest hugely in climate abatement and adaptation infrastructure.

 A better physically connected Europe, in the form of enhanced inter-country electricity grids (for sharing surplus renewable power) and upgraded water catchment and distribution systems, could deliver multiple benefits.

In addition to reducing the risks to food, water and energy supplies, now and in the future, a grand European project to become collectively more resilient to energy and water stress could be just what is needed to give Europe the new and positive shared narrative so urgently needed. Not to mention the jobs, economic growth and technological innovation involved.

The EU’s enormous political and economic achievements over the past six decades are at risk on multiple fronts, including the environmental.

An ever closer power and water infrastructure union would help demonstrate why the European project is as relevant as ever.

*Mr Hohnen was trained as an international lawyer, closely involved in the 1992, 2002 and 2012 UN sustainability summits, as well as in a wide range of climate change and other global treaties. He worked from 1975 to 1989 as an Australian diplomat at the OECD in Paris (global economic, development and environmental issues), at EU institutions in Brussels, and in Fiji and Sri Lanka. He was with Greenpeace International (1989-1997, as Head of Climate Policy, later Director, Political Division), and Strategic Director of the Global Reporting Initiative (GRI). An independent consultant since 2004, his clients have included government ministries, intergovernmental agencies, business and non-profit organisations.

Read his views on the broader canvas in Reasons to be both hugely disappointed and very excited

 

 

 

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Fioramonti: growth is dying as the silver bullet for success – this may be good thing

In May, Lorenzo Fioramonti*, Professor of Political Economy, University of Pretoria, wrote an article for The Conversation, republished in Quartz. He opens: “GDP as a measure of growth fails to account for damages caused to the environment by industrial activity”.

In his new book “Wellbeing Economy: Success in a World Without Growth” he points out that the “growth first” rule has dominated the world since the early 20th century. No other ideology has ever been so powerful: the obsession with growth even cut through both capitalist and socialist societies”.

Edited extracts

He asks: “What exactly is growth? Strangely enough, the notion has never been reasonably developed” and presents a view beyond that limited to an increase in overall wealth (common sense): “Growth happens when we generate value that wasn’t there before: for instance, through the education of children, the improvement of our health or the preparation of food. A more educated, healthy and well-nourished person is certainly an example of growth”. He then outlines the paradox: “our model of economic growth does exactly the opposite of what common sense suggests”. Here are some examples:

  • If I sell my kidney for some cash, then the economy grows.
  • If a country cuts and sells all its trees, it gets a boost in GDP. But nothing happens if it nurtures them.
  • But if I educate my kids, prepare and cook food for my community improve the health conditions of my people, if a country preserves open spaces like parks and nature reserves for the benefit of everybody, it does not see this increase in human and ecological wellbeing reflected in its economic performance.

But if it privatises them, commercialising the resources therein and charging fees to users, then growth happens.

Preserving our infrastructure, making it durable, long-term and free adds nothing or only marginally to growth. Destroying it, rebuilding it and making people pay for using it gives the growth economy a bump forward. Keeping people healthy has no value. Making them sick does. An effective and preventative public healthcare approach is suboptimal for growth: it’s better to have a highly unequal and dysfunctional system like in the US, which accounts for almost 20% of the country’s GDP.

Wars, conflicts, crime and corruption are friends of growth in so far as they force societies to build and buy weapons, to install security locks and to push up the prices of what government pays for tenders.

The earthquake in Fukushima like the Deep Water Horizon oil spill were manna for growth, as they required immense expenditure to clean up the mess and rebuild what was destroyed.

Disappearing growth

However, Fioramenti brings the good news that growth is disappearing; economies are puffing along- even China, the global locomotive, is running out of steam. And consumption has reached limits in the so-called developed world, with fewer buyers for the commodities and goods exported by developing countries.

Energy is running out, particularly fossil fuels, and global agreements to fight climate change require us to eliminate them soon. Measures to mitigate climate change will force industrial production to contract, limiting growth even further.

The future of the climate (and all of us on this planet) makes a return of growth, at least the conventional approach to industry-driven economic growth, politically and socially unacceptable.

Fioramonti continues: “Decades of research based on personal life evaluations, psychological dynamics, medical records and biological systems have produced a considerable amount of knowledge about what contributes to long and fulfilling lives. The conclusion is: a healthy social and natural environment.

As social animals, we thrive thanks to the quality and depth of our interconnectedness with friends and family as well as with our ecosystems. But of course, the quest for wellbeing is ultimately a personal one. Only you can decide what it is. This is precisely why I believe that an economic system should empower people to choose for themselves. Contrary to the growth mantra, which has standardised development across the world, I believe an economy that aspires to achieve wellbeing should be designed but those who live it, in accordance with their values and motives”.

He points out that even the International Monetary Fund and mainstream neoliberal economists like Larry Summers agree that the global economy is entering a “secular stagnation”, which may very well be the dominant character of the 21st century – an apparently disastrous prospect for our economies, which have been designed to grow – or perish.

But it is also a window of opportunity for change. With the disappearance of growth as the silver bullet to success, political leaders and their societies desperately need a new vision: a new narrative to engage with an uncertain future.

This article is part of a series to be published following the release of Lorenzo Fioramonti’s new book: Wellbeing Economy: Success in a World Without Growth (MacMillan South Africa). Lorenzo Fioramonti does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above. The idea that the economic “pie” can grow indefinitely is alluring. It means everybody can have a share without limiting anybody’s greed. Rampant inequality thus becomes socially acceptable because we hope the growth of the economy will eventually make everybody better off.

 

 

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Not ‘commercially viable’? Fracking: environmentally, socially and financially a bad investment

The decision to sell its share in Third Energy, announced by Barclay’s chairman will be welcomed by many. Mainstream media, however, are failing to report this; five pages were searched and all witnessed to publicity coming only from campaigning groups – a snapshot of the first page may be seen below.

Third Energy, a Barclays subsidiary, which had a licence to frack just south of the North York Moors national park has “not become a profitable investment”. This is due to local opposition, which delays companies’ progress, according to Barclay’s chairman John McFarlane, speaking at the bank’s annual general meeting.

Barclays’ has now announced that it will sell its stake in fracking company Third Energy “in due course”.

Steve Mason of local campaign group Frack Free Ryedale said in a press release: “Clearly fracking is a bad investment environmentally, socially and financially. Where is the long term future of this industry? Why would you put money into an industry that is increasingly rejected by communities and could get banned at anytime?”

 

 

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Basic income

Readers who are unaware of the basic income concept can find an outline here.

As Ontario, Canada’s largest province, became the latest to announce a universal basic income three year trial (read on here), we read that a privately-funded, short-term pilot program is being run by this Silicon Valley accelerator, Y Combinator, in California.

The goal is to see how people react in the U.S., says Sam Altman, President, Y Combinator Group. The program gives “unconditional” payments to selected residents of Oakland. The administrators write, “we hope basic income promotes freedom, and we want to see how people experience that freedom.” If it is successful, the plan is to follow up the pilot with a larger, longer-term program”.

Altman says: “50 years from now, I think it will seem ridiculous that we used fear of not being able to eat as a way to motivate people.”

The Dutch universal basic income proposal is for UBI to replace other social security benefits. It would be paid for with revenue from a number of taxes, including a 30% tax on business profits, tax on air pollution, and a higher tax on “big fortunes,” according to Johan Luijendijk, co-founder of the Basisinkomen 2018 advocacy group, which argues that UBI would be affordable because it would replace other government support programmes.

Replacement or supplement?

Over the years in Britain the writer had always heard of UBI as a replacement proposal – but now she reads Professor Karl Widerquist, founder of Basic Income News, describing the Dutch proposal as unique.

The Basic Income European Network (BIEN) agreed at its general assembly in Seoul (in 2016) that universal basic income should not be a replacement of other social services or entitlements, but instead should work in combination with other services. Widerquist in an email with CNBC, is reported to have said universal basic income “is not ‘generally considered’ as a replacement for the rest of the social safety net. Some see it primarily as a replacement. Others see it as a supplement, filling in the cracks.”

The Swiss campaign for the basic income referendum

Earlier this year, a draft report, tabled by a Member of the European Parliament, Mady Delvaux-Stehres, warned that preparations must be made for what it describes as the “technological revolution” currently taking place, including provisions for the “possible effects on the labour market of robotics”. The report which urges member states to consider a general basic income in preparation for robots taking over people’s jobs passed by 17 votes to two.

Ms Delvaux-Stehres said: “We ask the commission to look at what kind of jobs — or more precisely what kind of tasks — will be taken over by robots. There needs to be a discussion about whether we need to change our social security systems. And even whether we have to think about universal revenue, because if there are so many unemployed people, we need nevertheless to insure that they can have a decent life”. 

However the recommendation to “seriously consider” basic income was rejected for inclusion in the final report, with 328 MEPs voting against the recommendation, 286 MEPs voting in favour, and eight abstaining from the vote.

A study by Oxford University’s Carl Frey and Michael Osborne estimates that 47% of U.S. jobs will potentially be replaced by robots and automated technology in the next 10 to 20 years. Those individuals working in transportation, logistics, office management and production are likely to be the first to lose their jobs to robots; according to the report universal basic income may be necessary.

 

 

 

Brexit: moving away from globalisation towards self-reliance’  

Colin Hines draws attention to Green MEP Molly Scott Cato’s publication and launch of  a report by Victor Anderson and Rupert Read: Brexit and Trade Moving from Globalisation to Self-reliance’

Although it regrets our leaving the EU and wishes we wouldn’t, the report is written as an alternative approach assuming we are outside the EU.

Its Executive Summary states:This report puts on to the political agenda an option for Brexit which goes with the grain of widespread worries about globalisation, and argues for greater local, regional, and national self-sufficiency, reducing international trade and boosting import substitution”.

Hines continues: “As I am aware it is the first time a report from a politician isn’t clamouring to retain membership of the open border Single Market”

It details the need for an environmentally sustainable future involving constraints to trade and the rebuilding of local economies. Indeed the report actually calls for ‘Progressive Protectionism’ rather than a race to the bottom relationship with the EU – see page14:

Reducing dependence on international trade implies reducing both imports and exports. It is therefore very different from the traditional protectionism of seeking to limit imports whilst expanding exports. It should therefore meet with less hostility from other countries, as it has a very different aim from simply improving the UK’s balance of payments. It could be described as ‘progressive protectionism’, or ‘green protectionism’. X1V reference adds: ‘For detailed proposals on how this could and should be done, see http://progressiveprotectionism.com/wordpress/

Also ground-breaking in Green Party literature of late is its discussion of the arguments for and against managed migration.

Its sensitive handling of this contentious issue for many in the Greens does mark an important step forward and hopefully will help to start an internal debate about whether or not the party should reconsider its open borders approach.

This recent Daily Telegraph article with Iain Duncan Smith and Nigel Lawson frothing to get rid of key environmental regulations shows how impossible any green future will be under a hard Brexit.

Hines feels that we won’t leave the EU and central to that happening will be a realisation across Europe that to see off the extreme right they must manage internal migration and protect domestic jobs. At that point the reasons for supporting Brexit for most are no longer valid.

He ends: “This timely report makes a crucial input to this debate, one that will rage for the next two years”.