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“Money-manager capitalism has ‘fed political revolt’ in America and Europe: Philip Collins


In the Times, Philip Collins* writes that western “money-manager capitalism,” (term coined by Hyman Minsky), has changed the patterns of incentives and rewards in the economy, leading to stagnation in productivity and wages by reducing the capital investment that supports their growth.

He cites Erikson & Weigel: “A decade has passed since banks and financial houses began to crumble and took Western economies to the brink of collapse, but economic growth on both sides of the Atlantic remains weak. It is still determined more by governments and central banks than the animal spirits of entrepreneurial capitalism.

Economic developments before and after the crisis that started in 2007 have fed political revolt. In both America and Europe, people are angry about their poor income growth, and they indict the “one percent” or “the establishment” for pursuing policies that benefit the rich at the expense of the middle class. They feel that the age of cost-cutting McKinsey consultants, cheap capital, and Wall Street financial engineers brought prosperity to the professional classes, but that, as a result, everyone else’s expectations were revised permanently downward: “The revolt comes from both the Left and the Right, but the underlying premise is shared: capitalism hasn’t been working for me!”

Collins then adds that business investment has been falling as a proportion of GDP since the 1970s.

”Money that ought to be invested is instead flowing to shareholders in the form of dividends and buybacks. Too rapid a recourse to mergers is generating payments for unworthy executives and creating giant companies which do their best to evade fair taxation. All the while they buttress their position with expensive and effective lobbying to keep regulators sweet”.

He cites two sets of linked consequences

  • Unemployment among the young and low-skilled has increased and wages for those in work have stagnated.
  • The vast majority of the returns from the last decade of capitalist activity have accrued to those who are already rich in assets.

This trend within capitalism itself accelerated after the 2008 crash by central banks whose incontinent monetary policy had inflated asset prices.

Under capitalism it seemed, on the whole, that things could only get better. Growth made us more prosperous tomorrow than we are today. When that promise broke, the response was a growth in radical movements to the left and right.

The obvious answer, according to Collins includes:

  • shifting the burden of taxation away from income and towards wealth;
  • imposing a higher inheritance tax, to prevent large transfers of privilege;
  • taxing the capital gain on the residential home;
  • taxing land, of all the assets the least easy to hide;
  • cutting income tax for people who take home the average wage or less;
  • and earmarking some of the proceeds for the social care system which is a disgrace in a rich country.

Michael Gove, Secretary of State for Environment, Food and Rural Affairs, considers the deeper causes of populism. He believes that the British have seen so much of what they value which is beyond economics — whether love of place and landscape or the integrity of their cultural attachments — overlooked or ignored. He advocates:

  • reform of corporate governance,
  • better pricing of environmental costs,
  • changes to investment incentives and procurement rules,
  • “smarter” regulation
  • and no access for not corporate lobbyists.

But, Collins reflects: “Conservatives often give bold speeches which herald no action.

“After the expenses scandal David Cameron diagnosed all that was wrong with politics and proclaimed a radical plan to put it right, not a word of which ever materialised.

“In her first address as prime minister, Theresa May set out the array of social issues which would define her premiership. Mired in Brexit, we are still waiting.

“There is every chance that Mr Gove’s speech on capitalism will fall into the same category”.

Collins ends, ”The reason why the Conservative Party will not act . . . (is that) it is going to have to upset some natural-voting Conservatives. A state intervention to break up successful companies, an expansive set of welfare schemes and a government dedicated to imposing taxes on wealth. It doesn’t sound very likely from this government”.



Phillip Collins is the leader writer and columnist for The Times, chairman of Demos, Visiting Fellow at the London School of Economics, associate editor of Prospect magazine journalist, academic, banker and speechwriter






Green quantitative easing – good sense


Richard Murphy and Colin Hines published the Green QE report, which is summarised below.

In March 2009 the Bank of England began a programme of quantitative easing in the UK – in effect, the Bank of England granted the Treasury an overdraft but to keep the European Union happy had to do so by buying Government gilts issued by the Treasury from UK commercial banks, pension funds and other financial institutions.

There were three reasons for doing this:

  1. To keep interest rates low;
  2. To provide banks with the money they needed to lend to business and others to keep the economy going.
  3. To make sure there was enough money in the economy to prevent deflation happening

No one was sure whether quantitative easing would work, and as we note, no one is sure for certain whether it has worked.

We do however suggest in this report that several things did happen:

  • The banks profited enormously from the programme, which is why they bounced back into profit so soon after the crash– and bankers’ bonuses never went away;
  • The entire government deficit in 2009/10 of £155 billion was basically paid for by the quantitative easing programme. If you wanted to know how the government met its costs, now you do; There was a shortage of gilts available for investment purposes as a result of the Bank of England buying so many in the market. Large quantities of funds were invested instead in other financial assets including the stock market and commodities such as food stuffs and metals.
  • The USA also undertook quantitative easing at the same time as the UK, which meant that despite near recessionary conditions commodity prices for coffee and basic metals such as copper have risen enormously. This has impacted on inflation, which has stayed above the Bank of England target rate;
  • Deflation has been avoided, although the relative role of quantitative easing in this versus the previous government’s reflation policies is unclear;
  • Interest rates have remained low.

However, one thing has not happened, and that is that the funds made available have not resulted in new bank lending. In fact bank lending has declined almost steadily since the quantitative easing programme began.

there is an urgent need for action to stimulate the economy by investing in the new jobs, infrastructure, products and services we need in this country and there is no sign that this will happen without government intervention.

For that reason we propose a new round of quantitative easing –or Green QE2 as we call it.

Green QE2 would do three things. First it would deliver the Green New Deal – the innovative programme for investment in the new economy the UK needs as outlined by the Green New Deal group in its reports for the New Economics Foundation. This would require three actions:

  1. The government would need to invest directly in new infrastructure for the UK.
  2. The government needs to invest in the UK economy, in conjunction with the private sector, working through a new National Investment Bank;
  3. The government must liberate local authorities to partner with the private sector to green their local economies for the benefit of their own communities, and it can do this by providing a capital fund for them to use in the form of equity that bears the residual risks in such projects.

A second round of quantitative easing should involve direct expenditure on new infrastructure projects in the UK.

For example there is a desperate need for new energy efficient social housing in this country, for adequate investment in railways, not to mention a reinstatement of the schools rebuilding programme. Undertaking these activities would give the economy and immediate shot in the arm as well as providing infrastructure of lasting use which would more than repay any debt incurred in the course of its creation.

This is the result of the ‘Keynesian multiplier’ effect. This is the phenomenon that occurs when government borrowing to fund investment takes place during a time of unemployment.

That borrowing directly funds employment.

That new employment does four things.

First it reduces the obligation to pay benefits.

Second, it means that the person in that new employment pays tax.

Third, it means their employer pays tax on profits they make.

And finally the person in employment can then save, which means that they help fund the government borrowing which has created their own employment.

As Martin Wolf, the eminent Financial Times columnist has said in this FT video: “Borrowing is no sin, provided we use the funds to ensure that we bequeath a better infrastructure to the future”.

This is what we believe the programme we recommend would do and this is precisely why it is appropriate to do it now when the cost of government borrowing is so low, a point Wolf and Skidelsky also make.

Borrowing now to spend into the economy is the basis for the first stage of Green QE2 – and of the Green New Deal.

Read the whole report here:





Is there ‘simmering anger’ at the disruption unleashed by digital innovation?

 In September, Sathnam Sanghera wrote about a widely reported funeral in Wolverhampton for a 52-year-old man who died suddenly in August. According to the local paper hundreds of people gathered at his former workplace to pay their respects, A “sea” of more than 2,000 people were photographed gathering for his funeral. Then, after the eulogy had been given, the crowd erupted into spontaneous applause.

Who was he? A former footballer for Wolverhampton Wanderers? A local politician? No, he was Raj Kumar, who “just” ran the Ashmore Park Hardware shop for more than 30 years.

He died after collapsing in his shop and according to the tributes left for him the reason he elicited such affection was that he was, very simply, good at what he did. A shopkeeper who advocated for his fellow traders; who helped you out when needed; who always had a nice word even if you were just passing.

The positive reaction to Raj’s passing in Mr Sanghera’s home town contrasted with the adverse reaction there has been in the US to the launch of a company called Bodega.

Named after convenience stores specialising in Hispanic groceries, Bodega is installing unmanned machines in San Francisco’s apartments, offices and dormitories to serve non-perishable food and other items normally found in convenience stores.

Elizabeth Seagran explains: Bodega sets up five-foot-wide pantry boxes filled with non-perishable items you might pick up at a convenience store. An app will allow you to unlock the box and cameras powered with computer vision will register what you’ve picked up, automatically charging your credit card. The entire process happens without a person actually manning the “store.”

Thousands of outraged social media users and tens of US columnists have attacked the idea and Bodega’s CEO apologised online for causing offence, claiming that it was not his intention to put bodegas out of business and that they “didn’t fully understand what the reaction to the name would be”. Sanghera adds that the whole sorry episode was a sobering demonstration of what the funeral in Wolverhampton also showed that:

“People really value their local shopkeepers. It is not just that they sell you Monster Munch and paint, they sometimes proffer credit, provide lonely people with conversation, give shelter to kids from bullies, report suspicious events to the authorities, and can even help with race relations. For many people their local shopkeeper is their only interaction with someone of another race and religion: it is notable that in a radio interview in 2001 Lord Tebbit praised his Asian newsagent even as he attacked multiculturalism”.

The ‘more profound’ operations by Google are making it easier for ‘all sorts of awful people’ to access dangerous material:

  • social networking companies such as Facebook are creating, paradoxically, an epidemic in loneliness and fuelling a rise in fake news that, in turn, is leading to extreme politics . . .
  • Amazon is putting thousands of independent retailers out of business and paying very little tax in the process;
  • dating apps are encouraging even very average blokes to act as though they are Indian maharajahs in the 19th century and also destroying nightclubs
  • and “news” services are killing off local newspapers that bring us news of people like Raj and expose corruption on councils.

Sanghera believes that the intense backlash to Bodega shows the depth of the simmering anger ‘out there’ about Silicon Valley and its obsession with innovation and ends:

“It seems to me that Bodega’s real mistake has been to be explicit (initially) about its intention to disrupt “mom and pop stores”. All this other disruption we have accepted, gradually and thoughtlessly, as a necessary price to pay for services supposedly provided “free” by Silicon Valley.

“Has it all been worth it? By the time the penny drops, and we decide to be furious, I suspect it will be too late anyway”.

Sathnam Sanghera is a journalist and author. Follow him on Twitter @Sathnam




A realistic, grounded alternative politico-economic vision – 1

In a letter to the FT, Richard Urwin extols ‘the vibrancy of the debate already under way’, as ‘coherent critiques of the orthodox view’ are being articulated by Nobel laureates such as Joseph Stiglitz and Paul Krugman and economist Martin Wolf. He adds, “Even the establishment has demonstrated some capacity to adapt: Mark Carney’s recent ruminations on globalisation would have been unlikely a decade ago”.

colin-hines-7Colin Hines, convenor of the Green New Deal group (finance, tax, energy and environmental experts), is advocating “controls on the free movement of capital, goods and services to allow the rebuilding of national economies, and to bring an end to the damaging deification of open markets, which has bought us Trump and Brexit and maybe next year a President Le Pen”.

Colin was the co-ordinator of Greenpeace International’s Economics Unit having worked for the organisation for 10 years. Earlier he worked in the environmental movement on the issues of population, food, new technology and unemployment, nuclear proliferation. More recently he has focused on the adverse environmental and social effects of international trade and the need to solve these problems by replacing globalisation with localization.

localisation-book-2His widely cited book Localization- A Global Manifesto, is unique in setting out the international political agreement, trade treaties and regulations needed to foster and protect local self-sufficiency.

Localization, he believes, would ensure that all goods, finance and services that can reasonably be provided locally should be. Depending on the context, the ‘local’ is predominantly defined as part of the nation state, although it could refer to the nation state itself or a regional grouping of nation states.

In his forthcoming ‘Progressive Protectionism’ Hines details why ever more open borders are increasing inequality, reducing economic activity and threatening the environment. It explains how countries could rebuild and rediversify their economies by limiting what finance, goods and people they allow to enter their borders, and in the process wean themselves off export dependence. Domestic businesses and funding sources would then meet the needs of the majority in society in all countries. The prospect of such increasing economic security for the majority could gain widespread political support ranging from those on the left, the centre, the greens through to small ‘c’ conservatives.

Next post: Shaun Chamberlin, of the Fleming Policy Centre, Chelsea Green’s UK/Europe commissioning editor, responds to Hines by emailing: ‘Amen . . .’



People from these countries visited the site this week



Elect a public-spirited prime minister with the nerve to take on corporate ‘titans’

edward luceEdward Luce, an English journalist and the Financial Times’ chief US commentator and columnist based in Washington, DC, comments:

”The last people to grasp that things have gone wrong are the wealthy, the well-connected and the cognitive elites” . . .

“The wealthy’s share of the economy has risen sharply since the start of the century. The share of corporate profits in the economy has also soared. If you are rich you can afford what used to be normal for everyone — the privilege of interacting with human beings (in the service sector)”.


  • high net worth individuals receive personalised banking, where their bank manager knows their name and needs.
  • The wealthy also benefit from so-called concierge health services, which come with a human face.
  • Many oligopolistic service providers keep clandestine lists of VIP customers who need not wade through robotic software before reaching a customer service agent. When they pick up the phone, a human answers.

Ordinary consumers, much like most voters, know there are different rules for them. They also sense that the big service providers pay more attention to regulators than to their disaffected customers. It is a perfectly rational thing to do.

The top companies have markedly increased their market share in the past decade and this has led to a lack of real competition — giving them licence to treat consumers with impunity in the telecoms, information technology, transport, retail services and banking sectors.

Politicians rank their priorities in much the same order. Voters come low on their list.

Lawmakers devote time to raising money from donors. In most areas, the voter barely matters since gerrymandering or the party elite will have has rigged the election. Politicians with large war chests are far less likely to be challenged for their party’s nomination. The same logic leads companies to keep a strong lobbying presence in government circles.

Luce asks “So what can people do? As consumers very little”.

But to elect a public-spirited prime minister with the nerve to take on corporate ‘titans’ would be great populism and smart policy.




New report: Money Creation for the Common Good

This site focusses on plans and measures taken to improve the political and  economic life of the country. Today:

The Green economy can be stimulated through targeted quantitative easing: report from Anglia Ruskin University

James Phillips (Business Green) reviews a major new report from Anglia Ruskin University commissioned by Molly Scott Cato MEP [below] and published by the Greens/EFA group in the European Parliament.


It was written by Victor Anderson, Visiting Professor at the Global Sustainability Institute, Anglia Ruskin University*, Cambridge.

Full report: Green Money: Reclaiming Quantitative Easing – Money Creation for the Common Good.

At the launch, Molly Scott Cato said: “Quantitative easing to date has simply further benefited wealthy elites. But QE is just a technique to create money and we need to reclaim it for the common good. We need the money we create to be invested in energy from safe, clean renewable sources and provide safe clean homes for all the citizens of our continent. This public investment will create jobs for the thousands of unemployed across our continent while simultaneously building up our green infrastructure . . . It is time for us to liberate the power of money and make QE our own. In producing this report, we have benefitted greatly from comments by Andrew Waldie, Fran Boait, Colin Hines, Richard Murphy, Francisco Padilla Olivares and Grace Murray.

James Phillips writes: “European governments should adopt a policy of ‘Green Quantitative Easing’ (GQE), The report, which was commissioned by Green Party MEP for the south west of England, Molly Scott Cato, offers a detailed assessment of the Party’s previously stated plans for a round of targetted QE that would see central banks directly inject capital into low carbon infrastructure projects.

“Report author Professor Victor Anderson highlighted so-called ‘carbon bubble’ risks: “As well as damaging the environment, fossil fuel companies have also become a risk to financial stability. As action to combat climate change spreads, the value of fossil fuel investments will fall. This is a threat not only to those companies but also to the pension funds, insurance companies and other organisations which have shares in them. The Bank of England has a duty to play its part in helping the shift towards a greener economy no longer dependent on dirty sources of energy.”

The report, which follows last week’s G7 agreement to move away from fossil fuels and deliver full decarbonisation of the global economy this century, suggests that the European Investment Bank should also pioneer GQE policies across Europe.

Scott Cato said GQE would allow money to be reclaimed “for the common good” through direct investment in the green economy.

“Quantitative Easing to date has simply further benefited wealthy elites,” she said. “But QE is just a technique to create money and we need to reclaim it for the common good. We need the money we create to be invested in a future we want to see. So, for example, we need to invest in energy from safe, clean renewable sources and provide safe clean homes for all the citizens of our continent (and) . . . create jobs for the thousands of unemployed across our continent while simultaneously building up our green infrastructure”.

“Quantitative easing (QE) is a mechanism for putting new money into the economy. Central banks create money which they then use to buy bonds from investors such as banks or pension funds. This increased amount of cash in the financial system, aims to stimulate the economy by encouraging banks to make more loans and in turn increase investment.

“The European Central Bank (ECB) recently agreed a new round of QE in an attempt to tackle stagnation and deflation in the Eurozone. This report argues that evidence of conventional QE in the UK has shown it to fail in its objectives and that it has simply benefited wealthy elites. It calls instead for a mechanism of Green QE and identifies how this could be implemented.

“Green QE works in a similar way (but) the difference is that the money created in Green QE is used specifically to boost the green sectors of the economy with the aim of helping Europe transition to a sustainable economy”.

James Phillips ends: “We need urgently to respond to two crises: the crisis of climate destabilisation, and the after-effects of the 2008 financial crisis. Green QE is a practical plan to tackle both finance and the global environment together. This report clearly demonstrates that implementing such a plan would help create a more stable, secure and prosperous Europe”.

From the report:

Areas assisting the transition to a greener economy and society include:

  1. Insulation and ecological design and construction of buildings
  2. Public transport, walking & cycling schemes
  3. Arrangements for the collection, recycling and/or re-use of materials, and for waste minimisation
  4. Renewable energy projects
  5. Energy, water, metals and other resource efficiency promotion & implementation
  6. Nature conservation schemes
  7. Research, development, and application of environmental technologies for monitoring and measurement, e.g. for pollution control
  8. Environmental and sustainability education and awareness raising
  9. Ecologically sound agriculture and food production
  10. Noise reduction barriers and technologies
  11. Land and soil decontamination

Building political support to make the idea a reality.

“Given the European Commission’s emphasis on the importance of investment via the Juncker Plan, it is of concern that at present there is a very limited amount of new money to fund the plan. We would strongly recommend that they consider the route of new money creation rather than the highly leveraged system which might introduce its own instability and would also influence the sorts of projects that would be funded. The long-term nature of investment for the green transition requires patient capital of the sort that Green QE could provide.

“What is needed above all is a determination to take some political control over the finance system. There is absolutely no need to accept that banking and the creation of money are matters which have to be left to the private sector, when they are so crucial to the functioning of the whole economy, and when they have recently gone so badly wrong.

“This lesson was learned by policy makers who introduced conventional QE but they have not used that power strategically and, as argued earlier, the money they have created has not provided useful investment and has increased inequality.

“We need to respond to both crises: the crisis of climate destabilisation, and the after-effects of the 2008 financial crisis. Green QE is a practical plan to tackle both finance and the global environment together. Doing so would create a more stable, secure and prosperous Europe.”

*Victor Anderson is a Visiting Professor at Anglia Ruskin University. He worked as an economist for the Sustainable Development Commission, a government advisory body, where he contributed to the “Prosperity without Growth?” report. in 1858, when the art critic, patron and philanthropist John Ruskin opened Cambridge School of Art. The art school grew to become Anglia Ruskin University, and is still at the heart of its modern-day campus in Cambridge. Over the years, a number of colleges and institutes have become part of Anglia Ruskin. They include the Cambridgeshire College of Arts and Technology (CCAT) and the Essex Institute of Higher Education (formerly the Chelmer Institute – itself formed from the Mid-Essex Technical College and the Brentwood College of Education).