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Jane Morrice: in a post COVID-19 future, reset the teaching of economics

In a recent article, Wendy Carlin reflected, “Covid-19 along with climate change could be the driving forces of our age to transform economic thinking, policy and the choices people make.”

She referred to a “new way to talk about the economy” and that prompted a response from Jane Morrice (right), whose wide experience includes serving as Deputy Speaker of the NI Assembly.

Her letter advocated a fundamental reset of the teaching of basic economic theory which would require a new culture regarding health as a nation’s wealth, natural resources as its riches and people as its priority.

Our outdated approach to economic principles should be replaced by one which links social, environmental and economic policy and places a sustainable, socially just society alongside job creation and growth in one all-inclusive new theory, “socenomics”.

Jane believes Covid-19 has proved that our economy is intrinsically linked with the health of society and the environment. But our education is divided into information management silos.

She sees the need for radical change in the way we measure and value success to overcome these divisions; the use of gross domestic product to measure national success should be replaced by a system that goes beyond pennies in pockets or investment in stocks and should measure:

  • medics per inhabitant,
  • disease control
  • and levels of air and water quality

Her conclusion: a approach which places a sustainable, socially just society alongside job creation and growth in one all-inclusive new theory, ‘socenomics’ would offer “a simple, yet comprehensive, solution to the most serious challenges facing 21st-century society”.

 

 

 

 

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Will the post virus economy collapse or emerge leaner and fitter?

Many people facing the corona virus pandemic are focussing on immediate needs and requirements but some correspondents – and hopefully heads of state – are looking further.

A Moseley resident writes: “Once again, the bill will have to be paid. Expect years of austerity to pay for this virus disaster. I’m guessing that, otherwise the currency will be valueless and inflation will run riot. At the moment we’re in 1918 to be followed by 1920 and then 1930 and 1940 ….

A clear, convincing and relatively optimistic account was written on March 7th by Australian-born economist, Dr Steve Keen (right).

Dr Keen’s breadth and depth of education inspires confidence: it includes Bachelor of Arts and Bachelor of Laws degrees from the University of Sydney in the ‘70s and later a Master of Commerce and a PhD in economics in the ‘90s at the University of New South Wales in 1998. He is currently professor and Head of the School of Economics, History and Politics at Kingston University in London.

His article A Modern Jubilee as a Cure to the Financial Ills of the Coronavirus – is summarised here. Some links and graphics added

He points out that this is the first disease to compare to the Spanish Flu in terms of both transmissibility and virulence. Europe was embroiled in World War I at the outbreak of the Spanish Flu. Its health and population impacts were huge: estimates of the death toll vary between 40 and 100 million in a global population of 1.8 to 1.9 billion.

But its financial effects were mild, disruptions to the war economy for much of the world were relatively small, with guaranteed employment and wages for military personnel, rationing for the general public and other wartime measures. Crucially, private debt was a mere 55% of US GDP when the flu outbreak began. The private sector was relatively robust.

The situation is vastly different today. Our great financial crisis, the “Great Recession” or “Global Financial Crisis”, lies in the recent past, and its primary cause is still with us: US private sector debt is just 20% of GDP lower than its peak during the crisis, three times higher than at the time of the Spanish Flu.

In addition, we now have “the gig economy” and precarious jobs in industries which are likely are likely to be hard hit by the Coronavirus: health itself, entertainment, restaurants, tourism, education. They could lose their jobs, and be unable to service their debts or pay their rents, or even buy food.

Many employers could also be unable to service their debts. Corporations in the USA have levered up during the period of Quantitative Easing, pushing the US corporate debt to GDP ratio to an all-time record. It is also twice the level that applied during the Spanish Flu. Many corporations will find their cash flows dry up and many will find these debt levels crushing.

The production system is also more vulnerable than at the time of the Spanish Flu.

The global economy today relies on long and complicated supply chains, with many goods being produced from components manufactured in dozens of countries and shipped between them on container vessels.

  • If manufacturing in even one place (such as China) comes to a near standstill, production elsewhere will do the same.
  • “Just in Time” manufacturing methods will run out of inputs, even if their factories are still capable of operating.
  • Shipping could be affected if crews refuse to undertake trips that can take weeks with potentially asymptomatic carriers on board, or if crews are quarantined for two weeks prior to departure.
  • Shares are likely to plunge in value. We have already seen a 14% fall in the S&P500 (though followed by a 5% rebound on Monday March 2nd) . . . We are clearly in the exponential phase of the pandemic. It will ultimately taper, but at present the number of cases outside China is doubling every 2-6 days, depending on the country.
  • Banks will also suffer badly. The asset side of their ledgers includes corporate shares: if these fall in value, banks will find their assets plunging, while their liabilities remain constant. A bank cannot: it must have assets that exceed its liabilities, or it is bankrupt.

A private non-financial company can continue to operate with negative equity, so long as it can pay its debts as and when they fall due even if its liabilities are greater than their assets. But a bank cannot: it must have assets that exceed its liabilities, or it is bankrupt.

A credit-driven, private sector monetary system is not capable of handling a systemic crisis like this. If the rules of such a system are enforced, it will make the crisis worse:

  • renters and mortgagors will be evicted, put on the streets, where they are more likely to catch and transmit the virus,
  • personal hygiene and public health will suffer, when one is needed to slow the pandemic, and the other must be functional to support its current victims,
  • stock markets will crash,
  • banks themselves will fail as their shareholdings plunge in value, bringing the payments system to an end
  • and even those unaffected by the crisis will be unable to shop.

It is, on the other hand, possible for Central Banks and financial regulators, once authorised by their governments, to take actions that prevent the medical crisis from becoming a financial one.

Other mechanisms may exist, but these are the obvious ones to prevent a financial pandemic on top of a medical one.

First: make a direct payment now, on a per-capita basis, to all residents via their primary bank accounts (most effectively, their accounts through which they pay taxes).

As Quantitative Easing has shown, this does not have to be financed by asset purchases. It is quite possible for Central Banks to put a notional asset on their balance sheets to finance. This is already done by the Bank of England to back the value of the notes issued by Scottish Banks: a bill known as a Titan with a face value of £100 million balances the value of bank notes issued by Scottish banks.

The same could be done by any Central Bank to balance a direct cash transfer to the bank accounts of all residents of its country – see People’s Quantitative Easing (Coppola 2019).

This already has been done in Hong Kong. The payment there is HK$10,000, or roughly US$2,000. It does not need to be financed by the Treasury or by taxation: neither were used by the USA to support its $1 trillion dollars per year Quantitative Easing program. There will be no “debt burden for future generations”.

Secondly: boost share prices by buying shares directly.

Quantitative Easing was intended to boost share prices. Clearly it worked—but there is no guarantee that it would work in this situation.

Instead, Central Banks should directly buy shares, as they are also quite capable of doing: Japan’s Central Bank has been doing this for several years already. This puts money in the bank accounts of shareholders, while the shares are then owned by the Central Bank. This could prevent a collapse in share prices, which in turn could prevent a collapse in the banking sector—since if shares fall substantially, many banks will find that their assets are worth less than their liabilities, and they would be forced to declare bankruptcy.

Central Banks can also cope with a share market collapse in a way that private banks and financial institutions cannot. Unlike a private bank, a Central Bank can operate with negative equity. If there was still a stock market crash, a Central Bank holding shares would still be able to operate.

Thirdly: suspend standard bankruptcy rules while the crisis exists

Banks and financial institutions in particular are vulnerable to bankruptcy in this crisis. Non-financial companies which are heavily exposed to the pandemic—health companies, airlines and other transport firms, education providers (including many public universities reliant on student fees), restaurants, sporting grounds—could see their revenues plummet, making them unable to service their debts, and therefore liable to bankruptcy.

Corporations exposed to Coronavirus-driven losses of revenues should also be able to receive direct aid from Central Banks as well. This could take the form of the sale of newly issued shares in return for cash—it should not be in the form of debt, which would simply replace one problem with another.

As Professor Keen ends his constructive and reassuring article, the words of John and Andy, from Moseley and Bournville, have been blended to give their views on a post pandemic future:

If we look coolly, perhaps rather brutally, at our situation, a complete generation may be wiped out, but in the worst scenario most humans on the planet are unlikely to die and the younger members least of all. The NHS will be saved millions by not having to treat the elderly and generally infirm. Pensions will be reduced and a younger, leaner, more focused workforce that realises how soft we had become will take up the cudgels to drive the economy onwards. Human life will go on and maybe the lessons learnt from tackling this infection will help in facing the next.

 

 

 

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A different kind of life is possible: Bruce Kent

After a US commander revealed the information to the Senate, the Ministry of Defence confirmed on Sunday that it has committed the taxpayer to fund a multi billion pound replacement of Trident, with nuclear warheads based on US technology.

Colin Archer and Dave Webb point out that, given the importance of finding large sums of public money to fund the now-urgent green transition, this is the right time to highlight the huge sums devoted to the military sector and top of the list is the UK’s commitment to nuclear weapons. The proposed slogan for Global Days of Action on Military Spending (GDAMS) is ‘Military spending costs the Earth’. 

Amongst the articles listed on the GDAMS international campaign website was one by Bruce Kent originally published in Peace News. The article opens with his tribute to the readable, international and interesting Peace News, before signing off, at least for a time. He thanked all on the team, especially the very modest editor and continued:

Hospital is always an eye-opening experience. Any London hospital is an international community on its own: a Portuguese doctor, nurses from the Philippines and all parts of Africa – all helpful and concerned even if very over-worked. My biggest shock came in a chat with a young trainee nurse. I asked if she did an eight-hour day. She just smiled. Her working day runs for 12½ hours. She lives at least an hour away in South London. So she has about eight or nine hours at home to sleep, cook, eat and have any kind of social life. Not fair. It’s not just money that the NHS needs but good working conditions as well.

In the run-up to the general election, both main parties promised many millions to be spent on increased NHS funding. Why did they not say this and do it long ago?

We can apparently afford £200 billion for a new set of very non-independent nuclear missile submarines. Missiles are on rotating loan from the US, which no one seems to notice. Not a word so far, in all the electioneering that I have heard, about nuclear bombs except for a contemptuous mention that Jeremy Corbyn would not ‘press the button’ – and so kill tens of thousands of innocent civilians far away.

Our concern about military expenditure is clearly a global one. Only recently a report came through my letterbox from the Global Campaign on Military Spending (GCOMS) started by the International Peace Bureau in 2011.

(Right: Bruce and other campaigners attended a GDAMS protest and letter hand-in at the MoD in April 2019)

GCOMS concentrates every April-May on actions all around the world, highlighting the connection between military expenditure and the lack of money for real human needs. Last time, there were 110 events in 27 countries – with UK events in York, Bradford and London. Have a look at the work in progress on www.demilitarize.org.

The need is obvious. The money spent on war and the preparations for war is a scandal and ought to be commonly recognised as such. The global military budget is now not far off two trillion dollars a year. We now have the climate change campaigners with us.

To read the small print click here and use the magnifying glass symbol to read the data from SIPRI’s Arms Transfers Database (March 2019)

Military production involves the release of CO2 in massive quantities. The two great current perils, war and climate change, are dangerous twins.

Many of the events are fun to organise, such as the ‘Move the money’ selfie project, or stalls offering passers-by the opportunity to indicate their alternative budget choices (buttons in jam jars or buckets work well, labelled ‘education’, ‘green energy’, etc). We need a group campaigning on military expenditure to be active in every part of this country, but that means hard and imaginative work and energy. We need an enthusiastic volunteer to coordinate and encourage more GCOMS events next spring. How about you?

From “The Chance for Peace,” a speech to the American Society of Newspaper Editors, April 16, 1953

The best quote that I can end with comes, rather surprisingly, from a US general. Dwight Eisenhower was never a hawk. He can’t have been popular in his world for saying that the nuclear bombs on Japan in 1945 were never necessary. He had this to say in 1953 and you may well recognise the quotation: Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who are hungry and are not fed, those who are cold and not clothed. This is not a way of life. Under the cloud of war, it is humanity hanging on a cross of iron….’

Bruce ends: “A different kind of life is possible. Let’s together make it happen”.

 

 

 

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A new and better kind of politics: Nick Duffell

 

In 2017, Nick Duffell described how our votes could form a new and better kind of politics.

THANK goodness that voting seems to be coming back into fashion. Even if election results defy prediction, nothing could be worse than political apathy, which has lately been the norm — especially among the young — given the historic struggle for universal suffrage.

This apathy is understandable since Britain’s mainstream parties, whose hegemony our first-past-the-post system maintains, have been barely distinguishable over the past two decades.

Much as we would like it to be the fault of personalities or parties, the underlying cause is that global markets exercise such dominant control of national economies that — despite their rhetoric — every party ends up as the “business-as-usual party.”

This is not to say that those who understand the socially vulnerable (we can discount the Tories, ruled as ever by the ethos of “wounded leaders,” as described in my psycho-history of the same name) can’t make some difference. Of course they can. But only a bit, because so many of our problems are profoundly systemic.

The Grenfell tragedy highlights Britain’s failure to invest in social housing since the ’80s and our total unwillingness to regulate the rental sector and property speculation.

Getting these things right will require more than simply voting Labour, however well intentioned Jeremy Corbyn is, and however well he sidesteps the public-school bully style of politics that dominates Westminster . . .

Read on here.

 

 

 

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A Labour government will reverse forty years of privatised services: Professor Richard Hatcher

On 20 July Labour’s Shadow Chancellor John McDonnell launched a new Labour Party document, Democratising Local Public Services: A Plan for Twenty-First Century Insourcing. (1).

Richard Hatcher’s September paper, which may be read in full here, discusses its implications for social care, referring to Birmingham as a case study. Edited extracts follow (several hyperlinks added):

Democratising Local Public Services commits a future Labour government to reversing four decades of outsourcing by local councils by legislating to ensure that the default option for councils is for the public sector to deliver its own services.

The section headed ‘How Outsourcing Has Gone Wrong’ identifies two key issues:

  • poor quality of provision: there is now widespread evidence of failures in service quality in services provided through outsourced contracts’ (p12)
  • and lack of public accountability in different forms: the Information Commissioner has noted that just 23% of the public polled thought that the activities of private providers of public services were accessible. Information about outsourcing companies can only be requested by the public if it is held by a public authority on behalf of that outsourcing company. (p13)

Hatcher points out that social care is the largest single area of council spending, most of which goes to external providers, and finds it very surprising that there is only one reference to social care in the 53 pages of the Labour Party report. This is a regrettable missed opportunity because social care exemplifies the two major problems with outsourced provision that the Labour party report identifies and is therefore a prime candidate for insourcing.

The Thatcher government, we are reminded, created a lucrative new market in social care by forcing local authorities to spend 85% of their social care budget in the private sector, decimating local authority provision.

Since then the transformation towards a market in adult social care has progressed steadily, with no attempt by any government to halt or reverse the trend. [ ….]  In 1979 64% of residential and nursing home beds were still provided by local authorities or the National Health Service; by 2012 the local authority share was 6%; in the case of domiciliary care, 95% was directly provided by local authorities as late as 1993; by 2012 it was just 11%. This also means the bulk of the adult social care workforce – around 72% – is now employed in the private and voluntary sectors, along with another 14% employed by individual service users making use of ‘personal budgets’, leaving just 14% employed by local authorities.’ (pp7-8)  [2]

RH2However, the prospect of exceptional profits attracted big equity investors into this new market. They bought up small providers and opened much larger homes for maximum profit, employing staff, largely women, on low pay, according to Social Care as a Local Economic Solution for the West Midlands, a report by David Powell, New Economics Foundation, with Karen Leach and Karen McCarthy, Localise West Midlands, published in 2017 [4]:

Built into every contract to a major provider will be the underlying need to deliver a significant return on investment

CRESC [the Centre for Research on Socio-Cultural Change] found that big care providers expect to offer 11% returns to investors (including costly debt repayments which often return to the parent operating company). The business models of the largest five residential care chain companies in the UK offer returns to investors that account for as much as 29p in every £1 of their costs – the second biggest drain on expenditure after wages.

The care ‘market’ is increasingly consolidating towards such providers. As of 2015, nearly 20% of all care beds were provided by the ‘big four’ care companies – Four Seasons, Bupa Care Homes, HC-One Ltd, and Barchester Healthcare. They are gradually increasing their market share – buying up small chains and taking over provision from family-owned homes. (p12) But now the care market is in crisis because the government cuts in local authority budgets have squeezed the flow of profits to the care businesses. More than 400 care home operators have collapsed in the last five years, including over 100 in 2018 (Guardian 12 March 2019).

Insourcing will be difficult as the social care market is highly fragmented. As Bob Hudson says [3]:

rh3 (2)There is no compact adult social care service that can be easily repatriated into public sector ownership. Rather the sector is characterised by many fragmented, competing providers. The care home sector supports round 410,000 residents across 11,300 homes from 5500 different providers (Competition and Markets Authority, 2017). The situation in home care is even more diverse with almost 900,000 people receiving help from over 10,000 regulated providers. (2018, pp1-2)

After a detailed seven-page Birmingham case-study of the privatised care industry, Richard Hatcher ends, “One section of Birmingham Council’s Local Manifesto 2018-2022 is titled ‘A Rebirth of Municipal Socialism’. It promises, “We will re-state the case for the municipal provision of services in Birmingham, heralding a new age of municipal socialism. And the Labour council in Birmingham will lead by example, calling time on the misplaced notion that the private sector always trumps the public sector by adopting a policy of in-house preferred for all contracts”. That was published in March 2018, a year and a half ago.

He asks “Where are the detailed plans to put this policy into practice?” and recommends Birmingham City Council to publish detailed plans to bring its out-sourced social care services in-house, open the books and make public these and all its other out-sourcing contracts so there can be genuine public accountability – and specifically for social care, the biggest sector of the Council’s outsourcing.

References 

  1. The Labour Party (2019) Democratising Local Public Services: A Plan for Twenty-First Century Insourcing. http://labour.org.uk/wp-content/uploads/2019/07/Democratising-Local-Public-Services.pdf
  2. Bob Hudson (2016) ‘The failure of privatised adult social care in England: what is to be done?’, The Centre for Health and the Public Interest. https://chpi.org.uk/wp-content/uploads/2016/11/CHPI-SocialCare-Oct16-Proof01a.pdf
  3. Bob Hudson (n.d.) ‘Adult Social Care: An Irretrievable Outsourcing?’ https://www.healthcampaignstogether.com/pdf/Hudson%20Social%20Care%202018.pdf
  4. David Powell, New Economics Foundation, with Karen Leach and Karen McCarthy, Localise West Midlands (2017) Social Care as a Local Economic Solution for the West Midlands. https://neweconomics.org/uploads/files/West-Midlands-Social-Care-report.pdf
  5. Birmingham City Council website  (2018) ‘Care Homes and Supported Living 2018’. https://www.birmingham.gov.uk/directory/55/care_homes_home_support_and_supported_living/category/1069
  6. CorporateWatch (2016) The Home Care Business. https://corporatewatch.org/the-home-care-business/#__RefHeading___Toc2989_782775029
  7. The Labour Party (2017) Alternative Models of Ownership. https://labour.org.uk/wp-content/uploads/2017/10/Alternative-Models-of-Ownership.pdf
  8. The Labour Party (2018) Democratic Public Ownership. https://labour.org.uk/wp-content/uploads/2018/09/Democratic-public-ownership-consulation.pdf
  9. Richard Hatcher (July 2019) ‘Co-production, social care and participatory democracy’.  https://www.healthcampaignstogether.com/pdf/1907%2019%20RH%20co-production%20article%20v3.pdf In ‘Health Campaigns Together: The Debate over Social Care – New Additional Reading’ https://www.healthcampaignstogether.com/socialcare.php

10.‘Our Social Care System is Broken’. https://www.healthcampaignstogether.com/pdf/Social%20Care%20Leaflet%20draft%204%20final.pdf

 

 

 

 

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2018 stats: top post was by Dr Devinder Sharma and visitors came from 42 countries

Top post, ‘Natural farming is the future: Andhra Pradesh shows the way’: Professor Devinder Sharma

Ends: Andhra Pradesh has launched a massive programme to promote natural farming.

This programme, Rythu Sadhikara Samstha, aims to bring 5 lakh farmers in all the 13 districts during the period 2017-2022 to adopt natural farming practices (read more here and on their Facebook page). I recently visited a number of villages in Kurnool district to meet some farmers who have moved away from chemical agriculture to natural farming practices.

I was amazed to learn that yields are increasing across all crops

In groundnut, yields have gone up by 35 per cent; Cotton productivity has increased by 11 per cent; Chilli by 34 per cent; brinjal by 69 per cent; and paddy by 10 to 12 per cent. So far, 1.63 lakh farmers have switched to natural farming. If crop productivity can increase without using chemical fertiliser and pesticides; if the net income in the hands of farmers goes up considerably; and if natural farming ushers in a climate resilient agriculture, I see no reason why other states cannot emulate the pioneering efforts being made by Andhra Pradesh. #  Posted by Devinder Sharma

Most visitors came from the United Kingdom

 

 

 

 

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