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Tuesday, 17 October 2017

Intellectual Property and Corporate Power

One of the key components of my 'dissident' approach to economic science [or political economy] is my assertion that all ownable things - assets - come in four categories:

1. Keyn. anything in the category that J M Keynes described as chartalist in his definitive Treatise on Money. These are all the immaterial creations of the human mind that can be claimed as the possession of the person who invented them, or of the person who was able to capture such command over them as would be recognised in a court of law. Thus people and corporate entities [governments, local government, institutions, companies etc] come to be the 'owners' of control of the land, and owners of shares, stocks, bank deposits, patents, copyrights, brand names, trademarks etc. Most defined keyns can be sold . The most massively increasing category of keyns in the contemporary economy are items of intellectual property [or 'intellectual keyns' shown as ik in my text].

2. Quon. A material asset whose price includes both the costs of assembling the material thing and a charge for the intellectual property that the owner of the object is able to enjoy with the material thing. The owner of the ik sells the user a right to enjoy the benefits of their brand, and the intellectual property that inheres in the object.

3. Jev. A material asset whose price when resold is determined by its perceived rarity and aesthetic quality, rather than by its cost of production or its contemporary usefulness in any material sense to the owner. Thus this category covers antiques, works or art etc; which can be bought and sold and which - over time - often appreciate in retain price, so they can be assets of increasing inventory 'value'.

4. Marcom. These are commodities which are sold at prices that equal, or are close to, the cost of production and delivery [allowing for a reasonable return on capital to the producers and distributors], with no premium for any ik such as occurs in the price of a quon.

There are huge implications that arise from this differentiation of assets. I refer to two today.

A. Firms that are licensed and regulated as 'banks' have huge privileges. In particular, because they manage keynic money for natural and corporate persons they get special guarantees from the state. The most extreme version of this protection was the 'rescue' of the banking system in 2007-9, whose effects are still affecting everybody in the advanced economies. Despite the huge direct and indirect cost of 'saving' the banks, governments and their agents, the central banks [e.g. the Bank of England] have done nothing that definitively separates the socially-necessary and economically-indispensable banking functions of the huge complex firms that include banking divisions from the parts of the firm that trade in stocks and shares, bonds, investment advice, creating and trading in derivatives and futures and other speculative keyns. Thus the entire western world remains at risk from rogue trading or sheer incompetence in these pampered businesses. This remains one of the biggest risks to civilisation; even allowing for jihadism, rogue states, cybercrime, plague and famine.

B. Hundreds of thousands of people and firms own ik that has become increasingly desired by more and more people over the past twenty years. Computer games, films and records and all accessed from cyberspace, and social media have become massive foci of consumption; and although the ownership of such assets is widely diffused, a small number of points of access are used by the vast preponderance of users. Thus Google, Alibaba, Facebook and a few other leading points in the cyberworld are absolutely dominant. The creators of these platforms have established their intellectual property with immense rigour, and are constantly extending their [patented] means of checking on their customers so that they can increasingly tailor 'special offers' that will tempt them to spend their money and their time at the profitable direction of the ik owner. This gives more power over the consumers and their world to a small number of firms than has ever been held by firms that control material commodities. Economic models have not even begun to cope with it: the Econocracy have been content to monopolise their fantasies while Silicon Valley has established a much firmer hegemony than the professors can comprehend. Politicians are increasingly exercised by the new sort of power that is held by the dominant holders of the ik that shapes hundreds of millions of consumer's lifestyle; and don't know what to do about it. They can't even work out how to tax the massive cash flow that they receive.

My basic taxonomy of economic assets forms a basis on which public control, exercised by the political system of the state, can properly be established over the cybernauts within a sensible structure of political economy. One small step for man?

Monday, 16 October 2017

Disrupting the Econocracy? Thaler's Prize

The mutual admiration event of the Econocracy's year is the award of the 'Nobel Memorial Prize in Economic Science', which is announced at about the same time and in the same sort of way as the real Nobel prizes. But this prize was funded by Scandinavian banks, many decades after the original Nobel benefaction; before the absolute triumph of the 'rational expectations' dogma but well into the era when Economics had been captured by the neo-Keynesians who were about to show the dangerous impact of their views as applied [on their advice] by governments when the inflation that was the inevitable result of the flawed dogma began to bite into individuals' welfare and to undermine government strategies. Through the later nineteen sixties and into the 'seventies a back-catalogue of economic writers from the previous forty years were rewarded with the new prize, which was often split between two or more winners [thus quickly building-up the list of 'Laureates'] . After that the prize has been awarded to a mix of writers who have [in general] more or less closely subscribed to the increasingly tight dogmatic requirements of the Econocracy as they have tightened their control of the standard syllabus in Economics for students [as explained in the text Econocracy, frequently mentioned in the blog and created by the Post-Crash Economics Society at Manchester].

There have been occasional exceptions to this command of the prize by the dominant faction of Economics grandees, achievable because the electors' view of the world from the expanses of Scandinavia is broader than from Chicago, Princeton, the LSE or Cambridge; and thus other points of view have had a look-in from time to time. But those individuals have deferred, in general, to the overriding assertions of 'scientific' rigour, purity and authority that has been claimed by the Econocrats.

Thus this year's prize has been hailed as a novelty, a breakthrough; maybe as the gateway to a new era. This is the award of the prize to the hugely respected Richard Thaler, best known as the advocate of the 'Nudge Theory': a psychological insight that can be said directly to contradict the assumptions about humans' behaviour that lie at the heart of Econocratic dogma. Thaler has drawn on psychology to suggest that people do not behave as Alfred Marshall assumed in his Principles of Economics [1890] and which subsequent authoritative figures have built up constantly as the core of current theory. The critics have been delighted to welcome this award to Thaler as evidence that even the committee awarding the pseudo-Nobel Prize are open to the view that homo economicus - 'economic man' - is not a true or fair representation of real, living and breathing human beings.

The entire modus operandi of the Econocracy is based on the assertion that people will act 'rationally' if they have enough access to the facts on which they should reach economic decisions. Individuals will allocate their scarce resources to those purchases that will maximise their welfare over their lifetimes; thus dividing their spending between present needs and the demands of the future [such as providing for pensions and medical care in old age]. Recognising that resources are scarce, economic man will always buy what will do him most good and and least harm: always assuming that sufficient evidence of potential outcomes is available to him.

A few minutes' observation of real humans gives the lie to this daft assumption. Stand in any street and watch the obese people waddle laboriously along, eating something from a packet. Look at the flashy cars that young men can only afford to hire-purchase at the cost of making no provision for the future [and often not insuring the vehicles]. Look at the drunk, drugged young women in the gutters in any major city at weekend. Read the data on early deaths and completely burnt-out people still in their twenties.

Since real people behave so irrationally, it cannot be expected that whole communities whose coalmine or steelworks is closed down on the basis of fake data by a Thatcherite government [whose real objective is to eradicate the trade union that is embedded in the 'redundant' plant] will abandon their community, their homes and their connections, and migrate as individual families to places where there may or may not be new jobs for them. How do five hundred redundant miners assess such a situation? They can't: and anyway even a Thatcherite government is subject to the 'irrational' need to win the next election: so they maintain the denizens of the pit villages in situ with social security payments, early access to pensions and other means by which no 'rational' economic decisions need to be taken by the population. Hence both people and their political systems can be seen to be 'irrational' every day.

Thaler does not approach the issue as I do in this comment; but he suggests means by which people can be 'nudged' more constructively to react to the situations in which they find themselves. In doing this he has performed a major service: not just to 'economic science' but potentially to humanity. But this does not rescue Economics from its guilty hold on the essentials of human interaction: Thaler has cast light, and proved that his theories have traction in reality: which is great. But much more is needed to smash the Econonocracy; who can choose to teach their students that real people can be nudged to behave more like homo economicus: which would be the worst outcome of all.

Sunday, 15 October 2017

Austria's Choice

Today, there is to be a general election in Austria. Thanks to the actions of Angela Merkel two years ago, the conclusion of the election in this neighbouring country to Germany was clear before voting began. The overwhelming majority of Austrians agree that there are now too many Muslims in the country, that the strain they have put on the social assistance and housing and education and health systems is unacceptable; and that no further significant immigration - however desperate the plight of people claiming to be 'refugees' might be - should be permitted. The government that will emerge from the election will be a coalition with a more right-wing structure than any since the re-unification of Austria [after allied occupation] in 1956. The two stand-out policy positions that it is expected to adopt are to seal the frontiers of the EU against immigrants, and to review and restrict access to the social security and related systems.

Neigbouring Hungary has had a government with policies designed to minimise immigration from outside the EU for several years: access to that country is very heavily controlled, with high wire fences and a strong presence of border guards. To the south-west of the Hungarian frontier is Austria's border with Italy, which has already been 'strengthened' to limit the onward passage of any of the tens of thousands of economic migrants who reach Italy by sea every year. No doubt that border will further be toughened: but there will also be sympathy for the Italians in their situation of receiving the migrants, which is resulting in right-wing politicians rising through 'populist' movements there, too.

There will be resistance in Austria to any attempt by Germany to impose any quota of Muslim [or, indeed, any other category of] immigrants on any EU country. It is widely expected that Austria will adhere to, and may even join, the 'Visigrad' group of countries [Poland, Czech Republic, Slovakia and Hungary] that have 'ganged up' to resist pressure from Germany and France. Thus there is already the making of a very powerful subset of the EU that will simply decline to go along with aspects of the settlement that the USA imposed on 'liberated' Europe after 1945. The Liberal Consensus to which Roosevelt and Truman, Churchill and deGaulle subscribed is fading fast.

The right-wing AfD in Germany has gained seats in the Bundestag, sufficient in number to harass whatever coalition government Mrs Merkel may be able to cobble together. France has a completely unproved president; and there are huge questions as to whether his parliamentary majority and constitutional authority will be enough to overcome the inertia of the trade unions, farmers and other vested interests. It has been noted above that Italy has strong and growing right-wing parties, and the legacy of Fascism is ceasing to be seen as an embarrassment. Those countries in north and west Europe that have a couple of centuries of constitutional government [Belgium, the Netherlands, Sweden, Finland and Luxembourg; plus non-EU-member Norway] have all seen some emergence of minority anti-migrant movements. The three Baltic States [Estonia Latvia and Lithuania] have no significant problem with Muslim immigrants; they have suffered, to varying degrees, net emigration to the more affluent west of the EU.

The Balkan EU members, and aspirants to membership, want to prove their democratic credentials; but they have limited resources to accommodate immigrants [balanced by limited means of keeping them out]. They will sympathise with [and envy] the countries to the north that have the means and the will to seal their borders to a significant extent.

Thus the European Union that is harassed by the Brexit issue is a very different political and emotional structure than it was at the beginning of 2015: the year in which Cowardy Cameron launched the Referendum as an election pledge. It is quickly becoming an entity about which any true democrat would have serious questions. Britain is so beset by a useless government that it has not yet faced up to the point: but there is a growing doubt as to whether we would wish to join, if that was the issue before us.

Saturday, 14 October 2017

Politicians' Earnings

There is a glorious row rumbling on about the salaries of Vice-Chancellors [general managers] of Universities. A new Vice-Chancellor of Oxford feels constrained to defend a salary of less than £400,000 as the head of one of the half-dozen most powerful and effective academic communities in the world: and that is quite inappropriate. To attract a significant global academic-cum-manager needs that amount of money: though it is only a couple of decades since Sir Colin Lucas occupied the office of Vice Chancellor for a couple of years as Master of Balliol College. Colin was able to persuade the powers-that-be in the university that the time had come to drop the hit-or-miss rotation of the Vice-Chancellorship among the heads of colleges and to employ a top manager on a longer-term contract. Cambridge did the same thing about the same time, and so far the two institutions between them had some successes and some embarrassments: but nobody is proposing a reversion to the medieval system.

The silly title of Vice-Chancellor implies an assistant or deputy to the honorific head of a university, who may be a member of the aristocracy [even a minor royal] or a politician or a benefactor or a distinguished scholar or scientist: but who is in no way involved in the routine management of the place. Several vice-chancellors have added titles like 'president' to their portfolio [evincing a painful need to say 'I'm really the boss'] and Scots avoid the whole morass by being known as 'principals'.

The route to being a vice-chancellor is complex, but now that there are some 120 of them it has become obvious that both the institutions and their general managers are of very different quality. The vice-chancellor of Bolton University [yes, there is even one there now] has waded onto the media several times, bragging of his importance despite his institution wallowing near the bottom of the league. He claims to be worth what he is paid, in a way that would perhaps justify £50,000 a year plus expenses and pension: the fact that he is within spitting distance of the top 'earners' is absurd on any objective criterion.

The row started with somebody making the observation that all the vice-chancellors are paid more than the Prime Minister is paid. This has been developed into something close to a vendetta by the obsessive proponent of the useless HS2 railway, who has been unable to make any inroad into the system; while the government looks most unwilling to intervene. There are at least twenty world-class university institutions in the United Kingdom, including the leading colleges of the University of London. Their heads need to be global figures. But for the rest of the so-say university system the salaries are indeed inflated. How did this happen? I was there at the time. During the 'seventies and the 'eighties of the last century several 'polytechnics' were created, usually by amalgamating teacher-training colleges and craft colleges with city technical colleges. These institutions grew quickly as they 'produced' graduates more cheaply than did the 'traditional' universities; so their Directors were able to negotiate high salaries with their local-authority-dominated  employers. Then the government decided that the polys should be given 'parity of esteem' by being designated as universities. Then the pre-existing vice-chancellors found it impossible to ignore the fact that their median salaries were below those of ex-poly directors; and a game of catch-up went crazy: resulting in the present system.

Then somebody drew in the comparison with the Prime Minister: if she gets a much more modest salary for 'running the country', then it can be claimed to stand as self-evident that V-Cs are paid 'too much'.

This is daft: everybody knows that most prime ministers in recent decades have been quite young people, who had a great deal of lifetime remaining in which to make a great deal of money, if they are so inclined. Gordon Brown is not so inclined: he has a comfortable existence doing global good works. But his old sparring-partner Blair was quickly notorious for the millions that have passed through his personal accounts as well as through the charities that give him a public profile that has not yet diminished his odious personal reputation. David Cameron's cowardly exit from Downing Street and the Commons was followed by the purchase of a hut-on-wheels in which he is writing the memoirs that he hopes will begin the repletion of the fortunes that he and his wife have inherited. Mrs May's impending departure will give her the opportunity to accumulate a cash pile to set alongside her husband's City earnings; starting, again, with heavily-supported memoirs.

The 'granny of them all' among ex-politician big earners, Hillary Rodham Clinton, is in the UK now to promote the memoirs that have been written and published in quick time since her election defeat last November. Like her husband, she had outblaired Blair himself in the league of big post-political earners. So to make a current prime minister's salary a template for anything is simply silly. Some civil servants, NHS managers and others in the public sector are necessarily paid more than the prime minister. If Labour re-nationalise any industries or utilities, they will have to pay their managers more than the prime minister, if they want the re-nationalisation to work. That is the way of the world. Meanwhile, the vice-chancellor of Bolton University will be the living proof that some people in the semi-public sector are indeed overpaid.

Friday, 13 October 2017

Mrs May's Brexit: from Chaos to Catastrophe

Mrs May and Mr Hammond - her Finance Minister - are represented by various sections of the media as being in a serious conflict about making provision for a 'no deal' outcome from the current negotiation between the UK and the EU. The Chancellor [who is wedded, as tightly as if he were welded] to the concept of 'austerity' has told a Commons committee that he has contingency plans, but does not want to release any funds until the very last moment. He could not make that statement if staff time and some expenses [notably consultancy] had not been applied to the planning: so what he obviously means is that he is reluctant to release funds on implementing such a plan until that should appear to be the [utterly disastrous] inevitability.

Mrs May seems to be saying the same things, when she indicates that £250 million has been set aside for implementing a 'hard Brexit'. Yet the press, notably the Daily Mail, has become hysterical about the 'dispute' and the 'disloyalty' - even 'sabotage' - attributed to the Chancellor.

This stupid scenario shows that the minority of extreme Brexiteers are dragging the Tory party to its destruction; which would be no bad thing [in view of the appalling inadequacy that is apparent right across the government] if there was an opposition that combined honesty and competence over the board. But that is not the case. Labour is led by an unreconstructed Marxist who is as good as the late Comrade Suslov [the chief exponent of Leninist-Stalinist orthodoxy as the USSR was heading for destruction] at avoiding direct or evidence-based questions. The Momentum group show a dangerous revival of the 'entryism' that undermined the Labour government in the nineteen seventies, and thus opened up the way for Thatcherism and the dissipation of all that remained of the legacy of the first industrial revolution.

If May or Hammond was serious about managing a really 'hard' Brexit their first decision - however covertly it was taken - would be the abandonment of 'austerity'. Government spending far in excess of £250 billion would be needed to install a full customs border with the EU. The recruitment and training of hundreds of thousands of officials would need to begin now: somehow, the IT systems would have to be provided - almost instantly - despite the fact that even modest government schemes for computerisation are always over-cost and excessively delayed in implementation [to the extent that they often have to be abandoned].

British firms that still make things - there are many, often high-tech companies developed or reconstructed since 2008 - are almost all integrated into just-in-time Europe-wide supply chains [both in getting their necessary inputs and in selling components to EU companies]. Such businesses are making contingency plans that would require them at least to double the manpower and computer availability just to manage the 'paperwork' that would be involved in trying to maintain the flow of business after a default Brexit. Many such firms are already finding that their European customers are looking elsewhere for contingent supplies. Furthermore, insuring trade and the goods traded in a crash-Brexit situation will become massively more complex and thus expensive.

The clowns on the Tory right, with their airy assertions that all will be well 'under WTO Rules' [which they certainly do not understand:cf my many references to point protectionism], are driving an amazingly weak Cabinet towards the destruction of the national economy.

There must a popular movement, of Leavers and Remainers united, to avoid national economic destruction.

Thursday, 12 October 2017

Beware of Africa

It is terribly easy for a resident in Europe or the Americas to ignore Africa. Nevertheless the European Union is subject to a massive invasion of African economic migrants, many of whom claim to be refugees; but fewer and fewer are even allowed landfall on the continent. An unknown number of hundreds of thousands have gone to ground in Europe, many of whom have no prospect of becoming fully registered members of the workforce and of the social security systems. The main political focus on this issue is on keeping any more of them out, as 'populist' politicians gain votes from people who are scared [rationally or otherwise] by the prospect of culturally alien people of different skin colour 'swamping' medical services, schools and the jobs market.

Some voices are raised to point out threat the flow of would-be migrants would be massively less if more attention were given to economic and political development of African countries; but weary EU politicians who take any interest in such matters count the billions of dollars of 'aid' that have been abused by dictators on their personal lives and on military equipment to mount or to defend against political adventurism. The continent is seen as inherently corrupt; with many western corporations hesitant to trade there because of draconian anti-corruption laws that operate in their home states.

China has been very active in construction, especially of railways and port installations that enable the sources of materials and crops in which they have invested to get back to China easily. China has become a major manipulator of the African morass for its economic advantage; which has relatively disadvantaged the west where firms are hamstrung as mentioned above.

Almost every African country is an artificial construct, with boundaries set by the European imperialists in the nineteenth century which have simply been handed on the post-colonial regime that now prevails. These boundaries ignore ethnic diversity, and give cause to conflict on those grounds. It is estimated that half of the world's population growth in the next two decades will be in Africa, centred in just five countries; which are as diverse as Egypt, Nigeria and South Africa.

There are renewed signs that the ethnic tensions which have to some degree been restrained over the post-colonial half century will break out with renewed force. The key example here is in Kenya, where a few months ago a court whose participants - all native Africans - wore English eighteenth century white wigs and black gowns as handed down by the former colonial government to announce the decision to quash the result of a presidential election. Now the losing candidate in that election, who knows that he will also lose any re-run of the election, has stood down from the contest. So long as there is an acknowledged candidate from the Kikuyu population, as there is in Mr Kenyatta, no minority ethnic group has a chance of being elected, however free and fair the election process is. Mr Odinga uses many arguments, but the weight of numbers will always be against him.

So does Odinga try secession: do a Catalonia? It has been tries many times, all over Africa, dating back to the secessionist campaigns in Katanga and 'Biafra' several decades ago. There will be much more of this kind of thing, which will increase the lawlessness and political chaos that have paralysed most of central Africa for several decades. No outsiders have any right to tell Africans how to conduct their lives. The problems will multiply; and their effects will rebound on the rest of humanity: not only as an endless procession of boatloads of miserable, desperate humans who are even more unwanted in Europe than they were where they come from.

Wednesday, 11 October 2017

More British Self-Destruction

BAE systems is one of Britain's outstanding engineering companies; with a great deal of its success based on the supply of 'defence' equipment to the British and many foreign governments. The flow of government orders to the company has stimulated countless innovations, some of which have been widely diffused in industry worldwide. Like all defence suppliers, BAE systems depends on a massive complex of components suppliers, and it is itself a very significant contributor to other firms' final products.

This week it has been announced that the major parts of its aircraft assembly capability are to be closed. This follows a recent joint announcement by France and Germany that are to go it alone, together, on the construction of a next-generation fighter aircraft. It is unsurprising that Brexit Britain is not to be a partner in this venture, as we were in the Eurofighter which is to  cease production [in the UK] as soon as the existing run of orders is completed.

The largest concentration of job losses is at the two airfield based assembly plants at Salmesbury and Warton, in Lancashire. Warton is west of Preston, Samlesbury is to the east: Preston has always been a major centre of engineering, and the modern aviation capability was developed there by the English Electric Company, which had taken over the Dick, Kerr works that had been a major builder of tramcars and then of electric and diesel-electric railway engines while the higher level aircraft division was developed. Probably the highest level to which that firm aspired was in the nineteen-sixties with the development of a revolutionary fighter, designated the P1, that was confidently expected to become the world's leading 'plane for the 'seventies and beyond. Rumours circulating in Lancashire at the time indicated that British politicians were being browbeaten by the Americans into ordering US-designed rivals to the P1, while the British Treasury got cold feet about the cost of taking the design beyond the existing prototype to a full production version. So the project was abandoned: and that was regarded at the time as a major retreat from advanced science. This feeling of shamefaced abandonment of the 'best of British' was compounded by the fact that another very promising project, TSR2, was also abandoned.

Thus the UK was tied in to European joint fighter 'planes; which at least were assembled in this country while civil aviation was centred on Toulouse and the British industry became a components supplier to the Airbus and later to Bombardier when Short Brothers was sold to that Canadian firm. The facilities at Warton and Samlesbury, taken together, are Britain's last chance to retain the capacity to build aircraft. The present government, in thrall to the austerity lobby, are almost certain to let this capability - and the massive human skills base that contributes so much to it - be binned.

Meanwhile the Navy is being provided with the two biggest vessels it has ever had: aircraft carriers for which it is most unlikely that there will be so really effective aircraft for several years. The government is contracted to buy American 'planes that will need massive adjustment [paid for by the UK] to be even partially effective in operating from the carriers. To pay that bill, cuts so deep in the rest of the military are being imposed that this country's entire defensive capability is at risk.

A government with will and imagination would charge BAE with a project to build  a completely new generation of vertical take-off and landing [VTOL] planes, for which a global market could be generated once the planes were proven in service on the carriers.

Instead, the short-sighted submissive wastrels who cannot frame a Brexit negotiation with the EU will wring their hands at the loss of jobs and of technological capacity: and blunder on with the policy of austerity and the actuality of dismantling the economy on which the entire population depends.