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Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

A view of HM TreasuryIn the library of the Treasury, there is an ancient copy of one of Keynes’ pamphlets, and it has been scrawled over by Treasury officials with the words ‘bankruptcy’ and ‘insanity’.

Keynes was challenging the Treasury idea, which seems to have been in their DNA since time immemorial, that the way out of recession is to get people to save not spend.  The money has to be in the banks, ready to lend.

Keynes’ view was that, in the end, this kind of puritanical retrenchment led to death – “a peregrination in the catacombs with a guttering candle”.  But we don’t have to worry because that was in the 1930s.  Or do we?

A little bird told me recently that the attitude in the Treasury has reverted to type faced with the recession and deficit.  Once again, the official view is that people should be encouraged to save not spend, so that the money is available for lending.

Since Keynes’ day, there are two extra problems with this, and they are not small.  There are hardly any banks left, and those that survive have long since dismantled the infrastructure they need for local lending.  Their attention is elsewhere.  They can’t do it.

So when the Treasury persuade George Osborne to raise VAT to 20 per cent, this is the agenda: don’t spend, save.  Unless he and Cable and Danny Alexander can stand up to the Treasury, and tackle this hideous and ancient mistake, I fear it may be the peregrination in the catacombs for us.

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Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

One good thing about the budget: the recognition by George Osborne that the financial crisis began with the banks.  This was the justification for the £2 billion bank levy – though, as nef’s Tony Greenham points out, this is only a third of what they paid out in bonuses.

The implication – though Osborne didn’t say this bit – is that it will also end with the banks.  Only the most anal deficit hawk can possibly believe any more than we can cut our way to recovery.  Quite the reverse.  John Maynard Keynes warned that this approach will lead to “a peregrination in the catacombs with a guttering candle”.

No, the only way out of recession is to get the enterprise economy working again, despite decades when official attention – and certainly the attention of the banks – has been elsewhere.  The fantasy is that somehow the free market will do this magically, when it clearly won’t – and the main reason it doesn’t is that we no longer have a banking system fit for purpose.  Its structure and attention is on the speculative economy.

So, although Osborne may have made the link between the banks and the crisis, the full implications of that don’t seem to have been worked through in the budget. There is nothing but more cuts ahead unless we can produce a useful, local banking infrastructure out of the oligopoly of dinosaurs we have inherited from the huge banking mergers that the UK government encouraged throughout the 20th century.

We have names now to the banking commission that will investigate this, but they are not hugely inspiring ones, and the hands of the expensive lobbyists for the banking industry are everywhere – and desperate to keep us all chained supplicants to the old dispensation.

The key point we need to get across is that solving the problem of our ineffective banking infrastructure is critical to bringing recovery forward, and staving off more cuts.  It is a fantasy to suggest that somehow UK bankers can be cajoled in lending more effectively locally.  They don’t have the systems or the people in place to do that.  It is a fantasy to imagine that enterprise will somehow emerge without lending.

Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

What is it about The Wizard of Oz that makes it so popular now?  There was the new production at the Festival Hall last year.  Now there is the success of Wicked. Well, I have a suggestion.  It is to do with economic collapse.

The idea that Frank Baum actually wove his tale around the monetary battles of the 1890s only emerged in 1963, but I’m sure it is right.

Although Oz stands easily on its own as a tale, it was also a subtle tract urging more money in circulation on behalf of the agricultural workers (the Scarecrow) and the industrial workers (the Tin Man).

Baum was involved in the battle between the supporters of gold standard money – authoritative and scarce – and silver money (much more plentiful).  So Dorothy sets out on the Yellow Brick Road wearing the Witch of the East’s magic Silver Shoes (they were red in the Judy Garland film) – shoes that neither she, nor the Witch of the North, nor the Munchkins understand the power of.

The poor deluded residents of Oz are required to wear green-tinted glasses fastened by gold buckles.  They see the world through the colour of money.  Oz, of course, was the well-known measure of gold – the abbreviation for ounces – and the Wonderful Wizard, the personification of the gold standard, was finally revealed as a fraud.

This is how Baum saw the wizard-bankers who defended the gold standard: “Toto jumped away … in alarm and tipped over the screen that stood in a corner. As it fell with a crash they looked that way, and the next moment all of them were filled with wonder. For they saw, standing in just the spot the screen had hidden, a little old man, with a bald head and a wrinkled face, who seemed to be as much surprised as they were.”

All of which is a way of saying that The Wizard of Oz is about economic collapse.  The 1939 film certainly implies that, but the original tale is also about the pomposity and delusions of bankers.

The Populist movement that inspired Baum has all gone now, but actually these issues remain with us, seeking shape.  We still regard money as one, indivisible, totemic, semi-divine, golden truth, issued from on high by an infallible Federal Reserve or Bank of England, and handed down to a grateful populace.  Actually it is many things, and as adaptable to human ingenuity as it ever was.  We still walk around, like the people in the Emerald City, wearing tinted glasses which can only recognise what Wall Street or the City of London says is important.

We still suffer from the way that these eyeglasses twist how we see the world, causing so much of what we value to disappear because it has no monetary worth: families, communities, forests, rivers.  We still see the monoculture imposed by our money system driving out other cultures, species, languages, opinions, and forms of wealth.  We find that financial services are so profitable that almost every other economic activity – and especially Aunt Em’s farming – is threatened.  The big banks are now twice as profitable as they were even ten years ago.  The rare occasions when they are not, we all of us find ourselves bailing them out.

In the UK, there is a particular problem of a serious shortage of banks after generations of consolidation and centralisation.  Our businesses are now in a far weaker position than American or German competitors, and potential competitors, because we have no equivalent lending infrastructure.  There are only 170 branches per million people in the UK, compared to 520 in Germany and 960 in France.

Meanwhile, the great corporations are striving to become banks themselves.  They are shedding the real work until they are shells that just do financial services.  Money, at least as we conceive it, is driving out life.  We feel the hurricane of $3 trillion a day blowing through the world, but we have to remember it isn’t what it seems.  It reeks of decay.

Could anyone write a parable along the lines of Baum, to put the same points as he did?  Well, that was what was suggested to me some years ago, and I made an attempt.  It is an updated Oz, still a mythic story in its own right, about also about money – a Wizard of Oz for the age of derivatives trading and Goldman Sachs.

It is on sale now, published through The Real Press.  It includes a short essay about the meaning of the original Oz, my speech at the launch of the Brixton Pound last year, and some wonderful illustrations by Karin Dahlbacka, which are worth all the rest put together.

Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

“I pondered all these things,” wrote William Morris in A Dream of John Ball, “and how men in fight and lose the battle and the thing that they fought for comes about in spite of their defeat. And when it comes, turns out not to be what they meant and other men have to fight for what they meant under another name.”

Morris was right, and he seems to have hit on a profound truth about politics.  Change is deeply paradoxical, and – although the grammar of progress eludes most politicians – we achieve what we achieve sideways, like crabs.

When we win we are also at the moment of disappointment; when we lose then paradoxically things happen as a result.  It’s confusing, but that is how it works.

This is one of those paradoxical moments, because we are about to see the Conservatives support electoral reform in the Commons, if not outright PR.  The political shift is not yet complete, and it certainly won’t be embraced by all 306, but it has begun.

A quick race through political history shows that this isn’t actually very unusual.  It was Conservatives who extended the franchise in 1867, who reformed factories and extended free education.  It was the Tories who made Ireland independent.

Not because they really had much taste for it, but because of something else.  When Conservatives realise that radical reform is inevitable, then – in the end – they prefer to do it themselves.

In the case of PR, the alternative is that Labour will do it, when they next claw their way to power.  Then we risk Labour-style PR, with list systems that leave the party machines in control.

It is the historic destiny of the Conservative Party to introduce PR a different way, setting Britain on the path towards proportional representation in a way that retains that link between MPs and their constituencies.  The debate is about Alternative Vote now, but that is now so far from the Irish system of single transferable vote – giving the maximum amount of choice to the voters, and keeping van all-important constituency link.

That will mean bigger, multi-member constituencies.  But then, that is what Britain used to have.  It is a potential Conservative compromise.

What we are all learning this month is that strong, decisive and effective government isn’t quite what Conservatives thought it was.  In the end, giving absolute power to a minority isn’t either stable or decisive.

When we face the kind of problems that now face Britain – loss of confidence in the markets, the urgent need to cut the deficit – then minority power doesn’t work.  It isn’t stable and it can’t unite the nation.  The only thing that will work, and give stability, is government that is backed by a majority.  That applies now, but it will apply in the future too.

History suggests that this is the moment when enough Conservatives realise that, and grasp the opportunity to give power back to the voters.  In the heat of the moment, they agreed to back AV, but the logic suggests that many of them will go further.

Watch this space. They will wriggle, but in the end they will back PR.

Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

I’ve spent the last week glued to the television.  I hardly watch any normally, so this is enough to feel pretty exhausting.  There is some opposition already about the coalition government, but – for some aspects at least of the new economics – it seems to me to open up some thrilling possibilities.

Yes, I am also a Liberal Democrat (I think I ought to declare my political leanings at this point) so my heart is bound to leap a little at the thought of Liberals being in government for the first time for 65 years.

But even if I wasn’t, the cancellation of the Heathrow third runway – in the face of all those corporate lobbyists, and all that money – would be enough to make me prick up my ears.

For the emerging new economics, there are at least four areas where things may now move quite fast:

  1. Tackling the banks: Vince Cable will be doing more than just putting in place the banking levy, the coalition agreement has set out a path towards breaking them up – and creating a more diverse, local and mutual banking system.
  2. Localism: it wasn’t clear whether there was anything behind the Conservative commitment to localism. Now there is: the coalition has committed itself to large scale decentralisation of power.
  3. Low carbon economy: did Cameron know what this was when he used the phrase? That isn’t clear. Why did Clegg repeatedly use the phrase ‘green sustainable growth’?  That isn’t clear either.  It is up to us to define it on their behalf, but it is clear that the political will is there for a major shift.
  4. Co-production: the same applies to the so-called ‘Big Society’.  It wasn’t clear if there was any thought-through policy to support it.  Now there is a commitment to devolve power to communities, and – if co-production is not explicitly on the agenda – there is a hole in coalition policy shaped like co-production.

But for some of these, if not all, the political rules have now changed.  Two of the new cabinet in particular now control both elements of a potential Green New Deal, Vince Cable and Chris Huhne.  But if Cable acts on radical reform of the banking system, he will do so in the face of bitter opposition from the City of London and elements among bankbench Conservative MPs.

What he, and those like him, are going to need is explicit political support – as well as research, information and basic cheerleading – if they are going to be able to press forward their ambitions.

Those of us in the voluntary sector, or in campaigning NGOs, who have become used to simply demanding things of politicians, are going to need to develop a more sophisticated strategy.

We are going to encourage and then protect those ministers capable of creating a new economic revolution.  Tackling the banks and building a low-carbon economy is a matter of co-production, and our side of the work starts now.

Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

Are Tesco's claims about jobs correct?

Tesco’s spokesman Lucy Neville-Rolfe claims that the government’s new competition test will cost 25,000 jobs over the next decade.  This is highly misleading, and not just because Tesco are now firmly in the anti-competition camp.  Actually, as most people have known since Adam Smith, more competition usually means more jobs.

What this nonsense seeks to avoid is the truth which has devastated so many local economies over the past decade – some retail developers build the local economy; some corrode them.

It is highly misleading to suggest that all Tesco developers create jobs, when research suggests that most big supermarket developments are net destroyers of jobs.  It’s as if Lucy Neville-Rolfe and her kind are able to add, but are blind when it comes to subtracting.  The jobs in a new Tesco have to be offset against those which disappear as a result.

Local authorities need to do much more to distinguish between new stores which will be genuine anchors – which will bring in more customers to the local high street, and increase the money that stays circulating in the local economy – and those which won’t.

Sadly, many Tesco stores are not actually providing anchors to the surrounding shops.  They are intending to compete with them and, since the big four supermarkets are semi-monopolies – which have huge power over suppliers – they will tend to drive out any local competition.  Companies which, like Tesco, intend to compete in nearly every local market will rarely be effective anchors.

If you wonder why so many of our local economies have been hollowed out, here is the main reason: we have been using wealth destroyers as anchor stores.

So next time someone like Lucy Neville-Rolfe talks about the jobs that are not being created because someone has had the temerity to put some mild block in their path, ask them to do some proper arithmetic.

Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

Vince Cable was quite right on the Today programme. The response to the RBS director’s threat to resign if they are not allowed to pay the bonuses they want to their failed, cash-strapped, state-owned bank should be to say: go ahead.

But we need to look a little more closely at the business of banking bonuses. They are paid out of a percentage of the profits of the investment divisions, sometimes up to fifty per cent. The money would otherwise go to the shareholders – the same ones who failed to exercise proper control over the bank they owned.

There are some, and Fortune magazine is among them, who would say that they are better shared with the staff than shovelled at the owners – and that’s right as far as it goes.

But the real question is not why the bonuses are so high. It is why the profits are so high. They come, after all, out of all of our pension investments, or the debt that goes to build productive business, or capital investments in public infrastructure. The real scandal is that these bonuses are paid out of fees which ought rightly to stay with the small investors who are watching the value of their pensions falling.

The fact that the banks are able to award themselves such hefty fees is purely because we have allowed a semi-monopoly to build up in banking, both domestic and investment banking. So here is the real solution: slash the bonuses, accept the resignation of the directors, put in their place bankers who are prepared to do what is necessary to break up RBS into its constituent businesses and regions.

Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

The Building Britains Future initiative wont work – we have to find ways of handing real power and responsibility downwards.

The Building Britain's Future initiative won't work – we have to find ways of handing real power and responsibility downwards.

It is hard to tell, because the new Building Britain’s Future website says, as I write, “Error 404: Page not found”. But judging by the prime minister’s statement today, it doesn’t represent a meaningful shift towards localism.

That was the rhetoric – a shift from top-down targets to individual entitlements – but when it comes to localism, Gordon Brown is the victim of a huge misunderstanding. Targets are targets, Mr Brown: you don’t escape the huge inefficiencies they produce by having fewer of them, or by dressing them up as entitlements that people can enforce. And certainly not, as in the case of the NHS 18-week waiting list, by turning them into an obligation.

Quite the reverse. It will mean more administrators employed to shift people through the system and find creative ways of avoiding the various definitions, and it will reduce the money available for just doing the work. Targets are top-down, by their very nature. It doesn’t matter what you call them.

But the real problem is that politicians of all parties are very confused about localism. They gargle with the ideas, but believe it is something about giving people a little bit more, having fewer targets and setting up local committees. They get marooned in the narrow question of where each function of government should take place – a kind of parlour game for politicians before they lose the will to live. They miss the point.

The real problem is that centralisation is far more insidious than they realise. Not only does it make government and public services intensely ineffective, creating vast inhuman institutions – factory hospitals and monster schools – where professionals are constrained from using their human skills to make a difference. But it also reduces us from citizens to supplicants to vast organisations, public and private.

Westminster politicians still don’t get it. Their localism means lots of local administration, while the tentacles of economic centralisation stay intact. Local parish mayors are still supplicants to Tesco or vast hospitals, schools and distant mega-police forces. It means intricate webs of individual entitlements, when the public services we need still don’t work properly. They still treat us as units to be packaged, as potential legal minefields, as one-off bundles of need to be processed, without giving us the individual attention – via long-term relationships with professionals – that will actually make change happen.

Politicians urgently need to understand that localism also means devolving power to frontline public service staff, to give them back the initiative to make things happen. Or devolving responsibility to public service clients, delivering broader services alongside professionals, tackling our distant, burgeoning monster institutions, the huge schools, hospitals and jobcentres that manage us, and tackling the monopolistic centralisation of business.

Taken together, the implications of centralisation are that we have become supplicants to a combination of increasingly distant government systems, working with increasingly distant and monopolistic private corporations. That is the Supplicant State and one look at the key points in Building Britain’s Future shows that we still live there. This is all about what they are going to give us. Keeping us as supplicants isn’t going to work – we have to find ways of handing real power and responsibility downwards.

David’s new pamphlet, Localism: Unravelling the Supplicant State, is available to download from the nef website.

Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

“Future students of history will be shocked and angered by the fact that in 1945 the same monetary system that had driven the world to despair and disaster [in the Great Depression], and had almost destroyed the civilisation it was supposed to stand for, was revived on a much wider scope.”

So wrote the French economist Jacques Rueff in 1964.  It feels much the same now: we would be insane to go back to the same disastrous banking pattern we had before the bail-out, but – thanks to the government – we probably will.

Only a miserable 0.6 per cent of the government’s stimulus package is going on green measures, to genuinely shift the way the economy works.

Lord Mandelson has come out as a born again defender of the financial status quo.

But worst of all, the latest Bank of England assessment shows that, despite everything, business lending to small and medium-sized businesses is down again.  Differential interest rates and fees are both still rising.

Local bank managers who know their community well are largely a thing of the past.

Local bank managers who know their community well are largely a thing of the past.

It has become a lot more expensive to borrow money, even for the lucky few who make it through the approval stage.

One of the many tragedies about the Westminster expenses scandal, as Vince Cable pointed out last week, is that it robs MPs of the moral authority to tackle our dysfunctional banking system.

Ministers daren’t say anything too interesting, or too bold, in case heir colleagues assume they are throwing their hand into the ring for the Labour leadership.  It is a miserable prospect, and it may guarantee a swift return to banking business-as-usual.

To start with, it is time we broke the all-party consensus that somehow the government can use their holdings in the big banks to kick-start local lending again.  It hasn’t worked, and seems unlikely to work any time soon.

This is not only because banks won’t lend, but because they can’t lend using their current infrastructure and systems.

They have been consolidated to the point where they point towards the speculative economy and have little local lending infrastructure left.  Their lending decisions are taken by computerised systems which, because we are in a recession, naturally recommend against.

There are no longer bank managers, or local staff with the authority to pick out the success stories, using their knowledge of their local economy.

Our businesses are now in a far weaker position than American or German competitors, and potential competitors, because we have no equivalent lending infrastructure.  There are only 170 branches per million people in the UK, compared to 520 in Germany and 960 in France.

Now that the elections are over, this is what politicians need to do immediately:

money matters Why is this still not top of the agenda?  I think this is partly because, in this country at least, people don’t understand the money system.  Their mental map of it is nearly a century old: safe reliable Captain Mainwaring and vaults full of money.

I was assured some years ago by the Washington correspondent of a national newspaper (admittedly it was the Sun) that all money is based on gold.  It hasn’t actually been since 1931.

This is my excuse for writing an accessible guide to the way money works: Money Matters: Putting the Eco into Economics.

I hope (no small ambition this) that it might help dispel some of the bizarre mystique that bankers continue to exercise over the minds of the English.  Because what we really need to do is abandon the idea that our current useless system was somehow placed there by God, and demand the new local banking infrastructure we need.

Bookmark and Share David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

I was looking for some English honey in Sainsbury’s in Crystal Palace over the weekend.

beeI have to confess, for the purposes of this blog, that I do occasionally shop with the monopolistic supermarkets, but there we are.  Let’s leave that on one side for a moment.  The point is that, in this supermarket at least, one of the fake ‘choices’ before customers is between identical honeys.  English honey is no longer considered an appropriate choice for us.

All we have to choose from is a selection of honey from other countries and some blended honeys, which use any bits and pieces that manufacturers can knit together from anywhere they can find it.  Which are also heat-treated to destroy any local diversity and naturally occurring enzymes.

Bland, over-screen, de-natured honey, that’s all we are allowed, as if we hadn’t noticed that the bees making honey nearer home are disappearing.

Now, I think local honey is an absolutely vital symbol of everything we stand for – in this blog at least – and it is a big worry if it is suddenly unavailable.

Local honey is at least a potential cure for hay fever, because it provides a homeopathic dose of the local pollen, if you keep taking it from the previous autumn.  But its continued existence, in the face of all the new diseases that are threatening our bee colonies, is some guarantee of continued diversity.

We need bees to do their pollinating in our country, not just the handful of places where supermarkets decide to source their honey (Brazil, Canada and Australia).

So this is my suggestion.  That we try very carefully to buy absolutely no more blended honey, no honey which isn’t from anywhere in particular, and chase down local honey – at least regional honey – where ever we can.  That we insist on real, local honey, on such a scale that its production continues in the face of whatever peril the bees are facing from the modern world.

The more we insist on buying local honey, the more we keep the craft of local beekeeping alive and the more we hold out – not just against the systems that are destroying our bees – but against bland, identikit, technocratic food, and bland, identikit technocratic honey in particular.

We may not be able to regulate banks all by ourselves, or wrest the pension rights from Sir Fred Goodwin, or to cancel the new Heathrow runway.  But at least we can make a stand and shun fake honey.

Find out more here: http://www.beedata.com/localhoney/

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nef employees blog in their personal capacity. The opinions expressed here do not necessarily reflect those of the new economics foundation.