Newsnotes 2012 03

Notes On The News

by Gwydion M Williams

Tax Breaks for Job Providers?

Turning Against Welfare [Suspicion of Fraud]

Qualitative Easing – Another Case of “Feed the Rich”

Common Sense and Economic Theology

Humanitarian Bloodshed and Chaos [Syria and Bahrain]

Egypt – What Next?

Dickens and the USA

Shooting Germans [US executing prisoners of war]

Kids as orchids or dandelions [the effects of a bad childhood]

 

Tax Breaks for Job Providers?

The left should never have let slip the demand for Full Employment. Unemployment is demoralising, obviously. But also it is not primarily the fault of the unemployed. The society let the economic troubles of the 1970s destroy the important concept of the society having a duty to provide jobs for everyone willing to work.

That’s not to say that all unemployed are innocent victims. When employers find that they have more applicants than they have jobs to fill, obviously they take those they like best. This favours the minority who’d sooner be unemployed than have a job. And it can lead to a loss of hope by those who don’t have the training or attitude, or who have never had a job and are not trusted to be decent workers if given the chance. But all of these are effects of unemployment. None of them are causes.

Suppose that ordinary mild unemployment means that there are 2 unemployed job-seekers for every job opening, and if rising unemployment means that there are 4, 6 or 7 unemployed job-seekers for every job opening. Common sense would say that more jobs were needed to cure the fix. But the dominant neo-liberal Economic Theology says that the economy would automatically correct itself and generate jobs, if left to itself. The problem must be that the unemployed are not trying hard enough. The best idea is to harass them. And also to raise the pension age and harass the disabled, so that there will be maybe 9 or 10 or 11 to every job opening.

This same spirit led to the scandal of the unemployed being forced into non-jobs under the label of ‘work experience’:

“Unpaid jobseekers have been forced to clean private homes and offices for more than a month at a time under government employment schemes, despite mounting evidence that the controversial policy is reducing the overall availability of paid work by replacing temporary jobs and overtime for other staff…

“The Department for Work and Pensions (DWP) has previously stated that all mandatory schemes must be for ‘community benefit’. However, under government rules, this can be defined as increasing the profit of organisations where the unemployed are sent to work without pay.”[A]

This is part of the general pattern of Privatisation, with profit-making firms being deemed better even when they blatantly are not:

“Fresh to his job as prime minister, with boundless energy and hope, David Cameron told assembled locals at a Relate centre in Leeds that he had made a fantastic new signing to his team trying to improve the lot of families.

“‘She refuses to believe some people are lost causes and has a proven track record,’ the prime minister boasted, ‘which is why I have asked her to come on board to help us.’ Less stuffy state bureaucracy; more focused, personalised support. ‘Emma Harrison understands that,’ Cameron chirped.

“Fourteen months on, and things don’t look so sunny. Harrison has not only quit as the Cameron’s ‘family tsar’ but also as the boss of A4E, the company she formed 25 years ago, following the arrests of four members of its staff on suspicion of fraud.

“Harrison says she doesn’t want the ‘media attention’ around her to damage her firm’s prospects. There is a £15m contract for the rehabilitation of prisoners to be awarded, for which A4E is still the preferred bidder. The company still has £438m of contracts under the Work Programme. And along with a money advice service and some apprenticeship work, A4E is still earning about £180m a year by carrying out services on behalf of the state. There is a lot to lose.

“But how has A4E, a company with an ‘abysmal’ record, according to parliament’s public accounts committee, got so rich?

“The clue may lie in its company accounts. ‘At present, A4E’s sectors benefit from a broad cross-party consensus,’ it says. In other words, ministers, be they Labour or Conservative, have come to believe that private profit-hunting firms do it best – and cheapest.”[B]

This same fixation drives the Tory determination to “reform” the NHS, even after most Health Professionals have rejected it. And explains the weakness of Labour opposition, they are still caught up in the New Labour belief that Thatcherism was a massive success that they dare not challenge except on marginal matters.

Thatcher may have dreamed of restoring the Primitive Capitalism of 19th century Britain. What we’ve actually got could be called Privatised Corporatism, with the state still dominant but a lot of the money siphoned off to private companies with a cosy relationship to political parties.

(It used to be that no one got rich as an elected politicians unless they were actually taking bribes. But the modern method us quite legal, well-paid lecture tours and book deals that achieve the same effect but are entirely legal.)

But what’s the alternative? It’s no good objecting to what exists, unless you have some alternative idea that a decent government might manage.

Restoring the Primitive Capitalism of 19th century Britain still has its fans, but that capitalism was actually sluggish and dirty by modern standards. Britain amazing the world because at first it had no competitors. Growth rates were between 1% and 2% per annum, absurd compared to any modern economy. And Britain was being overtaken by both Germany and the USA in the decades leading up to the Great War.

Primitive Capitalism is a non-runner. Since no one much likes Privatised Corporatism, why not accept that some form of Corporatism is a simple necessity? And then try adjusting it to work more in the interests of ordinary people.

What I’d call for is an adjustment of the tax system so that firms get tax rebates for creating jobs, though with strict auditing to check that these are really new jobs rather than old jobs shuffled. For far too long, we have been congratulating and rewarding managers who managed to destroy jobs while boosting profits. This was based on the hypothesis that more profits would lead to more jobs and social wealth in the long run. But this hypothesis has been tested to destruction and found to be untrue.

 

Turning Against Welfare [Suspicion of Fraud]

This month’s Prospect splashed a claim that people were turning against welfare. A closer look shows something else.

People are indeed suspicious of those on welfare, with 7% thinking it was most welfare claimants are ‘scroungers’, 22% thinking it was around half, 39% thinking a significant minority and 25% a small minority.[C] But when asked about ‘unaffordable’ old age pensions, 35% were willing to pay more tax to provide greater support, 39% liked the present balance and only 9% wanted less tax for less support.

The greatest hostility was to unmarried single parents, 44% for less support as against 6% for more and 29% for the status quo. There was almost as much hostility to the unemployed, 42% for less support, 7% for more and 32% for the status quo. But 50% were for the status quo on child benefit for people paying standard rate tax, with 9% wanting them to get more and 21% saying less. Support for the disabled was also solid, 40% for the status quo, 29% for more and 11% for less.

Years of propaganda by right-wing media have not undermined the basis belief in welfare. It has created an excessive suspicion that people are getting it who do not deserve it, but that’s a different matter. Most people want the system fixed, not broken.

Paying more tax to subsidise marginal jobs and ensure there was at least a part-time job for everyone might prove an election-winner. A part-time childminder to help any mother with small children would take a big chunk out of the present pool of unemployment.

But of course the current elite of our Privatised Corporatism don’t want unemployment cured, they want it flourishing to undermine Trade Union power and to make ordinary people suspicious of each other. It would probably need an entirely new political party to push such things.

 

Qualitative Easing – Another Case of “Feed the Rich”

The idea of ‘Qualitative Easing’ has been to give money to banks, in the belief that for every million they are given, they will lend out ten millions to needy businesses.

The reality has been that for every million they are given, most stays within the bank and only a fraction gets out to small businesses desperate for loans.

Modern banking hyped the idea of ‘Fractional Lending’, which means lending out a lot more than you borrow. This would once have been seen as ludicrously unsafe, and the failure to bounce back from the crisis of 2008 suggests that the conventional caution of old-style banking was correct for real-world commercial societies. We are now facing years of austerity for the privilege of saving the ‘adventurous financing’ that makes a few people very rich.

The original idea of a bank was that it stored money for those who wanted to save and lent it out again for those who wished to borrow, paying savers from the average profits of lending. That was sound banking, and matched the common-sense notion that banks do not create wealth, merely shuffle the needs of borrowers and lenders.

‘Adventurous banking’ went beyond this. A bank can lend money it doesn’t have, for as long as it is seen as sound. This can happen even while it has become unsound, quite hollow. It is also easy enough to lose huge amounts in bad debts or failed investments.

Derivatives and similar created a much worse problem. They began with the sensible idea of someone producing something having some sort of insurance against loss. If they were breeding pigs, they could have a derivative that would pay them something if the price of pigs fell. But it very easily became gambling and speculation.

What seems to have happened is that all of the banks went in for massive gambling. Winners took their winnings out of the banking system, translated it into personal wealth. Voids were left behind, unreal assets, hidden losses. You might have thought that proper accounting would stop it, but Nick Leeson at Barings Bank managed to gamble away all of the bank’s capital, several hundred millions, while convincing his bosses he was making a huge profit. The energy giant Enron was a vastly worse case, probably a net loser from their earliest days as a conglomerate, but able to manipulate the accounts to create the appearance of vast profits. Widely praised for their brilliance until one day the bubble burst.

The Atlantic economy has been stagnant or declining since 2008, mostly because banks have stopped trusting each other, and probably a lot of them have something to hide. Even those who’ve done nothing wrong have to wonder if money lent to apparently sound institutions is in fact recoverable.

We have very low interest rates, meaning that ordinary people who saved are having the value of those savings drained away by inflation. The banks are also reluctant to lend – it is a bad financial climate, but also they probably need all of the sound money they can get to fill up any voids they are hiding and to prepare of any losses they may sustain if another big bank crashes.

‘Qualitative Easing’ is money from the government that helps them get through the crisis with minimal losses to the rich and to bondholders. Ordinary depositors are protected anyway, would have been compensated if they bank had vanished. But most banks have not vanished and over-exposed speculators have been pretty well looked after. This has happened at the expense of ordinary people, squeezed everywhere by austerity measures and facing perhaps years of stagnation. But they make no coherent protest, while the financial sector continues to have great political pull.

Meantime the World Bank is urging “integrating the Chinese financial sector into the global financial system”,[D] from which they have previously been insulated by a currency that’s not easy to convert. Surprisingly, this is being taken seriously.

 

Common Sense and Economic Theology

Adam Smith was the inventor of Economic Theology, a set of Trans-Factual Notions that were pushed as economic wisdom. Britain’s economy in his day was prospering behind very high tariff barriers: he was certain that Free Trade was the answer. He cited pin-making as a prime example of sensible division of labour, yet it was an industry that was under state supervision to ensure that only decent-quality pins were sold.[E] He knew that the British government of his era had put a lot of effort into improving the economy, yet was certain that things would be even better if the government had done nothing at all.

Adam Smith also failed to mention how much of what he said had been said already, by Sir William Petty and Bernard Mandeville and by the French Economistes (mostly quarantined in British thought under the bizarre label ‘Physiocrats’). Failed to mention that the significance of Division of Labour was mentioned as far back as Plato in his Republic and had been seen as important by almost every economic theorist since then.

All of which would have been dishonest but not damaging had Smith truly summed up economic wisdom on the basis of rationality. But he did not.

Adam Smith was a Deist, a man who rejected Christianity and all other known religions, but still believed in a kind of God who ran the world as an ‘invisible hand’. But not a god that made inconvenient demands for charity or forgiveness or equality. Adam Smith’s God was very much a Bespoke God, made to match the author’s prejudices. And from this came his Trans-Factual Notions, while neo-liberal economists continue to defend against common-sense notions that the way to create jobs is to create jobs, not give more money and power to the rich.

Common sense can be mistaken – but when it was applied to economics after World War Two, when governments saw their prime duty as full employment and when the views of the money-men were disregarded, we did indeed have steady growth with very little long-term unemployment. For that matter, a major factor in Hitler’s rise was that he ignored the classical- liberal Economic Theology of his day and insisted that it was ridiculous to have one German worker in four miserably unemployed when there was work that needed doing. He insisted that the government could and should generate jobs, including the first motorways, and this worked. Worked so well that the conservatives who had put him into found that he was now impossible to curb, control or remove.

Meanwhile President Theodore Roosevelt was doing something similar with the New Deal, but was hampered by the US political system, with Congress undermining him and with the Supreme Court ruling unconstitutional many of his programs of useful public works. By 1938, the USA was sliding back into recession, but was accidentally saved by Hitler’s warlike posturing. Though it’s very unlikely that Hitler had any intention of waging war against the USA, he was an habitual loudmouth and Roosevelt was able to get enough people scared enough to start a rearmament program. Money for weapons and wars can always be found, regardless of the views of the Economic Theologians.

For some 30 years after World War Two, the rich and powerful in the West were scared of both the Soviet Union as a rival and fascism as a lurking menace that might revive. Keynesianism was the officially recognised Economic Theology. But when these dangers receded, the rich saw the possibility of grabbing back the wealth and power they had lost.

We’re now paying the price.

 

Humanitarian Bloodshed and Chaos [Syria and Bahrain]

Are Syria and Bahrain on different planets? They are being treated as such. The demands of the majority Shia in Bahrain are ignored and they have been intimidated into silence. In Syria, the demands of some of the majority Sunni get continuous support from the West.

The whole process of “humanitarian intervention” that began in 1991 has been brutal and ineffective. It took two wars to reduce Iraq to chaos, and chaotic it remains. In Afghanistan, the US is learning the old lesson that it is easy to get into Afghanistan, but almost impossible to get out without disaster. An attempt to reshape Somalia failed. European air forces bombed Libya hard enough to allow a motley crew of rebels to overthrow Gaddafi, but there is no coherent government.

The New Right in UK and USA are good at controlling the home society, but lousy at extending those values elsewhere.

 

Egypt – What Next?

The last Newsnotes quoted what I was saying about Egypt in February and March of 2011. In fact only the stuff from March was published: that from February was circulated in e-mails but was too late to appear in print.

It all still reads fine. Egyptian politics are moving slowly, but an Islamist outcome is pretty well certain. The next act in the drama looks set to be the public trial of the West’s would-be manipulators, people paid by a network of Non-Governmental Organisations to be missionaries for US values. Someone commented to me by e-mail:

“This type of NGO operation now appears to be rife in those areas of the world where the West believes it needs to exert more influence – no doubt they assumed the profile they have in Egypt as an insurance against the emergence of the wrong kind of democracy in Egypt. In fact these organisations could more accurately be described as FIO, or Foreign Interference Operation. We can see them very clearly in Russia where I’m surprised they haven’t been clamped down more vigorously.”

Possibly in Russia they have ceased to count. In Egypt, they massively failed to steer Egypt towards the sort of ‘open-legged’ policies that the West wants for poorer countries. In as far as they succeeded in Middle Europe, the western half of the former Soviet block, it was because nations like Poland and the Czech Republic were genuinely being invited to be part of the ‘Top Table’, the global block of Continental Europe with the global Anglosphere.

 

Dickens and the USA

I’ve never been that fond of Dickens, who documented the surface details of life in great detail, but in my view missed the substance. He was a man with no positive vision except for the classic story-telling device of a rich man coming along and rescuing the novel’s protagonists from their misfortunes. This is a trick that goes back at least as far as the 1760s with Oliver Goldsmith’s The Vicar of Wakefield, and misses wider social forces.

Still, the man had principles. He went to the USA in the 1840s predisposed to like it, but found a lot to offend him. Particularly slavery, and the brutality to slaves that he found openly advertised in notices printed by slave-owners seeking to recover runaway slaves.

Remarkably, a recent BBC article[F] on Dickens talks at length about various minor matters but wholly omits the matter of slavery. Typical of what the BBC has become, the said decline of what was once the world’s best and least biased news service.

 

Shooting Germans [US executing prisoners of war]

“The graphic and often painful memoirs of celebrated American author William Wharton – which include an account of his role in the killing of German prisoners during the second world war – are to be published for the first time in English.

“Wharton’s first novel, Birdy, was an instant bestseller and was turned into an award-winning film by director Alan Parker. Despite the critical acclaim that greeted subsequent books and a legion of admirers that included the Nobel laureate Doris Lessing, he has been largely out of print in the UK. He died in 2008…

“He recalls Germans whom his men had captured being shot in the legs before they were executed, arguably in revenge for an SS massacre of American soldiers at Malmédy in Belgium. He describes a German pulling out his family photo and crying. He writes: ‘Some of [the Americans] are feeling guilty about it all, but the worst of them are proud of themselves, consider themselves avenging patriots.’ He remembers vomiting when soldiers dug the Germans from shallow graves where their executioners had hidden them.” [G]

This has been mentioned before – in the US-made war-series Band of Brothers on television, for instance. It’s surprising how little is made of it. On the Western Front – though not in the East – the Germany army behaved as a proper army. The US knew they were winning and were not under any great pressure. But they always have had a wobbly sense of morality.

 

Kids as orchids or dandelions [the effects of a bad childhood]

Some people grow up well-behaved despite awful circumstances. Others misbehave despite having had every advantage. But it now looks as if this is part of a complex mix of genes and upbringing.

“Why are some children better at sharing than others? One attempt to find out uses what you could call the ‘Bamba test’. In a large, playroom-like lab, a 3-year-old spends an hour or so playing games with a friendly woman, before snack time is announced. The adult brings out two packs of Bambas – peanut-butter-flavoured corn puffs much coveted in this part of the world.

“The child’s pack, like every normal one, holds 24 of the treats. But when the woman opens hers, she dumps out the contents and cries: ‘Mine has only three!’ Will the 3-year-old share without being asked?

“Most do not. ‘Self-initiated sharing is difficult,’ says psychologist Arial Knafo, who runs this study at The Hebrew University of Jerusalem in Israel. ‘You have to detect the need, then decide to do it.’

“A few 3-year-olds, however, will offer up their Bambas. What’s different about them? The children most likely to share carried a certain gene variant, the ‘7R’ version of DRD4, a gene that affects levels of the important brain chemical dopamine.

“What made this finding remarkable was that this gene variant has generally been tied to antisocial behaviour. A pile of previous studies found that children with the 7R variant were more likely to be naughty and hyperactive. It had been dubbed the ADHD gene, the brat gene, the drinking gene, even the slut gene. Now Knafo was effectively calling it the Bamba-sharing gene. The bad-news gene was having a good effect…

“They also showed that a variant of a gene called MAOA, which affects serotonin and several other brain chemicals, increased the chance of violent or sociopathic behaviour, but only in people who were abused as children (Science, vol 297, p 851)…

“Boyce was soon joined in this line of inquiry by Bruce Ellis at the University of Arizona in Tucson. Together they speculated that this reactivity also affects mood and behaviour. Drawing on Swedish terms, they distinguished between ‘dandelion children’, who did about the same whatever their environment, and ‘orchid children’, who wilted under poor care but flourished if carefully tended (Development and Psychopathology, vol 17, p 271).

“Then, in 1997, Belsky also raised the idea of children who were especially sensitive to their early environments. Initially unaware of Boyce and Ellis’s work, he was trying to figure out why some troubled kids responded more than others to counselling or other interventions to change their behaviour.

“As Belsky, Boyce and Ellis watched the vulnerability-gene studies accumulate, they realised these could be the very genes that prompted the sensitivity they had found. And when Belsky delved into the literature he found evidence showing exactly that. Many vulnerability-gene studies indeed seemed to show that the so-called bad variants of SERT, DRD4, and MAOA generated extra resilience and other assets in people with fortunate early years. Yet the literature largely ignored this upside: in paper after paper, the raw data and graphs indicated the positive effects, but the text failed to explore or even note them…

“Of the leading orchid-gene variants – the short SERT, the 7R DRD4 and the more plastic version of MAOA – none existed in humans 80,000 years ago. Since emerging, these variants have spread into 20 to 50 per cent of the population. ‘That’s not random drift,’ says John Hawks, an evolutionary anthropologist at the University of Wisconsin-Madison. ‘They’re being selected for.’

“Orchid genes could provide an advantage in several ways. To start with, they seem to create better mental health and greater resilience in people with secure, stimulating childhoods. The ‘problem’ traits they can generate, such as anxiety, aggression or ADHD, could help survival in conflict-ridden or volatile environments. Plasticity genes also boost resilience at the group level by creating a mix of steady do-ers (dandelions) and individuals with greater behavioural range (orchids).” [H]

So ‘bad genes’ are not bad in themselves, they lead to better people when kids are properly raised. Those lacking these genes are less harmed by a bad childhood and less benefited by a good one. The ‘new wave’ would do better given a lot of attention, which would probably have happened in a primitive hunter-gatherer band where playing with children would have been part of the norm and one of the best entertainments around. In a richer but more fragmented and sometimes dangerous society, less of this happens and some kids suffer.

That ties in with my earlier idea of giving heavily subsidised child care to every mother. A lot of kids might grow up no different, but some of those who’re the worst under the present system might end up among the best.

It also shows up the fundamental flaw in New Right thinking. They’d like everyone to be a ‘dandelion’, but unless they are going to go in for mass murder or regulated breeding of humans, they are not going to get their wish. And it also seems to be against the trend of human evolution. I always did think that their creed was sub-human.

 

[A] [http://www.guardian.co.uk/politics/2012/feb/24/jobseekers-unpaid-work-placements]

[B] [http://www.guardian.co.uk/politics/2012/feb/25/emma-harrison-family-tsar]

[C] All figures from ‘A quiet revolution’ by Peter Keller, Prospect March 2012.

[D] [http://www.ft.com/cms/s/0/88141132-6140-11e1-a738-00144feabdc0.html#axzz1ncKMDvfC]

[E] All of this is detailed in my book Wealth Without Nations

[F] [http://www.bbc.co.uk/news/magazine-17017791]

[G] [http://www.guardian.co.uk/books/2012/feb/18/william-wharton-birdy-autobiography-memoir]

[H] From issue 2849 of New Scientist magazine, page 42-45. You can find more at [http://daviddobbs.net/]

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