Wednesday, December 22, 2010

Shakespeare on bubbles

The earth hath bubbles, as the water has,
And these are of them.Whither are they vanish'd?

Into the air; and what seem'd corporal melted
As breath into the wind.
Would they had stay'd!

Were such things here as we do speak about?
Or have we eaten on the insane root
That takes the reason prisoner?

Macbeth, Act 1 Sc.3

The witches of investment banking and market ideology provided the insane root with which our masters - and our systems - were poisoned, and the rest is as malevolent and illusory as any witch could devise.

Thursday, July 01, 2010

So can the oil companies deliver deep oil?

Probably not quite as easily as they have suggested:

Monday, June 28, 2010

I give up - does anyone read this blog?

If so, just add a comment to this entry saying 'Yes'. No details required (unless you'd like to volunteer them). I'd dearly like to know.

25/7/2010 - Well, in the 30 days since I posed this question, it turns out that there have been 174 views of this page. I guess you're all too shy to speak up! But it would be nice to know - it's quite dispiriting to write and not be read. Blogging is a bit like standing on a high cliff on a foggy night and shoutin ginto the darkness - does anyone hear anything?

Wednesday, June 23, 2010

National budgets and global economies

George Osborne delivers his first budget and insists that it is fair. I’m not sure what he means by this, but it is hard to see how it can be. Regardless of what Mr Osborne wants, he simply lacks the political levers needed to control the economy or to decide who bears the burden of the recovery. Of the three key controls, he has access to (and by no means full control over) just one: the UK public sector, including the livelihoods of millions who not only did not cause this recession but also are the main victims.

As for the other two areas - the private sector and the global economy - what can he say? But, being a mainstream politician who therefore cannot confess that the social system he works in is profoundly dysfunctional, he has no power over the UK private sector, especially the banks. I know from my one personal experience that the banks are doing very well at the moment, thank you, and despite a piffling bank tax, will do even better in future. But George cannot do anything about them, because they are his mates in the City – not exactly the Tories’ targets of choice - and because faith in the beneficence of untrammeled markets and big business is in the very the bedrock of Tory thought. Indeed, I suspect that most Tories cannot imagine what taking the City to task would even mean (and I doubt that many Labour or Liberal politicians would do any better).

But even that is a relatively small problem. The real reason why the private sector is free from political action is not that it is sacrosanct but that it invulnerable. Capital will simply go somewhere else. The reason it is free to do this is not that this is some sort of natural phenomenon – the mysterious workings of the market – but because we lack a political system with the span of control, the competence and the willingness to take action on a global scale. There are no true global or inter-governmental political institutions, and such economic institutions as do exist at that level – the WTO, IMF, etc. – have effective power only over the weak (and therefore, like the poor in this country, the very people who require support, not budget cuts), and remain committed to the market ideology that got us into this mess in the first place.

At the moment this gap can be filled only when the politicians of all the major economies can agree on a common policy. But that is extremely unlikely, because the very mobility of capital that allows banks and others to flout local economic controls also creates a bidding war between struggling national economies that forces national politicians to make their own economies as attractive as possible to global capital.

Tough luck, George. But you can do something about it. You can start to admit that the global economy requires direction, not only to escape from the present recession but also avoid future problems with the environment, with global development, and so on. Secondly, you can agree that that direction must be active - not just ‘market forces’ and more than regulation but positive organisation (or at least active alignment) of its basic forces with the world’s basic needs. And finally, you can start to campaign for the truly global political system, without which any aspirations to a coherent economic system are completely forlorn.

You won’t, of course, and neither will your Liberal or Labour counterparts. Because you are, after all, a mainstream politician for whom the present system is so all-encompassing that you cannot even imagine what it is. Asking you to grasp the nature of global society is like asking a fish to point at the sea it is swimming in – obviously everywhere, but so pervasive that it cannot be conceived by any run-of-the-mill fish like you. So we all limp along, with little hope for anything but the weasel words of a well-intentioned bloke who is unable to solve the problem he is confronted with, but too immodest to concede that there is nothing he can - or will - do.

Wednesday, June 16, 2010

Margaret Thatcher – a re-evaluation

Driving home this morning I catch Woman’s Hour, the excellent Radio 4 programme, where they are conducting a balloon debate. The question is, ‘Who has done the most to put women on the political map in the UK?’, and the four individuals in the balloon are Mary Wollstonecraft (author in 1792 of the Vindication of the Rights of Women), Emmeline Pankhurst (the great heroine of suffragette activism), Barbara Castle (who gave British women the Equal Pay Act and ensured that the contraceptive pill would be readily available for all – perhaps the two most important changes to women’s position in a century), and finally Margaret Thatcher, Britain’s only woman prime minister.

By an overwhelming majority and to the audience’s obvious delight, Margret Thatcher is the first to be tossed out. And I think, a good thing too – it is just a pity we did not have such simple, practical solutions to her presence when she was PM. She had the unique knack of correctly identifying every important political problem the country faced, and then choosing a solution that actually made things worse. Her period in office began with her quickly becoming the most unpopular PM in British history, and ended with the British middle classes rioting in the streets of London about her wretched poll tax. By the time she was finally ejected from office (by her own party), I could no longer listen to her voice without feeling something between enraged and physically sick. Had it not been for the Falklands War, she would have been out on her ear in one of the shortest premierships ever recorded.

I must admit that the Falklands was the one subject on which I actually agreed with Thatcher. Only the worst charlatan or the greatest fool could imagine that handing over 1400 innocent people to the truly vicious Argentine military dictatorship could possibly be justified by either an 18th-century treaty with Spain or the desire to harm her government by any means possible.

Nowadays, however, I find myself increasingly agreeing with another of her ideas – and in this case, perhaps as central an idea to Thatcherism as there ever was. Am I undergoing a conversion?

The idea in question is Thatcher’s notorious dictum that there is no such thing as society. Or, more fully:

there is no such thing as society. There are individual men and women, and there are families. [Interview 23 September 1987]
At the time I had quite grand ideas about the reality of society, and regarded Thatcher as simply another Tory fool with absolutely no understanding about how society really works – definitely a candidate for a GCSE Sociology course.

Now I am less confident. And again I have Margaret Thatcher (and her associates) to thank for this. For there really is very little left of society - now that, for three decades, the other great social force Thatcher was willing to acknowledge – the market – has had its way. What really is left of society? So well done Margaret, I’m finally persuaded: there is no such thing as society. There’s just the desert you and your kind left behind. Thanks.

Tuesday, June 15, 2010

Are Boomers to blame?

An interesting article over at the Burning Platform site - a nicely expressed summary of the widespread sense in the USA that our current crisis is caused by Boomer fecklessness, corporate greed and other cultural and psychological failings. This is the comment I posted:

Nice article but still just a footnote to the culture-wars debate. No real analysis of capitalism as an economic system, so not likely to get to the real nub of the matter. Just as your car is ultimately driven by its underlying engineering and your driving style only affects what it is capable of in relatively small ways, so the basic rules of a capitalist system are clear and simple and all this anger about corporate greed and reckless Boomers is secondary. So are complaints about CEOs offshoring America’s jobs: if you don’t get the basic fact that globalisation is the natural expression of capitalism and completely indifferent to American interests then you are just going to be reduced to another branch of the Tea Party any day now. A capitalist economy pursues the maximum possible ROI – and that is necessarily greater than any sustainable return from the real economy. So this structural requirement for ever-increasing profit will soon cease to be met by any conceivable real economy, especially in peace-time, and the unreal economy, where imaginary values can be made to look real just long enough to cash the cheques, will start to take over. But even the financial sector is only the pure form of capitalism: _all_ sectors of a capitalist economy – including the real economy – will eventually be forced to resort to the same tricks – short-termism, unsustainable debt, insane risks, creative accounting, illusory economics, perpetual motion machines, ridiculous leverage, subsidies to the biggest and richest companies, the constant destruction of (and forced demand for more) goods and services to fight imaginary security threats, and finally just plain dishonesty. Where else are the profits in a mature, free and open economy going to come from? Well, you could try being less mature, free and open, but I don’t think that’s a policy direction any of the subscribers to this site would like much – being cheap labour and having a security-obsessed state isn’t much of a future. None of which has anything to do with Boomers or greed or other cultural or psychological explanations. They are the symptoms – along with environmental devastation, the looting of developing countries, the appalling levels of poverty within America itself, the absurd dishonesty of so much of the media and government, and much else. But they are not the disease.

Not, I suspect, very congenial to most of the readers on that site, nor likely to be responded to, but what the hell.

Monday, June 07, 2010

Gilead, by Marilynne Robinson - a brief review

Well, I've been reading Marilynne Robinson's universally acclaimed Gilead, and at page 83 I've given up.

I cannot imagine what inspires critics to such paeans. If you believe that piety and quietism are the pre-eminent virtues, then perhaps it has something to recommend it, but I just found it a dull collection of inconsequential thoughts by a very ordinary person whose reminiscences do nothing whatsoever for me. Here the boldness and adventure of the great trek's to the American West collapse into the parochialism and thoughtless faith to which the physical harshness and the cultural smallness of the colonialist’s existence is inevitably prey.

Nothing is allowed to disturb its fearful religiosity. The son returning from Germany, armed with Feuerbach's brilliant, profound and sensitive atheism, is cast out. Every possibility of criticism or change, every attempt to hold their beliefs up to scrutiny, is rejected, and the resulting rigidity – which the author presents as timeless simplicity – creates a society inhabited by individuals (like the book’s protagonist) who are no doubt gentle and humane on the surface, but who, when threatened with anything they do not know, are likely to either be crushed (a tragedy for them) or turn their back (a tragedy for peace and democracy in 1914 and 1939) or lash out in the name of their vengeful Lord (a tragedy for the society about them, or at least for anyone who is not like them).

If I were looking for a simple explanation for why America scares me, this would be it.

Wednesday, June 02, 2010

Deepwater Horizon

An interesting (and more than a little unnerving) contribution to the current debate on the Deepwater Horizon spillage at from Dr Stephen A Rinehart - advocating the use of nuclear weapons to plug the hole, raising the prospect of the Gulf of Mexico rapidly degenerating into a carcinogenic benzene pool, and concluding that 'this is a “National Emergency” on the scale of a nuclear weapon attack'. The author's conclusion:

Bottom Line: We are looking at the worse environmental disaster in human
history and it continues to grow and the US Government has failed totally in
responding to this epic crisis because of BP and Big Oil political clout and

Monday, May 31, 2010

Computing a sense of proportion

The wor;d's single biggest problem is...? Climate change. So, when a list of the world's biggest computers is released, lo and behold, just a handful of the world's top 500 are devoted to weather, let alone climate change.

Friday, May 28, 2010

A proper education

As all too many parents will be all too aware, it’s exam time again. All around the world, offspring are swotting up obscure facts about Tudor history how a dialysis machine works and the generic formula for making a salt from acid and metal, all ready to regurgitate it all again in sweaty halls all around the planet. And parents recall their own traumas, dredging an unwilling memory for the distribution of opal deposits in Australia and the difference between gerunds and gerundives.

I had it relatively easy: unlike most of my contemporaries (or indeed most reasonable beings) I used to do a lot better at exams than at course work, so the extra stress translated into extra marks I really didn’t deserve. But still, definitely not the best days of my life.

More to the (present) point, not the most useful either. But there the problem lies not so much in examinations as such as in the knowledge I was being examined on. Did I really need to know where opals are mined in Australia? No, more forcefully: under what possible circumstances would I ever want to know where opals are mined in Australia? I suspect that no one but an Australian mining engineer could possibly need that information.

Standard bitching about the education system, of course. And I have to admit that, it’s a little disingenuous. As a typical teenage geek, I rather liked knowing that sort of thing. I loved that sort of obscure information. Indeed, I positively cherished it. But can I really claim that it added to my education? I suspect not. Nor looking at so much of what my children have been examined on over the last few years, can I arouse any greater enthusiasm for the current curriculum.

The fact is – and I emphasise that this is a fact – is that, in far too many cases, what my children are learning is contributing nothing to their education. My daughter spent two years studying Tudor history. Why? Because it was the syllabus. But what did that teach her? Does she have a better understanding of life – her own life and the life of the society she lives in? Especially compared with what she might have been taught?

My impression is that schools teach based on the assumption that they are preparing the student for long-term specialisation in that topic. On that basis it makes sense for the curriculum to consist of so many apparent fragments – because if they study this topic long enough, it will all fall into place. By the time they graduate, they will indeed have a very good knowledge of their specialist subject.

But of course this is completely irrational. We can’t specialise in everything on the curriculum. Andin any case, it is far from obvious that even specialisation is best achieved by specialising from the very start.

So here is an alternative proposition: that at every stage in the education process – every break point at which students are winnowed out by a change of level - departing students finish their studies with is a fully rounded understanding appropriate to that level.

Take biology. What could a child who learns biology up to – but no further than – the age of 16 be taught that would pass this test? Well, what are the relevant topics? Diet, perhaps, or drugs or reproduction or basic environmental processes perhaps? Any of these, and perhaps a few others.

And what exactly would they be taught? I don’t know, but not, I suspect, the technical details of how the body or an ecosystem works so much as the ‘functional’ connections they need to know about – what different lifestyles entail, the real nature of the foods and (legal and illegal) drugs around them, and so on. Only later – at the point at which such things have a greater significance to the student because they can do something about them – would the technical details be taught.

This would plainly be much more of an education. It just wouldn’t involve anything like much modern schooling. On the other hand, precisely because it isn’t abstract technical knowledge, I suspect that this sort of education would be a lot more politically sensitive. What food company is not going to lobby against straightforward teaching of the facts of modern diet – the disastrous health consequences of how industrial food is made, transported around the world, and so on? What pharmaceutical company is not going to lobby against straightforward teaching of the facts of prescription drugs and the modern drug industry?

But that, of course, is very largely the point. A population that was no longer ignorant – not even its least educated member – about the world it inhabits would be better equipped to deal with the modern world – including changing it to suit their needs. Indeed, if I were looking for a recipe for eliminating political apathy, this would certainly be high on my list of innovations.

Likewise for every other topic. Personally I would replace the current obsession history teachers have with the Tudors and the origins of the First World War with a general course on world history – not the Euro-centric nonsense that condemns the vast majority of humanity to the void and ignores the real history of the modern world – and a more detailed political history of post-War Britain. And then between 16 and 18 I would teach the same things again, by with a greater focus on the mechanisms of globalisation and how Britain got to be like it is.

And so on. Even English would be taught quite differently – by looking at the use of language around us, in advertising, in politics, in the media, and so on. Conversely, would 16-year old biology students study dialysis? No, of course not. Nor would anyone else, perhaps, except a specialist in renal medicine. It’s not hard to think of a hundred alternative curricula, sharing only the fact that they lead to education rather than exam certificates.

Tuesday, May 18, 2010

Dear Lloyd

Mr L. Blankfein
CEO Suite
Goldman Sachs
Tuesday, 18 May 2010

Dear Lloyd

How are you? Well, I hope. I appreciate that you must be busy these days, what with the SEC investigating you and so on, but I thought I’d write anyway – perhaps, like me, you find that a little personal news can brighten up a dull day.

It’s a lovely day here in England. Spring is well on the way, and I’m spending a lot more time in the garden these days – I can’t say I envy you all the time you must be spending in dreary board rooms!

Not that it’s been exactly a bed of roses here lately. In fact we’ve been having one or two domestic problems. I don’t think I’ve mentioned it before, but I had to stop working last November, and I’m still looking for a new job. As you can imagine, it’s been a strain, but I can’t say there’s anything special about us – several of our friends are in the same boat. I’m not sure it’s a boat any of us want to be in, but at least we are all in it together. Bit short of oars, though!

On the other hand, it helps me to sympathise with your own plight – what a shock it must have been, having your pay cut so savagely last year – from $42.9 million to under $10 million! I hope you aren’t having to make too many difficult choices. Anyway, I’m sure it won’t last - once people really appreciate what you and your colleagues in the financial services sector have done for us all over the last few years, hopefully you’ll get what you truly deserve.

And here at home, I’m sure everything will be OK in the end. My wife is looking a bit stressed these days but assures me that she’s not too worried. I’m not sure how worried ‘too worried’ is – at least she isn’t on pills yet! - but we’re OK for the moment. Our savings run out next month, but we’ve still got the children’s savings. One of her usual brilliant twenty-year plans was to put aside their child benefit each month since they were born, to make sure they wouldn’t start their working lives with huge debts from university. We had hoped to have enough put aside to get them all the way through, but I guess we’ll have to make other plans. It’s a pity – neither of them look like potential investment bankers (I guess we’ve brought them up wrong) so it will be many years before they’re out of debt.

Still, it can’t be helped. I’m only glad my wife had such foresight and we have something to fall back on now, even if it is only by accident. Otherwise we’d have to start thinking about selling the house. Now that can wait for a few months, thank heavens.

Of course, we count our blessings. I saw the other day that millions of your compatriots have lost their homes (all those sub-prime mortgages, I believe), and 31 million are now either out of work or ‘underemployed’ – a very ugly word, don’t you think? Unemployment is up here too, though not so sharply, I believe. You must be relieved that it didn’t hit the financial sector as hard as the rest of the country – it must be hard finding a good investment banker at the best of times.

It’s been a strain in other ways too. You won’t know our niece, but we’ve been trying to support her through school. She’s a lovely girl, and really benefits from being able to continue her education. But I’m afraid that that’s had to stop now, at least until I can get another job. I hope it isn’t too late – perhaps we can find some more cuts to see her through.

But the real pity is that we’ve had to stop pretty much all our regular charity contributions too. I hope you’ve been able to keep up your charity work – it’s the Robin Hood Foundation your work for, isn’t it? But what an irony – all the wonderful work you do for the poor of New York, and then to be accused of leading the rich in robbing the poor. How unfair is that?

Most of our contributions go to charities working in developing countries. They used to send us newsletters and reports from time to time, and it was great seeing how much good they do. They also made us more than grateful that we live in such wealthy countries. You probably recall the UN saying a while back that 100 million more people will be living on less than $2 a day because of this recession, and recently I read somewhere that the World Bank is saying that 50,000 more babies will die in Africa. (Perhaps you could ask your fellow investment bankers to make a small contribution there – I don’t know whether you are a religious man, but it’s doing God’s work, isn’t it?)

It must be especially galling to see the company you have devoted your whole life to being vilified so. If it were me, I’d be wondering what sense it makes to be an investment banker, when people just think you’re a con man. Look how vigorously Goldman Sachs staff are contributing to the recovery – so many of your best people right there at the top, advising your government and the banks and doing so much else.

Yet people are still ungrateful – for example, why would anyone give a book a hurtful title like Chasing Goldman Sachs: How the Masters of the Universe Melted Wall Street Down… And Why They'll Take Us to the Brink Again? There are even people who suggest that you plan to exploit the carbon trading markets to make billions – surely they can’t think you’d be so irresponsible?

By the way, we were all very impressed by the clever way your people arranged to borrow government money at 0.5% and then use it to buy government bonds that pay 3%-4% - a healthy profit for doing nothing at all! How ingenious! As that cheeky Matt Taibbi puts it, it’s ‘no different than attaching an ATM to the side of the Federal Reserve’. You must be so proud.

Well, I’m sure that’s enough from me for one day, but I’ll write again soon. Please feel free to pass my letter around to all your friends on Wall Street – we’re all thinking of them.

Best wishes


Wednesday, March 31, 2010

Lovelock speaks. But I wish he wouldn't

A singularly unhelpful intervention from James Lovelock of Gaia fame (or notoriety). The Guardian reports –

‘I don't think we're yet evolved to the point where we're clever enough to handle a complex a situation as climate change,’ said Lovelock in his first in-depth interview since the theft of the UEA emails last November. ‘The inertia of humans is so huge that you can't really do anything meaningful.’

One of the main obstructions to meaningful action is ‘modern democracy’, he added. ‘Even the best democracies agree that when a major war approaches, democracy must be put on hold for the time being. I have a feeling that climate change may be an issue as severe as a war. It may be necessary to put democracy on hold for a while.’
Oh really. I don’t seem to recall Lovelock’s previous analysis of the larger-scale but little-understood and even less acknowledged structures of human activity – economic systems, global technologies, ideologies – that actually provide the basis for human ‘intelligence’ as it is conventionally understood. In that rather conspicuous absence, what exactly are Lovelock’s qualifications for having such a lovingly quoted opinion? The Gaia theory, which until the environment came back to the forefront of our collective consciousness, was treated by most scientists as a somewhat quaint, if not downright silly, model of planetary processes. And even now that planetary processes are under discussion, it’s still striking how seldom Lovelock’s theories make it into scientific discourse.

Of course, given that almost all other scientists are equally lacking in any convincing understanding of how human social and economic systems work, they are no more qualified than Lovelock to pronounce on either human ‘intelligence’ or the processes and systems that driven environmental change. But at least national newspapers aren’t asking them their opinions.

More that all that, it is about time we stopped treating people as authoritative just because they have the job ‘scientist’. It’s a job that is typically highly specialised, and having read a fair number of our most prominent scientists’ accounts of our present predicament, it does not strike me that their opinions about the situation as a whole are particularly scientific. No matter how brilliant the physicist or biologist, they are no better qualified than me to pronounce on economic systems, the power of ideologies, and especially not any but the most technical aspects of solutions to our problems.

Meanwhile, putting democracy 'on hold' is not only a very bad idea but precisely the opposite of what is needed. If there are any forces that will actively resist takintg the necessary steps to deal with our environmental problems it is the entrenched corporate forces of the economy and politicl system. Closing down democracy would only strengthen, indeed perpetuate their stranglehold over economic, political and so environmental policy.

EPT: An Environment Protection Tax

Over the weekend I meet Nick, an accountant and consultant. He has an interesting idea about dealing with the environmental externalities markets are currently unable to capture. I would call is an ‘Environment Protection Tax’ – EPT for short – that would operate like the Value-Added Tax (VAT) already familiar in many countries.

After a really interesting conversation, this how I would summarise EPT as I now see it working:

  1. We have some idea of the scale of the environmental externalities caused by our economic activity. We can at least assign an approximate percentage of what is required to address the resulting environmental problems and to update our industries so that the problem goes away.
  2. A great deal of this arises from primary extraction industries – mining, oil, gas, fishing, and so on.
  3. So, why not add an appropriate percentage to the price of primary products, to be passed on (like VAT is now) to each successive buyer in the supply chain.
  4. Also like VAT, each payment is accounted for, netted out in the EPT return, and the surplus reclaimed at each stage…
  5. …until the final consumer, who cannot reclaim the tax, and thus becomes the real payer.
  6. One additional detail: that there should also be a system of tax breaks that allows anyone in the supply chain to avoid EPT if they can demonstrate that they are dealing with the externality directly. They then can reclaim the relevant portion of their EPT and convert the surplus to additional profits, more competitive prices, or anything else they chose.

The benefits of such a system are clear:

  1. It is a very simple system that requires no incessant calculation of precise externalities.
  2. We could reuse the exist VAT system to collect and disperse it.
  3. The inclusion of tax breaks would actively drive environmental improvement at every point in the supply chain.
  4. If primary production were not the best starting point for such as system, it could be readily migrated to other areas of economic activity.

Such a system would not be without its problems:

  1. Who owns the resulting fund? At the moment it could only be collected by national governments, but experience suggests that they could not be trusted to use it for its intended purposes. Most governments are understandably allergic to hypothecating taxes to specific purposes, but surely has to be an exception. After all, if it were used to supplement general taxation, it would soon stop being used for its intended purpose, not least because for the foreseeable future at least, environmental protection is a long-term game, and elected governments don’t generally do long term thinking. International institutions such as the IMF, the WTO and the United Nations are equally suspect.
  2. It’s potentially a bit crude and insensitive to the details of how externalities are really incurred and slightly out of touch with current environmental research. But at the moment this would be a small price compared with the ease and simplicity with which such a system can be understood, implemented and adapted as the level of externalities changes.
  3. The indirectness of the relationship between tax and specific externalities may leave it open to subversion. As Nick himself warned me, a whole school of accountants will spring up to take advantage of any loopholes, and they become a profession that insists on being fed and expanded even though they add nothing of social value. As to what the investment bankers could make of such a system, I shudder to think.

Tuesday, March 30, 2010

Repo 105 - Symptoms or disease?

As I asked in the previous entry about the swelling scandal surrounding Lehman's use of the so-called repo 105 accounting dodge, 'Coming to a bank near you soon? Already arrived but no one has told you? Never forget Enron and Arthur Andersen.'

So yesterday the Securities and Exchange Commission, who regulate US markets, initiated their investigation into this scandal by asking 'more than 20 financial groups' whether they used repos for the same purpose. I shall be a bit surprised if they don't use repos in general, given that repos are a perfectly respectable hedging device, but it will be interesting to see how they are used.

The SEC are not planning to get to the real bottom, though. According to the FT, their investigation will only ask 'whether companies booked repos as asset sales for accounting purposes over the past three years, and whether these deals were concentrated with certain counterparties or certain countries'.

The latter part suggests that they are looking for whether other companies or governments were parties to this dubious process, which is essential to understanding how widespread it is. But the former - the limit to three years - suggests a residual timidity about looking at real roots of the crisis - the consistent misleading of the markets and regulators over much longer periods, to build up extremely profitable but highly risky positions that cumulatively led to our collective fall. We know that Lehman's use of repo 105 went back far longer than three years; it is preposterous to believe that this only because a useful accounting tool for staving off crisis immediately before the crisis itself.

Understanding the scale and exact nature of the crisis means looking at much more than the shifting tectonic plates; it is also important to know why - and when - the decision was made to undermine the building' foundations, which made the quake so disastrous.

It will be equally interesting to see how this investigation is report by the SEC. What if it turns out that a significant number of these financial groups not only used this misleading technique in the past but are using it now? Will we hear? And exactly what will we hear. After all, what would be the repercussions of discovering that, yet again, the books are being massively cooked?

I look forward to future reports.

Monday, March 15, 2010

Repo 105 - another Enron in the pipeline?

In the arcane terminology of the markets, a 'repo' is a transaction in which I sell you something today but guarantee to buy it back for a stated price at some stated time in future. ‘Repo’ is actually short for ‘repurchase’.

Dull, huh? Well, it may turn out to be a little more exciting than it seems. If you are near the end of the quarter and you’ve got a lot of liabilities and a lot of worthless assets and your accounts are going to look lousy, why not do a deal to repo the rubbish for billions, report these as sales (which they aren't) use the billions to pay off liabilities, and then once you have reported how healthy your books now are, borrow more money you can’t afford to buy back the rubbish you 'sold' a few days previously.

This is what Lehman's called a Repo 105. It makes your books look good, it fools the regulators and everyone is briefly happy, until the time comes when the size and riskiness of the deals is so huge no one will touch them and you fall with a resounding splash down the toilet.

This, it seems is exactly what Lehman’s did - round and round for years on end, until $700 billion of assets and liabilities was being held up by just $25 billion in capital - a ration of 28:1. Their boss, Richard Fuld, claims that he had no idea this was going on. So he is either lying or spectacularly incompetent, because a) this was the only thing keeping Lehman afloat, and b) the scale of the repos – $50 billion in the first and second quarters of 2008, for example – was so huge that even if it weren’t you’d need to be dead from the neck up not to have noticed them. And the banking regulators? This had been going on for years, and no one noticed or thought that it odd?

More importantly, there is now a growing suspicion that repos are a bit more pervasive than was previously realised – if Lehmann had been doing it for years and their accountants (Ernst & Youung) didn't care - they say they were 'comfortable with the policy for purposes of auditing financial statements' - it would make sense for any of the banks and the increasingly many other businesses and government institutions who rely on financial services to generate money have been doing the same. Coming to a bank near you soon? Already arrived but no one has told you? Never forget Enron and Arthur Andersen. As Tracy Alloway, the FT Alphaville blogger puts it, 'Think window-dressing on a massive, and possibly misleading, scale'.

The story is summarised here and its full grubbiess set out here. Well worth reading.

Friday, March 12, 2010

Human intelligence and the Birth of Reason

One of my many unpublished manuscripts is a book-length treatment of the origins, evolution and individual development of intelligence, entitled The Birth of Reason. It treats the concept of 'intelligence' in the same way a biologist might treat 'life' – i.e., as a general term for everything human beings and other natural intelligences are and do, rather than (by analogy with for example, ‘the organism’) a narrowly cognitive process. That is, it is designed to explain the full span of intelligent activity, including not only the usual cognitive powers associated with that term but also the possibility of history, consciousness, global social and economic systems and so on. It includes a comprehensive account of the relationship between human and other natural forms of intelligence, such as primates. I have never tried to have this book published. I don’t really know why not – it is complete, the few people who have read it have spoken very well of it, and there are no other treatments of intelligence in this extremely broad sense of which I am aware. If you would like to know more about it, I have created a new website from which the full text can be accessed.

Tuesday, March 02, 2010

Herbert Marcuse speaks from the grave!

Having recently quoted Huxley's Brave New World on consumerism, here's an equally compelling statement of the situation, from the German philosopher Herbert Marcuse:

Tolerance toward that which is radically evil now appears as good because it serves the cohesion of the whole on the road to affluence or more affluence. The toleration of the systematic moronization of children and adults alike by publicity and propaganda, the release of destructiveness in aggressive driving, the recruitment for and training of special forces, the impotent and benevolent tolerance toward outright deception in merchandizing, waste, and planned obsolescence are not distortions and aberrations, they are the essence of a system which fosters tolerance as a means for perpetuating the struggle for existence and suppressing the alternatives.
From Marcuse's Repressive Tolerance.

Well, for people of my generation it's an interesting quote. Marcuse was one of the intellectual stars of the Left during the Sixties, so for old times' sake...

Monday, March 01, 2010

Was it caused by fractional reserve banking? Not really.

Almost a year ago, I wrote an entry in my parallel environmental blog entitled Why capitalism must expand - whatever the environmental consequences. Rather surprisingly, yesterday I received a comment, from Jerry Fox, an American engineer and blogger. His comment ran as follows:

Capitalism supported by fractional reserve banking and the artificial support of governmental bailouts does require constant expansion both to pay off the inherent interest and to delay the inflationary effects of the money supply. I hope that you are not trying to lump the great system of free enterprise which has helped to make America the envy of the world, being linked to a Constitutionally maintained money supply, to this travesty that has come to be called "Capitalism". Under the former, there is no need for constant expansion to support a healthy thriving economy along with proper concern for any environmental issues.
I repeat Jerry’s comment here because it is equally relevant to a point I have recently been considering. There is a striking difference between the diagnoses and remedies offered by American and non-American bloggers and other commentators, which, quite by chance, Jerry’s comments expresses very well.

Here is my reply, which is equally relevant to this blog:
Thanks for your comment, Jerry. I sympathise strongly with the view that fractional reserve banking has played a terrible role in the current crisis, and my impression from tracking a number of American blogs is that this is widely held to blame for the crisis as a whole. However, I remain sceptical of the idea that this is a distinct phenomenon from capitalism proper, for two reasons.

Firstly, fractional reserve banking has been a feature of financial capitalism ever since the first capitalist banks came into existence – far earlier than the fist Europeans arrived in the Americas, let alone anything specific to the US economy or constitution. It is simply a matter of risk management: although I don’t have enough reserves to cover all my commitments, I take a chance that all the chickens won’t come home to roost at the same time. And by and large this has proved a good and familiar bet – to the point where one of Shakespeare’s best known tragedies, The Merchant of Venice, which was first performed around 1596-1597, depends entirely on a situation in which this bet on fractional reserves fails.

And it was essentially the recurring failure of this bet that led to regulations specifying exactly how much reserves were required for various kinds of transaction. In other words, there was no pure capitalist system with non-fractional reserves, which was then polluted by the creation of fractional reserve banking. Rather, capitalism was always a system of fractional reserve banking, which governments, sick the regular crises, eventually normalised with formal requirements for banking licenses, specified capital requirements, the 1933 Glass-Steagal Act, and so on.

As I understand it, the issue with the recent collapses was two-fold. When markets have been massively aligned (as they were, for many reasons, over the last few years), a boom that had looked fantastic turned into a bust proved that it was all just a fantasy, because everything went up and down at once. But even more importantly, the problem with many speculations (it’s hard to describe credit default swaps as investments) was that they were not required to be backed by any reserves at all. I have seen of what would have been a large enough reserve to cover most defaults and so forestall this crisis, and none of them were very different from the standard fractional reserve requirements for more conventional loans and obligations.

You can blame a number of technical features for this – the rise of ‘mark to market’ accounting, for example. In my own view, a more profound explanation lies in the process of systematic deregulation. This seems to have been a pretty universal phenomenon – certainly rife in London, where the absence of effective capital requirements made it the most popular financial centre in the world. Other centres tended to be more reserved (as it were) than London and the various US exchanges, but unfortunately they are collectively large enough to push the planet into a financial nosedive.

So fractional reserve banking played a role in the current crisis, but primarily because it did not extend to the specific types of transaction that actually brought the system down. Not much to do with the corruption of free enterprise or Constitutionally-protected monetary system.

Warren Buffett on financial CEOs

From Buffett's characteristically frank Chairman's letter in the 2009 Berskshire Hathaway annual report (p.18):

In my view a board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control. If he’s incapable of handling that job, he should look for other employment. And if he fails at it – with the government thereupon required to step in with funds or guarantees – the financial consequences for him and his board should be severe.

It has not been shareholders who have botched the operations of some of our country’s largest financial institutions. Yet they have borne the burden, with 90% or more of the value of their holdings wiped out in most cases of failure. Collectively, they have lost more than $500 billion in just the four largest financial fiascoes of the last two years. To say these owners have been “bailed-out” is to make a mockery of the term.

The CEOs and directors of the failed companies, however, have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price – one not reimbursable by the companies they’ve damaged nor by insurance. CEOs and, in many cases, directors have long benefitted from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well.
Pity he was so effusive about what a great manager Lloyd Blankfein is last week.

But of course the powers that be will do very little about this. They are too implicated in this mess, they have too little understanding of what has happened over the last couple of years (other than in the technical sense), and they know that if they just wait it will start to look better.

More generally, we are all implicated in this mess. As I have observed elsewhere, the financial villains and incompetents were not the real cause of the collapse. far from being the enemies of our current economic system, they and their bubble-generating, monopoly-creating strategies, methods and objectives are its apotheosis. This kind of crisis is a perfectly natural conclusion of its routine self-development over a decade or so. And that, of course, places the real solutions even further beyond our present politicians' grasp: not only do they not understand how profound the problems really are, but they are neither willing nor able to exercise the kind of political control that needed to fix the problem for good.

Tuesday, February 23, 2010

Wall Street looting US Social Security

Interesting article entitled 'Wall Street Targets the Elderly: Looting Social Security'.

It's by Paul Craig Roberts, once editor of the Wall Street Journal, not to mention Assistant Secretary of the U.S. Treasury. For an ex-WSJ editor, he has a refreshingly robust attitude to the bad guys:

Hank Paulson, the Gold Sacks bankster/US Treasury Secretary, who deregulated the financial system, caused a world crisis that wrecked the prospects of foreign banks and governments, caused millions of Americans to lose retirement savings, homes, and jobs, and left taxpayers burdened with multi-trillions of dollars of new US debt, is still not in jail.
Surely there is some application of the negligence or conspiracy laws that would allow us to put Hank and one or two (thousand) of his pals in the slammer?

Monday, February 22, 2010

James Hansen and the inexorable slide toward nuclear power.

On his Storms of My Grandchildren site, James Hansen talks about how intolerable coal-powered power stations are in any realistic future, and claims that:

in most countries, phase-out of coal emissions requires also a carbon-free source of baseload electric power that is competitive in price with coal. Until we have another way to meet 21st century energy needs while eliminating coal and carbon emissions, nuclear power appears to be the only option.
From this he infers that even nuclear power would be the lesser of these two evils, concluding that
The (“3rd generation”) nuclear technology ready to replace the aging 2nd generation reactors in the United States and other counties is inherently safer than existing nuclear power, which already has an exemplary safety record – however, it still burns less than one percent of the nuclear fuel and leaves a long-lived nuclear waste pile. Hansen recommends initiating urgent development of a fourth-generation nuclear power plant. These “fast” nuclear reactors utilize more than 99 percent of the fuel and can “burn” nuclear waste, thus solving the nuclear waste problem that concerns so many.
This doesn't seem to me to follow. Why is he so confident that these fourth-generation nuclear power plants are any less pie-in-the-sky than carbon capture? It's the first time I have heard anyone suggest that the problems of safety and spent nuclear fuel could be a thing of the past. I would very much like to hear Hansen's reasoning. Not that I would like CCS any more than him, but it doesn't make much sense to be asked to choose between two mirages.

But there's a more important assumption in Hansen's commentary. He argues that, if we are to avoid both fossil fuels and nuclear power, then we need 'a carbon-free source of baseload electric power that is competitive in price with coal'. It is certainly a most attractive option. However, my reading of the technical literature leads me to two conclusions. One, such an option will not exist for many years to come. And two, we can't afford to wait that long.

So how is it Professor Hansen can claim that the solution needs to be 'competitive in price with coal'? Given the magnitude of the potential problem - a series of disasters and creeping destruction that will dwarf any previous human experience short of, perhaps, a re-run of the global plague in the 14th century, surely this is like saying that we should have decided our strategy for the Second World War on the basis of whether it would have been as painless as peace.

Plainly this would be nonsense, and as in the case of WW2, there is little doubt what the consequences of continuing prevarication will be. Add to this the impact of ever-expanding resource depletion, ecosystems collapse and 40% more people by 2050, and waiting for another cheap energy source to come along sounds like madness. It would be nice if we were in a position to choose between cheap, friendly, familiar options, but we aren't. Meanwhile, our social, political and economic system is awash with people and interests for which an effective solution would be anathema, if not fatal.

Of course, we are not at war, and such metaphors are as likely to be misleading as helpful. But to pretend that we can reach Professor Hansen's own goals without paying a price and making preparations comparable to a war strikes me as unwarranted optimism, if not self-deception.

Sunday, February 21, 2010

Al Gore, Kurt Vonnegut and the siren voices

At the very start of his 2009 book, Our Choice, Al Gore, Nobel Prize winner and darling of so much of the environmental movement, quotes the message Kurt Vonnegut suggested we should leave behind for any passing aliens who may happen upon the wreckage of planet Earth. ‘Carved in great big letters on a Grand Canyon wall’, it would read:

We probably could have saved ourselves, but were too damned lazy to try very hard… and too damned cheap.
When you have stared at our current environmental problems for long enough and marvelled at how little we seem to be willing to do to save ourselves or our children, it is tempting to go along with Vonnegut. But both he and Gore are wrong. We are not too lazy or too cheap and the solutions on offer from Mr Gore will not solve our problems. Neither the problems we face nor the solutions that will deliver us have much to do with technology or making business and governments account for the true cost of energy, manufacturing, agriculture, transport, etc., mass individual action, or any of the other things Gore advocates. Yet it is in many ways a very good book.

The real problem is not our inability to understand or act upon our present problems. It is rather that we are already committed to another way of doing things that prevents us from taking up any of the credible solutions to our environmental problems. Perhaps it’s worth quoting Aldous Huxley again here:
In the nurseries, … the voices were adapting future demand to future industrial supply. ‘I do love flying’, they whispered, ‘I do love flying, I do love having new clothes, I do love…’
The siren voices of growth, consumption, free markets, entrepreneurship and all the rest are busily pointing us in quite the wrong direction. The resources and system needed to fix our problems are under the control of processes, systems and institutions and in the hands iof nterests that would be completely undone by actually carrying the solution.

So the political powers-that-be, who have spent the last three decades abandoning the idea that the world could be a better place only if it were a different place, would have to perpetrate a genuine revolution to get us onto the right track.

Perhaps the single most important thing is to stop thinking of the problem as primarily reflecting personal selfishness (even of investment bankers). Personal actions are certainly part of both the problem and the solution, but it will only have a peripheral effect so long as we fail to also think of both problem and solution in systemic terms. Vonnegut was writing as a novelist and entitled not to be read too literally. But those who fail to understand the nature of our economic system, and the necessities and pressures it places on individuals, institutions and other systems (e.g., the entire social and political systems) are merely standing on the beach trying to bail out the ocean while the tide is coming in faster and faster.

Remember, Odysseus was forced to listen to the Sirens only because there were no other options open to him. Likewise we have few options that will in any way improve our environmental predicament - unless we change our ship and the ocean we sail. Likewise, even our most venal bankers were only following the system. Given a different system, they might not have had the option of running the ship onto the rocks (oops, different part of the Odyssey).

Saturday, February 20, 2010

Consumerism, 1932

I re-read Aldous Huxley's Brave New World, and what do I find?

In the nurseries, … the voices were adapting future demand to future industrial supply. ‘I do love flying’, they whispered, ‘I do love flying, I do love having new clothes, I do love…’

Thursday, February 18, 2010

Danny Chivers - Poet Laureate for the Environment

If you haven't already heard of him, take a listen to Danny Chivers. His poems on the environment and on business are brilliant, enthralling, funny and biting. He also knows his stuff, being (according to a professional carbon footprinting consultant based in Oxford with two environmental Masters degrees.

For more on Danny, go to his blog, at A Daisy Through Concrete or his MySpace page. Or watch him on YouTube. And buy his new CD. We did, and it's excellent.

Get him to your children's school, to your local climate change event, to your front room. And pay him lots - we need more people like him.

Will the Volcker Rule work? No.

When the last crisis kicked off, organisations such as Goldman Sachs were not banks, and therefore would not have able to request support from the US government had the proposed Volcker Rule been in force then. In fact they weren't able to ask for government help then either.

So how did the US Government respond to the crises at Goldman, Morgan Stanley and the rest? By making them banks, even though they plainly were not. It was a fig leaf, to bend the rules so that they would not fail.

So if, in order to avoid the Volcker Rule, these same organisations ceased to be banks, and if there were a new crises that threatened them, what would the US Government do? Going by the evidence of 2008, they would allow them to be banks again.

What possible good will the Volcker Rule have done then, other than to create an illusion of safety for the government and allowing the investment banks to engage in dangerous activities until things get too hot, at which point they will be rescued just like they were last time?

Fair value? Can free markets ever value the environment?

A basic problem with markets that absolutely must be answered if we are to create an environmentally rational economy is that of deciding how to value things. Valuation failures were a key cause of the recent financial crisis, which stemmed at least in part from the policy of allowing companies to claim that their value was whatever the market would currently bear, including any number of imponderable items that had yet to demonstrate any real value, such as future prices, hypothetical values and debatable projections derived from complex financial models. As part of the general indifference to risk exhibited by regulators and accounting authorities during the last decade or so, this so-called ‘mark-to-market’ or ‘fair value’ approach accounting has been a part of US GAAP since the early 1990s and seems to have all but replaced any notion of intrinsic value. And as if all that were not enough, ‘fair value’ accounting was also central to the Enron scandal.

Mark-to-market is obviously important when it came to buying and selling stocks and shares, but it goes far beyond that. The value of company assets that can be offered as collateral is also the basis for loans, derivatives and other direct and indirect funding. So when a bull market lasts for years on end and prices kept going up regardless of any material value of the companies themselves, smart operators are provided with an environment that favours both massive speculation and spectacular frauds. From the point of view of mark-to-market accounting, a bull market amounts to a universal pyramid scheme: whatever the value of an asset or liability today, we can usually assume that it will be worth more tomorrow, so we can borrow today as though we are more wealthy than we really are.

However, when the dislocations and fantasies this situation naturally engenders go too far, the market will be seized by the bears, and the rapid falls in mark-to-market valuations that follow will mean that previous loans, bonds, asset and liability prices, interest rates and pretty much every other number the markets use will start to go the wrong way for everyone – again regardless of the underlying strengths and weaknesses of individual companies. In a bear market, mark-to-market put the pyramid onto its head, and you would be stupid to lend today, as the collateral that guarantees your loans will almost certainly be worth less – maybe a lot less – tomorrow than it is today. In extremis, markets for many items disappear altogether and the financial sector ground to a halt.

The key problem this presents if markets are to be part of the solution of our environmental problems is that the scope, scale and urgency of those problems mean we cannot allow the kind of fragility and flakiness market economies have exhibited to determine how we invest in the environment. Leaving aside the question of speculators actively manipulating environment-related markets (e.g., greenhouse gas cap-and-trade, offsets, and so on – see the final section of this), we cannot accept the risk of being plunged into years of environmental inactivity or retrenchment simply because markets were unable to value these investments appropriately.

But is there any alternative as far as markets are concerned? Is there any definition of value markets can work with that will always reflect the intrinsic social value of taking action to protect the environment? Are there any accounting principles, valuation methods or other general policies, methods or tools that will ensure that environmental investments are not caught up in speculative frenzies and then dumped as unceremoniously as the global financial system was in 2008-9?

Probably not, or at least not ones that are capable of controlling markets without considerable active intervention and constraint – which is to say, undermines their very nature as markets. After all, how are markets to price things other than in money? How am I to judge a given transaction other than in terms of the profit it offers me (which means strictly in terms of money)? And once all value is reduced to money and the only goal is more money, what other valuation method is there apart from what the market says? In other words, regardless of whether valuing assets and companies in terms of their market price is sensible, it represents what market-based investors wanted to know about a stock, because it predicted what they most wanted to know about their ultimate concern, namely profitability.

In short, the markets know the price of everything and the value of nothing. As this is Oscar Wilde’s definition of a cynic, that seems appropriate enough – the attitude of markets (and perhaps business in general) to the environment is cynical at heart, for the only question they are capable of posing is, How do we make money out of this? Not exactly a responsible attitude.

Actually there is a limit to how far this is true. In a market who basic function is to direct investment in the real economy, prices will still be determined by prices, but these prices will be linked to the material consequences of making real investments - in houses, in MP3 players, in clothes, in a million other goods and services. And that of course is what the economy is for – to ensure that society works. True, the answer is still expressed indirectly, in terms of money, prices and profits, but at least the link to real, non-financial value is there.

Or so it should be, in a socially rational economy. But when the central function of markets is perverted into speculation, and the key question is not how to distribute wealth in society but how to make a quick killing by exploiting changes in price.

But is this a real problem, or merely a theoretical stick with which to beat the markets? Unfortunately it is very, very real. For example, by 2008 the average barrel of oil was being traded 27 times before it was actually delivered for use in the real economy. This certainly contributed to the otherwise inexplicable massive price spike of that year, and is hard to account for in terms of buying oil for use in the real economy. Or again, the Tabb Group consultancy has estimated that mroe than 60% of trades in the US stock markets are controlled by automated systems that are designed to take advantage of tiny price difference within miliseconds of their arising - not really an issue for investors in the real economy. More generally, it has been estimated that perhaps 85% of stock exchange activity is speculative, with only a small minority representing genuine investment.

And so on. All in all, the speculators are clearly in charge, and as a number of scandals and exposés have demonstrated, the manipulation of prices is a fundamental of stock markets.

This is perhaps the fundamental problem of using markets to manage the environment: that markets recognise only prices, and no price generated by a pure market can reflect socially rational value (including environmentally rational values) unless forced to do so – which is the very antithesis of a market price. Markets are like severely autistic children: it’s not hard to get through to them - it’s impossible. You can constrain them with regulations and rules, but once the market has taken over control of prices, it is hard to see why just this sort of bubble should not develop.

So can markets play any part in managing the environment? Perhaps in limited ways. But the tendency to break the link with real environmental goals and consequences seems to be intrinsic to any system that measures success strictly in terms of prices and profits. If it doesn’t do that, is it a market? If it does, how can we ever trust it not to undermine every strategy for managing the environment?

Wednesday, February 17, 2010

Yesterday the Financial Times reported that many wealthy countries have failed to fulfil their aid pledges, given only a few years back at the G8 summit at Gleneagles (‘Wealthy countries fail to hit aid target’, FT 17/02/10).

‘The Organisation for Economic Co-operation and Development … publishes a report on Wednesday predicting that its rich member countries will collectively give a net $107bn in aid this year... But promises made in 2005 … implied a pledge of almost $130bn by this time.’
No one familiar with the sorry history of aid can be much surprised at this outcome: we practically never do do what we promise, we take back most of what we give, and people die as a result. In fact it is more surprising that we got so close to our targets, and that so many countries are likely to fulfil their individual commitments.

More interesting was the reaction of Max Lawson of campaign Oxfam, who is quoted as saying that: ‘This is a damning indictment of rich nations, who can find plenty of money to save banks but precious little to save lives’.

Obvious enough, of course. But in what sense is this really a ‘damning indictment’? Why have governments found it so easy (relatively speaking) to save the bankers and not the poor? Is it because they are so callow that their priorities are utterly wrong-headed? Quite possibly, and we should not doubt the extent to which the largesse to bankers was the product of very deliberate political manipulation (on which, see Matt Taibbi’s excellent articles here and here).

But that does not explain why the response was quite so immediate and unqualified. That takes us to the question of the relative roles played in our own societies of aid and the banks. Aid is still perceived as a matter of charity, whereas the banking system is the very core of the global economy. If we disregard the interests of the global poor and of under-developed countries, the results are likely to be seen as ‘regrettable’; but if our banking system falls, that takes the economy with it, and the economy is the system through which we produce, distribution, exchange and consume pretty much everything we need to do anything at all – from our daily bread to all that aid, of course.

Yet it is by no means obvious that this is the full answer. In particular:

  1. Why is it that the centre of ‘the system’ lies in finance, which produces only money, and not the ‘real’ economy, which produces the goods and services needed to actually do anything for real people?

  2. The phrase ‘the system’ implies a neutral mechanism that somehow serves us all – as does the way I described it above. But is the economy really neutral, even at that level? Or does it in fact serve on be special set of interests, even when apparently just going about its day-to-day operations?
Answer these questions and a completely different picture emerges – a picture that makes it clear not only that we will never address the problems of developing countries with any sincerity but also that that very economic system will worsen the economic and environmental plight not only of the global poor and of under-developed countries but, in quite short order, the rest of us too.

Monday, February 08, 2010

A DIY manifesto

Less than 90 days to the General Election, and everything seems a good deal less certain. A year back, a Tory landslide seemed a foregone conclusion and Gordon was indisputably headed for backbench ignominy. How different – and how uncertain – everything seems now.

Well, not quite everything. Mulling over the goods on offer, it’s hard to feel uncertain about one thing: whoever wins, the electorate will be hard pressed to have high expectations of the winner. And in a time of war, economic crisis and unearned wealth for the few and undeserved hardship for millions, that is surely the one thing we cannot afford.

Who should we take to task for this? Our uninspired, uninspiring political masters? The army of unelected, manipulating ‘special advisers’? The abything-but objective and balanced media? No. Democracy is rule of the people, by the people, for the people, so if what We the People are getting isn’t what we want, then We the People have only ourselves to blame.

But there’s the rub. Just how do we change things? The only mechanism on offer is the ballot box, through which ‘we’ supposedly send ‘them’ a ‘signal’ telling them what we think. Only it plainly doesn’t work that way. Maybe they will get the message – and maybe not. And even if they get the signal, they are all too free to interpret it to suit themselves. And while we are limited to the ballot box, it can hardly be otherwise.

So let’s not make the mistake of trying to use the system to fix the system. No, let’s turn the tables completely. Let’s decide that, here in the age of the internet, we can tell them what we want, and decide that the job of politicians is to tell us not what we can have but only how they plan carrying out our orders.

It’s a slightly bonkers idea, of course. To start with, there are plenty of things voters would never agree about in a million years, which leaves plenty of scope for the usual manifesto verbiage. It’s also pretty hard to believe that our media would make it easy for public opinion to be untainted by corporate propaganda and sectional interests.

But that still leaves all those things that plenty of voters agree on – regardless of what the lobbyists persuade politicians to think – but which stay off the political agenda for years and decades together because our political parties can’t – or won’t - fit them in?

So what do voters actually want? I’ve no idea, and it would defeat the whole point to try to decide for them. On the other hand, if anyone would like to set up the website, database and voting system, here is my personal Top 10 (oh, all right, 11) for starters:


  1. Government ministers and senior civil servants should be forbidden to personally use private health or education. Yes, I know, quite a few ministers sincerely believe in the right to go private, but it’s the public system we pay them to run, and I can’t help feeling that they’d be a little less inclined to treat public services as political footballs if, as their business pals like to say, they had a little more skin in the game. Politicians need to know that, when they cut health budgets, this means them.
  2. The children of all MPs who vote for war are immediately conscripted to the front line. And if, in this age of political babes-in-arms, the MPs themselves if they are 45 or under, off they go too. If a cause is worth having someone else’s kids die for, sacrifice closer to home is surely warranted - and required.
  3. Replace the voting system with one that tells our representatives what we think of them –scores for each candidate – positive or negative - and if the ‘winner’ is the one we think least badly of, so be it. And instant recall if we just don’t think they’re up to it. Enough of ‘respect’ for the ‘authority’ of Parliament: MPs are our employees, and should expect to be fired if they’re not good enough.
  4. And on the voters’ side? Mandatory voting. I haven’t voted in years (who was there to vote for?), but if I were voting for what the people really wanted, what right would I have to keep silent?
The media
  1. Prevent any single individual or company from owning more than one television station or one national newspaper, or both a television station and a national newspaper. Enough of corporate bias and propaganda. (I’d probably extend this to state funding for Private Eye, just to make sure that the mass media also got their fair share of attention, but Ian Hislop would probably rather die than accept.)
  2. Replace the Press Complaints Commission with a truly independent body with real teeth. (And an independent Independent Police Complaints Commission too, while we’re at it.)
  1. Stop business turning schools, hospitals and society’s other key institutions into ‘business opportunities’. There’s little that annoys me more than the commercial prostitution of everything in sight, but when it comes to my children’s education and health, advertising is straightforward pornography. (Banksy has the right idea – if an advertisement is shouting in my face, I have the right of reply – including scribbling all over it if I want. They started it.)
  2. Get serious about corporate crime. Any director of a tobacco company should be tried for manslaughter. Anyone who was still a director after the tobacco companies’ own research showed that tobacco was addictive and poisonous should be tried for murder. As for the advertising agencies, the lobbyists and all the rest who prostituted their talents to help tobacco companies sell their poison, perhaps a little tar and a few feathers? (Could be worse – what I really meant to write there was ‘public stoning’.)
  3. Place much firmer controls on business influence over politics. Business people are people but businesses are not, and are entitled to precisely zero representation in our political system. Put an end to lobbying of political bodies, corporate funding of political parties and all the rest of the sleaze. And if trades unions and other corporate bodies are busy doing this too, include them in the same controls.
The environment
I could go on and on about global warming and climate change, but really, after Copenhagen, does anyone really think any government has any intention of doing what is needed, no matter what the public pressure? Puh-lease…

All the same, how about:
  1. Real public education on climate change. That’s what governments signed up to at Kyoto, but I haven’t seen it yet. Maybe they forgot to read the small print, but meanwhile the nutters and the lobbyists are getting the upper hand.
  2. A serious plan to cut our national carbon footprint. No, we don’t have to wait for the Americans or the Chinese – even if Beijing and Washington won’t help make things right, we can at least minimise just how bad things become.
Perhaps it can’t work – a political nirvana, in which the government of people can be replaced by the administration of things, because, to quote the famous Zapatero slogan, ‘Here the people give the orders and the government obeys’. Well, perhaps it’s all a bit too un-British. But surely we can give them a few polite hints?

Monday, February 01, 2010

How do we pay for micro-generation?

I just wrote a letter to The Guardian. It said:

With the government's new electricity feed-in schemes, surely mortgage lenders could now realistically finance the installation of a nation-wide micro-generation capacity? With a pay-back period of, say, a decade, could they not receive the income from generation until the installation is paid for (at a reasonable ROI), with ownership then reverting to the homeowner? Large financial institutions would be far better at pressing the government for better returns, the homeowner would pay nothing but gain a more valuable property, and the chances of our reaching our current renewables target would be much improved.

I hope they print it. Even more, I hope someone gives the idea some thought.

Friday, January 29, 2010

The problem isn't Peak Oil. It's just plain OIL

It seems to be very hard for some people to 'get' what the problem with fossil fuels really is. Daniel Yergin, Mr Peak-Oil-What-Peak-Oil? in person, is apparently in Davos for the annual jamboree in which all those clever people who got us in the current mess celebrate how clever they are.

Mr Yergin thinks Peak Oil is a long way off. A lot of other people in Davos would agree, I suspect, though whether this is a matter of superior knowledge, judgement or self-interest I would not like to say.

But what does it matter how far away Peak Oil is? Assume that it is close, or has even arrived. The contradiction between falling supply and massively accelerating growth (courtesy of China, India, etc.) will create an equally massive economic crisis. But what if we assume that Peak Oil is far off, as Yergin argues. What then? We syphon billions of barrels of the stuff up the surface and burn it into CO2? Yes, that's exactly what we do.

As various people have now noted, we cannot afford to burn more than a small fraction of even the fossil fuels at our disposal now, let alone any additional future supplies - not because of its economic price but because of its environmental consequences.

So, Peak Oil is a huge problem. But so is the oil continuing to flow.

To put the matter in a nutshell, the problem is not Peak Oil. It's just plain Oil. A uniquely valuable and important commodity, but one for which we haven't even begun to really pay.

Those who cannot remember the past...

Three decades ago, the Carter Administration tried to pass legislation to establish an energy policy for the USA. Writing in Wednesday's FT Energy Source, Philip K. Verleger - then Carter's Director of the Office of Energy Policy at the U.S. Treasury - claims that the current Obama administration hasn't a hope of getting his global warming legislation through. The reasons: arrogance, ignorance of the substantive issues, and failure to recognise the power of pork.

For Verleger the implications are clear, and in the light of recent events in Congress (and Copenhagen, because, whatever the scorn within which Europeans treat US politics, this is by no means a uniquely American problem) I find it hard to disagree. Here are Verleger's closing words:

"Many of the veterans of the Carter battle have quietly exchanged emails and
phone calls as the Obama legislation awaits its fate. The consensus opinions are
  1. None of the people putting the Obama energy policy forward understood the
    problems they would face in Congress.
  2. The bill’s supporters (”greens”) are less aware of history than we were in
    the 1970s, if that is possible.
  3. The legislation’s passage is unlikely absent an outside precipitating

It will be difficult to take effective action on emissions even when every
American accepts global warming as fact. Concerns regarding economic security
are far greater than those over climate impacts 10 or 20 years in the future.
Tragically, individuals pushing such actions - the representatives of various
NGOs covered in this blog, for example - do not understand history, the concerns
of voters, or the workings of Congress.

The battle is lost."

For those of us for whom the problem of global warming is, as energy was for Carter, the Moral Equivalent of War (MEOW!), it's a depressing insight.

Tax breaks for accelerating Peak Oil

Yesterday's Financial Times includes an article by their Energy Editor, Ed Crooks entitled 'Tax breaks to lure oil and gas sector'. It reported that tax allowances of up to £160m per field will be made for developing an area west of the Shetland Islands that probably includes more than 2 billion barrels of oil.

Tax breaks on oil wells? What sense does this make? Oil companies are some of the richest on the planet, and subsidising them to drill is doubly stupid - in a world fast approaching (passing?) Peak Oil, this is foolish short-termism, and in a world that cannot afford to burn more than a small fraction of its remaining fossil fuels before it trips us into irreversible global warming, paying them extra to make sure it happens is simply bonkers.

So why are they doing it? It's a hard region to develop, so if the UK government wants oil money to continue flowing into the economy, they have to bribe oil companies to bring it here. Hence the tax breaks.

It's a characteristic environmental/resource problem that follows from a) the mass nature of many decision-marking processes (e.g., multiple nations and companies making related decisions in parallel) and b) the absence of effective overarching (e.g., global political or regulatory) systems capable of ensuring that the whole - the net impact of a mass of individually intelligible decisions - does not undermine the interests of us all.

And in this case, that is exactly what is happening: a hundred countries trying to attract investment for the sake of the employment, the tax revenues and the boost to GDP are collectively abandoning the responsibility for handing over a sustainable resource base to future generations and accelerating global warming. A thousand companies, all hungry for investment and struggling to maximise their returns, ravish the planet and resist even the most superficial controls.

But there's nothing unique about the oil industry: we subsidise a huge range of damaging and short-term practices (e.g., airline flights through tax breaks and indifference to 'externalities'). In fact governments and business have been 'managing' the economy between themselves for perhaps as long as there has been an 'economy' to manage. Monopolies, politically inspired subsidies, corruption are the normal practices of all major economies - all delivering short-term gains for state and business that destroy the long term interests of society. All that is new today is that these mechanisms are so powerful and so far of the leash that we are simultaneously creating an unprecedented threat to society's very survival and abandoning every tool we once had to manage such a problem.

Thursday, January 28, 2010

The bad guys and the worse guys

I’m looking for a new job. Yesterday evening, sitting in a local café, I shocked my wife by suggesting that I would consider working for an investment bank (in IT, not their signature skullduggery). If you have been reading this blog for any length of time, you may will be as astonished as she was – after all this ranting and raving about the causes of the recent crisis and recession, how could I possibly be thinking of working for such dreadful people! What a hypocrite!

Maybe. But the answer is, the investment banks are indisputably the bad guys, but where are the good guys? Haven’t you ever worked for someone who was doing some good, my wife replied? Someone who treated their staff well and was doing something socially useful (as opposed to the irredeemable social parasitism of the contemporary investment bank)?

Not really, I answered. Well, it’s not that they are all relentlessly evil, but rather that all their benevolence seems to stem from the single-minded desire to maximise profits. And if you had to be nice to people to achieve that, then you were damned well nice to them. And when it becomes more profitable to treat them like dirt, that too will come to pass.

Nor are personnel policies the only issue.

  • Some years ago I was working for a major testing consultancy. It collapsed as a result of the .dotcom debacle. And then the fun began. Within a few months we were hearing fascinating tales about the board being investigated by the FBI and our own ex-CEO being highly sought by some quite undesirable company that wanted a word about their relationship.
  • More recently, I spent some time with a major UK supermarket. Their employees told me that they were pretty good to work for – but as soon as you found out anything about how they exploited their suppliers, you’d realise that this was not out of unqualified benevolence. And so on. It’s the norm – companies are indeed becoming more benevolent, but only a) where they have to, and b) it’s the price they pay for extracting more and more high-level value from the employees – you only give potted plants to the ones who need a comfortable environment in which to work effectively.
  • Or going right back into ancient history, when the creative accounting practices used by Arthur Andersen at Enron came to light, I seem to recall that the reaction of many people in the City was ‘Why couldn’t you do that for us?’
So in a sense they are all the bad guys – that’s what it means to be in business. True, some are truly beyond the pale – the tobacco companies, for example, or arms dealers. But investment bankers? Given how the average company uses its ‘treasury’ operations (i.e., lending cash, buying and selling derivatives, etc.) to boost its profits, they were colluding with Morgan Stanley, Lehman and a rest. They weren’t very clever about it – most of them were caught out – but that doesn’t make them less culpable.

Conversely, the investment bankers aren't breaking the system - on the contrary, they represent its apotheosis.

So perhaps I’m making the wrong distinction – there are bad guys, and there are worse guys. The worse guys seem only to be a little smarter and little more determined than the not-quite-so-bad guys, but fundamentally? I’m not sure I can really tell the difference anymore. I’d love a job with the good guys, but I have no idea who they are.

Wednesday, January 27, 2010

Economy versus environment (Part 94)

Q: What would actually happen if any significant proportion of the population suddenly took it into their head to reduce their environmental impact? A: The economy would collapse.

If you look at the recent recession, it is striking how much damage was done by relatively small changes in GDP. Of the highly developed nations, the UK (among the OECD countries, a middling performer) was so badly hit that it has experienced a loss of a little over 2.5% since the end of 2007. What? 2.5% in two years? A bit over 1% a year? What’s the big deal? Yes, I know, losing 1/80th of my income would not be a good thing in a year, but how can this be enough to do so much damage to an economy?

So what would happen if, say, 20% of the population managed to knock 50% off their environmental impact? Surely that would be an excellent start. Well, from an environmental point of view, perhaps. But if that translated into a 10% fall in consumer spending, where would that leave the economy? Consumer spending represents about 56% of German GDP, 58% of Japan’s GDP, 64% of the UK’s and 72% of the US’s (here). So a 50% fall in spending by 20% of all individuals would cut these economies by somewhere between 5.6% and 7.2% of GDP. In other words, even such a small change by a small minority would reek more economic havoc than the current recession!

So, we all get the environmental bug, and the economy folds. And with it go (as the current recession has also shown) investment in green technology and solutions of all kinds. Not everything, but far too much to support the real greening of industry. On the contrary, investors would be heading for the safe, short-term returns. And governments everywhere would be trying to compensate for the shortfall with new spending – and so shoring up the very economic activity those who had cut their impact had hoped to eliminate.

This isn’t a criticism of taking action, of course. But it is the old revision-versus-revolution problem. If you want only that the system work a bit more benignly, you need only revise the system so that it loses its more unpleasant foibles. But if the problem you are worried about is inherent in the system itself, revision isn’t the answer. The only way to fix systematic problems is to change the system in systematic ways.

That in turn is a political issue. Our politicians are of course firmly committed to growth, but that is not an irreversible condition. But two things are fundamental.

  1. We must develop a credible explanation of this most fatal link between economy and environment, and make it as central a plank of future political discourse and policy-making as growth and consumerism have been since the 1970s.
  2. We must define a programme for migrating our existing economy to a sustainable form. This cannot wait for 'the market' or the actions of private corporations, whose interests will never be to change themselves while there is still money to be made. Governments and local organisations must start to plan the elimination of environmentally destructive economic activity, undo the vicious circle of capital expansion that drives consumerism, obsession economic growth and the disregard of the poor and weak.

A momentary lapse into defeatism

I have always felt very ambivalent about the 10/10 campaign. It seems so very unambitious. Most people can reduce their carbon footprint and general environmental impact by 10% by little more than scrutinising their current lifestyle and cutting out the worst excesses. Turn the thermostat down a couple of degrees too high, stop wearing flimsy clothes on cold days, fix poor insulation for a small outlay, stop buying gadgets, fashion, trinkets, food from the other side of the planet, drive more thoughtfully (and if possible stop driving altogether), turn off unused lights (and stop squandering electricity for pointless lighting in the first place), remember to turn the PC off, and so on. 10%? A piece of cake.

What is more, I have probably managed 10% with disproportionately little sacrifice. It took me seconds to reset the thermostat and turn off the radiators in areas I barely use. It took about a week to get used to rooms a couple of degrees cooler. It took not time at all to remember to turn off lights and shut doors. It will take a lot longer to step back from impulse buying and toys, but it’s not impossible – I’m not so addicted to consumerism that I have to go along with the entire glitzy, grubby farrago. Nothing too it, if you really want to make a difference. 10%? Why so little?

But that isn’t the problem I have with 10/10, or any of the many other exhortations to us (as individuals) to use less. 10% is a nice idea, but the correct answer is something like 85%. So if we achieve 10% in 2010, will we achieve another 10% in 2011, and then another in 2012? It’s not inconceivable, given a truly impressive level of sign-up (which has not, as far as I can see, happened so far).

But even 30% is long way from 50%, let alone 85%. Read George Monbiot’s Heat or David McKay’s Sustainable Energy – Without the Hot Air for a sense of just how far we really have to go. At that level, the only sensible answer is to look seriously at our core social, political and economic systems to see how they need to be changed to deliver the goods. Or rather, stop delivering them.

But especially since Copenhagen I feel like we not only still have a very long way to go but that we have taken completely the wrong road. Down this road, no matter what a few individuals do, things do not get better – no, they get only worse.

I’m not too worried by the flagging public confidence in the reality of global warming or the tiny holes knocked in the credibility of individual environmental researchers - not even the IPCC. Such upsets will be transient and have a marginal impact. Much more serious is the decision by so many national governments to do what can only be summarised as - nothing. For how else can we understand Copenhagen (which left the world’s environmental strategy even weaker than after Kyoto), or the news that the UK government plans to take its expenditure on environmental projects in the developing world from existing budgets, or Obama’s evident fear of doing anything whatsoever about his environmental promises for the foreseeable future, or the Chinese government’s unwillingness to make any significant contribution to climate change (other than to make it much worse, of course)?

But why is this so much more important than persuading individuals to make a start on their personal environmental impact? Because the number of individuals who were ever likely to take that road was never more than a small – perhaps tiny – minority whose collective actions would have no significant effect on our fate. To have a wider impact, they had to serve as a catalyst, as a demonstration to governments that the environment was a vote-winner. Only when they had learned that would governments start to take the action needed to transform not just the footprint of individual households or even a Transition Town but the collective footprint of (in the UK’s case) 60 million people or more.

And not just 60 million individuals. Unlike you and me, governments can directly transform the country’s physical infrastructure on a national scale, coordinate similar actions on an international scale, force big business to mend its ways, and all in all make the systematic changes that no assembly of individual persons can ever bring about. Even 60 millions individuals could not change the public transport system without government action, nor how we generate electricity, nor how developing countries go about achieving a civilised level of development, nor any of the rest.

But after Copenhagen? Nothing can expected from governments any more. Or at least, far too little even to deflect the crisis by more than a smidgen. Even worse, not only have they decided against going beyond Kyoto but they have plainly decided that the only solution to the world’s economic woes is to restore the economic system that got us into our current mess – economic and environmental alike. The only adjustments they plan to make are trivial, serving only to make the economic system a little less dangerous in narrowly economic terms, without any thought for the environmental consequences of a capitalist ‘business as usual’.

In such a situation, what is the point of an individual making a personal commitment to reducing their environmental impact? Does it make sense for individuals to take action off their own bat if the great majority are not only not doing practically nothing (a situation I can live with for a decade or two) but major organisations (political and economic) are never going to be moved in an environmental direction, and have in fact decided to head straight back down the road we all know leads only to global warming, ecosystems collapse and resource wars? What can we claim that individual environmental self-control can achieve after that – that we will succeed in putting off the evil day by 10 minutes?

So even if I do manage a 10% - or 25% or 100% - reduction, exactly what have I accomplished? On a personal level, perhaps it is still a lot. At the very least, if I can get my footprint down to a sustainable level (not a very meaningful proposition while I remain a member of such a destructive society), I can say that at least it wasn’t me, guv. But on a higher level? What have ‘we’ accomplished? In the absence of a broader, systematic impact on the whole way we (at worst) conceive of the environment and (at best) the way we manage our economy, a lot less than we might imagine.

Monday, January 18, 2010

Where does obsessive growth come from? Well, not consumerism, that's for sure

Contemporary society is widely described as consumerist, and when politicians and pundits are asked how we can control the endless expansion of the economy, their first hand-wringing response is that what ‘the consumer’ (a group that seems to have superseded ‘the voter’ as the arbiters of political policy) want is simply ‘more and more’. So growth is the only game in town.

The environmental implication of this frozen staring into the contemporary economy is simple: nothing can be done. Nothing can be done to prevent us driving right over the CO2/ resource/ ecosystem cliff, because ‘the consumer’ is king and ‘the consumer’ would not stand for not having more stuff, more holidays abroad, more everything.

This is mythology at its most deceitful – and, given its environmental implications, most disastrous.

Look at how the economic process that links consumers to the economy really works. Somewhere out there is someone – some billionaire, some bank – with a lot of money to invest. They build/buy a factory that makes some consumer goody – iPods, perhaps, or ‘designer’ jeans’, or the latest ‘taste sensation’. The new owner invests millions, maybe billions. They’ve invested millions in creating the product, millions more in setting up production, millions more paying managers and production line workers, millions more for natural resources and energy, millions more to create the supply chain that gets it into the shops.

The sole reason all this investment takes place is to make money – lots of money, and certainly more than the millions invested. Otherwise there is no profit. So they need people to buy their product. You and me. Hence the endless orgy of marginally differentiated goods and services, the interminable and increasingly in-your-face advertising, marketing, the lobbying, the focus groups, the viral messages.

Consumerism exists not because consumers want to buy but because companies need to sell. If they don’t invest more and more in manufacturing, services, energy, transport, and so on, there will be no returns on their capital. They go bankrupt. But if they do invest, then there must be sales. It is not consumerism that drives growth but capital’s need for a return - endlessly.

But why does this lead to growth rather than simply a ‘steady state’ economy in which we can continue to have what we have now? Or if we must expand, why can we not expand in directions that contribute to the sustainability and equity so many commentators – Nicholas Stern, Jonathan Porritt, George Monbiot, and many more - insist must be the goals of the 21st-century economy? The answer is quite simple: there are plenty of mechanisms built into the contemporary economy that enforce growth - whether or not we want it - but none of then involve doing anything for developing countries – unless, that is, they can pay as well as developed countries can.

Ironically, one of the key mechanisms for ensuring that growth will happen is the very efficiency improvements that so many pundits are relying on to reduce future growth. From society’s point of view it makes sense that, if we can produce the same goods and services by using less energy, less resources, with less damage to the atmosphere and the environment, then surely this is the way we should be going.

But from a capitalist perspective, there reverse is true. If I – just me, rather than my rivals – can use the same resources to produce more, then I will. I will not – could not – simply produce the same in a more environmentally benign way - the assumption of the pundits – because the goals of investment is to maximise profits, not minimise total costs. Given that I have already invested hugely in plant, resources, supply chains, marketing, and so on, many of my costs are already fixed, regardless of how much I actually produce. As a result, if I want to maximise my profits the only rational thing to way to exploit improved efficiency is to use the same investments still more intensively.

After all, I will still be paying fixed rent on my factory and offices, still paying the same fixed interest on my loans, and so on. The main variable costs come from the inputs (labour, materials, energy, transport, and so on) that I use to create actual goods and services. So if I want to maximise the profit I make from this enterprise, simple arithmetic dictates that I should increase the amount of stuff I make (i.e., increase my investment in resources, labour, energy, etc.), because the same fixed costs will now be spread over more units. That will minimise my unit costs, and so (other things being equal) increase my profits. Hurrah!

This logic becomes more compelling the more capitalism matures. History as a whole can be seen as humanity building and rebuilding society with more and more fixed capital – roads, education systems, hospitals, technology, and so on – so that each generation is blessed with a greater stock of means to its ends. In a rational universe this would lead to societies in which, having satisfied its ‘basic’ wants, humanity might not ever quite lose its appetite for progress, but it would at least be able to decide exactly what progress meant.

In our present position, this would surely mean the very commitment to sustainability and equity referred to above. But again, capitalism bucks the trend. As the level of fixed investment needed even to join the game grows – the size of a new car plant, the cost of R+D, and so on – the more fixed costs dominate, the more units that must be sold to cover them, and the more compelling the need to grow becomes.

There are whole countries devoted to this model. China, for example, has put overwhelming emphasis on manufacturing for export – feeding the West’s addictions before developing its own. But there is little reason to believe that even China’s authoritarian government will be able to resist the logic of capitalist investment. And no doubt the boys from Goldman Sachs – or whatever their Chinese incarnation turns out to be – will, for a handsome fee, show them how to lock the handcuffs on themselves.

So growth won’t be ending any time soon. On the contrary, there is only acceleration ahead. Our despoliation of the planet won’t be quite as rapid – those efficiency gains are real (because they are profitable) and neither public nor governments are quite helpless. But until we recognise exactly what the link between capitalism, growth and our all too unpleasant environmental fate is, there is no turning back.

Welcome to the machine.