What if Spider-Man was a neo-liberal?

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"With great power comes great responsibility." That is the takeaway lesson from Spider-Man. That and the fact that New York is a great place to live if you have an easy way of avoiding the traffic.

The lesson is completely true, Spider-Man has huge abilities beyond that of most people and he could easily use these powers to enrich himself at the expense of others. So what is stopping him? It is that sense of social responsibility (impressed on him by his uncle) and his own internal moral compass, shaped by experiences such as seeing close friends and colleagues corrupted by power (Harry Osborn, Dr Octavius, etc).

However, if Spider-Man was to meet a neo-liberal economist, the economist would argue against Uncle Ben's advice and claim that Spider-Man does not have any responsibility to anyone other than himself. The neo-liberal would argue that Spider-Man is a rational individual and he should act in his own rational self-interest. This is the central belief of neo-liberal economics: if everyone acted this way then we would all be more prosperous.

The only flaw in this argument is that a world with someone as powerful as Spider-Man in it, who acted only in their own self-interest, would be a terrifying place for everyone who was not Spider-Man.

If we extend his logic to all superheroes then the world gets even darker. Should the Avengers act in their own rational self-interest and ignore all their social obligations? Neo-liberal economists would argue that they should, however if they did then there would be no power on earth that could stop them. The Avengers could hurt many people in the process of enriching themselves and it would be perfectly rational to do so.

There is no wider social organisation made up of the people they would exploit that could hold the Avengers to account for their actions, that is how great their collective power is. We have seen Thor, Hulk Iron Man, et al face down entire armies. If the Avengers acted only out of rational self-interest then world would clearly be much worse off, not better off as the neo-liberal economists argue.

This is because of the asymmetric power relationships in the world of the Avengers. The Avengers are more powerful than everyone else in the world combined, which removes any element of accountability for their actions. We are dependent on the Avengers choosing to honour social obligations, but neo-liberals argue that they should act with rational self-interest and enrich themselves. No global system with asymmetric power relationship whose gulfs of power are as large as the difference between Thor and a baseline human could work based around complete individual freedom because the Avengers would exploit us all.

Superheroes work as a metaphor for the neo-liberal view of the individual. In their world, it is wrong to constrain the individualism of heroes. Their accomplishments are entirely individual and not the product of wider social factors. They stand apart from the society that created them and are not beholden to it. Thor has little regard for the rules of his own society, as he seeks personal glory from attacking the Frost Giants, and the Hulk’s destruction of vital infrastructure shows no regard for the wider needs of the people dependent on such infrastructure. This view of the individual is based on a reading of history where only individuals achieve anything and on the idea that we need to put our trust in great individuals and not institutions.

If you think about it, a world with superheroes in it has the sameproblems as a world with neo-liberal economics in it. Superheroes show the dominance of the free neo-liberal individual. Only rational individuals can wield the power necessary to save the world and collective action is, at best, ineffective and, at worst, directly opposed to individual freedom. The army is constantly trying to constrain the individual freedom of the Hulk. In V for Vendetta we see how only an individual with complete freedom can stop a society which oppresses individual freedom.

The problem with complete individual freedom is that there is nothing to stop people hurting each other, either deliberately or out of selfishness. Again the Hulk is a great example of this, it is accepted that there must be some limits on personal freedom where an individual can do as much damage as the Hulk can, given complete freedom to act in any way they feel.

Superheroes are a lot like big companies and the ultra rich of our world. They act in their own rational self-interest and there is no power left on Earth which can hold them to account for their actions. Like with Spider-Man, we are dependent on them choosing to follow their social obligations, but they are constantly being told by neo-liberal economists that we would all be better off if they ignore their social obligations and behave with rational self-interest.

It is true that with great power comes great responsibility. Like superheroes, large companies and the ultra-rich have a great responsibility. We need a system made up of the people they oppress to make sure they do not oppress us, a system with the power to hold them to account. In the Marvel Cinematic Universe, we can trust superheroes’ internal moral compass to honour their social obligations, but in our world we cannot rely on good intentions to prevail. There has to be a mechanism to protect the less powerful from asymmetrical power relationships.

Any system that constrains the absolute freedom of the individual sounds oppressive, but superheroes show how dangerous complete individual freedom is in a world of rational individuals acting in their own self-interest who cannot be held back from exploiting others to enrich themselves.

It is interesting that Captain America is the Marvel hero who has the strongest internal moral compass and is the most willing to act against rational self-interest by risking himself to help the less powerful. This this because he comes from a time before the advent of neo-liberalism. Contrast his behaviour to Iron Man who refuses to acknowledge the authority of his own government and believes he is beholden to no one other than himself.

Great responsibility does come hand in hand with great power. Superheroes show the best and worst the human race is capable of. The huge power that superheroes have means that we cannot rely on them choosing to be good. Rational individuals acting in their own self-interest can only work when there is equal power between parties and not the asymmetric power relationships between superheroes and regular people. This lesson applies equally to the powerful in our world as it does to the powerful in the Marvel Cinematic Universe.

If Spiderman was too meet a neo-liberal economist, I hope that he would remember Uncle Ben’s advice about our social obligations and not act in his own rational self-interest.

The devil takes the hindmost

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It was 2am, I was drunk and in the back of a taxi heading home after a punk gig. None of these things are particularly remarkable. While I ranted, probably incoherently, to the driver I remember saying:

"What is important is that we look after the people who need help, the least fortunate in society."

"Yeah, you're right." The taxi driver agreed. "But what's also important is that we stop helping those who don’t need it."

My memory of this exchange is hazy but I got the sense that the driver agreed with me in the need for there to be a safety net but that she was concerned that is was currently being taken advantage of. Benefit fraud is not something that especially concerns me. The tiny amount claimed fraudulently is nothing compared to the amount of tax that is avoided and it seems ridiculous that we are so concerned about one and not about the other. Social obligations seem to only apply to the poor.

Benefit reforms will end the “something-for-nothing culture,” Work and Pensions Secretary Iain Duncan Smith has claimed in the past. Variations on this statement are constantly being uttered by top Tory politicians. It is a popular line, no one believes that the government you should give you something for nothing, especially in the age of austerity. The Tories claim they are ending the “something-for-nothing culture”, then they cut benefits. Then later they are claim the same again and cut further. It is as if the “something-for-nothing culture” cannot be ended while we still have a welfare state.

July's emergency budget is likely to contain £12bn in further cuts to the Duncan Smith’s DWP budget which means further cuts to welfare. As always the justification for this is that it will encourage the workshy to finally turn off daytime TV, get off their sofa and find a job. Apparently, the billion in welfare cuts so far have not achieved this but this time it will be different.

There is only one slight flaw in this argument, most people claiming benefits are in work. This will not encourage the lazy to be productive, but will instead punish millions of cleaners, check out staff, call centre workers and other low earners. Some of the country’s hardest grafters are about to be punished for having a low paid job.

The reason why most people claiming benefits are in work is that wages are low and the cost of living is high. This is mainly due to our lack of regulation of the energy, housing and labour market. State subsidies are needed to top up millions of low paid workers' basic income. How will cutting benefits encourages these people to reduce their energy bills, be paid more or have cheaper housing remains to be explained.

David Cameron publicly admitted that low wages and high cost of living are the main cause for the large benefits bill. Cameron identified the problem but his motivation in solving it is to reduce the national debt and not to raise living standards for low earners. He said we need to move from a "low wage, high tax, high welfare society to a higher wage, low tax, low welfare society".

Cameron's proposed solution will not improve the situations for those with low wages. His plan is to remove the tax subsidies which top up low earners income but not put any pressure on employers to pay more. There is no plan to raise wages, for example by raising the minimum wage to be the living wage. In fact is removal of the tax subsides means that the target living wage will increase, as wages will have to rise to cover the income lost from benefit cuts. No one expects a Tory government to put pressure on big business to pay their staff more.

I want to know the logic behind how this will make people better off? How will cutting tax subsidies to low earners when wages are stagnant and the cost of living is high help anyone? This cut will hurt Cameron's precious “hard working families” the most. The people in work, on low wages, who work hard but still do not earn a living wage. These people will be made worse off.

Many of these people want to earn more but cannot because wage growth is low and because underemployment is a major economic barrier. Many of these people want to work more hours to raise their income but the jobs are not available for them to go it. They are trapped in low paying jobs and now their living standards will fall. The only effect this will have is to drive some people to work harder and be exploited more by their employers who are still not paying them a living wage.

This is the devil takes the hindmost approach to capitalism, taking away the safety net from those who fall behind. These reforms serve only to punish people in low paid work for being in low paid work. It is a policy conceived by the wealthy and it says: “I am okay. What is the problem? Surely anyone can earn more money if they want to”. The simple truth is that many people cannot earn more and now will be worse off.

The sad thing is that these reforms will be greeted with cheers in the press and in the streets. Many of those who support the cuts will be on low wages because the Tories are once again bringing an end to the “something-for-nothing culture” of benefits and encouraging people to work harder.

If we are worried about the benefits bill then we need higher wages and lower cost of living. We needs laws to ensure employees pay their staff a living wage. We need better regulation of the energy and private property market to reduce costs of living for those on low wages. We also need to understand that people claiming benefits are not getting “something-for-nothing” they are exercising a human right. They need compassion, not jibes.

Many people still believe that welfare is paid to the people who can work but simply choose not to and that the only solution is to cut benefits so that these people will finally get off the sofa and get a job. It will be a difficult journey to change this attitude but we can start by focusing on one basic fact: most people claiming benefits are already in work. If we approach the benefits bill from this angle then then government's policy makes no sense and will clearly hurt the working poor.

What can Mad Max: Fury Road teach us about the free market?

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Mad Max: Fury Road is fast paced, vibrant and bloody. It is a colourful explosion of carnage and vehicular combat. On first inspection it comes across as a visually stunning but shallow movie of wall to wall action and little character development. However underneath the explosions and car crashes Max Max makes some subtle points about how we see ourselves as individuals.

The Cambridge economist Ha-Joon Chang said Mad Max is a vision of the neoliberal economist’s perfectly free market. Granted he was referring to the Mel Gibson starring original but it applies equally to the Tom Hardy starring remake.

Neoliberal economics, often referred to as free-market economics, is a school of thought which believes that unregulated markets are preferable to regulated markets. They believe the government should get out of the way of private business to allow private business to create as much wealth and job as possible.

Neoliberalism is based on the liberal (liberal as in Adam Smith not George Clooney) principle of individualism and that society is made of rational individuals making decisions in their own interest. It is best for society when governments do not curtail this individualism, as what is best for society is rational individuals making decisions in their own interest. Individual freedom is at the core of neoliberalism, neoliberals often oppose programs aimed specifically at gender or racial equality claiming that group rights oppressed individual rights.

That is enough theory, we should look at the film. Mad Max: Fury Road takes place in a future where society as we know it was destroyed in a nuclear war. Most of the action takes place in a desert where vicious cultists follow bloodthirsty messiahs, who use their military power take what they need and kill anyone who opposes them.

In the world of Mad Max there is no government and no laws. Mad Max has is the neoliberal vision of a perfectly free market, with no state intervention and complete personal freedom. Why then is it so violent and chaotic and not a neoliberal paradise of plenty and economic efficiency?

Certainly environmental factors are at play here. Scarce resources has led to intense completion, which is manifesting itself as violence. Yet there are clearly enough resources to sustain a sizeable population and some individuals are clearly resource rich which indicates that the issue is not the lack of resources but an unequal distribution of resources. In Mad Max monopoly power has risen in an unregulated market, this takes the form of the film's villain, Immortan Joe, who hoards all the water for himself. What this says about the perfect neoliberal world is that rational individuals who possess social status (in this case being the leader of a militarised cult) will horded all the resources and created private monopolies. In the complete free market our intelligence or hard work is not a factor of success, it is the social status of an individual which determines success.

Mad Max is a world with complete individual freedom and no group rights, there are no affirmative action programs or governments holding back individuals. It is also a world entirely based on competition with no welfare, those who cannot compete in this violent desert die. In order to survive in such a world individuals must band together to form mutually supporting collectives. This is what the main characters of Max (Tom Hardy), Imperator Furiosa (Charlize Theron) and the wives of Immortan Joe, which Furiosa has liberated from his cult, do. These characters form a mutually supporting collective to protect themselves against individual freedom run amok. The individual freedom takes the form of the lawless bandits roaming the desert and the bloody thirsty war boys which Immortan Joe sends to retrieve his wife.

We see this in real life examples of environmental catastrophes, individual needs are set aside as people work together for the good of everyone affected by the disaster. In Mad Max no individual can stand up to the private monopoly of Immortan Joe backed up by his cultists and military power so it is necessary for individuals to form a collective. These collectives operate along Communist, not neoliberal, lines with equality of resources and mutual aid along the principal of "each unto their need and each unto their ability". (This is good loose definition of Communism laid out by David Graeber in his book Debt: The First 5,000 Years.)

The individuals in the collective are less effective when the unspoken rules of the collective are broken, in other words when they do not work along the principal of each according to their needs and abilities. When Max tries to use a sniper rifle to stop a vehicle crewed by Immortan Joe’s followers, Max turns out to be a bad sniper. Mad Max has reverted to neoliberal individual self reliance acting as rational individual who believes he is the best shot. The safety of the collective is threatened as Max cannot shoot the incoming vehicle and has to voluntarily give up his rifle to the shooter of greater ability, Furiosa, who is able to protect the collective. It is telling that Max does not have the rifle taken from him by force, but has to voluntarily admit that his best chance of survival is trusting in someone else and not acting as a rational individual.

The neoliberal world of Mad Max is completely male dominated, with women related to childcare roles. The purpose of Immortan Joe many wives is simply to produce more male offspring to expand his private monopoly, this shows that existing oppressive social structures would get worse in a neoliberal world without state intervention to counter them. The focus on individual rights in reality is rights for the dominant class as an equal society can only be achieved through pursuing the rights of oppressed groups.

By forming a collective against individualism, group rights can be asserted and male dominance challenged. Again this is what happens in the band led by Furiosa and Max. This collective is against the male dominated private monopoly and offers a range of roles for women, not just related to children. The collective is led by a woman, women take part in all roles including fighting and is expressly opposed to the male dominated world of individualism which seeks to oppress them.

The same metaphor about the neoliberal view of individual freedom in a chaotic or post apocalyptic world is explored in other works such as the move and film The Road and and the video game Borderlands. Both emphasise the point that a complete free market and world based entirely on individual freedom without border social structures is violent, chaotic, oppressive and prone to the domination of individuals with social status. Stylistically Mad Max: Fury Road is very much influenced by Borderlands, although the game in turn is clear aesthetically influenced by the earlier Mad Max films.

Obviously, Mad Max: Fury Road can be read differently if you have different political views. It can be interpreted the other way around with Max and Furiosa representing individuals fighting back against Immortan Joe, who in this reading represents an oppressive government determined to stamp out their individual freedom. This is possible but that would make Immortan Joe some form of Communist dictator and there is clearly no sharing of resources in his society.

There is also nothing to stop the cultists leaving his army. If Immortan Joe represents the government then why are there no laws or civic institutions, something even primitive societies have? Immortan Joe’s followers are all rational individuals with their own freedom who choose to remain part of his monopoly because they dependant on it to survive due of the lack of social safety network. The reading of Immortan Joe as the government leaves more questions unanswered than the reading of him as rational individual using his social status to amass a private monopoly of society's scarce resources which he can because nothing can stop him in a perfectly free market.

Mad Max can be viewed as a simply a piece of entertainment, a silence of visual spectacle, but what entertains us makes subtly points about our hops, aspirations and fears. Mad Max speaks volumes about our fear of complete individualism, where nothing can hold back greed or violence. It speaks about our needs to band together against individuals who will do us harm. If the future is the neoliberal view of complete individual freedom then the future really does belong to the mad.

No One Likes Tax Avoidance

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You would be hard pressed to find someone who supports tax avoidance. We all agree that at least some tax must be collected for the police, fire service, the military, etc. Only an extremely libertarian inclined individual would suggest that it is acceptable for multi-billion pound companies to only pay tax on a tiny percentage of their income. However, I believe that it is not enough to oppose tax avoidance and that only radical change to our economy can prevent large companies from dodging their responsibility to society.

There is little political will to tackle the problem of tax avoidance – the government would much rather spend its time exaggerating the problem caused by poor people. Whenever anyone suggest that a stronger line be taken with large companies, their apologists argue that if we are not nice to the wealthy people and let them get away with whatever they want, then they will take their money elsewhere. As recent tax probes have shown, if rich companies do not pay tax when we are very nice and accommodating to them, then I am not certain what we have to lose by compelling them to pay more tax.

A political and popular desire to tackle the entrenched privileges of wealth is needed to stop tax avoidance. Whenever a particular gross piece of excesses is uncovered, we as a nation simply tut disapprovingly but nothing ever changes. We are currently going through a phase of rumbling and groaning when people have to grudging admit that the perhaps the wealthy do treat their social obligation as a wall to urinate against. Still even if new laws are passed and loopholes closed, tax avoidance will still continue on a grand scale, as you cannot prune neo-liberalism into something fair or compassionate. This is what most people (including a lot of lefties) would like to believe, partly because it conveniently avoids questioning the wider implications of tax avoidance. If companies treat their social obligation to pay tax something to be wriggled out of, how do they view health and safety or even employees’ wages? If you think the idea that a company would try to avoid paying its staff is ridiculous, then look at McDonald’s attempts to do just that in America.

An economic system which concentrates wealth among the few, as opposed to distributing it more evenly, will always have the problem of these few wealthy individuals taking advantage. They hold the greater amount of power and thus cannot be compelled to pay their fair share of taxes. What we have seen recently with Starbucks, Google and others is an indication that taxes which are supposed to be inescapable (remember the old adage) can be avoided by the wealthy as our wealth based system will always create an incentive for the rich to avoid paying their fair share of tax.

The solution to wanton tax avoidance is to change the way we think about wealth completely. We need to stop thinking about wealth as a goal in itself, but more a by-product of success in another field such as science or art. Wealth (much like fame) is a life goal in and of itself, one which we acquire through cynical self-interest, the proof for this is that no small child ever said they wanted to grow up to be a hedge fund manager when asked what they wanted to be in primary school. We also need to stop respecting people purely because they are richer than us. Being wealthy does not necessary mean you are a more creative or intelligent human being, it more likely means that you had a bigger leg up in life than others. Mainly we need to think about the global plutarchy of the ultra-rich as a different sort of person who transcends national identities and inhabits a world so different to ours it might as well be alien. The idea that people whose existence is so far removed from the pressures of normal life know what is best for the average person is laughable. We need to stop bowing down to the extremely wealthy and living in fear that they will take their money else where - that fire sale has already happened. We need to remember that social obligations are for everyone, and it is grossly unfair that wealthy companies pay a smaller percentage of tax on their income than the average private citizen who earns a lot less.

Only with radical change will the excesses of greed and wealth be stopped. Small, incremental changes will not stop tax avoidance, sweeping reform of our entire political and economic system is needed. If we are all so disapproving of tax avoidance then it is time we face up to what the underlying causes are and accept what the solution is.



How fair is fair-trade?

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Ethical consumption is at an all time high. Never before in the history of the world have people been so unaware of how their goods reached them, but also curious to know, hence ethical consumption. In the past, we would know who had made our clothes and where the wool had come from. In the more recent past, we would not have known, but also we would not have cared. Now we want to know and we want to care.

Fair trade and other forms of ethical consumption are ever present in today's markets. Once the preserve of specialist shops, they are stocked by supermarkets alongside goods made in sweatshops without a hint of irony. The fact that even Nestle, that old boycotter’s favourite, now sticks the fair-trade label on some of its confectionary hints that fair-trade is part of the mainstream. It scratches an itch some people have about their spending habits. However, there are people who knowingly consume unethical goods or are aware of a dubious moral track record of certain brands but continue to purchase them anyway.

Why does this happen? There is a degree to which unethical consumption is a reaction to pressure to consume ethically. Some feel a knee jerk reaction to what is perceived as left-wing pressure, political correctness or interference in their daily lives. These individuals continue to consume unethically in order to resist social pressure to consume ethically. This attitude is selfish and a result of culture which emphasises individual gratification above collective good. There is a degree to which advocates of ethical consumption are their own enemies as applying pressure to change consumer habits can drive people in the opposite direction. We can see a similar phenomenon with advertising; many people avoid the Go Compare website simply because their adverts are so annoying.

Worse than callous disregard for the suffering that unethical consumption causes are those who believe that unethical consumption is good for the world’s poor. There are those who generally believe that sweatshops and exploitative labour improve the circumstances of people in poorer countries. For some this is simply a desire to justify their spending habits and a way of intellectualising rigid brand loyalty. For others it is somewhere between blind faith that capitalism will solve the world’s problems or genuine belief in the libertarian free market, a point of view which can only come from a position of privilege. Just as capitalism’s greatest defenders are those who have lucked out and currently sit on top of the heap, unethical consumption is defended by those who value cheap produce above all else and cannot see beyond the end of their garden. Only someone who has never stitched T-shirts continuously for twelve hours for only a few cents could ever suggest it was a route out of poverty.

Just because someone consumes ethically does not necessarily remove the impact of their consumption on others. It’s not that buying a Fairtrade T-shirt or jar of coffee isn’t preferable to a non-Fairtrade version. It’s just to say that these consumers aren’t just paying for a product alone. Ethical consumption is just another level of service. People who have more than their fair share feel guilty and want to know what effect their excess income has on the world. Purchasing Fairtrade products is a way of assuaging this guilt, whilst essentially maintaining the present system by those it benefits, albeit whilst also acknowledging its obvious flaws. If you are rich, you are hardly likely to seriously challenge the economic model that made you rich. It is however difficult to deny the problems caused by inequality on a global scale so a certain section of the wealthy have come up with ethical consumption as a means to relieve their guilt without having to threaten their position within the established economic system.

There are those who question the rights of ethical consumers to have a larger income than average and believe that this inequality is part and parcel of the system which lead to ethical consumption differentiating itself from unethical consumption. In short there will always be unethical products until we radically reconsider how the market place is constructed. Only substantial change to every aspect of our economy will remove unethical products.

Leaving this complex issue up to anything as simple as consumer choice will never resolve the problems caused by unethical consumption. Offering ethical alternatives from the same companies which created the problem in the first place alongside their unethical counterparts is not a solution and will never be. If you worried about unethical produce then ethnical consumption will not resolve the problem. Only radical change to the economy will suffice. However, in the absence of a strong movement for radical change, ethical consumption is preferable to ignoring the problems consumption creates, or choosing to believe that exploitation will rid capitalism of its contradictions.

Bankers! Bankers! Bankers! Out! Out! Out!

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The death of Thatcher has opened up a lot of old wounds and a lot of old debates. The news narrative was dominated by North Korea and IDS claiming he could live on £53 a week, then all of a sudden we were dragged back to the 1980s to debate the miners’ strike and the poll tax riots. Again and again, I have heard the same justification for Thatcher's actions: that the unions controlled the country in the 1970s, and that they used collective bargaining to bring the country to a standstill.

Clearly there was public outrage following the Winter of Discontent, which Thatcher effectively harnessed to pursue her own political agenda. Even many of those who disagreed with her cure for the problem agreed that ‘something had to be done’. Most politicians are opportunists and this was a once in a generation chance to change the agenda. Thatcher's success leads me to ask: why are we so bad at this on the left? Could we not use the banking crisis in the same way to achieve our aims?

Anti-banker sentiment is at an all high. Bankers are derided across nation, from cartoons in broadsheet newspapers to Carling commercials. Their popularity is located on the scale somewhere below politicians and above benefit claimants - firmly near the bottom. However no-one is making a strong attempt use this anger to effect any change, unlike the Thatcher government was able to in the early ‘eighties when it capitalised on anti-strike sentiments.

Essentially, the main reason for this is the entire political establishment is broadly in favour of letting the banks off the hook. Neither side wishes to be publicly viewed as in the banker's pockets, but the general consensus in Westminster is that we need the elitist, tax dodging money swallowing black hole that is the City of London more than it need us. This is of course not true, and will remain untrue until the Square Mile takes off and flies above us in a disgusting parody of a Douglas Adams novel. Britain isn’t the Isle of Man. We have an economy that exists outside the Square Mile and anyone who works in chemical engineering, software development, games & high tech arts, aerospace or any of the other industries in which Britain is a world leader should be greatly offended by the idea that we dependent on the bankers.

It doesn’t have to be this way. ‘Bashing the bankers’ is just tabloid stuff – in and of itself, rhetoric doesn’t achieve much. What it could do, however, is provide the ground work for creating a broad consensus for more intelligent regulation, and above all an end to the morally redundant idea that rampant inequality is somehow good for everyone. Anti-banker sentiment could be a starting point for a debate challenging the assumptions of our pro-greed, anti-collectivist consensus, just like Thatcher challenged the political consensus of the post war era. It’s a debate we badly need to have, but neither the Labour Party nor anyone else in mainstream politics seems willing to have it.

Thatcher, for all her innumerate faults, stood for a clearly defined ideology. She had a vision for what society should be liked and set about making it so, manipulating anti-union sentiment and patriotic feelings over the Falklands war whenever public confidence in her plan faltered. Thatcher genuinely believed that the whole country would be better off if labour markets were less regulated and the unions were less powerful. At the time most of the country did not believe this as strongly as she did (although now it is now an almost universally held political opinion) but popular anti-union sentiment allowed her to pursue her ideological objectives. The reason the same thing is not happening to the bankers today is that it is no longer consider appropriate for politicians to have strong ideological view points. Instead both sides tend towards varying degrees of acceptance of the neo-liberal hegemony.

The Conservative Party under Thatcher’s leadership were not united in their support for her policies and she had to fight off a few leadership challenges before eventually be ousted in 1990. Still to most people she stood as a strong unifying figure bringing together a diverse movement around a single set of goals. This is something the left sorely lacks. After the banking crisis the left is more divided than ever. This is especially true when discussing how we respond to the problems presented by this new era of capitalism. The left has always been fractious and divided but there is no consensus on how to best use the popular dislike of bankers to achieve any political goals.

Thatcher was an astute politician who used the public’s anti-union sentiment to great advantage in order to accomplish her political goals. The Left could learn a lot from her in how to respond to the banking crisis and in finding a way to snap out of this ideological paralysis we find ourselves trapped in. The public hates the banks almost as much as they hate benefit claimants. This is because most people who work hard resent people who they feel have got something for nothing. The Right is expertly using this feeling to roll back the welfare state. The left should be thinking the same if they want to make a dent in the power of international banking conglomerates.

The benefit of space exploration

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Last year on July the 21st NASA’s Space Shuttle programme officially came to end when Atlantis returned to Earth after completing its final voyage. Since then the US government has withdrawn from manned space flights, relying on the Russians and Chinese to ferry American astronauts to and from the international space station. Western governments are slowly abandoning space exploration and turning their attention towards more Earth-bound problems. In the age of austerity and economic stagnation, space exploration seems like a past excess we can no longer afford (along with public sector pensions and healthcare it appears). The space shuttles stand as a towering monument to the optimism of a by-gone age, when we thought the white heat of technology and Keynesian demand management could have saved us from ourselves. Many hold the same opinions of space exploration as they do of the welfare state, that it was a costly mistake fuelled by optimism and good intentions but ultimately lacking a grounding in the reality. With the space shuttles sent to museums and with no government plan in place to replace them, private companies such as Richard Branson’s Virgin Galactic are vying to be the dominant powers in our upper atmosphere. Some see this as an indication of the way the western world is heading with more and more of what we thought could only be handled by the government being taken over by private companies.

While America is already being nostalgic about the days of space exploration, on the other side of the world government space programs are very much alive and well. China and India are currently engaged in a space race of their own with the former launching their Tiangong-1 space laboratory in September last year and the later aiming to be the first nation to return the moon since Apollo 17 in 1972. In these countries their space programs are a source of enormous national pride, especially as they take over the arena previously dominated by the globe’s fading powers. As the age of US, Britain and Russia ends and their space programs are discontinued and new generation of super powers are aiming not only to conquer the world but also the space above it. Even North Korea maintains its sights on the stars with an attempt earlier this year to put a satellite into lower Earth orbit. This attempt was unsuccessful but it was unprecedented in the level of access foreign media was given to the launch, indicating how confident the famously isolationist state is in their rocket scientists. In these countries space exploration is not considered to be an extravagance of an overly confident super-power but part of the global coming of age process and vital arm of both industry and government.

However, space exploration is not just for rival super powers or a way for newly emerging economies to show off. In Nigeria firms are partnering with western experts to develop a national space industry with satellites already successful launched. These industries (supported by the government) are seen as a way of training workers in important 21st century skills of computer programming, engineering and micro-electronics. The space industry also has a positive economic effect in fostering a high tech support industry that offers well-paying jobs and boosts national income. Creating a space industry is seen as a wage to develop the national infrastructure with the aim of growing the economy and lifting people out of poverty.

Western economies showing sluggish growth could learn from these countries who are investing in an advanced technological industries and enjoying strong growth. Investing in space technology for Nigeria and China is having a positive effect on people on the ground by developing industries and training workers. It would be reprehensible to let the west’s flaunted competitive advantage in high tech industries slide to other countries because we were unwilling to spend the money needed to support it. Space exploration creates growth in in all manner of industries from software design to metal casting. Through government investment in large scale projects like space travel, money will pass to the industries needed to support space exploration and from them to the industries which provide the basic components and raw materials for these high tech firms causing the economy as whole grow. Something western governments are crying out for.

In order for the industry to progress, technical innovation is necessary. The old vertical take-off model used by the space shuttle and Apollo program might have to be replaced by the more efficient horizontal take off model favoured by Virgin Galactic and other private space ventures. Also for the industry to reach its full potential corporation is needed to spread the costs and ensure that the economic benefits reach all the denizens of Earth.

The strongest argument for global co-operation in space exploration is that the space industry is unlike any other industry in the world in its unique ability to inspire people and capture their imagination. The draw of the stars is irresistible to many and space exploration has given us the world’s most frequently used image (the Earth from orbit) as well as the iconic moon landing footage. There is no greater symbol in thawing of the cold war than a Russian Cosmonaut and an American Astronaut shaking hands in orbit in 1975. Great deeds inspire people on the ground to reach further and accomplish more, it is a symbol of how far we have come as a civilisation since we first discovered fire and a reminder of how far we still have to go to reach the heavens.

If Nigeria and China can find the economic argument for space exploration than surely it remains relevant in the west as well. In an age of tempered ambitions and cut backs we need the symbol of stirring accomplishment to inspire us. Not to mention the economic and scientific benefits that space exploration can bring. The space shuttle was an ambitious programme, much like the New Deal’s program of public works which lifted America out of the great depression. It seems our leaders are keen to remind us that we live in a time where we can no longer afford ambition and we should fix our sights lower on what we can accomplish. No wonder disillusionment has replaced the white heat of optimism. I believe there is still an argument for space exploration just as there is still an argument for ambitious government projects whether they come in the form of the space shuttle or the welfare state.

Austerity or growth: a politician's dilemma

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With Karolos Papoulias emerging as the new Prime Minister of Greece, the nations of the Eurozone hold their collective breaths to see what approach to the crisis the new government will take. In some ways, Merkel and friends must be breathing a deep sigh of relief at having dodged the bullet of a coalition involving the ΚΚΕ (the Communist Party of Greece) who wish to renounce austerity and and leave the Euro. After the election dust has settled, a coalition has emerged between the parliament's largest party, New Democracy, Pasok (the Socialist party) and the Democratic Left. All three parties are broadly in favour of remaining in the Euro and desiring a less radical renegotiation of the bailout. However, the new government does seek some changes to the demands placed on Greece, and this must worry Merkel and co.

Across Europe, austerity is looking less attractive to politicians, as voters turn towards parties which favor growth. In France, François Hollande defeated Nicolas Sarkozy on a platform of taxing and spending. This is a sign of how much things have changed in the two years since the last UK general election, where austerity was taken as common sense. Since then, European economies have seen little growth, and the prosperity that has been created has not helped where it is needed most. As government budget cuts force roll-backs across the services which are available, most people feel worse off under austerity. Now the Tory-led government talks about efficiency and promoting growth, realising that if the situation does not improve then re-election looks unlikely. As well as watching Greece, keen eyes are also focused on France to see if Hollande's policies of tax-spend will boost the economy faster than Merkel's austerity.

In the UK, boosting growth has support on both side of the political divide not the least because GDP must rise if tax revenue is to increase enough to meet the government's deficit reduction targets. Further stagnation in the economy will hinder growth in the long term and cause lasting structural damage. Aside from the much talked about 'lost generation' of young people locked out of jobs and the housing market through increased scarcity, social problems are becoming exacerbated through a lack of prosperity – see last summer's London riots for evidence of this. Faced with the prospect of the economy tanking, the government's austerity programme now looks a lot less like common sense and a lot more like an ideological commitment to privatization and rolling back the state. I have blogged before about the roots of the government's philosophical commitment to austerity.

If austerity is ever going to work, it will have to deliver some growth soon. In the meantime, the people of Greece are facing a fifth consecutive year of recession and world greatly appreciate some growth. The austerity conditions imposed on Greece are very harsh and surely smothering the green shoots of recovery. However, the new government has little room to maneuver, as they are reliant on the support of the rest of the Eurozone to manage the country’s enormous debt. Papoulias needs growth and austerity, but it is becoming evident that the two are mutually exclusive. Greece will be watching both France and Germany to see which economy grows the fastest. The divisions across Europe are summed up last Friday's Euro 2012 match between Germany and Greece, a contest of the prosperous against the impoverished. Germany's victory does not silence the doubts about the merits of austerity.

The leaders of Europe are in need of some answers to the question of austerity verses a bold dash for growth, and are keen to see what happens in the countries which have most openly embraced either stance. The new Greek government will have to make some difficult economic choices and the continuing existence of the Euro maybe rest on these decisions. One thing that is certain – politicians will need to embrace either harsh austerity or a strong push for growth soon, as the current stagnation is unsustainable.

The end of the high street: not with a bang but a whimper

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It's easy to live in a left-wing bubble: between organic toiletries, pubs with locally-sourced food and shopping on the internet, sometimes it is easy to forget there are High Streets where a large number of people do the majority of their consuming. A few days ago, my delicate shield of ethical consumption was smashed when I spent a few hours inside the Westfield Shopping Centre near Shepherd's Bush, west London.

The phrase 'fish out of water' does not cover the experience that I went through. I assumed that Westfield employed people specifically to keep dirty lefties like me out of their palace of consumption. Much to my surprise, I was welcomed in and dazzled with the bright lights and the range of shiny baubles available for me to purchase. I had some time to waste, and decided to find a music shop to pass the time in. I briefly considered unraveling a thread from my shirt and attaching it to the door so that I could find my way back later, but then I noticed the handy maps available from an information stand. Armed with a plan of the place, and mentally comparing myself to Livingstone, I set out to explore this strange and unfamiliar land of retail.

As I walked past the juice stands and Sky TV sign up booths, two things become almost immediately apparent to me: firstly, that there were no music, DVD, books or games shops anywhere to be seen, and secondly that the shops which did make up the Westfield were almost exclusively either clothing or jewellery shops. This confused me, for surely the main point behind a large-scale retail development is to get as much diversity of shops into as small a place as possible, thus allowing consumers to satisfy all their needs at once. Apparently not, as the Westfield caters to a very small section of consumption, mainly high-end up-market deeply personal. For those who shop in the Westfield, the particular boutique they frequent is a statement about their individuality made through mass consumption, the triumph of late-stage capitalism. In short, I discovered that the Westfield is the last bastion of the high-end High Street retailers against the advancing tide of internet shopping.

Later in a gastro-pub serving organic, locally-sourced pies, I was firmly back in my element and discussing my afternoon with a friend. I said that clothes and jewellery were one of the few areas where internet shopping and has had little impact. My friend informed me that he purchases T-shirts and shoes online, to which I agreed. The internet's particular brand of culture is very suited to the T-shirt business and allows the consumer to seek out designs which speak to them. Here the internet has had success in breaking the High Street's stranglehold on fashion. I asked my friend, however, if he would consider buying trousers online and we both agreed the idea seemed somewhat perverse.

The internet has taken over from the High Street in areas where it does best: bulk selling of goods, mainly entrainment goods, where the major factors are price and range. The last time I went into HMV to purchase a DVD, a friend told me not to bother and that it would be 'cheaper online'. He did not specify a website or have any data to justify his claim, which was built on a cultural understanding that this variety of shopping is simply better on the internet.

So where does this leave the High Street, other than with pound shops and clothing outlets? Some things have to be brought in the flesh, and the time delay involved in internet shopping means some goods will always be purchased in meat-space. However, with the rise in smart phones, tablets and app stores, immediate entertainment purchases online are a reality. All that is needed is a shift in social conventions, to make the giving of online content an acceptable present, and there will be no need at all for High Street entertainment retailers.

The High Street is certainly in a bad state, and a simple Google search for 'the end of the high street' returns thousands of blog posts and broadsheet articles bemoaning the end of face-to-face retail and making lazy observations comparing the closure of Game to the rise of Angry Birds. The truth is that this is hardly a recent phenomenon. It was nearly two decades ago that Amazon's diversification into VHS selling meant that Saturday afternoons were no longer spent wandering into the city centre to buy the latest Simpsons collection. One article I read claimed that 2012 was the year the High Street would end, as if most people had only just discovered the internet. In fact, most High Street retailers discovered the internet a long time ago and have also moved into online shopping.

Most likely the current process will simply continue. Places like the Westfield will hold their own in certain sectors for a while, but eventually changes in technology and social conventions will move our lives and consumption almost entirely online. If the High Street does end, it will be slowly over many decades, and not because everyone turned exclusively to online shopping over one Christmas period. If the High Street does end, it will not be with a bang but with a whimper, and one which is already well underway.

The Hunger Games and Game Theory

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I do not usually write posts about popular culture topics, so this blog will open with a first which is a SPOILERS WARNING. This article may ruin the ending of The Hunger Games if you have not seen the film or read the book yet.

With that out of the way, I can move onto the main area of discussion. One might think that The Hunger Games, which opened at cinemas nationwide on the 23rd of March, might not have much to teach the viewer about economics, but that would be a mistake. The film has some important insights into the nature of competition and game theory.

The film follows the story of Katniss Everdeen, a teenage girl who volunteers to combat 23 other juveniles in a battle to the death in order to avoid the same fate befalling her sister. She strikes up a friendship come romance come rivalry with one of her opponents who hails from the same district of the film's dystopian future as she does. Katniss has to rely on her own survival skills to make it back to her family but is also faced with difficult decisions along the way in regard to who she can trust. There can be only one winner of The Hunger Games and only one can return to their home, co-operation in this environment can only go so far.

This is very similar to game theory and I am sure that had John Forbes Nash been alive today he would have found the questions raised by this literary sensation fascinating. Nash's game theory is a study in human selfishness which attempts to find mathematical and logical optimal solutions to real world problems. His results are bleak and frequently point to the power of human greed as a means to achieve the optimal result from any situation. Nash won the Nobel Prize for economics for his efforts and his theories underpin a lot of the prevailing market ideology and government policy. I have blogged on Nash and his theories before.

In a typical game theory situation there is a trade off between cooperating with the other player(s) and behaving selfishly for personal gain. Frequently you do not know what the other player's moves are or how they affect yours until after you have made a key decision. Nash found that there is always an incentive to betray trust for personal gain as in any one moment the other player(s) is likely to be betray you if they are behaving logically according to game theory.

In The Hunger Games itself there is an incentive to cooperate with one or more opponents against further opponents. Katniss teams up with Rue during the game to great effect whereas Peeta Mellark (her rival/love interest) allies himself with the stronger and better trained players. However there is an incentive to betray trust at any point as there can only be one winner. During the course of the game Peeta switches sides to help Katniss defeat his former allies. Signs of personal weakness are rewarded with timely betrayal and several characters come to an abrupt end at the hands of their recent allies. At any moment there is an incentive to betray trust just as whoever you are allied with is likely to also be planning the moment they turn on you.

This all sounds very bleak and has led many to doubt the human virtues of cooperation and altruism but there is a positive side to game theory. More recent experiments have been based upon the idea of iterated game theory where games are not played in isolation but repeated over and over with the long term outcomes monitored. These studies have shown that there is a mathematical advantage to altruism in iterated game theory. If you cooperate in the long term, through repeated games then all parties can each gain greater results than they could have achieved through seeking personal glory.

The Hunger Games also has an argument for cooperation and altruism if you view not as a single game but a series of games Katniss repeatedly plays against a changing series of opponents. There is a clear incentive for her to cooperating with weaker plays against the players with advantages. Ultimately Katniss's victory in The Hunger Games is achieved because she works together with others and uses their competitive advantage against her opponents. She also exploits the selfish players willingness to turn on each other to thin the field. At the end of the film Katniss is able to save herself and Peeta not because of their ability to work together to achieve a common goal but because they are able to trust each other.

The Hunger Games shows that there is not only an incentive for cooperation but also for trusting others even in an single victor environment. It is a strong argument against Nash's dark view of human nature as motivated by selfishness and personal gain. In our personal lives as well in society as a whole we need to learn from Katniss example of helping the weak, harnessing the power of cooperation over selfishness and above all that we need to trust each other.

A budget to reward work?

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Politicians are always looking to incentivise employment. The general means of accomplishing this is by either cutting taxes on high earners and corporations to encourage entrepreneurship or cutting benefits to get the unemployed off the dole and contributing to GDP and tax revenue. In the run up to today’s third budget of the coalition government Chancellor George Osborne claimed he was planning a “budget to reward work”, i.e. one which will benefit those already in employment and encourage the unemployed to get a job.

Now with the details of the next 12 months of government spending announced we can ask ourselves: to what do degree has he succeeded? There was some welcome news, such as raising the level at which someone in employment begins to pay income tax to £9,205 a year with the aim of raising it to £10,000 next year. Not only will this reduce the tax burden on those with the lowest incomes but all those in employment will pay less tax; the average basic rate tax payer will now be £305 a year better off. This may not sound like a lot but it will boost consumption and aid the economy. Another good idea was tax breaks for firms working in the fields of computer games, animation and high end television manufacture. These are important sectors to the UK economy where we have a competitive advantage and are vital to our growth.

However, over the last year those in employment have had their prosperity dogged by the spectre of inflation above the Bank of England’s target. Although inflation has fallen back in the last few months (currently the CPI is at 3.4%) higher inflation erodes the value of income made from working and reduces the incentive to enter work. Firms have tended to give lower than inflation pay rises recently so as inflation remains high and those in work are finding themselves worse off. Inflationary pressure is largely the result of rising fuel costs caused by the soaring price of oil and gas on the global market. A domestic fuel subsidy or measures to reduce transport costs could have reduced inflationary pressure and made the income from work more valuable. This, however, was never on the agenda.

Another consideration is where will the funds come from to pay for this tax reduction? Borrowing is projected to be £1bn lower than anticipated which has given the Chancellor room to manoeuvre. A certain amount of the slack will be taken up by the rise in stamp duty for properties over £2m and the proposed clamp down on tax avoidance. The majority of the additional revenue will be raised by an extra 37p per unit tax on cigarettes. It is worth remembering that taxes on commodities disproportionately affect low earners as they spend a higher proportion of their income on the taxed commodity. A tax break for lower earners could be a double edged sword for those who also smoke – which there is also a higher instance of among the poor.

The other main highlight of the budget was the reduction in the top income tax bracket - from 50p in the pound to 45p – aimed at encouraging entrepreneurship and investment from overseas. I have blogged about this before but investment will remain low and the rate of business start ups will be sluggish while GDP growth is lack luster. With growth in 2012 projected at a mere 0.7%, Osborne should consider a growth strategy if he wishes to stimulate investment and create a fertile environment for new businesses.

Job creation and a plan for boosting growth were not overtly stated in today’s budget. There was protection for some vital areas but others important growth sectors (such as renewable energy) were all but activity discouraged – mainly through the government’s continual commitment to non-renewable energy. Unemployment is projected to hit a peak this year at 8.7% and a clear plan for job creation is needed to protect the recovery. Unemployment and the low growth rate are the biggest problems the UK economy faces right now and the government should commit to a clear strategy for tackling these before it leads to endemic social problems. Such a plan would also send a clear signal to overseas investors and aspiring entrepreneurs that the UK is committed to economic prosperity above political goals.

Overall this is a budget lacking in ambition or a clear plan to boost the economy out of its current dire situation. There were no sweeping cuts, surprise new schemes or massive tax boondocks. Just a few tweaks to the system with the vague goal of stimulating growth and getting more people off benefits and into employment. If Osborne really wanted to create a budget that would reward work he would take measures to reduce inflation or help get more people into work. More employment and a better growth rate would benefit both those in and out of work as it would grow the economy overall. The Coalition maybe attempting to incentivise work but while the economy remains weak, their efforts will be unsuccessful.

50p Tax: What’s going through the Torys’ heads?

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It is no secret that the Tories want to abolish the 50p tax band. There are few points more fundamental to Tory ideology than the belief that taxing the wealthy is not only bad for the economy but also morally wrong. It runs to the heart of their belief in individual freedom, economic liberalism and personal responsibility. The most surprising fact about the rumoured plans to abolish the 50p tax rate in the forthcoming budget is that it has taken the Tories the better part of two years in government to consider acting.

This is partly due to their coalition partners. The Liberal Democrats oppose the removal of the tax without the instigation of another tax on the wealthy in its place. They would prefer the Mansion Tax they proposed in their 2010 manifesto – which is also vehemently opposed by grass roots Conservatives. If the Tories were to repeal the 50p tax rate without implementing the Mansion Tax (or something similar) it could derail the coalition’s remaining legislative agenda at a time where Lib Dem support is essential to pass the government’s welfare reforms.

The second reason why the Tories have waited until now to considering removing the tax is fiscal. The government’s argument that the nation’s coffers are in such a dire state that all must make sacrifices for the economic wellbeing of the country carries little weight if it emerges that there is room in the budget to cut a substantial revenue stream. The Conservatives would be on dodgy political ground if as soon as they entered government they cut the essential services lower income earners rely on (such as EMA) and introduced a tax which falls disproportionally on the poor (the VAT rise) whilst also passing a tax break for the highest earners.

Sound economics does also lie behind the decision to keep the 50p tax rate. To reduce government borrowing as quickly as possible, tax streams would have to be kept at the current level or raised – hence the rise in VAT. Income Tax is the largest proportion of the government’s income from taxation, and high earners pay the lion’s share of this income.

So why act now? Again there is an economic case to repeal the tax. Growth has been poor since the coalition came to power, and many think tanks and economists believe that repealing the 50p tax would stimulate consumption of consumer durables (predominantly purchased by high earners) and boost the economy. It would also go some way toward attracting investment from overseas - although investment will be limited whilst growth remains sluggish. The Tories’ re-election and deficit reduction programme depend on growth rising in the next few years, and cutting taxes on high earners is seen as a short cut to achieving this.

There is also pressure to repeal the tax from within the Tory Party. Cameron has a problem with his own right flank, who feel that too many Liberal Democrat policies are on the agenda, that the government has not played hard ball sufficiently with the EU, and that Cameron is not doing enough to protect the international standing of Britain as a great nation. These MPs are also concerned about their own re-election under the Tory banner, and are crying out for some traditional Tory reforms to take back to their constituencies. Cameron’s failure to support the back-benchers’ proposed EU membership referendum has created resentment within his own party, and he needs a bone to throw to them to ensure they keep supporting the continuation of the coalition.

The Tories do have to consider the strong case for keeping the higher tax rate. Firstly, it generates essential revenue at a time when growth is slow and tax receipts are lower accordingly. Another key point to consider is that those who stand to benefit from the repeal of the rate are the very wealthy, and studies have consistently shown that the wealthy save a higher proportion of their income, whereas those with lower incomes spend the majority of their income out of necessity. If the government’s plan is to boost consumption, then conventional logic suggests the amount of money that circulates around the economy should be raised, rather than the amount left inactive in bank accounts.

Aside from this, the government is faced with a moral responsibility that any government should have, which is to help the less fortunate, the vulnerable, and those who cannot look after themselves. This government is failing in that regard as its austerity programme is cutting the services needed most by those whom society is supposed to look out for. To reduce taxes paid by those most capable of providing for themselves at this time would be a failure on a moral level.

If Osborne wishes to abolish the 50p tax band in tomorrow's budget, then he must consider the political fall-out with his Lib Dem coalition partners as well as the wider economic implications. He must also bear in mind that the most obvious logic of cutting taxes to boost consumption does not always hold true. Whatever decision is reached, it will certainly be considered a test of the Tories’ claim that all sections of society must make sacrifices in order to tackle the budget deficit. The Conservatives certainly would love to abolish the top tax bracket; whether they are willing to spend the political capital needed to do so will be a question that can only be answered by Wednesday's budget.

Austerity economics: how we were misled

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Hindsight is wonderful thing in economics. Knowing exactly what should have been done at certain cross road in history to avert catastrophe has been the subject of many books and PhD thesis. The Former US Defence Secretary Robert S. McNamara once said that “historians are not interested in counterfactuals. The what might have beens.” Economists certainly are. Economists use the data from lead indicators, current indicators and lag indicators to work out exactly what the state of the economy is and what would be the best course of action. Sometimes this is simple, growth is low interest rates are cut and households have more money. Thus aggregate demand is boosted and there is a spike in growth. Usually it is much more complicated than that and the data shows no clear path to be taken out of a crisis.

In the absence of knowing for certain what needs be done, politics often comes into play in making the decision. In other words, the debate becomes about what should be done. The root of all politics is philosophy. Governments decided on a philosophy of marketization or state intervention and from this their politics and the economics follows. By the time this reaches the public in the form of social pressures it often appears that the facts have been twisted to be in line with the philosophy.

With the benefit of hindsight we can see that the Thatcher government’s curtailing of union powers was philosophical and not economic. It stemmed from her government’s ideological commitment to neo-liberalism and not a genuine need to decrease union powers to make the economy more prosperous and therefore grow faster. At the time it was sold as such but now we can see how the economics flowed from the politics and that the politics had its root in her philosophical views.

It is no longer fashionable for parties to have a clear ideology but there is still philosophy at the root of their politics. Nearly two years into the coalition government, with the benefit of hindsight, we can start to see how the philosophy has guided the economics and where the mistakes were made.

Austerity is the economics of the coalition government. In the campaign there was also a commitment to opening public services to market competition but this has been less forthcoming, especially with the woes associated with NHS reforms. When George Osborne became Chancellor he offered us a simple economic parable, cut the state and the private sector will grow. Two years later with growth lacklustre at best, unemployment higher than it has been at any point under Labour and the country teetering on the brink of another recession this parable seems more like a fairy tale - or a coma fantasy. In years to come Osborne’s austerity program will be seen as a result of his philosophical commitment to neo-liberalism rather than a response to the economic necessity of cutting the budget deficit. This goes hand in hand with his proposals to open public services to competition from private firms. Right now the philosophy is still being sold as economics, but it is politicians who are driving the economics and their philosophy which drives them.

Sociology is applied economics and the social consequence of economics facts - such as rising number of the unemployed – are seen in urban decay and public order offences. Last August’s riots were in essence the application of economic factors to the population and as incomes continue to fall and more and more people are out of work social breakdown becomes more likely.

Social breakdown is also in evidence in Greece were rioting against the government’s austerity program has become a feature of daily life. The Greek coalition government is attempting to impose a gruelling program of public sector cuts in order to secure essential funds from the European Central Bank and the International Monetary Fund to prevent a default on their sovereign debt. However with the Greek economy entering its fifth consecutive year of recession and the most recent data indicating that this recession is depending and not improving, austerity does not seem like the best course of action. Couple this with evidence from the UK that our recovery has faltered since the beginning of our program of cuts and the case for austerity in Greece looks pretty week. Of course the pressure for austerity emanates from the ECB and IMF and their control of the bail out money. These bodies, the IMF especially, also have philosophical ties to neo-liberalism and use their status as the world’s creditor to pressure their own political agenda. Economic good comes behind a philosophical world view and social consequences to the ordinary Greeks comes last of all. Hence the neo-liberal agenda of the IMF and others leads to rioting on the streets of Athens.

Austerity was sold to the public as economics when in actual fact it is a philosophy; a philosophy which the data – the life blood of economics – does not support. Until economists can see the future, they will always need philosophy and politics to guide them. Yet philosophy and politics need be informed the data of economic reality and must consider the social consequences of their actions. Philosophy and Politics are essential to governance, as they are a vision to aim for and a direction to travel in. Even this blog, ostensibly an economics blog, frequently wonders into politics and philosophy.

Hindsight is useful for knowing exactly which economic policy should have been adopted at a cross roads - like the one Britain and the Euro face. Lacking hindsight in the present we must always be aware that sometimes when politicians are selling us economic necessity they are in fact selling us their philosophical desires.

The Rolls Royce Government: The case for big government protecting social values

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What does the Continental European model of social democracy and a Rolls Royce have in common? We will return to this metaphor after some brief analysis.

Last week David Miliband wrote in the New Statesman that Labour should not be the party of the “big state” - this comes against a recent trend of criticism of large governments, which many politicians believe, are bad for the economy and unpopular with voters. Western governments are not without their legitimate criticism as anyone who has had to claim benefits or submit a planning application will be aware of. The marsh of bureaucracy that the public has to deal with when they want something from their government creates a feeling of disillusionment with the virtues of the public sector which turns voters away from any politician who claims that we need more government to solve societies’ problems. The slick efficiency of the tills at Tesco stand in sharp contrast to the long periods of standing around waiting at the Job Centre. It is no wonder politicians who favour the selling of public services to private companies find voters agreeing with them at all levels of society.

The scepticism directed towards big government is partly a result of real fear caused by the European Sovereign Debt Crisis but it is also a definite effort to shift the agenda towards a free-market small government approach by those with vested interest in this opinion. This being large companies and right leaning governments keen to drum up support for their ideologically motivated austerity programs. Miliband argues that it was faith in big government which caused the Labour party to lose the public’s trust over the economy. He is pandering to the view that Labour is the party of the “nanny state” and that the Conservatives are the party of individual freedom.

I personally, have never had a problem with the label nanny state. When you think about it, who is a nanny? A warm and comforting figure that looks after children when they are cannot look after themselves. I cannot think of a better role model for government. However western voters are opposed to oppressive, overbearing regimes which meddle in the daily lives of their citizens. The fear behind this is also legitimate, only a fool in the West would want to live under a Cold War Communist regime. However, in the left learning parties of Europe’s desperate attempts to escape the spectre of being labelled a Marxist-Leninist, some of what was truly important about socialism has been washed away in the bland acceptance of the free market.

What is important about socialism is not a commitment to the big state but to a set of underlying principles that society should be directed towards income equality, the removal of class divides causes by wealth inequality, an equality of opportunity for all citizens as a birth right and safety net for those who are unable (temporally or permanently) to provide for themselves and their families. Self-reliance should not be the governing rule of society and the collective should look out for the individual. In exchange for this the individual must be willing to make a sacrifice for the good of the collective in terms of personal wealth and some degree of personal freedom. The social democratic parties of European - some of which are differentiated from the socialist parties of Europe and some of which are not – maintain the commitment to these values on a social level but not an economic one. In place of the economic proportion of socialism there is a general acceptance of the virtues of free market capitalism as the best method to allocate societies’ scarce resources.

David Miliband and the Brown Government embodied this notion of a commitment to social justice along with a commitment to small state free market capitalism. The coalition government has continued the shift towards right wing economic principles by further reducing the state at the expense of any commitment to the values of stated above. Miliband’s insistence that Labour move beyond the big state verses small state argument may win him support with voters but will do little to reassure those who believe that Labour has lost touch with the key values at the root of socialism from which the party draws its ideology.

I submit that a rebranding of the virtues of big government is needed by social democrats if they are to distinguish themselves from the economically right leaning parties and reconnect with the values at the root of their past popularity. This rebranding should be focused on the core values stated above. There are many who are concerned about the growing divide between the rich and the poor and how unevenly wealth is distributed across society. This is also where Rolls Royce comes in.

The typical criticism of big government by the right is three fold: 1, that state involvement in the market causes a problems for industry, 2, that that it requires higher taxation and 3, the old nanny state argument. I will take each point in turn:

Firstly, I have already written on the need for Capital Conscious Socialism. I have said that government should always be mindful of the needs of private business to provide employment when intervening in the economy. It is also worth considering that state invention is often necessary to make sure that industry allocates societies’ scare resources so that they create the most social good not economic good. An example of this is medicine, which should be allocated where it benefits society by curing diseases rather than where it is most profitable.

Secondly, the cost is key to the value of large Government. We should think of Government like a car. If we opt for the cheap option (economically right wing with low taxation and spending) then we will receive a cheap government, one which is ineffectual at meeting our needs and protecting our values. If we opt for the Rolls Royce government, which is expensive but capable then we will have a government that is empowered to tackle social problems and is something to be proud off. Spending more on our government should be viewed the same as buying a luxury car. That the price tag is part of the appeal because only with an expensive product can we achieve satisfaction from our spending.

Thirdly, social democrats should remind the public that it is their government’s duty to look after them and not simply get out of the way of private businesses. It is the role of government to embody the values of altruistic medieval kings. To clothe the naked, feed the poor, provide shelter for the homeless. Those who have the least are the most vulnerable to the problems created by wealth inequality and the basic safety net provided by the state ensure that the needs of the very worst off are not forgotten. The state may intervene in our lives to protect us from letting the selfishness - which the free market uses to drive economic growth - from entering our social conscience and thus kicking aside the poor, the vulnerable and the politically weak.

The values at the heart of socialism and big government will resonate with voters once framed within the right context. The argument of big state verses small state is not the right context. The argument of Rolls Royce against a budget banger is the right context. It is important that social democrats across Europe defend these values less society become deeply divided between rich and poor. The core values behind socialism are important in building a fairer society and there is still merit to the argument that big government can help to achieve this.

Ed Miliband would do wise to bare this in mind during his review of Labour’s policies - rather than listening to the supposed wisdom of his older brother. Many on the left hope the results of the policy review will bring the Labour party out of inertia and back into the business of providing a genuine alternative to the methods of the coalition government. Until that time we should remember that we get back from our government what we put in. If we give it scepticism and starve it of funds it will be ineffective at protecting our core values. If we view government spending as an important step to having a fairer society then we can empower government to tackle the root causes of social ills.

Facebook’s IPO: Are those adds worth $100bn

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In the eight years since Facebook first appeared online, the site has gone from a way to waste time to a social necessity. Today (especially for younger users) not having a Facebook account is akin to not having a mobile phone, in that you are likely to be left out of the loop by friends and work colleagues. Now the internet giant’s recent IPO suggests that this social necessity could be worth up $100bn as a company.

Facebook was founded in 2004 by Harvard University undergraduate Mark Zuckerberg, and since then has taken the internet by storm. First it became the world’s largest social network with over 800 million users. Then the site replaced Google in its position as the internet’s most visited site. Now Zuckerberg and his team have earned a new record after raising over $5bn from an initial public offering, the largest ever for an internet firm. More than just a commercial success, Facebook has added new terms to the popular lexicon such “to friend” and has redefined the use of the verb “to like” online. Brands large and small have rushed to establish fan pages on the website and entire real world conversations focus on events which took place in the entirely virtual social network.

What is interesting about Facebook’s petition to be partially floated on the Stock Exchange is that the information they have released has given us a rare glimpse at the numbers behind Facebook’s success. Facebook and other internet companies that offer a free service lack a traditional revenue stream upon which to draw. Most fall back on the tried and tested method of advertising. The value of an advertisement on a website is determined by the “click through rate” in other words the percentage of users who click on an advertisement to be taken away from the page which they were browsing to one which they had not intended to visit, prior to seeing the advert. Research has suggested that click through rates for most websites are very low as most users are resistant to the idea of following links online. This is partially due to a legitimate concern about internet security but also a response to the degree to which users are saturated with banners and links tempting (often unsubtly) users to leave behind what they were interested in the first place. This has prompted concerns that that this revenue model has become out dated and that many internet firms might be overvalued.

Facebook has relieved that a substantial amount of their $1bn annual net revenue comes from advertising, leading to speculation that intelligent internet advertising is having a degree of success in tempting users. Firms like Facebook use the personal information supplied to them to customise their advertising space to a user’s tastes, and thus boost the click through rate. This in turn makes advertising space on Facebook more valuable, not simply because of the larger audience but because of a greater degree of success. Try, for an experiment, changing your relationship status to “engaged” and witness the barrage of wedding goods and services that will come out of Facebook’s proverbial woodwork to tempt you to their pages. Often the advertising is more subtle than this, and usually it is from a trusted website. It is this clever use of Facebook’s greatest asset (its members’ data) which makes it a viable company.

However, all is not rosy in Zuckerberg’s world. Internet users are becoming increasingly aware about how their data is being used. The wealth of information which Facebook has built up is also a liability as the public demand restrictions on how this data is used. Facebook’s privacy settings are becoming increasingly complex, which is creating an incentive for uses to switch to a network that is more mindful of privacy.

For now Facebook retains its dominant market position, and the necessity of having an account means this situation is unlikely to change soon. The site has seen off competition from a variety of other social networks seeking to challenge its dominance, and even Google entering the fray with their Buzz and later Google+ services have had little effect on the state of the market.

Facebook should be applauded for changing the way we relate to one another. Upon meeting a new friend at a party it is easier (and seems less forward) to connect with said person via Facebook than to ask for a phone number – mainly because it is also easier to remember a name rather than an 11 digit number.

However, Facebook would do well to consider an alternative revenue model as users become more concerned about privacy. It is also worth considering that the click through rates of intelligent advertisements will eventually fall as users become tried of their saturation, just as we all became tired of banners atop websites in the early days of the popular internet.

This week Facebook’s founders and executives will be congratulating themselves after their IPO sets another record for the company – but if the site’s meteoric rise proves one thing, it is how quickly the internet can change and how complacency is severely punished. For further proof of this, simply ask anyone who still has a MySpace account.